2018 Franchise Disclosure Document for Beyond Food Mart

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  • 1 unit locations

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Business Description

We are a California corporation organized July 8, 2016. We have no predecessors. Our principal business address is 4300 Edison Avenue, Chino, California 91710 (“Beyond Office”). We do business under the name Beyond Food Mart®. Our shareholders also own two related entities. One is Beyond International, LLC, a California limited liability company (the “LLC”) that owns the Beyond Food Mart® trade name (the “Name”) and trademarks and the trade dress and other intellectual property used by Beyond Food Mart® businesses (collectively, the “IP”) and licenses them to us with permission to sublicense to franchisees. We obtained the rights to use the Name, Marks (as defined below), and IP that we grant you through a license from the LLC. The second related entity is Beyond Food Mart, Inc., a California corporation (the “Corporation”) to which the LLC has licensed the Name, Marks, and IP and given the right to develop Beyond Food Mart® locations. The Corporation may operate some of those locations or may sell or lease the real property to persons or entities who enter into Beyond Food Mart® franchise agreements with us. The locations the Corporation operates will use the same trade name, trademarks, trade dress, and business operating method we license to you and sell substantially the same merchandise you will sell but will not be bound by a Franchise Agreement so long as the Corporation operates them itself.

Prior Experience

We began our business in January 2017. In February 2017 we assumed the LLC's obligations under the two Beyond Food Mart® Franchise Agreements it entered into in exempt transactions in 2015. As described above, the LLC has also retroactively assigned to us the Beyond Food Mart® Franchise Agreements it entered into in December 2016 and June 2017. We do not presently operate any company-owned Beyond Food Mart® locations and do not expect to open or operate any company-owned Beyond Food Mart® locations. The Corporation currently operates two Beyond Food Mart® locations and is currently developing and expects to continue to develop additional Beyond Food Mart® locations that it will operate permanently or until it sells the assets to an operator that enters into a Franchise Agreement with us. We began offering Beyond Food Mart® franchises on June 7, 2017. We have not offered franchises in other lines of business nor do we presently engage in any other businesses. The LLC sold two exempt franchises in 2015 and sold two more franchises in 2016 and 2017, as described above, but will no longer offer franchises. Our agent for service of process is Mark Sater, 4300 Edison Avenue, Chino, California 91710.

Business Offered

We offer franchises for the development and operation of a Beyond Food Mart® convenience store (individually a “Beyond Food Mart®” and collectively “Beyond Food Marts”) at a specified location, usually a motor fuel and power retailing facility or similar location. Each Beyond Food Mart® sells a variety of groceries and packaged food, hot and cold prepared food, snacks, candy, and other packaged goods, pastries, ice cream and frozen desserts, hot and cold beverages and soft drinks, toiletries, magazines and newspapers, hats, novelty items, sundries, and other products and services we designate or approve (including some private label merchandise), as well as beer and wine (if they can legally be sold at the location), some tobacco products you select (if tobacco can legally be sold at the location), and some inventory you select subject to our approval, which may include hard liquor if it can legally be sold at the location and we approve. A Beyond Food Mart® typically occupies between 1,600 and 7,000 square feet of retail space with most stores having about 2,500 square feet of space, usually in a motor fuel and power retailing facility but sometimes in a storefront, office building, or mini-mall location. Most Beyond Food Marts will not have any sit down eating or other space but some may. FDD1905 3 of 59 Beyond Food Marts use the Name and the trade and service marks Beyond Food Mart® (both with and without the word Beyond with the letter “y” in the shape of a root vegetable), Fountain Falls® , Glacial Aisle® , and Frosty Peak® and other marks, commercial symbols, logos, and trade identifiers we may designate at any time (all of which together we call the “Marks”), as well as our unique methods and techniques for the design, development, stocking, and operation of convenience stores, including proprietary layout, décor, and trade dress, our unique product mix and variety, our business management methods and procedures developed through years of convenience store operating experience, our unique approach to customer service, and our proprietary training and quality maintenance procedures and standards, as well as other Beyond Food Mart® business operating, management, accounting, and administration techniques and methods, all of which together we call the “Beyond Food Mart® Method”. The success of your relationship with us and the success of the Beyond Food Mart® franchise system (the “System”) depend on your strict adherence to our specific practices, procedures, methods, and standards of quality and performance that you are required to follow meticulously in all aspects of the development, maintenance, and operation of your Beyond Food Mart®. We can change our requirements as we deem necessary and those changes may make it necessary for you to spend additional money on your franchised business. Like every business, investing in and operating a Beyond Food Mart® franchise involves many significant economic risks that cannot be eliminated. Significant investment beyond what is described in this Franchise Disclosure Document may be required for you to succeed. Your revenue, profit, income, and success are dependent on many factors, including your personal financial, management, and other business skills, resources, acumen, and judgment, your willingness to work hard and invest in the success of your business, and your adherence to the Beyond Food Mart® Method. We cannot and do not guarantee your success.

Initial Fees

Initial Franchise Fee. All franchisees pay us a $30,000 initial franchise fee in a lump sum. You will pay the initial franchise fee on the first to occur of the (a) fifth day of the calendar month after the calendar month in which the Franchise Location first has Gross Revenue (as defined in the Franchise Agreement) of no less than $45,000, (b) fifth day of the 31st calendar month after the date the Franchise Location opens for business (the “Term Commencement Date”), or (c) date you are in default under the Franchise Agreement. The initial franchise fee is fully earned when paid and is not refundable. FDD1905 6 of 59 Franchise Location Furniture, Fixtures, and Equipment unless you purchase a turnkey location, you must purchase from us or our affiliate all of the furniture, fixtures, and equipment you are required to install in your Franchise Location. These payments will be between $200,000 and $650,000. These payments are not refundable.

Financing

After you select a Franchise Location we approve, we will give you the Estimate (as defined in Item 6, Note 4) and, if you have real property security with the value we require, as described in the next paragraph (unless we choose to forego our right to require real property security), tell you the Beyond Loan Amount (as defined in Item 6, Note 4) but that will not be more than $650,000 and may be less than that and less than the cost of acquiring and installing the Financeable FFE (as defined in Item 6, Note 4). If you are purchasing a turnkey location, we tell you the Turnkey Beyond Loan Amount (as defined in Item 6, Note 4) but that will not be more than $650,000 and may be less than that and less than the cost of acquiring the Financeable FFE. The interest rate on the Beyond Loan or the Turnkey beyond Loan will be 9% per annum. Because, as described below, we may forgive one-twentieth of the loan at the end of each year of your operation of your Beyond Food Mart® and all accrued interest at the end of the loan term, if you do not default under the Franchise Agreement, the promissory note, or any other agreement with us or any of our affiliates, meet the necessary performance standards, pay all your suppliers as and when due, and the Franchise Agreement is not terminated or cancelled for any other reason, the entire Beyond Loan Amount will be forgiven by the end of the 20 year term of the Franchise Agreement. FDD1905 30 of 59 You must give us a (i) Secured Revolving Promissory Note that provides for annual payments of one-twentieth of the Beyond Loan Amount with the outstanding balance of principal and accrued interest all due in 20 years or upon earlier termination of the Franchise Agreement for any reason, (ii) Deed of Trust with Assignment of Rents and Fixture Filing (the “DOT”) to the Franchise Location real property if you own it, a leasehold mortgage in the form of a DOT if you are the ground tenant of the Franchise Location, or a DOT to other real property and improvements approved by us that is owned by you or your affiliate that is the guarantor of the Secured Revolving Promissory Note (one prerequisite for approval being that the owned real property, whether it is the Franchise Location of other real property you or your guarantor affiliate owns, must have an appraised value (as shown by an MAI appraisal obtained by us and paid for by you) at least 20% greater than the total amount of indebtedness secured by the real property after your DOT securing the Secured Revolving Promissory Note is recorded), all unless we choose to forego receiving real property security, (iii) Conditional Assignment of Leasehold Interest and Landlord's Consent and Waiver if you lease the Franchise Location, (iv) Lender's Consent, Fixture Waiver, and No disturbance Agreement from any senior lender on the real property that is the subject of the DOT or leasehold mortgage; (v) title report issued by a title company we designate showing that any DOT will have a lien with a no more than second or third priority, whichever we select, (vi) Loan and Security Agreement pledging all the assets, present and future, of the Beyond Food Mart® that are owned by you, and (vii) personal guaranty from you or each of your owners and the owner of any real property you do not own that is the subject of a DOT and each of its owners (items (i) through (iv), (vi), and (vii) are called the “Loan Documents”). We may obtain an MAI appraisal prior to approving the real property security and may obtain one or more updated appraisals at any time during the term of the Secured Revolving Promissory Note. If when the Loan Documents are delivered, at any time prior to or upon recordation of any DOT, or at any time during the term of the Secured Revolving Promissory Note the real property security, if any, has less than the priority we have agreed to or the total amount of indebtedness is more than 80% of the value of any real property that secures the loan (either, a “Shortfall”), we may terminate the Franchise Agreement and accelerate payment of the Secured Revolving Promissory Note if you do not take all action necessary to cure the Shortfall within 10 days after we deliver notice of the Shortfall. If we make the Beyond Loan, we will advance payments as and when necessary to purchase the Financeable FFE, up to the total Beyond Loan Amount, directly to the contractor, sellers of the FFE, and other suppliers or installers of materials, goods, and services that are part of the Work (as defined in the Franchise Agreement). If for any reason, whether or not foreseen, the Build Out cost exceeds the Beyond Loan Amount or the Estimate, you must pay that excess amount (the “Excess”) to the contractor within five days after notice of the amount of the Excess is delivered to you. If the Build out Cost exceeds the Beyond Loan Amount or the Estimate for any reason and you do not deliver the Excess within five days after demand, we may terminate the Franchise Agreement by delivering written notice of termination. You must pay directly all the costs of developing a Beyond Food Mart® on the Franchise Location site that are not included in the Beyond Loan Amount, whether those are costs for items or work other than the acquisition and installation of the Financeable FFE or costs that exceed the Estimate for any reason. The Secured Revolving Promissory Note will require equal annual payments of principal every year for 20 years. On the business day after the last day of each 365 day period after the Term Commencement Date (a “Franchise Agreement Year”) during which you fully and timely perform all of your obligations under the Franchise Agreement and any other agreement between you and us or any of our affiliates (including, without limitation, the Secured Revolving FDD1905 31 of 59 Promissory Note and any other promissory note from you or any of your affiliates to us or any of our affiliates) and pay as and when due all the vendors and others who provide goods or services to your Beyond Food Mart® (collectively, “Fully Performed”), we will forgive the annual principal payment on the Secured Revolving Promissory Note for the preceding Franchise Agreement Year. We will issue you an Internal Revenue Service Form 1099 or other appropriate document memorializing the principal forgiveness each year. At the end of the Secured Promissory Note term we will forgive all accrued interest if you have Fully Performed throughout the term. We will issue you an Internal Revenue Service Form 1099 or other appropriate document memorializing the interest forgiveness. We do not guaranty your lease or any other obligation you incur.

Franchisee Revenue and Profit

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances. We do not make any representations about a franchisee's future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor's management by contacting Mr. Mark Sater, 4300 Edison Avenue, Chino, CA 91710, telephone (909) 465-4101, the Federal Trade Commission, and the appropriate state regulatory agencies.