International operation and intermediary selection

Wok to Walk is a young ambitious company with the global appeal. We would like to get as much people as possible to discover our concept and quality. The markets of countries of Western Europe are especially interesting for us, as soon as the market of pan-Asian food is not saturated yet. We would like to open a restaurant in Saint-Petersburg, knowing that it is considered as the most “European” Russian city, but there are some issues that interfere.

Coming to Russian market without sufficient knowledge would be too risky for our company, and that is why we considered finding an intermediary as one of the first steps of further expansion. It is obvious that Russian business people know market a lot better and might have enough experience in opening a food-chain.

Franchising is one of the best possible options in this case, because it permits our brand name to enter foreign market but also minimize the investments and protect from high risks. It is also well-known that this form intermediary is popular among food-chain businesses and the effectiveness of it is proven by many companies.

Franchising is able to provide relatively quick and rather easy expansion, as soon as the local franchisee already has some necessary business connections in the field, knows the territory, the cultural background, customs and habits of the potential customers.

It is considered to be the cheapest way to spread the brand and the concept on a large territory. Our company will provide the brand name as well as the business concept and the possible experience that we have gained. The franchisee has no right to change the granted logo, concept or design. We also provide some marketing outlines, as soon as the philosophy of the brand, the concept itself should be the same no matter where the Wok to Walk restaurant is located. It means that we keep all the control upon our concept.

We have developed the Wok to Walk concept and have established a reputation and distinctive image with the public for the Wok to Walk restaurant, and now we wish to expand our franchised network and are therefore willing to grant the rights set out herein to enable our franchisee to operate a Wok to Walk restaurant from the premises. The detailed outline of the franchising agreement can be found in Appendix 3. Here we present the comments on the most important articles of the contract:

Article	Comment
Assignment of a middlemen	Search for a franchisee that will comply will all the necessary requirements
Territory	As we are willing to expand to the Russian market the territory of the franchising agreement is within the official borders of Russia. The first restaurant is to be open in Saint-Petersburg.
Term	10 years from the opening of the first restaurant
Exclusivity	Non-exclusive as we want to be able to grant the franchise to other prospective vendors in the region (Subway expansion model)
Conditions for expiration/termination of intermediary agreement	The contract expires in the 10 year period from the opening of the first restaurant unless earlier termination by one of the Parties. Franchisee can terminate the agreement on any grounds available by law. Franchisor may terminate the agreement if the Franchisee becomes insolvent, fails to provide the necessary fees, sells unauthorized products or services, fails to acquire an accepted location within time required, fails to remodel when required, fails to open Restaurant when required, fails to comply with any term and condition of the agreement.
Kinds of intermediary’s compensation	Francisee is to provide Franchisor with: Initial fee (to be paid 3 months before the planned date of opening): – 1^st venue: 30 000 EUR – 2^nd venue: 25 000 EUR – 3^rd venue: 20 000 EUR – 10 000 EUR any subsequent venue Royalty: 8% of pre-tax profit All the other profit goes to Franchisee
Obligations of the Parties	WOK TO WALK Franchise BV is to: Provide: · the site selection guidelines and assistance · four-week training program · set of prototypical architectural and design plans and specifications · signage, in-store materials and equipment at a reasonable cost · list of Our approved suppliers · advertising and promotional materials for use in the pre-opening promotion · operational support · quality control support · use of the “Wok to Walk” name LLC Wok To Walk Russia is to • Conduct its business at all times in compliance with the operating rules prescribed by the Franchisor • Meet the minimum requirements • Participate in four-week training program • Obtain all the necessary licenses and authorizations in compliance with the Franchisee’s home country regulations • Bear all the costs related to the opening and to the further operation of a venue • Comply with all the regulations concerning trademarks and proprietary information • Provide the required financial reports to the Franchisor • Agree to periodic quality reviews held by the Franchisor • Transfer all the required fees in time
Minimum Requirements	Minimum financial requirements: • Minimum liquidity of 300,000 EUR • Minimum Net Worth of 1,000,000 EUR Venue requirements: • Dining area: 35-70m2 • Kitchen: 15-20m2 • Storage: 8-15m2 • Seating capacity: 20-45 • Exhaust hood system • All necessary licenses and authorizations, incl. signage • Outdoor signs must be clearly visible at a distance of 25m

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