Franchise Arrangements

12 Months Ended

10 Months Ended

Mar. 31, 2012

Studio II Brands, Inc. (Successor)

Feb. 09, 2011

Hippo Lace Limited (Predecessor)

Franchise Arrangements:

Franchise Arrangements

NOTE 11 FRANCHISE ARRANGEMENTS

Franchise arrangements are pursuant to franchise agreements entered by the Company as the franchisee and Sizegenic as the franchisor.  The Agreements require payment of franchise fees on anniversary basis and continuing monthly management fee base upon a percent of franchisees’ net income after tax to Sizegenic throughout the term of franchise.  Under this arrangement, two franchise agreements were entered in February and March 2010 respectively in which the Company is granted the right to operate a café bistro using the brand name “Caffe Kenon” for a term of 3 years and sublicense right to two subfranchisees in Hong Kong and Beijing respectively to use brand name “caffe Kenon” to operate a café bistro for a term of 3 years commencing from April 1, 2010.  Franchise fee expenses on the use of the license of the brand name and trademark “Caffe Kenon” is recorded upon the granting of the non-exclusive rights by Sizegenic as the fee is non-refundable to and non-cancellable by the Company.

Franchise fee income on the sublicensing of the brand name and trademark “Caffe Kenon” is recognized upon the granting of the non-exclusive rights  to the franchisee as the fee is non-refundable to and non-cancellable by the franchisee and the Company has no further obligations since they are all assumed  by franchisee throughout the term.  The franchisee and the subfranchisees pay related occupancy costs including rent, property management fee and government rent and rates, insurance and maintenance for their owned restaurant.  Franchisor has no obligation to any legal consequences arose from what the franchisee and subfranchisees assumed.

The franchisee and subfranchisees have the right to renew for one additional term equal to the initial term granted under Franchisor’s franchise agreement after expiration  of the initial term provided that franchisee and subfranchisees have, during the term of the agreement, substantially complied with all its provisions.  Franchisee and subfranchisees must pay franchisor, three months prior to the date of renewal, a renewal fee to be agreed between franchisor and the franchisee/subfranchisees.

Revenues from franchised Caffe Kenon are as follows:  

	Year ended  March 31, 2012	Successor Period from February 10, 2011 to March31, 2011	Predecessor  Period from April1, 2010 to February 9, 2011
Franchise and management fee income	$     12,472	$         450	$     22,266

Franchise and management fee income due to the Company are as follows:

	As of March 31, 2012	As of March 31, 2011
Subfranchise annual fee due to the Company: Sino Wish	$       5,907	$       10,272
Beijing Kenon	11,880	11,880
	$      17,787	$        22,152

Future minimum franchise fee payments due from the Company under existing franchise and subfranchise arrangements are:

Year ended March 31,
2013	$       5,136
2014	-
2015	-
2016	-
Total	$              -

Future minimum franchise fee payments due to the Company under existing franchise and subfranchise arrangements are nil.

Franchise fees owed to Sizegenic consist of franchise and subfranchise annual fee and monthly franchise management fee applicable to profit after tax of Company-owned restaurant. 

The first year franchise annual fee owed to Sizegenic for the Company-owned restaurant at $5,136 as of March 31, 2010 was after a special 50% discount and full amount of $10,272 is due per annum for the second year and waived in the third year of the initial term of the agreement. On April 1, 2012, the Company based on a supplementary franchise agreement with Sizegenic in April 2010 to  grant the right to HLL for Sino Wish to operate Caffé Kenon at Tai Yau Plaza, Hong Kong at annual fee of $5,136 for the third year.

NOTE 9 FRANCHISE ARRANGEMENTS

Franchise arrangements are pursuant to franchise agreements entered by the Company as the franchisee and Sizegenic Holdings Limited (“Sizegenic”) as the franchisor.  The Agreements require payment of franchise fees on anniversary basis and continuing monthly management fee base upon a percent of franchisees’ net income after tax to Sizegenic throughout the term of franchise.  Under this arrangement, two franchise agreements were entered in February and March 2010 respectively in which the Company is granted the right to operate a café bistro using the brand name “Caffe Kenon” for a term of 3 years and sublicense right to two subfranchisees in Hong Kong and Beijing respectively to use brand name “caffe Kenon” to operate a café bistro for a term of 3 years commencing from April 1, 2010.  Franchise fee expenses on the use of the license of the brand name and trademark “Caffe Kenon” is recorded upon the granting of the non-exclusive rights by Sizegenic as the fee is non-refundable to and non-cancellable by the Company.  Franchise fee income on the sublicensing of the brand name and trademark “Caffe Kenon” is recognized upon the granting of the non-exclusive rights  to the franchisee as the fee is non-refundable to and non-cancellable by the franchisee and the Company has no further obligations since they are all assumed  by franchisee throughout the term.  The franchisee and the subfranchisees pay related occupancy costs including rent, property management fee and government rent and rates, insurance and maintenance for their owned restaurant.  Franchisor has no obligation to any legal consequences arose from what the franchisee and subfranchisees assumed.

The franchisee and subfranchisees have the right to renew for one additional term equal to the initial term granted under Franchisor’s franchise agreement after expiration  of the initial term provided that franchisee and subfranchisees have, during the term of the agreement, substantially complied with all its provisions.  Franchisee and subfranchisees must pay franchisor, three months prior to the date of renewal, a renewal fee to be agreed between franchisor and the franchisee/subfranchisees.

Franchise and management fee expenses due to Sizegenic are as follows:

	As of February 9, 2011	As of   March 31, 2010
Annual fee expenses for Company and subfranchisee-owned restaurant	$     -	$  5,136
Management fee expense	-	-
	$       -	$  5,136

Future minimum franchise fee payments due from the Company under existing franchise and subfranchise arrangements are:

Year Ended March 31,

2011	$    20,544
2012	20,544
2013	5,136
Total	$    46,224

Future minimum franchise fee payments due to the Company under existing subfranchise arrangements are:

Year Ended March 31,

2011	$    22,152
2012	16,472
2013	10,272
Total	$    48,896

Franchise fees owed to Sizegenic consist of franchise and subfranchise annual fee and monthly franchise management fee applicable to profit after tax of Company-owned restaurant.  The subfranchise annual fee expense in total of $10,272 for Hong Kong and Beijing owed to Sizegenic partially offset the annual fee income in total of $22,152 owed by subfranchisee in HK and Beijing.

The first year franchise annual fee owed to Sizegenic for the Company-owned restaurant at $5,136 as of Mar 31, 2010 was after a special 50% discount and full amount of $10,272 is due per annum beginning in the second year and throughout the term of the agreement.