ITEM 1.
THE FRANCHISOR, AND ANY
PARENTS, PREDECESSORS AND AFFILIATES
Baja Sol Franchising, Inc.
("we," "us," "our," "ours," or the
"Company") is a Minnesota corporation, incorporated on March 22,
2000, with its principal place of business located at 2922 Upper 55th Street,
Inver Grove Heights, Minnesota 55076. Our phone number is (651) 554-1111. Our
agent for service of process is listed in the State Agency Exhibit attached to
this Franchise Disclosure Document.
Our affiliated company,
formerly called Baja Sol, Inc. (see next paragraph), a Minnesota corporation,
was founded by Mr. Michael Piatt, its founder and former Chief Executive
Officer, in January 1995 (the "Affiliate"). Our predecessor, Tortilla
Ventures, Inc., a Delaware corporation, was incorporated on November 1, 1994
(the "Predecessor"). The Predecessor developed the concept for a
fresh food Mexican restaurant called Baja Tortilla Grill and originally began
franchising in 1995. In 1995, Mr. Piatt became intrigued with the Baja Tortilla
Grill concept and led a group of investors in acquiring certain territorial
franchise rights to Baja Tortilla Grill from the Predecessor. Mr. Piatt and
some of the Company''s investors also invested in the Affiliate. In 1995, the
Affiliate, with Mr. Piatt''s leadership, built the Affiliate''s first Baja
Tortilla Grill on Hennepin Avenue in Minneapolis, Minnesota in a joint venture
with the Predecessor. In October 1995, the Affiliate acquired the Predecessor''s
interest, and negotiated a Master Franchise Agreement. In October 1998, the
Affiliate acquired the Predecessor, and the Affiliate now owns the exclusive
rights to certain Baja Tortilla Grill business assets of the Predecessor,
including the core concept, menus, and trademarks with the rights to license or
franchise them worldwide. The Affiliate is the parent of the Company. In 2000,
the Company began to offer franchises to operate Baja Sol restaurants
specializing in high quality, quick service Mexican food at very reasonable
prices.
In October 2006, Sutton
Enterprises, LLC, a Minnesota limited liability company with principal offices
at the same location as the Company, acquired the Affiliate, the Company and
the affiliated entities that own and operate the Baja Sol restaurants in Minnesota (see Item 20). In conjunction with this transaction, the management of the
Company was transferred to certain individuals listed in Item 2 of this
Franchise Disclosure Document, and the name of the Affiliate was changed to
Baja Sol Restaurant Group, Inc.
Franchised
Business
The Franchisee
("you") will conduct the retail business from one fixed site (the
"Location"). You will do business under the names "Baja
Sol�," "Baja Sol Tortilla Grill�," "Baja Sol Grill &
Cantina�," "Baja Sol Express�" or "Baja Joe''s Beachfront
Grill�." For purposes of convenience, the trade names you will be
authorized to use will collectively be referred to in this Franchise Disclosure
Document as "Baja Sol" or the "Marks," unless designated
individually.
We have the right to license
the system to be franchised (the "System") and the name "Baja
Sol" and the other Marks as described in the attached Franchise Agreement
(the "Franchise Agreement"). You are licensed to use the System and
the Marks, trade secrets and other confidential information to conduct the
franchised Baja Sol� restaurant business (the "Business" or the
"Franchise") at retail only at the Location.
We grant franchises to
qualified candidates for the operation of Baja Sol restaurants offering
high-quality, quick-service Mexican food to value-oriented customers in a
bright and crisp restaurant environment. A Baja Sol restaurant design requires
a relatively small physical space (approximately 2,100 square feet with seating
for about 50 customers), although somewhat larger units have been opened with
additional seating, table service and a bar for the service of alcoholic
beverages (see below). Tortillas are freshly made in plain sight of the
customers. A wide range of hand-made salsas are available from a salsa bar. In
addition, Baja Sol restaurants offer all-you-can-eat, self-serve, hot tortilla
chips, free with purchase of any entree. The overall concept is "better
than fast food" Mexican food that is freshly prepared with healthy
ingredients. For example, no MSG, lard or trans fats will be used.
The Baja Sol Express concept
offers the most popular fresh Mexican food in the fastest service model. A Baja
Sol Express restaurant serves burritos, tacos, quesadillas, nachos and salads
with service times geared toward those in a hurry. As with all of our concepts,
exclusive salsas and chips come gratis with every entree order. The Baja Sol
Express concept is ideal for food court locations such as malls, school
campuses and stadium settings.
The St. Cloud location has been
a Baja Joe''s restaurant since September 2006. The Baja Joe''s concept is ideal
for smaller locations and food courts, and combines everyone''s favorite Mexican
food with the Ail-American favorite hamburger. The Baja Joe''s restaurant serves
burritos, tacos, chicken sandwiches and chargrilled burgers with a choice of 12
different toppings, and free chips and salsa.
The Baja Sol Grill &
Cantina ("Cantina") concept is a full-service casual dining Mexican
restaurant with table service and a full service bar for serving alcoholic beverage.
This concept also offers express to-go service, catering and warm weather patio
dining. Unless otherwise specified, all references to the Business or the Baja
Sol restaurant(s) in this Franchise Disclosure Document will include Baja Sol,
Baja Sol Express, Baja Sol Cantina and Baja Joe''s restaurants.
The Company focuses on
differentiating Baja Sol restaurants from traditional Mexican fast food
restaurants. The restaurant is designed to give the concept a primarily
contemporary American atmosphere: bright and crisp, with no hint of sombreros
or donkeys. Freshness and health dominate the Baja Sol approach. Freshly made
tortillas are the cornerstone of the Baja Sol concept.
Baja Sol restaurants locate the
food assembly area in full view of the customers, where they can view the
products being assembled as well as the unique tortilla machine producing fresh
aromatic tortillas. Although prices may be slightly higher than those found in
other fast food chains, the Company believes customers will recognize and value
the quality level offered by Baja Sol restaurants.
The Mexican food products
offered by Baja Sol restaurants can be prepared at home with sufficient
knowledge, access to the ingredients, and a reasonable amount of time and
effort. The Company believes, however, that customers will patronize a Baja Sol
restaurant to enjoy the fresh taste and texture of its products which may be
difficult to duplicate at home and at other fast food restaurants; that the
quick and convenient service provided by a Baja Sol restaurant will draw
customers out of their kitchens. Finally, Baja Sol restaurants deliver value to
its customers in the form of high quality, healthy and fresh food for a
reasonably inexpensive price.
Regulations Specific to Food
Service Industry
The food service industry is
heavily regulated. All Baja Sol restaurants must comply with federal, state and
local laws applicable to the operation and licensing of food service
businesses, including obtaining all applicable health permits and inspections
and approvals by municipal, county or state health departments that regulate
food service operations. Your Business must also meet applicable municipal,
county, state and federal building codes and handicap access codes. You should
consider these laws and regulations when evaluating your purchase of the
Franchise.
You must have a liquor license
before you can sell alcoholic beverages at a Baja Sol Cantina restaurant. The
difficulty and cost of obtaining a liquor license, and the procedures for
securing the license, vary greatly from area to area. There is also wide
variation in state and local laws and regulations that govern the sale of
alcoholic beverages. State dram shop laws may result in liability for injuries
that directly or indirectly relate to the sale and consumption of alcohol.
The U.S. Food and Drug
Administration, the U.S. Department of Agriculture and state and local health
departments administer and enforce regulations that govern food preparation,
service and sanitary conditions. State and local agencies inspect food service
businesses to ensure that they comply with these laws and regulations.
The Federal Clean Air Act and
various state laws require certain state and local areas to meet national air
quality standards limiting emissions of ozone, carbon monoxide and particles,
including caps on emissions from commercial food preparation. Some state and
local governments also regulate indoor air quality, including limiting the use
of tobacco products in public places.
Prior Business
Experience of the Company, the Affiliate and the Predecessor
From January 1995 to October
1995, the Predecessor and the Affiliate were joint venture partners in Midwest
Tortillas, LLC, which began operating a Baja Sol restaurant in Minneapolis in June 1995. In October 1998, the Affiliate acquired the Predecessor''s
interest in the joint venture. The Affiliate now owns the exclusive rights to
certain assets of the Predecessor, including the core business concept, menus,
and trademarks with the rights to license or franchise them worldwide.
The Company has never operated
any Baja Sol restaurants. However, as of December 31, 2007, the Affiliate,
through related entities, owns and operates four Baja Sol restaurants, all
located in the State of Minnesota. These restaurants are listed as
affiliate-owned restaurants in Item 20 and Exhibit A of this Franchise
Disclosure Document. In addition, JC Food Systems, LLC, an entity wholly-owned
by the Affiliate''s parent, Sutton Enterprises, LLC, owns and operates the Baja
Sol restaurants at City Center and U.S. Bank Plaza, both in downtown Minneapolis, Minnesota. These restaurants are included as franchised locations in Item 20
and Exhibit A to this Franchise Disclosure Document.
A wholly-owned subsidiary of
Sutton Enterprises, LLC opened a Baja Sol Grill & Cantina in Inver Grove Heights, Minnesota in 2007. This concept is a full-service casual dining
Mexican restaurant with a full bar for the service of alcoholic beverages that
offers express to-go service, catering and a patio for warm weather dining.
This restaurant is listed as an affiliate-owned restaurant in Item 20 and
Exhibit A of this Franchise Disclosure Document.
Neither the Affiliate nor the
Company is currently engaged in business activities, other than the development
of the System and the offer, sale and support of Baja Sol restaurants. The
Company has offered Baja Sol restaurant franchises since 2000, and as of
December 31, 2007, had 10 franchised locations (see Item 20). Otherwise, the
Predecessor, the Affiliate and the Company have never granted Baja Sol
restaurant franchises or franchises in any other line of business during the
last 10 years.
The Company retains the right
to offer, sell and support franchises or dealers in similar and other lines of
business. The Company also retains the right to establish businesses in any
location that offer, through any method of distribution, except those methods
identicaf to the System being offered, products and services identified by the
Marks.
The market for Mexican food
restaurants is well developed, very competitive and still growing. Your
competitors are other national and regional chains and local restaurants, offering
the same or similar products and services. Many of your competitors serve the
same menu items on premises, some of which will be larger, better known and
better financed than we are including, for example, Taco Bell, Taco John''s,
Chipotle, Q-doba, Baja Fresh, Panchero''s, Rubio''s, On the Border, Don Pablo''s
and Salsarita''s. No officer of the Company owns any ownership interests in any
entity that competes with Baja Sol restaurants.
Territory
Development Agreement
If you meet the qualifications
established by the Company, you may enter into a Territory Development
Agreement for the development of multiple Baja Sol Businesses in a designated
geographic area. Under the Territory Development Agreement, you must develop an
agreed upon number of Baja Sol Businesses within an agreed upon period of time.
You will sign a copy of the Territory Development Agreement attached as an
exhibit to this Franchise Disclosure Document. The person or entity entering
into a Territory Development Agreement is referred to in the agreement as the
"Area Developer." If you sign a Territory Development Agreement,
references in this Franchise Disclosure Document to you as the Franchisee may
also include you as the Area Developer under the Territory Development Agreement,
if applicable. You must sign a separate Franchise Agreement for each Baja Sol
Business you develop under a Territory Development Agreement.
