Eriks_Delicafe 2024 Franchise FAQ - FDD Ninja

Question 1

Where must disputes be mediated or arbitrated for Eriks Delicafe?

Accepted Answer

| PROVISION | SECTION IN AGREEMENT | SUMMARY |
|---|---|---|
| t. Integration/merger clauses | Sections 7.2 and 7.3 | Franchise Agreement terms express all obligations. Prior agreements and promises not enforceable. These provisions are binding subject to California law. |
| u. Dispute resolution | Section 7.11 | Except for certain claims, all disputes |
| by arbitration or |  | must be mediated or arbitrated in San |
| mediation |  | Jose, California. (See Note 4) |
| v. Choice of forum | Section 7.9 | Litigation must be in San Jose, California. |
| w. Choice of law | Section 7.9 | California law applies.

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 30–34)

Question 2

Are Eriks Delicafe franchisees allowed to make any setoff or deduction from royalty payments?

Accepted Answer

Franchisee shall throughout the term of this Agreement at Franchisee's expense, submit to Erik's, complete and accurate reports and payments in such form and detail as Erik's may require, and in the manner that Erik's may designate, as follows:

- (a) Unless otherwise required by Erik's, on or before Friday of each calendar week, a report of all Gross Revenue of the DeliCafe for the preceding week (as defined in Section 3.3), together with payment, without setoff or deduction, of the royalties required by Section 3.3;

Source: Item 23 — RECEIPTS (FDD pages 38–159)

Question 3

Will Eriks Delicafe franchisees be reimbursed for charges assessed to Eriks due to insufficient funds in the franchisee's account?

Accepted Answer

Erik's, which may include payment by electronic funds transfer from a designated bank account of Franchisee to a designated bank account of Erik's, or payment by some other electronic debit/credit method. Franchisee agrees to execute any forms or agreements required by banks or financial institutions to authorize transfers, whether initiated by Erik's or Franchisee. Franchisee is responsible for having sufficient funds on deposit to cover all checks, debits and electronic funds transfers made. All charges imposed by Franchisee's bank or financial institution to process and clear any checks, debits or transfers shall be paid by Franchisee. Franchisee will also reimburse Erik's for any charges assessed to Erik's due to Franchisee's account having insufficient funds to cover any check, debit or funds transfer or for any "stop payment' or other refusal to honor or pay a check, debit or funds transfer to Erik's.

Source: Item 23 — RECEIPTS (FDD pages 38–159)

Question 4

What happens if an Eriks Delicafe franchisee abandons or transfers the franchise without the Franchisor's approval?

Accepted Answer

|    | PROVISION                                                 | SECTION IN AGREEMENT   | SUMMARY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|----|-----------------------------------------------------------|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  |  | Franchise Agreement or operating procedures that is not the basis for immediate termination (30 days to cure after notice or must start cure in 10 days where defaults cannot be reasonably cured in 30 days). |
| h. | "Cause" - defined defaults which cannot be cured | Section 5.2(a) | You fail to find a site or develop the DeliCafe in a timely manner; fail to begin to operate the DeliCafe in a timely manner; fail to successfully complete training program; abandon or transfer franchise without the Franchisor's approval; misrepresent or omit material facts in application; are convicted of felony or other criminal misconduct; make unauthorized transfer; make improper or unauthorized use of the Marks, trade secrets or Confidential Information; become insolvent, bankrupt or a receiver is appointed; fail for 10 days or more to comply with any federal, state or local law or regulation; multiple or repeated failures to comply with the Franchise Agreement in the same 12 month period regardless of whether prior defaults were cured after notice (See Note 2). |
| i. | Your obligations on termination or nonrenewal | Section 5.3 | Cease operation of business under system and Marks; immediately pay all sums you owe your creditors including all sums owed the Franchisor or its affiliates; vacate premises or lease; relinquish all rights and phone numbers, listings, and advertising privileges; remove or change signs, colors, menus or decor; offer to the Franchisor the right to repurchase all furniture, fixtures, furnishings, equipment, signs, decor and leasehold improvements of the DeliCafe; return the Manuals and Confidential Information; abide by covenant not to compete. |
| j. | Assignment of contract by the Franchisor | Section 6.6 | The Franchisor may freely assign to anyone who assumes the Franchisor's obligations. |
| k. | "Transfer" by you – definition | Sections 6.1, 6.3 and 6.4 | Any assignment of the Franchise Agreement or the DeliCafe or any part or all of the ownership of you, including |
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|    | PROVISION                                                                       | SECTION IN AGREEMENT | SUMMARY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|----|---------------------------------------------------------------------------------|-------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  |  | voting stock, securities, partnership or sole proprietorship interests, voluntarily, involuntarily sold, issued or transferred. |
| l. | The Franchisor's approval of transfer by you | Section 6.1 | You must have the Franchisor's prior written consent which will not be unreasonably withheld. |
| m. | Conditions for the Franchisor's approval of transfer | Section 6.1 and 6.3 | You must first notify Franchisor in writing of your intent to sell and Franchisor has right of first refusal; proposed transferee meets the Franchisor's qualifications standards; you are in good standing; payment of \$10,000 transfer fee; transferee signs then-current Franchise Agreement and Assignment Amendment; you assign to the transferee your leasehold interest; you sign general release; you enter into a non-compete agreement; you agree to subordinate debt of transferee to you; and the Franchisor approves terms of assignment. |
| n. | The Franchisor's right of first refusal to acquire your business | Sections 6.1(a) and 6.3 | You must notify Franchisor in writing before offering to sell. Franchisor can match any offer within 30 days of written notice; reactivated if sale not completed in 60 days or if there are material changes in the terms of the sale. The Franchisor also has the right of first refusal to purchase your stock or partnership interest. |
| o.

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 30–34)

Question 5

Where must litigation occur for disputes related to Eriks Delicafe?

Accepted Answer

|    | PROVISION                                            | SECTION IN AGREEMENT | SUMMARY                                                                                                                                                               |
|----|------------------------------------------------------|-------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| v. | Choice of forum | Section 7.9 | Litigation must be in San Jose, California. |

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 30–34)

Question 6

How many Eriks Delicafe franchises were sold during the year ending December 31, 2021?

Accepted Answer

ERIK'S DELICAFE FRANCHISES, INC. has twenty-seven franchises operating in California as of December 31, 2021.

Source: Item 23 — RECEIPTS (FDD pages 38–159)

Question 7

Is Eriks Delicafe obligated to purchase inventory from the franchisee upon termination?

Accepted Answer

association with Erik's. Franchisee shall take all action as may be required to cancel all fictitious or assumed name or equivalent registrations relating to Franchisee's use of any Mark. - (b) Pay Creditors. Franchisee shall immediately pay all creditors of the DeliCafe, including all sums then owing by Franchisee to Erik's or its affiliates. - Vacate Premise or Lease: Offer to Repurchase. Unless termination results solely from the exercise by Franchisee of Franchisee's option as provided in Section 5.1 hereof, Erik's shall have the option, exercisable by written notice to Franchisee at any time within thirty (30) days from the date of termination hereof, to require that Franchisee assign to Erik's the leasehold interest of Franchisee in the Premises in consideration of Erik's assumption of the obligations thereunder. If Erik's exercises this option, Erik's shall repurchase from Franchisee all furniture, fixtures, furnishings, equipment, signs, decor and inventory owned by Franchisee and used in the operation of the DeliCafe at the lower of their fair market value, or the price paid by Franchisee (less depreciation). Erik's shall in any event, make purchases from Franchisee of inventory and supplies as may be required by applicable law. - (d) Transfer Telephone Privileges; Remove Sign; Alterations. Franchisee shall relinquish and take all steps necessary to transfer all right, title and interest in all telephone numbers, listings, and advertising privileges concurrent therewith, relating to the Franchisee's DeliCafe to Erik's. Franchisee, in the event Erik's does not exercise its option to require vacation of the Premises (or assignment of the leasehold interest) as provided in subparagraph (c) above, shall also make removals or changes in signs, colors, menu and decor as Erik's shall reasonably request so to effectively distinguish the Premises from their former appearance and from any other franchised DeliCafes and return the Premises to pre-Erik's condition. - (e) Erik's Right To Purchase the DeliCafe. Upon termination of this Agreement by Erik's for cause or upon expiration of this Agreement (without renewal), Erik's shall have the option, exercisable by giving written notice thereof within sixty (60) days from the date of such expiration or termination, to purchase from Franchisee all the assets of the DeliCafe. ![](_page_117_Picture_0.jpeg) Assets shall include, without limitation, furniture, fixtures, furnishings, equipment, signs, decor, leasehold improvements and the lease for the Premises. Erik's shall have the unrestricted right to assign this option to purchase. In the event Franchisee owns the Premises, Franchisee shall grant to Erik's or its assignee a retail lease, in a form acceptable to Erik's, for a term of ten (10) years. Erik's or its assignee shall be entitled to all customary warranties and representations in connection with its asset purchase, including, without limitation, representations and warranties as to ownership, condition and title to assets, liens and encumbrances on the assets, validity of contracts and agreements, and liabilities inuring to Erik's or affecting the assets, contingent or otherwise. The purchase price for the assets of the DeliCafe shall be the fair market value, determined in a manner consistent with reasonable depreciation of leasehold improvements owned by Franchisee and the furniture, fixtures, furnishings, equipment, signs, decor and inventory of the DeliCafe, provided that the purchase price shall not contain any factor or increment for any trademark, service mark or other commercial symbol used in connection with the operation of the DeliCafe, and further provided that Erik's may exclude from the assets purchased hereunder any furniture, fixtures, furnishings, equipment, signs, decor and inventory that are not approved as meeting quality standards for DeliCafes. The length of the remaining term of the lease for the Premises of the DeliCafe shall also be considered in determining the fair market value hereunder. Source: Item 23 — RECEIPTS (FDD pages 38–159)

Question 8

How many franchised Eriks Delicafe outlets were operating at the start of 2021?

Accepted Answer

| State | Year | Outlets at Start of the Year | Outlets Opened | Terminations | Non-Renewals | Reacquired by Franchisor | Ceased Operations For Other Reasons | Outlets at End of Year |
|---|---|---|---|---|---|---|---|---|
| CA | 2021 | 26 | 1(1) | 0 | 0 | 0 | 1(1) | 26 |
|  | 2022 | 26 | 1 | 0 | 0 | 0 | 1 | 26 |
|  | 2023 | 26 | 0 | 0 | 0 | 0 | 0 | 26 |
| Totals | 2021 | 26 | 1(1) | 0 | 0 | 0 | 1(1) | 26 |
|  | 2022 | 26 | 1 | 0 | 0 | 0 | 1 | 26 |
|  | 2023 | 26 | 0 | 0 | 0 | 0 | 0 | 26 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 37–38)

Eriks_Delicafe 2024 FDD FAQ