ITEM 1
THE FRANCHISOR AND ANY PARENT,
PREDECESSORS, AND AFFILIATES
To simplify the language in
this Franchise Disclosure Document, "Extreme Pita", "us" or "we" means The Extreme Pita
Franchising USA, Inc., the franchisor. "You" means the person, corporation, partnership or other
entity that buys the franchise, the franchisee. If a corporation, partnership
or other entity is the franchisee, "you" includes the franchisee''s
owners.
The Franchisor, Its
Predecessors and Affiliates
The Extreme Pita Franchising
USA, Inc. is a Delaware corporation that was incorporated on March 14, 2001 to
operate a franchising business in the United States under the name "The
Extreme Pita". Our principal business address in the United States is 3120 W. Carefree Hwy, Suite #243, Phoenix, AZ 85086, our head office for North America is 2187 Dunwin Drive, Mississauga, Ontario L5L 1X2, Canada. Our agents for service of process are disclosed in Exhibit E. Unless otherwise specified, our registered agent for
service of process is Corporation Service Company, 2711 Centerville Road, Suite
400, Wilmington, Delaware 19808. We are members in good standing of the
International Franchise Association ("IFA") and we therefore comply
with the IFA''s Code of Ethics.
Extreme Pita is
a franchising company which sells and grants franchises for the operation of
retail restaurant businesses ("Extreme Pita Franchise") using the name "EXTREME
PITA�" in the United States. We are not engaged in any other type of
business activity.
We have been offering Extreme
Pita franchises in the United States since March 2001. We have been offering
Area Developer franchises in the United States since April 2004. We do not have
any predecessors, but we do have affiliates. We are affiliated with RDHR
Investments & Holdings, Inc. ("Extreme Pita Canada"), an Ontario corporation that
was incorporated on December 23, 1996. Certain of the principals controlling
The Extreme Pita Franchising USA, Inc. also control Extreme Pita Canada. The principal business address of Extreme Pita Canada is 2187 Dunwin Drive, Mississauga , Ontario, L5L 1X2, and the telephone number is (905) 820-7887. Extreme Pita Canada is the Canadian franchisor of the Extreme Pita franchise and is engaged in the business of
granting and supporting Extreme Pita franchises throughout Canada. Extreme Pita Canada also provides support services to Extreme Pita Stores in the United States pursuant to the terms of the management services agreement ("Management Services
Agreement") between us and Extreme Pita Canada. Extreme Pita Canada operated the original Extreme Pita business from February 1997 until May 2000. Extreme Pita Canada has been offering franchises since October 1997 and as of December 31, 2007 there are
approximately 149 Extreme Pita franchises located throughout Canada. Extreme Pita Canada currently owns and operates two Extreme Pita Stores itself. On or
about February 13, 2001, Extreme Pita Canada became a wholly owned subsidiary
of The Extreme Pita Franchising Canada Inc., an Ontario corporation. The
principal address for The Extreme Pita Franchising Canada Inc. is also 2187
Dunwin Drive, Mississauga, Ontario, L5L 1X2, and the telephone number is (905)
820-7887.Extreme Pita Canada is a member in good standing of the Canadian
Franchise Association ("CFA") and therefore complies with the CFA''s
Code of Ethics.
We also have seven other
affiliates. The Extreme Pita Restaurants Inc. is an Ontario corporation that
was incorporated in January 1999. The Extreme Pita Restaurants Limited is an Ontario corporation that was incorporated in February 2003. Extreme Pita Corporation
Limited is a Canada corporation that was incorporated in November 2004. These
three corporations (the "Leasing Affiliates") locale potential real estate
sites and control the real property leases that are ultimately subleased to
Extreme Pita franchises in the Provinces of Ontario, Saskatchewan, Manitoba and
Quebec (and occasionally the other Provinces of Canada). Neither corporation
has offered franchises or operated an Extreme Pita business. The principal
address for both Leasing Affiliates is also 2187 Dunwin Drive, Mississauga, Ontario, L5L 1X2, and the telephone number is (905) 820-7887 and both companies are
wholly-owned subsidiaries of The Extreme Pita Franchising Canada Inc.
839997 Alberta Ltd. is an Alberta corporation that was incorporated on July 27, 1999. This corporation is the master
franchisee for the province of Alberta, has offered Extreme Pita subfranchises
since July 1999, and is controlled by The Extreme Pita Franchising Canada Inc.
It operated an Extreme Pita business from September 1999 until January 2000.
Extreme Pita Corporation Quebec Inc. was incorporated on December 18, 2003
under the laws of Canada. This corporation has been granted the master
franchising rights for the Province of Quebec and is a wholly-owned subsidiary
of The Extreme Pita Franchising Canada Inc. It has not operated an Extreme Pita
business. The principal address for Extreme Pita Corporation Quebec is also 2187 Dunwin Drive, Mississauga, Ontario, L5L 1X2, and the telephone number is (905)
820-7887. The principal address for 839997 Alberta Ltd. is 214-5403 Crowchild
Trail N.W., Calgary, Alberta, T3B 4Z1 and the telephone number is (403)
640-0975. Extreme Pita Corporation Quebec is 8061 Avenue Jean-Bourdon, Montreal, Quebec, H4K. 2Z2, and the telephone number is (514) 521-7770.
The Extreme Pita Western
Canada Franchising Inc. is a British Columbia corporation that was incorporated
in November 2004. This corporation is the. master franchisee for the province of British Columbia, has offered Extreme Pita subfranchises since February 15,
2005, and is controlled by The Extreme Pita Franchising Canada Inc. It has not
operated an Extreme Pita business in the Province of British Columbia. The
principal address for The Extreme Pita Western Canada Inc. is 214-5403
Crowchild Trail N.W., Calgary, Alberta, T3B 4Z1 and the telephone number is
(403) 640-0975.
Neither we nor our affiliates
do business under any name other than "The Extreme Pita" or
"EXTREME PITA", nor have we offered franchises in other lines of
business. However, as explained in more detail below, we also offer Area
Developer franchises to qualified persons and businesses by way of a separate
Franchise Disclosure Document.
The Business
An Extreme Pita store ("Extreme Pita
Store") is
a retail quick service restaurant selling "wrap-style" hot and cold
pita and wrap sandwiches, flat baked pita, salads, soups, other assorted foods
and drinks, and other menu items related to the Extreme Pita concept. An
Extreme Pita Store serves its customers by operating a uniform system
consisting of high standards of service, the use of consistent quality
products, and in accordance with the business format created and developed by
Extreme Pita ("System").
We
authorize you to use The Extreme Pita trademarks of, and operate an Extreme
Pita Store.
We also offer to select
qualified persons the opportunity to acquire the exclusive right to develop
multiple Extreme Pita Stores in a designated Multiple Unit Territory. If you
arc purchasing a Multiple Unit Territory, you must execute our Multiple Unit
Purchase Agreement and pay us the required Area Multiple Unit Development Fee
(as defined in ITEM 5).
We also offer to select
qualified persons and/or companies the opportunity to acquire the right to
license our Marks and confidential recipes for use in operating at a food
facility that services colleges, universities and other institutions. If you
are purchasing an institutional license, you must execute a separate agreement,
our Institutional License Agreement which you may request from us. Due to the
unique nature of these other channels of distribution, these institutional
providers may pay reduced or may pay no Royalties, marketing contributions and
advertising contributions in comparison to other Extreme Pita franchisees and
may not be required to participate in Local Advertising Cooperatives.
Certain franchise operators
and other experienced business people are offered the opportunity to become
Area Developers ("Area Developers"). The Area Developer is responsible for locating
potential franchise operators in the Area Developer''s Territory ("AD Territory") franchise sales, on-going
training, site selection assistance and ongoing operational and marketing
support to franchise operators located in the AD Territory. Each Area Developer
also makes recommendations as to whether a prospective franchisee in the AD
Territory should be granted a franchise. We take such recommendations into
consideration when determining whether a franchise will be granted. Area
Developers are compensated for the services they provide to franchise operators
in their AD Territories (see ITEM 5). We prohibit Area Developers from
making any representation regarding sales, expenses or profits to you.
Additionally, we require Area Developers to abide by all federal and stale laws
in the performance of their duties. Area Developers are independent contractors
and not our employees. The opportunity to purchase an Area Developer franchise
is made available only to certain qualified persons or businesses and is made
by a separate Franchise Disclosure Document. If you purchase an Extreme Pita
Store located in an AD Territory, you may receive some or all of your ongoing
training and ongoing support from the Area Developer in that AD Territory. A
list of our Area Developers is included in Exhibit J.
Market and Competition
Throughout the United States, the food service industry is highly competitive with constantly changing
market conditions, and is characterized by a profusion of operators, including
well-financed and highly sophisticated national and regional chains. Extreme
Pita Stores will compete with restaurants, fast food outlets and sandwich
stores operated by national and regional chains and independent operators and,
to some extent, with grocery and convenience stores that sell various prepared
food products. Extreme Pita Stores will compete with these competitors for
market share, access to desirable locations, and food service personnel.
Extreme Pita Stores will offer Extreme Pita Products (as defined in ITEM 16)
primarily to individual consumers for on-site or off-site consumption. The
market for pita sandwich stores is well-developed in some areas and developing
in other areas, depending on the number of restaurants and stores operating in
the particular area. Extreme Pita Stores appeal to a wide range of customers
because of their perceived quality, taste and health of its products. You are
given the opportunity to enter into a unique and evolving market with
relatively limited competition from other pita sandwich-based chains.
Extreme Pita markets Extreme
Pita Products to consumers seeking the convenience of quick food service while
also seeking a fresh healthy alternative to typical fast food. You will have to
compete with other food service businesses, including other franchised
operations or restaurants. Investing in an Extreme Pita Store is a speculative
risk and there are no warranties for your success. You will also face normal
business risks that could have an adverse affect on your Extreme Pita Store.
These include industry developments, such as pricing policies of competitors,
supply and demand, and changing consumer tastes. Another potential risk factor
is our dependence on personnel, the loss of whom could have an adverse affect
on us. Our ability to fulfill our obligations under our Franchise Agreement or
Multiple Unit Purchase Agreement depends in part on our present and nature
financial condition. Litigation risks also exist, including product liability
litigation against you or us because of food-related illnesses and future
litigation which may not be foreseeable.
Regulations
Your Extreme Pita Store will
be subject to various federal, state and local health and sanitation laws that
apply to restaurant operations. See Exhibit I, which summarizes certain special laws applicable to
this business. In addition, your business will be subject to various employment
regulations concerning wage rales, mandated employee benefits, employment
taxes, tip reporting, worker safety, unemployment compensation, workers''
compensation, teenage labor practices, disabled employees and discrimination in
employment practices. Environmental regulations will impact your restaurant
operations, particularly in the area of sewer discharge. You will be subject to
the Americans with Disabilities Act which prohibits practices that discriminate
against physically and mentally challenged individuals regarding access to
public accommodations and employment opportunities. You must report and pay
various sales, excise, property, income, use and inventory taxes. Additionally,
you must obtain various licenses and permits at the federal, state and local
level in order to conduct business including, but not limited to, those related
to food preparation. The laws in your state or municipality may be more or less
stringent, but failure to comply with the above governmental regulations could
have a material adverse impact on you and your business. You should examine
these laws before purchasing an Extreme Pita Franchise.
