What are the 'Standards and Specifications' that Floyds 99 franchisees must adhere to?

change standards and specifications for services and products offered at or through the FLOYD'S 99 Shop and for the Franchised Location, equipment, furniture, fixtures, inventory policies, hair care products offered for sale and used, employee attire, supplies, forms, advertising material and other items used in connection with the Barbershop, upon 30 days prior written notice to the Franchisee. The Franchisee shall, at the Franchisee's expense and throughout the term of this Agreement, remain in compliance and strictly adhere to all of the Franchisor's current standards and specifications for the FLOYD'S 99 Shop as prescribed from time to time. The Franchisee acknowledges that compliance with the Operations Manual is vitally important to the Franchisor and other FLOYD'S 99 system franchisees and is necessary to protect the reputation and goodwill of the Marks and to maintain a uniform quality of operation throughout the FLOYD'S 99 system. However, while the Operations Manual is designed to protect the reputation and goodwill of the Marks, it is not designed to control the day-to-day operation of the FLOYD'S 99 Shop.

• 14.3 Inspections. The Franchisor shall have the right to examine the Franchised Location, including the services offered and the manner in which those services are provided, inventory, products, equipment, furniture, fixtures, materials, supplies or services used or sold there, to ensure compliance with all standards and specifications set by the Franchisor. The Franchisor shall conduct such inspections during regular business hours and the Franchisee may be present at such inspections. The Franchisor, however, reserves the right to conduct the inspections without prior notice to the Franchisee.
• 14.4 Restrictions on Products and Services. The Franchisee is prohibited from offering or selling any products or services not authorized by the Franchisor as being a part of the Licensed Methods. If the Franchisee proposes to offer, conduct or utilize any products, services, materials, forms, items, supplies or services for use in connection with or sale through the FLOYD'S 99 Shop which are not previously approved by the Franchisor as meeting its specifications, the Franchisee shall first notify the Franchisor in writing requesting approval. The Franchisor may, in its sole discretion, for any reason whatsoever, elect to withhold such approval; however, in order to make such determination, the Franchisor may require submission of specifications, information, or samples of such products, services, materials, forms, items or supplies. The Franchisee shall pay and/or reimburse the Franchisor for the reasonable costs of investigation in determining whether such products, services, materials, forms, items or supplies meet the Franchisor's

specifications. The Franchisor will advise the Franchisee within a reasonable time whether such products, services, materials, forms, items or supplies meet the Franchisor's specifications.

• 14.5 Approved Suppliers. The Franchisee shall purchase all products, equipment, materials, supplies and services required for the operation of the FLOYD'S 99 Shop from the Franchisor, from the Franchisor's affiliates, from suppliers designated or approved by the Franchisor or, if there is no designated or approved supplier for a particular product, piece of equipment, supply, material or service, from such other suppliers who meet all of the Franchisor's specifications and standards as to quality, composition, finish, appearance and service, and who shall adequately demonstrate their capacity and facilities to supply the Franchisee's needs in the quantities, at the times, and with the reliability requisite to the efficient operation of the FLOYD'S 99 Shop.
• 14.6 Request to Approve Supplier. If the Franchisee desires to purchase or use products, equipment, supplies, materials or services from suppliers other than those previously approved by the Franchisor, the Franchisee shall, prior to purchasing from or otherwise utilizing any supplier give the Franchisor a written request to approve the supplier. If the Franchisor rejects the Franchisee's requested new supplier, the Franchisor must notify the Franchisee in writing within 30 days of Franchisor's receipt of the Franchisee's request to approve the supplier. The Franchisor may continue from time to time to inspect any suppliers' facilities and products to assure compliance with the Franchisor's standards and specifications. Permission for such inspection shall be a condition of the continued approval of such supplier. The Franchisor will not unreasonably withhold approval of the supplier; however, in order to make such determination, the Franchisor may require that samples from a proposed new supplier be delivered to the Franchisor for testing prior to approval and use. A charge not to exceed the reasonable cost of investigation may be made by the Franchisor and shall be paid by the Franchisee. Approval of a supplier may be revoked upon 30 days prior written notice of the reason for revocation of the approval of a supplier.
• 14.7 Shopping Service. The Franchisor reserves the right to use third party shopping services from time to time to evaluate the operation and quality of the Franchisee's FLOYD'S 99 Shop, including such things as quality of the services rendered, product availability, client service, cleanliness, merchandising and proper use of computers and registers. The Franchisor may use such shopping services to evaluate the Franchisee's FLOYD'S 99 Shop at any time at the Franchisor's expense, without prior notification to the Franchisee. The Franchisor may make the results of any such service evaluation available to the Franchisee, in the Franchisor's sole discretion.

15. MARKS, TRADE NAMES AND PROPRIETARY INTERESTS

• 15.1 Marks. The Franchisee acknowledges that the Franchisor or the Franchisor's affiliate Floyd's 99 Holdings, LLC, has the sole right to own, license and control the Franchisee's use of the "FLOYD'S 99" service mark and other of the Marks, and that such Marks shall remain under the sole and exclusive ownership and control of the Franchisor or Floyd's 99 Holdings, LLC. The Franchisee shall display the Marks prominently at the Barbershop premises and on furnishings and packaging materials and in connection with forms, advertising and marketing, all in a manner as the Franchisor shall reasonably prescribe. The Franchisee acknowledges that it has not acquired any right, title or interest in such Marks except for the right to use such marks in the operation of its FLOYD'S 99 Shop as it is governed by this Agreement. Except as permitted in the Operations Manual, the Franchisee shall not use any of the Marks as part of an electronic mail address, or on any sites on the Internet and the Franchisee shall not use or register any of the Marks as part of a domain name on the Internet.

• 15.2 No Use of Other Marks. No service marks other than "FLOYD'S 99" or such other Marks as may be specified by the Franchisor shall be used in the identification, marketing, promotion or operation of the FLOYD'S 99 Shop.

• 15.3 Licensed Methods. The Franchisee acknowledges that the Franchisor owns and controls the distinctive plan for the establishment, operation and promotion of the FLOYD'S 99 Shop and all related licensed methods of doing business, previously defined as the "Licensed Methods," which include, but are not limited to, the Franchisor's standards and specifications for the franchised site, premises, leasehold improvements, interior finish, interior décor, furnishings, equipment, products, product formulas, supplies, materials, inventory type and control, technical equipment standards, order fulfillment methods, client relations, marketing techniques, written promotional materials, advertising, accounting systems, and service delivery methods, all of which constitute confidential trade secrets of the Franchisor. The Franchisee acknowledges that the Franchisor has valuable rights in and to such trade secrets. The Franchisee further acknowledges that it has not acquired any right, title or interest in the Licensed Methods except for the right to use the Licensed Methods in the operation of the FLOYD'S 99 Shop as it is governed by this Agreement and that it is obligated to maintain the confidentiality of the Licensed Methods in accordance with Section 22.3 below.

• 15.4 Mark Infringement. The Franchisee shall notify the Franchisor in writing of any possible infringement or illegal use by others of a trademark the same as or confusingly similar to the Marks or of any copyrighted work of the Franchisor which may come to its attention. The Franchisee acknowledges that the Franchisor shall have the right, in its sole discretion, to determine whether any action will be taken on account of any possible infringement or illegal use. The Franchisor may commence or prosecute such action in the Franchisor's own name, the name of Floyd's 99 Holdings, LLC and may join the Franchisee as a party to the action if the Franchisor determines it to be reasonably necessary for the continued protection and quality control of the Marks, Licensed Methods and copyrighted works. The Franchisor shall bear the reasonable cost of any such action, including attorneys' fees. The Franchisee must fully cooperate with the Franchisor in any such litigation. The Franchisor shall indemnify and hold the Franchisee harmless from, and reimburse the Franchisee for, any loss, liability, claim or damages (collectively, the "Claims"), and all reasonable costs, expenses and attorneys' fees incurred defending any Claims brought against the Franchisee, or in any action in which the Franchisee is named as a party, which arises out of or is related to the Franchisee's authorized use of any Mark or copyrighted work of the Franchisor, which use is in compliance with the terms of this Agreement. The Franchisee shall timely notify the Franchisor of any Claims for which it is seeking indemnity hereunder. The Franchisor, at its option, shall be entitled to control the defense of any action or proceeding involving any Claims.

• 15.5 Franchisee's Business Name and Domain Name. The Franchisee acknowledges that the Franchisor and affiliates of the Franchisor have a prior and superior claim to the "FLOYD'S 99" trade name. The Franchisee shall not use the words "FLOYD'S 99" in the legal name of its corporation, limited liability company or any other business entity used in conducting the business provided for in this Agreement. The Franchisee also agrees not to register or attempt to register an Internet domain name or a trade name with a state using the words "FLOYD'S 99" unless such registration meets the Franchisor's specifications and the Franchisee obtains the Franchisor's prior written consent. When this Agreement expires or terminates, the Franchisee shall execute any assignment or other document the Franchisor requires to transfer to the Franchisor any rights the Franchisee may possess in a trade name or an Internet domain name utilizing the words "FLOYD'S 99" or any other Mark owned by the Franchisor. The Franchisee shall not identify itself as being "Floyd's 99 Franchising, LLC" or as being associated with the Franchisor in any manner other than as a franchisee or licensee or as being associated with any affiliate of the Franchisor. The Franchisee shall, in all advertising and promotion and promotional materials, display its business name only in obvious conjunction with the phrase "FLOYD'S 99 Licensee" or "FLOYD'S 99 Franchisee" or with such other words and in such other phrases to identify itself as an independent owner of the FLOYD'S 99 Shop, as may from time to time be prescribed in the Operations Manual.

• 15.6 Change of Marks and Licensed Methods. The Franchisor may in its sole discretion, discontinue, change, modify or alter the Marks and the Licensed Methods by among other things, adopting or developing

new trademarks, trade names, service marks, copyrighted materials, new services or products, new furnishings, equipment, new signage or new operational techniques ("Alterations"). If the Franchisor shall make any Alterations to the Marks or Licensed Methods, the Franchisee shall, within a reasonable time after receipt of written notice of such Alteration from the Franchisor, take such action, at the Franchisee's sole expense, as may be necessary to comply with such required Alteration. The Franchisee shall not unilaterally change, alter or modify the Marks or Licensed Methods in any way without the Franchisor's prior written consent which may be withheld in the Franchisor's sole discretion. The Franchisee's approved changes or improvements to the Licensed Methods or the Marks shall inure to the exclusive benefit of the Franchisor.

• 15.7 Creative Ownership. All copyrightable works created by the Franchisee or any of its owners, officers or employees in connection with the Barbershop shall be the sole property of the Franchisor. The Franchisee assigns all proprietary rights, including copyrights, in these works to the Franchisor without additional consideration. The Franchisee hereby assigns and will execute such additional assignments or documentation to effectuate the assignment of all intellectual property, inventions, copyrights and trade secrets developed in part or in whole in relation to the Barbershop, during the term of this Agreement, as the Franchisor may deem necessary in order to enable it, at its expense, to apply for, prosecute and obtain copyrights, patents or other proprietary rights in the United States and in foreign countries or in order to transfer to the Franchisor all right, title, and interest in said property. The Franchisee shall promptly disclose to the Franchisor all inventions, discoveries, improvements, creations, patents, copyrights, trademarks and confidential information relating to the Barbershops and the Licensed Methods which it or any of its owners, officers or employees has made or may make solely, jointly or commonly with others and shall promptly create a written record of the same. In addition to the foregoing, the Franchisee acknowledges and agrees that any improvements or modifications directly or indirectly related to the Barbershop, whether or not copyrightable, shall be deemed to be a part of the Licensed Methods and shall inure to the benefit of the Franchisor.
• 15.8 Alterations for Protection of Marks. The Franchisor may, in its sole discretion but with reasonable notice to the Franchisee, enter into the Franchised Location to make any Alterations required for the protection of the Marks and Licensed Methods, including but not limited to the signs, furniture, fixtures, trade dress or décor of the Barbershop, if the Franchisee refuses to make any Alterations required by the Operations Manual or under the terms of this Agreement. If the Franchisor elects to make such Alteration on the Franchisee's behalf, the Franchisor reserves the right to charge the Franchisee for all expenses incurred by the Franchisor in connection with such Alteration including the Franchisor's travel, lodging, living expenses, telephone charges and other identifiable expenses (such as construction and materials), plus a fee based on the time spent by each of Franchisor's employees or agents on behalf of the Franchisee.

16. SOFTWARE LICENSE

• 16.1 Grant of License. The Franchisor will license one or more proprietary computer software programs (the "Software") to the Franchisee for use in the operation of the FLOYD'S 99 Shop, including any modifications or revisions thereto, all documentation (other than the Software) related to the Software, the tangible media upon which such programs are recorded and the database file structure thereof (collectively, the "Program"). The Franchisor hereby grants to the Franchisee a nonexclusive, nontransferable, fully paid license to use the Program (the "License") for the term hereof, and agrees to provide updates for the Program for the term hereof. The parties agree as follows:

  • a. The Program shall be installed on the computer equipment designated by the Franchisor as meeting its specifications (the "Designated Equipment").

• b. Except with the prior written consent of the Franchisor, the Program shall not be: (i) operated by persons other than the Franchisee and employees of the Franchisee; (ii) operated on more than one computer at a time; (iii) operated on equipment other than the Designated Equipment; or (iv) operated at locations other than the Franchised Location.

• c.

Source: Item 22 — CONTRACTS (FDD pages 57–58)