Note 8 Franchise Arrangements

6 Months Ended

Sep. 30, 2012

Note 8 Franchise Arrangements:

Note 8 Franchise Arrangements

NOTE 8 FRANCHISE ARRANGEMENTS

Company is granted the right to operate a café bistro using the brand name “Caffe Kenon” for a term of 3 years and sublicense the 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.

After acquisition of Sino Wish by HLL, HLL and Sino Wish agreed to terminate the franchise agreement signed on April 1, 2010 with effect from April 1, 2012.  In this connection, HLL agreed, based on a supplementary agreement entered with Sizegenic in March 2010, to grant the right to Sino wish to operate the caffé Kenon restaurant at Tai Yau Plaza, Hong Kong at an annual fee of $5,136 for the third year of the term.

In conjunction with the termination of subfranchise agreement:

(a)    no subfranchise fee income of HK$80,000 (approx. $10,272) from Sino Wish for  the remaining third year term of the agreement to be recognized in April of 2012.

(b)    franchise fee expenses of HK$40,000 (approx. $5,136) for Sino Wish for the remaining third year term of the agreement to be recognized in April of 2012.

Revenues from franchised Caffe Kenon are as follows:

		Six months Ended September 30, 2012		Six months Ended September 30, 2011
Subfranchise annual fee income	$	-	$	16,482
Subfranchise management fee income		-		-
	$	-	$	16,482

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

	September 30, 2012	March 31, 2012
Subfranchise annual and management fee due to the Company:
Beijing Kenon (included in due from related party)	$     18,090	$     11,880

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

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

Franchise fees owe to Sizegenic consist of franchise and subfranchise annual fee and monthly franchise management fee applicable to profit after tax of Company-owned restaurant.  For six months ended September 30, 2012, the franchise annual fee expense amounting to $5,136 for Hong Kong was owed by Sino Wish to Sizegenic.

The first year franchise annual fee owe to Sizegenic for the Company-owned restaurant at $5,136 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.