ITEM
1
THE
FRANCHISOR, AND ANY PARENTS, PREDECESSORS, AND AFFILIATES
The Franchisor, Its Parent,
Predecessors, and Affiliates
The Franchisor is Flip Flop
Shops Franchise Company, LLC, referred to in this disclosure document as
"we," "us" or "our." We refer to the person
interested in buying a franchise as "you" or "your." If you
are a corporation, partnership, limited liability company or other entity,
certain provisions of the Franchise and Development Agreements will apply to
your owners. These will be addressed in this disclosure document where
appropriate.
We were organized as a Delaware limited liability company on August 24, 2007. Our principal business address is
2774 North Cobb Parkway, Suite 109-334, Kennesaw, Georgia 30152.
We do business under our
corporate name and under the name the "Flip Flop Shops". Our agents
for service of process in the states which require franchise registration are
listed in Attachment 13.
We sell franchises for retail
stores that specialize in the sale of flip flops and sandals and related
footwear and accessories (the "Flip Flop Shops Stores" or
"Stores"). Flip Flop Shops Stores do business under the name
"Flip Flop Shops" and other trademarks identified in Item 13 (the
"Marks"). We do not operate any Flip Flop Shops Stores, but Flip Flop
Shops, Inc., an entity related to us, has owned and operated Flip Flop Shops
Stores since September 24, 2004 (See Item 20).
We began to offer franchises on
October 9, 2007. We are not engaged in any other businesses and have never
offered franchises in any other lines of business.
Our parent is FFS Holdings, LLC ("Holdings").
Moldings shares our principal business address.
Our Chairman, Todd Gialrelis,
founded GGF, LLC, a Massachusetts limited liability company ("GGF"),
which offers franchises for businesses providing staffing and recruiting
services to the restaurant and hospitality industries under the name
"Gates Group" ("GGF Businesses"). GGF'' has been offering
franchises for GGF Businesses since January 2005. As of the date of this
disclosure document, GGF has sold I franchise for a GGF Business. GGF has never
offered franchises in any other line of business and does not operate any other
businesses. GGF''s principal business address is 1336 Spectrum, Irvine, CA 92618.
Except as described above, we have no predecessors or
affiliates.
The Franchise
We offer qualified applicants
franchises for Flip Flop Shops Stores that operate under the Flip Flop Shops
System (the "System"). The System includes distinctive exterior and
interior design, decor, and color scheme; furnishings; uniform standards,
specifications, policies and procedures for operations; quality and uniformity
of the products and services offered; procedures for inventory, management and
Financial control; training and assistance; record keeping and reporting; and
advertising and promotional programs, all of which may be changed, improved,
and further developed by us periodically. You must operate your Flip Flop Shops
Store under the Marks and use other trade names, service marks, trademarks,
logos, and other symbols wc designate (or may later designate) in writing for
use in the System.
The Franchise Agreement
(Exhibit C to this disclosure document) gives you the right to establish and
operate I Store at a specified location. If you do not sign a Development
Agreement (discussed below), the location for the Store will be in the
Designated Area described in the Site Addendum to Franchise Agreement. The size
of the Designated Area will vary depending on local market conditions and other
factors. The Designated Area will be determined before you sign the Franchise
Agreement. (See Item 12)
We also offer qualified
applicants the right to enter into a Development Agreement (the
"Development Agreement") to develop multiple Stores within a
specifically described geographic area (the "Territory"). The size of
the Territory will vary depending on local market conditions and the number of
Stores to be developed. The Development Territory will be determined before you
sign the Development Agreement and will be described in Attachment E to the
Development Agreement. (See Item 12) You must develop the number of Stores
contemplated by the Development Agreement in the Territory according to a
development schedule and must enter into a separate Franchise Agreement for
each Store established.
The Franchise Agreement for the
first Store developed under the Development Agreement will be in the form of
Exhibit C to this disclosure document and must be signed within 90 days after
the Development Agreement is signed. For each additional Store developed under
the Development Agreement, you must sign the form of Franchise Agreement that
we are then offering to new franchisees, except that the initial franchise fees
will be as provided in the Development Agreement, and the royally and
advertising expenditure percentages will be the same as those in the Franchise
Agreement at Exhibit C to this disclosure document.
We may require your current and
future Principals (as defined in the Agreements) to sign a Guaranty and
Assumption Agreement ("Guaranty"), guaranteeing your performance and
binding themselves individually to certain provisions of the Agreements,
including the covenants against competition and disclosure of confidential
information, restrictions on transfer and dispute resolution procedures. Those
of your Principals who are not required to sign the Guaranty will each sign a
Confidentiality Agreement and Ancillary Covenants Not to Compete, with
Principal''s undertakings, in the form attached to the Agreements. (See Item 15)
You must designate an
"Operating Principal" under the Agreements. Your Operating Principal
is the main individual responsible for your business. If you are an individual,
you will be the Operating Principal. If you arc not an individual, you must
designate someone who meets our requirements and whom we approve to be your
Operating Principal. Your Operating Principal must have and maintain at least
10% ownership interest in you. Your Operating Principal will sign the Guaranty.
The person or entity signing
the Development Agreement is the "Developer" and the person or entity
signing the Franchise Agreement is the "Franchisee." In this
disclosure document, the terms "Principals" "and "Operating
Principal" include tiiosc persons having similar obligations identified in
both the Development Agreement and Franchise Agreement, and the terms
"you" and "your" include the Developer under the
Development Agreement and the Franchisee under the Franchise Agreement unless
we have noted otherwise. Any reference to the "Agreements" means the
Development Agreement and the Franchise Agreement, as applicable.
Competition
The market for footwear,
including flip flops and sandals and related accessories, is well-established
and highly competitive. There is active price competition among general and
specialty stores that sell flip flops and sandals and similar footwear, as well
as competition for management personnel and for attractive commercial real
estate sites suitable for retail stores. You must expect to compete with other
stores offering Hip flops, sandals, footwear, and related accessories,
including department stores and footwear stores (including stores that sell
surfing equipment). Competitors may be locally-owned or large regional or
national chains. The retail footwear business is also affected by changes in the
seasons, consumer taste, demographics, traffic patterns and economic
conditions.
Industry
Specific Regulation
The sale of retail merchandise
to consumers is subject to legal requirements and you should obtain assistance
in evaluating and complying with applicable federal, state and local laws,
rules and regulations. Many of the laws, rules and regulations that apply to
business generally, such as the Americans With Disabilities Act, Federal Wage
and Flour Laws and the Occupational Safety and Health Act, also apply to retail
clothing stores. However, some jurisdictions may have other laws, rules and
regulations that have particular applicability to retail footwear stores. You
should consider these laws and regulations when evaluating your purchase of a
franchise.
