Key Items to Watch out for in the Dippin’ Dots Franchising, L.L.C. 2020 FDD

Certain states require that the following risk(s) be highlighted: 1. Out-of-State Dispute Resolution. The franchise agreement requires you to resolve disputes with the franchisor by arbitration and/or litigation only in Oklahoma. Out-of-state mediation, arbitration, or litigation may force you to accept a less favorable settlement for disputes. It may also cost more to mediate, arbitrate, or litigate with the franchisor in Oklahoma than in your own state.

Certain states may require other risks to be highlighted. Check the “State Specific Addenda” (if any) to see whether your state requires other risks to be highlighted

Item 5: Initial Fees

The initial franchise fee is $15,000 payable in full upon the opening of your Dippin’ Dots(R) Franchised Business. This fee is not refundable. If you wish to operate more than one fixed-location, store or kiosk, you may purchase additional Dippin’ Dots(R) franchises at $10,000 per each additional fixed location, store or kiosk.

Discount for Current Doc Popcorn(R) Franchisees If you are a Doc Popcorn(R) franchisee having signed your franchise agreement with DPF on or prior to January 31, 2015 and are a party to an effective franchise agreement with our affiliate DPF, you will receive a 50% discount to your initial franchise fee if you purchase a Dippin’ Dots(R) Franchised Business under this Disclosure Document. In order to become a Dippin’ Dots(R) franchisee, you must not be in default under any agreement with DPF or its affiliates, including your franchise agreement with DPF. We, in our sole discretion, may refuse to sell a Dippin’ Dots(R) Franchised Business to a current Doc Popcorn(R) franchisee for any reason. We reserve the right to terminate, renew or extend the offer at our sole discretion. If you are a Doc Popcorn(R) franchisee having signed a franchise agreement with DPF on or after February 1, 2015 and are wishing to purchase a Dippin’ Dots(R) Franchised Business, you will be afforded a 25% discount on the initial franchise fee for your first Dippin’ Dots(R) Franchised Business. DPF has agreed to provide a similar discount to current Dippin’ Dots(R) franchisees that desire to purchase their first Doc Popcorn(R) franchise after their purchase of a Dippin’ Dots(R) Franchised Business. If you purchase a Dippin’ Dots(R) Franchised Business at a non-discounted rate and, at a later date, decide to purchase a Doc Popcorn(R) franchise, you will be afforded a 25% discount for the Doc Popcorn(R) franchise. If you are interested in purchasing a Dippin’ Dots(R) Franchised Business and a Doc Popcorn(R) franchise at the same time, you might be eligible for the discount described in the next section.

Discount for Concurrent Purchases of Multiple Franchise Systems If you are simultaneously purchasing both a Dippin’ Dots Franchised Business from us and a Doc Popcorn(R) franchise from our affiliate, DPF, in accordance with the Doc Popcorn(R) franchise disclosure document, we will provide you a 25% discount off the initial franchise fee for your Dippin’ Dots Franchised Business and our affiliate, DPF, has agreed to offer you a 25% discount off the initial franchise fee for the Doc Popcorn(R) franchise; provided that the purchases of the franchises from both franchise systems are consummated concurrently and you enter into a franchise agreement in accordance with this Disclosure Document and enter into a franchise agreement with DPF in accordance with the Doc Popcorn franchise disclosure document. We are not offering you a DPF franchise under this Disclosure Document but are merely informing you of the discount we will offer you in connection with your purchase of a Dippin’ Dots Franchised Business and a Doc Popcorn franchise.

U.S. Veterans Franchise Discount If you are a current member of the U.S. armed forces or an honorably discharged U.S. Veteran and have provided us with sufficient proof of the same in the form as we may reasonably require, we will offer you a 15% discount off your initial franchise fee for your initial Dippin’ Dots Franchised Business.

Other Initial Fees The following are additional, non-refundable, initial fees that you might be required to pay to us or DDL before the business opens. The exact amount depended on whether a Franchised Business was primarily distribution-based or included a retail store or kiosk. The amount was on the lower end of the range for Franchised Businesses that are primarily distribution-based, and on the higher end of the range for Franchised Businesses that include a retail store or kiosk.

Item 8: Restrictions on Sources of Products and Services

You may only purchase or lease equipment, supplies, inventory, advertising materials, construction services and other products and services used for the operation of your Franchised Business from approved manufacturers, contractors and other suppliers who demonstrate, to our continuing reasonable satisfaction: (i) ability to meet our reasonable standards and specifications; (ii) adequate quality controls and capacity to supply your needs promptly and reliably; and (iii) approval in writing by us within 30 days of submission and not later disapproved. We may approve a single supplier for any brand and may approve only a certain supplier as to any certain brand or brands and may take into consideration the price and quality of the products or services and the reliability of the supplier and other factors. Approval of a supplier may be conditioned on numerous requirements and may be temporary, pending our additional evaluation of the supplier.

You must purchase all ice cream, yogurt, sherbet and flavored ice products from DDL, which is the only approved supplier of Dippin’ Dots brand products. Additionally, you must purchase all cups featuring the Marks from DDL. DDL is also an approved supplier of freezers and other equipment necessary to operate your Franchised Business, although DDL is not currently the only approved supplier of equipment. DDL is our affiliate and is ultimately owned by the Fischer family, including Mark Fischer, who is a manager of DDF. You must refrain from selling any Products in retail establishments that have a primary business of selling alcoholic beverages, tobacco or vape related products. You must purchase credit and debit card and gift card services from a designated approved supplier.

Specifications and Standards We provide specifications and/or required suppliers for the purchase or lease of certain items. These may include standards for enhancing the System’s image along with minimum standards for safety, appearance and quality. Specifications are issued to you in the Confidential Operating Manual (the “Manual”) or otherwise in writing. To ensure that the highest degree of quality and service is maintained, you must operate the Franchised Business in accordance with the methods, standards, and specifications as we may from time to time prescribe in the Manual or otherwise in writing, including but not limited to, the purchase and installation, at your expense, of a cash register and point-of-sale recording system (“P.O.S. System”) as we may reasonably direct from time to time in the Manual or otherwise in writing. This P.O.S. System is further described in Item 11. The costs for the P.O.S. System is estimated to be in the range of $250 to $2,800, with the possibility of ongoing monthly cost associated with the P.O.S. System transactions ranging from $100 to $150.

Insurance In addition to insurance required by applicable law, your landlord, lender or otherwise, you must obtain and maintain insurance, at your expense, required by us. All policies must be written by an insurance company reasonably satisfactory to us with a Best rating of “A” or include the risks of coverage and deductibles as stated in the Manual and Section 13 of the Franchise Agreement. As of the issuance date of this Disclosure Document, you must procure, maintain in full force and effect an insurance policy or policies protecting you, us and DDL, as well as their respective officers, directors, partners, managers, agents and employees against any demand or claim with respect to personal injury, death or property damage, or any loss, liability, or expense whatsoever arising or occurring upon or in connection with the Franchised Business, including, but not limited to, comprehensive general liability insurance, property and casualty insurance, statutory workers’ compensation insurance, employer’s liability insurance, and business interruption insurance. Such policy or policies shall be written by a responsible carrier or carriers acceptable to us, shall name us and DDL as an additional insured thereunder (in such manner as may be specified by us), shall provide coverage in the amount of not less than One Million Dollars ($1,000,000.00) per occurrence and Two Million Dollars ($2,000,000.00) in the aggregate, and contain a waiver by you and our insurers of their subrogation rights against us and our affiliates and their respective owners, managers, directors, employees and agents.

Building Specifications If you do not operate a kiosk or cart, you must employ a qualified licensed architect or engineer to prepare a site plan and adopt the building specifications to the specific site and/or adapt the recommended floor plan to the Premises (Section 5.3 of the Franchise Agreement).

Advertising You must submit to us, and receive our approval, for all advertising materials to be used in the operation of your Franchised Business. All materials containing proprietary Marks must comply with the specifications stated in the Manual and in accordance with Sections 8.2 and 8.3 of the Franchise Agreement.

Approval of New Specifications and Alternative Suppliers If you desire to purchase or lease any equipment, supplies, non-ice cream products, advertising materials, construction services or other products or services from an unapproved, alternate supplier, you must obtain our prior written approval. We may approve alternate suppliers that, to our reasonable satisfaction, meet the standards and specifications set forth in the Manual, which is provided to every franchisee, and who demonstrate adequate quality controls and capacity to supply your needs promptly and reliably. We may approve a single supplier for any brand and may approve only a certain supplier as to any certain brand or brands and may take into consideration the price and quality of the products or services and the reliability of the supplier and other factors. Approval of a supplier may be conditioned on numerous requirements and may be temporary, pending our additional evaluation of the supplier. We have the right to require that our representatives be permitted to inspect the supplier’s facilities, and that samples from the supplier be delivered for evaluation and testing either to us or to an independent testing facility we designate. You must pay a charge not to exceed the reasonable cost of the evaluation and testing. We will notify you in writing of our approval or disapproval of the proposed supplier within 30 days after we complete evaluation and testing (if required).

Revenues from Franchise Purchases We do not sell or lease products or services directly to our franchisees. We may, however, receive rebates or other payments from approved suppliers, or from other suppliers, including equipment and kiosk suppliers, manufacturers, sales to our franchisees and our owned stores. DDL will derive revenue from the sale of products and equipment to our franchisees. For the year ended December 31, 2019, DDL’s total revenues were approximately $71,738,655 and the total revenues that DDL derived from sales to Dippin’ Dots franchisees was approximately $20,968,220, or 29% of its total revenues. DDL remits a portion of the revenue it collects from the sale of Dippin’ Dots brand products to franchisees to us for our royalty fees. During 2019, DDL received a total of $8,933 in rebates and marketing allowances from vendors. Purchases from DDL should represent approximately 47% to 66% of your total purchases of goods and services in connection with establishment and operation of your Franchised Business There are no purchasing or distribution cooperatives for franchisees. We may, from time to time, obtain purchase arrangements from suppliers and pass these on to franchisees. We do not provide material benefits to franchisees based on their purchase of any particular products or services or their use of a particular supplier.

Item 10: Financing

We do not offer direct or indirect financing. We do not guarantee your note, lease or obligations.

Item 12: Territory

You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. The franchise granted to you will permit you to sell Dippin’ Dots products within a specified territory. Except for the possible operation of Doc Popcorn(R) franchises as described in Item 1, neither we nor any of our affiliates operate or plan to operate or franchise businesses under a different trademark that will sell similar goods or services to those you are selling. The size of each franchisee’s territory is not uniform and will depend on many factors such as location, population density, consumer median income in the territory, your financial resources, and your proximity to other franchisees or other sales avenues. Before you sign a Franchise Agreement, we and you will mutually agree upon the size and scope of your territory. The minimum territory that any Dippin’ Dots franchisee would be granted by us would be a territory consisting of the shopping mall or general shopping center in which the fixed-location retail store is located.

We are not required to pay you for soliciting or accepting orders from inside your territory. You may not solicit or accept orders from customers outside of your territory or ship Dippin’ Dots products to customers outside of your territory without our expressed written consent. You may not use alternative channels of distribution, such as the internet, catalog sales, telemarketing, or other direct marketing to make sales outside your territory.

In connection with establishing a territory, we and you will mutually agree on a performance plan that sets forth the performance requirements you must meet with respect to your territory. The performance plan is based on the number of points of presence that you establish in your territory. These points of presence can be attained through fixed-store locations, freezer and vending machine placements and selling Dippin’ Dots products at events within the territory. Performance plans will not be uniform, and the performance requirements in your performance plan will be specifically tailored to the attributes of your territory and will vary based on the size of territory, the population of your territory, your financial resources and other factors we and you agree are appropriate. In the event you do not meet the performance requirements in your performance plan, then (i) we may, and may permit others to, solicit and make sales in your territory, or (ii) reduce the size of your territory, in our sole discretion, to a size that we determine to be appropriate based on your level of performance during your agreement term or upon renewal.

Within your territory, you will be permitted to (1) open one fixed-location retail store or kiosk at an approved location within your territory, (2) sell Dippin’ Dots products at an unlimited amount of fairs, festivals and similar events within your territory, and (3) sell Dippin’ Dots(R) products in an unlimited number of vending machines and freezers located in other retail locations within your territory. We will not grant a franchise or license to any other person to establish a Franchised Business in the same enclosed mall, strip mall, shopping center or facility in which your fixed-location store or kiosk is located. However, if a franchisee has a vending machine or freezer placement already located in the mall prior to your franchise purchase, that vending machine or freezer placement will be permitted to continue operating in its current location.

We will not solicit or make sales or permit any other person to solicit or make sales of any Dippin’ Dots(R) products within your territory, so long as you meet the performance requirements set forth in a performance plan mutually agreed upon by us and you, except as follows: DDL and its distributors may continue to sell Dippin’ Dots(R) products in locations in your territory where DDL or the distributor had operations prior to the date of your Franchise Agreement; We may solicit the right to make sales at retail venues as described in Exhibit A-1 to the Franchise Agreement in your territory on your behalf and will offer the right to make sales at these retail venues to you. If you are unable to or choose not to solicit and make sales at such retail venue, then we may, in our sole discretion, sell direct to the location or permit another person to solicit and make sales at that particular retail venue and that retail venue will be carved out of your territory going forward; Certain large retail “chains” prefer to have their accounts handled through a centralized organization rather than through multiple franchisees. If you are soliciting and making sales at a retail location that is part of a “National Account”, otherwise known as a Product Placement Venue under the Franchise Agreement, then upon a request from that chain’s headquarters, DDL may take over operations at the location solely in connection with DDL’s sale of Dippin’ Dots(R) products to all or a portion of such National Account’s location. “National Account” means any retail establishment having one hundred (100) or more locations. You shall not receive any compensation from us or DDL for taking over operations at any such National Account location. We may solicit and make sales of Dippin’ Dots products to customers within your territory at a lower price set by us on your behalf, in which case, we will first offer you the right to complete the sale to such customers at the price that we have offered to the customer and to receive the proceeds thereof. If you are unable to or choose not to complete such sales offered by us to customers within your territory, then we may, in our sole discretion, complete the sale to such customer or permit another franchisee or person to complete the sale to such customer. Additional details for this exception shall be provided in the Manual.

If you fail to meet the performance requirements set forth in your performance plan with respect to any particular location or event within your territory, we may, at our discretion, solicit or make sales or permit others (including other franchisees) to solicit or make sales at such location or event; provided, however, that we will not and will not permit others to solicit or make sales from a location that is within a 100-foot radius of your cart at such location or event. DDL reserves the sole right to make sales over the internet (or other alternative distribution channels) of Dippin’ Dots(R) products and you may not make any sales over the internet (or other alternative distribution channels), even if such sales are within your territory. DDL will not compensate you for soliciting or accepting orders inside your specified territory.

You may not relocate your fixed-location store or kiosk without our prior written consent. We have the right to accept or reject any change of location requests in our sole discretion. You must pay us a fee of $1,000 if you relocate your fixed-location store or kiosk. We will review a number of factors to decide whether to approve relation of your fixed-location store or kiosk, including your lease, sales, other nearby businesses and your proposed new location. You have no options, rights of first refusal or similar rights to acquire additional territories. Additional Co-Brand locations within your territory will not be afforded rights of first refusal and may be offered to a “new” franchisee without your prior approval or knowledge.

Item 15: Obligation to Participate in the Actual Operation of the Franchise Business

Your Franchised Business must be directly supervised by an on-site manager who has successfully completed the Basic Management Training Program (“Manager”). The Manager is expected to devote his or her best full-time efforts to the management and operation of your Franchised Business. The Manager is not required to have any equity interest in your Dippin’ Dots Franchise. The Manager cannot have an interest or business relationship in any business competing with DDL, DDF or its franchisees. Any replacement or additional Managers are required to complete Basic Management Training before managing your Dippin’ Dots(R) Franchised Business, unless we otherwise agree in writing. You shall be responsible for taking reasonable steps to ensure that your Manager maintains the confidentiality of information that the Manager receives in connection with his or her employment by you and you shall be responsible for his or her unauthorized disclosure of any such confidential information. Any and all information, knowledge, know-how, techniques and other data which we designate as confidential shall be deemed confidential for purposes of this Agreement.

If you are a corporation, limited liability company or other entity, all of the your holders of a legal or beneficial interest of 5% or more must execute a Personal Guaranty upon becoming a franchisee that will also, among other matters, require them to jointly and severally guarantee your payment and performance under this Agreement and any other agreements between you and either DDF. Any other persons providing substantial capital for your operations must also execute a Personal Guaranty. DDF reserves the right to require any guarantor to provide personal financial statements at any time upon request.

Item 16: RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL

You must offer and sell all goods and services that we require for all franchisees. We have the right to add or remove authorized products or services offered by franchisees. There are no limits to our right to add or remove products or services offered by franchisees. Some products and services offered will be optional as among franchisees based on market, distribution, legal and unit conditions. These will be determined by us, in our sole discretion, on a case-by-case basis. You must keep the Franchised Business open and in normal operation for the minimum hours and days as we require in the Manual or otherwise in writing except as may be limited by local governmental regulations or the landlord of the Premises’ rules and regulations. You must not allow the use of the Premises for any other purpose or activity at any time without first obtaining our written consent. This prohibition is extended to but not limited to the production, storage, and/or distribution of any other frozen beaded product. There are no restrictions on the customers you may serve except as provided in this Item. Sales to customers over the internet are prohibited. You must not offer any goods or services without our written consent.

To view the full Franchise Disclosure Document, please click here