UFOC

The original documents were scanned as an image. The original file can be downloaded at the link above.


Sample UFOC

FRANCHISE OFFERING CIRCULAR

1st Propane Franchising, Inc.

A California Corporation

d.b.a. 1st Propane

14670 Cantova Way, Suite 208

Rancho Murieta, California 95683

Telephone: (877) 977-6726

http://www.1st-propane.com

1st Propane Franchising, Inc. awards franchises for the establishment, development and operation of a 1st Propane® Franchise, including the right to use the service mark "1st Propane" and associated logos and the 1st Propane® System in the operation of a 1st Propane® unit. 1st Propane® Franchisees provide retail distribution of propane gas in bulk.

The initial franchise fee currently charged by us in this state is $30,000. You must deposit $4,000 with us for a grand opening advertising and promotional program. The estimated initial cost to commence operations (including the initial franchise fee) ranges from approximately $248,500 to $652,000. The estimated initial cost to commence operations may vary widely depending on the location, layout, size, local building code and zoning requirements and other factors and may exceed such estimates. The above figures are approximate only and you are urged to read Items 5 through 7 in their entirety for further information. This summary of the initial cost to commence operations does not represent your total costs and makes no provision for capital necessary to reach "break-even" or any other financial position. It does not include ongoing operating expenses or debt service and is supplemented by more detailed information appearing in this Offering Circular, which you should read.

RISK FACTORS:

1. THE FRANCHISE AGREEMENT CONTAINS A MANDATORY BINDING ARBITRATION CLAUSE GOVERNING NEARLY ALL DISPUTES BETWEEN YOU AND US, AND ALSO PROVIDES FOR A FACE-TO-FACE MEETING AND MEDIATION TO SETTLE DISPUTES. THE MEDIATION, BINDING ARBITRATION (AND ANY LITIGATION) AND ANY ARBITRATION APPEAL WILL TAKE PLACE AT A NEUTRAL LOCATION IN THE COUNTY IN WHICH OUR THEN CURRENT HEADQUARTERS IS LOCATED, AND THAT MAY COST YOU MORE THAN IF THOSE PROCEEDINGS TOOK PLACE NEAR YOUR RESIDENCE OR BUSINESS. COSTS OF THE FACE-TO-FACE MEETING, MEDIATION, ARBITRATION AND ANY ARBITRATION APPEAL MAY BE GREATER THAN IN LITIGATION. YOU AND WE WILL GENERALLY BEAR EACH OF OUR OWN COSTS IN ANY DISPUTE, BUT THE ARBITRATOR CAN ASSESS COSTS (BUT NOT ATTORNEY'S FEES) AGAINST A LOSING PARTY. THE FRANCHISE AGREEMENT PROVIDES THAT THE LAW OF THE STATE WHERE YOUR 1ST PROPANE® FRANCHISE IS OR WILL BE LOCATED GOVERNS THE AGREEMENT. BY AGREEING TO ARBITRATE, YOU WAIVE YOUR RIGHTS TO A JURY

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TRIAL, AS WELL AS TO^TRIAL BEFORE A JUDGE IN A COURTOF LAW, YOU GENERALLY WAIVE YOUR RIGHT TO APPEAL AN ARBITRATION AWARD (EXCEPT TO A THREE ARBITRATOR APPEAL PANEL) AND MAY BE GIVING UP RIGHTS TO PRE-TRIAL DISCOVERY, AS WELL AS GIVING UP CERTAIN RIGHTS REGARDING CLASS ACTIONS. THE FRANCHISE AGREEMENT ALSO LIMITS THE AMOUNT OF DAMAGES RECOVERABLE BY YOU OR US TO A MAXIMUM TOTAL AMOUNT OF $300,000; REQUIRES YOU TO GIVE US NOTICE OF, AND OPPORTUNITY TO CURE, DEFAULTS BY US; AND PROVIDES FOR A PERIOD OF TIME IN WHICH YOU OR WE CAN BRING CLAIMS WHICH MAY BE SHORTER THAN THAT PROVIDED BY APPLICABLE LAW.

2.       THE PURCHASE OF A 1ST PROPANE® FRANCHISE INVOLVES BUSINESS RISKS AND SUCCESS CANNOT BE GUARANTEED.

3.       THE POSSIBLE SUCCESS OF YOUR 1ST PROPANE® FRANCHISE MAY BE DEPENDENT ON THE LOCATION OR AREA YOU CHOOSE, THE LOCAL MARKET FOR THE PRODUCTS AND SERVICES OFFERED, COMPETITION AND OTHER FACTORS. THESE FACTORS, ALONG WITH YOUR OWN BUSINESS ABILITY IN OPERATING YOUR 1ST PROPANE® AND THE EXTENT TO WHICH YOU FOLLOW THE 1ST PROPANE® SYSTEM, TOGETHER WITH YOUR FINANCIAL AND OTHER RESOURCES, ARE THE THINGS MOST LIKELY TO DETERMINE YOUR POSSIBLE SUCCESS.

4.       THE FRANCHISOR HAS LIMITED FINANCIAL RESOURCES. SEE THE FRANCHISOR'S FINANCIAL STATEMENTS, AND THE ACCOMPANYING AUDITORS' REPORT, FOR ADDITIONAL DETAILS.

Information comparing Franchisors is available. Call the state administrators listed in Exhibit G or your public library for sources of information.

Registration of this franchise by a state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in this circular is untrue, contact the Federal Trade Commission and the state agency listed in Exhibit G.

The Effective Date of this Offering Circular is September 28, 2006__________________unless

otherwise noted on an addendum for your state included in Exhibit I of this Offering Circular.

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TABLE OF CONTENTS

ITEM 1.              THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

ITEM 2.              BUSINESS EXPERIENCE

ITEM 3.              LITIGATION

ITEM 4.              BANKRUPTCY

ITEM 5.              INITIAL FRANCHISE FEE

ITEM 6.              OTHER FEES

ITEM 7.              INITIAL INVESTMENT

ITEM 8.              RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

ITEM 9.              FRANCHISEE'S OBLIGATIONS

ITEM 10.            FINANCING

ITEM 11.            OUR OBLIGATIONS

ITEM 12.            TERRITORY

ITEM 13.            TRADEMARKS

ITEM 14.            PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION

ITEM 15.            YOUR OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS

ITEM 16.            RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL

ITEM 17.            RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION

ITEM 18.            PUBLIC FIGURES

ITEM 19.            EARNINGS CLAIMS

ITEM 20.            LIST OF OUTLETS

ITEM 21.            FINANCIAL STATEMENTS

ITEM 22.            CONTRACTS

ITEM 23.            RECEIPT

PAGE

1

2

3

3

4

5

7

11

13

14

14

25

28

29

29 30 31 35 35 36 39 39 39

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EXHIBITS:

A.          FRANCHISE AGREEMENT WITH4WD6X ANO-OWNER'S GUARANTY AND ASSUMPTION OF CORPORATE OBLIGATIONS, TERRITORY, PHONE DIRECTORY LISTING POWER OF ATTORNEY AND COLLATERAL ASSIGNMENT OF LEASE

B.          FINANCIAL STATEMENTS

C.          TABLE OF CONTENTS OF MANAGEMENT MANUAL AND OPERATIONS MANUAL

D.          STATE GOVERNMENT REGULATION OF THE PROPANE INDUSTRY E           LIST OF FRANCHISEES AND FORMER FRANCHISEES

F.          HISTORIC OPERATING RESULTS AS REPORTED BY CLIENTS OF NETWORK PROPANE GROUP AND FRANCHISEES OF 1ST PROPANE FRANCHISING, INC.

G.          LIST OF STATE ADMINISTRATORS AND AGENTS FOR SERVICE OF PROCESS H.          STATE ADDENDA

I.            LIST OF FRANCHISE BROKERS

J.           STATEMENT OF PROSPECTIVE FRANCHISEE

K.          RECEIPT

1st Propane Franchising, Inc. - UFOC - 20052006


1.          THE FRANCHISOR. ITS PREDECESSORS AND AFFILIATES

The Franchisor. Business Form. Names. Address

To simplify the language in this Offering Circular, 1st Propane Franchising, Inc. (the Franchisor) is referred to as "we," "us", "our, "the Company" or "1st Propane." We're a California corporation that was incorporated on October 2, 1997, as 1st Propane Franchising, Inc. Our principal place of business is 14670 Cantova Way, Suite 208, Rancho Murieta, California 95683.

"You" or "your" means the person who is granted the franchise. If a corporation or partnership is granted the franchise, "you" includes the Franchisee's owners. (In general, we grant franchises only to individuals, not corporations, but assignment to a corporation is allowed under conditions specified in the Franchise Agreement.)

Our agent in this state authorized to receive service of process is in Exhibit G.

Our Business and the Franchises to be Offered in This State

Effootivc July 10, 2005 wo acquired and ourrontly operate one company ownod 1st Propono®-tffl& in the County of Amador, California fseo Itom 20]. As of June 30, 20052006, we have 40-8 franchisees and one company-owned 1st Propane® unit which is located in the County of Amador, California [see Item 20].

Under each Franchise Agreement, you'll operate a retail business which provides distribution of propane gas in bulk, and certain related and other products and services, including installation of storage tanks, distribution and other facilities. These businesses, referred to in the Franchise Agreement as "1st Propane® Franchises," operate at locations that feature a distinctive format and method of doing business, including color scheme, signs, equipment, layouts, systems, methods, procedures, designs and marketing and advertising standards and formats (the "1st Propane® System" or "System"), any element of which we can modify from time-to-time in our sole and absolute discretion and with which you'll promptly comply.

In general, many states require a sales and use tax license, a local business license, and compliance with various government regulations pertaining to the retail propane industry to operate a 1st Propane® Franchise. (See Exhibit D for a list of various regulatory agencies, and a brief discussion of some regulations, in your state. Similar requirements may apply in other states.) You should independently research the need for vou to hold anv licenses, or satisfy any other legal requirements. before vou sign anv binding documents or make anv investments. General regulations associated with operating businesses, including zoning restrictions, may affect your operation of your 1st Propane® Franchise and should also be investigated by you. Of course, you're required to comply with all applicable laws. In order to do business in certain locations, local regulations (related to zoning, hazardous materials storage, etc.) may need to be complied with and you should review those requirements before making any commitments. Your activities as a 1st Propane® Franchisee may require you to comply with state or other contractor's licensing and related requirements and could require you, and/or your personnel, to obtain general contractor's and/or other licenses.

Your customers will be the general public and other businesses. You will compete with other businesses which offer retail distribution of propane gas in bulk, and certain related and other products and services, including installation of customer tanks, distribution and other facilities. You're not allowed to engage in any wholesale business activities or engage in over-the-road trucking of propane or related products. "Over-the-road trucking" is defined as hauling privately or for hire, propane or related products

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I in trucks capable of transporting in excess of 5,000 gallons. (Franchise Agreement, Sections 2.1 and 10.3)

Our Prior Experience. Predecessors and Other Information

Our predecessor is Thacher Financial Group, Inc., (d.b.a. Network Propane Group) and is located at 14670 Cantova Way, Rancho Murieta, California 95683. Thacher Financial Group, Inc. provides financial, accounting and management services to retail propane businesses. Our predecessor does not offer franchises in any line of business. The franchises described in this document are offered only by 1 st Propane Franchising, Inc. You will have a contractual relationship only with us. Thacher Financial Group, Inc. does not have (and will not have) any obligations to you and you may look only to us for performance under the Franchise Agreement and any other documents.

We have been offering 1st Propane® franchises since 1997. We've never offered, and don't currently offer, franchises in any other line of business and we're not engaged in any other line of business.

This Offering Circular sets forth the terms and conditions for franchises offered to 1st Propane® Franchisees in this state. We reserve the right to offer other franchises or licenses, in this state or elsewhere, to new Franchisees or existing licensees on entirely different economic and other terms and conditions.

This Offering Circular contains a summary of various provisions of the Franchise Agreement, and other documents, in relatively brief language, as required by state and federal law. We've summarized the main features of our program above and further information appears at appropriate points throughout this Offering Circular. Of course, the descriptions in this Offering Circular of various documents and their provisions are for general informational purposes only, in many cases (in the interests of brevity and understandability) only excerpts or summaries of documents are discussed, the actual, provisions of the documents will control in any case and you should read the entire Franchise Agreement, and other documents, for more complete information.

A 1st Propane® Franchise (like any other enterprise) involves business risks. Your volume, profit and success are primarily dependent on your ability and efforts as an independent business operator, and success can't be guaranteed. You'll be responsible for an aggressive, proactive local marketing effort using the techniques and methods of the 1st Propane® System.

2.          BUSINESS EXPERIENCE

President: William W. Thacher

Mr. Thacher began his career in the propane industry in 1970, and was employed in several management and executive positions in the industry until 1990. Mr. Thacher founded the Thacher Financial Group, Inc. (d.b.a. Network Propane Group) in 1990 which is now located in Rancho Murieta, California. He continues to serve as President and CEO of Thacher Financial Group, Inc., and is responsible for developing all of the systems for the start-up and financing of new propane dealers. Mr. Thacher became our President upon our inception in 1997. Mr. Thacher also acts as a financial consultant to retail propane dealers and as an expert witness in propane business-related legal matters.

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Vice President of Operations: Richard D. Collins

Mr. Collins joined the propane industry in 1974 as a Mechanical Engineer for the California Liquid Gas Corporation (Cal-Gas). Between 1974 and 1990, he held several positions with Cal-Gas and it's subsequent owner, Amerigas and its subsidiaries, including Director of Operations Support and Manager of Terminals. From 1990 until 1994, he was the Western Regional Manager for Ely Energy, Inc., based in Rancho Murieta, California. Beginning in 1994, until December, 1997, Mr. Collins was Vice President for Cal-Pac Energy, Inc., a propane and natural gas construction firm located in Rancho Murieta, California. Mr. Collins assumed his position as our Vice President of Operations in December 1997. Mr. Collins is responsible for the development and operation of the 1st Propane franchise training program, as well as franchise technical services and safety programs, code and regulatory compliance.

Secretary-Treasurer: Lynn D. Thacher

Mrs. Thacher has worked for us since our inception in 1997, and has worked for Thacher Financial Group, Inc. in a similar capacity since its founding in 1990. She is responsible for all data collection and other communications with the dealers, in addition to her role in corporate management.

Member. Board of Directors: Don Hankins

Mr. Hankins was elected to the Board of Directors in February 2000. He has been the owner and President.of Propane Ventures, in Ft. Worth, Texas, since July 1989.

Member. Board of Directors: Sandra Hobov

Ms. Hoboy was elected to the Board of Directors in February 2000. Since 1990, she has operated a business investment and consulting business in Anacortes, Washington.

Member. Board of Directors: Stanley Smith

Mr. Smith was elected to the Board of Directors in February 2000. He has been the owner and Presidont of Petrosol International, Inc., located in Spokane, Washington, since 1974. From July 1974 to June 2006, he was President of Petrosol. In July 2006, he became CEO of Petrosol. Petrosol is a major wholesale propane supplier in the northern tier of the United States.

Franchise Brokers

We do not at this time, but reserve the right to employ various franchise brokers in different parts of the United States to assist us in identifying qualified franchise applicants. A list of these franchise brokers is attached as Exhibit I.

3.          LITIGATION

There is no litigation that is required to be disclosed in the Offering Circular.

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4.          BANKRUPTCY

No person previously identified in Items 1 or 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item.

5.          INITIAL FRANCHISE FEE

The Initial Franchise Fee currently charged by us, in this state and for the franchise covering your location, is $30,000. The Initial Franchise Fee is due and payable on signing the Franchise Agreement.

On signing the Franchise Agreement, you must deposit $4,000 with us, which we will disburse, for a grand opening advertising and promotional program covering your 1st Propane® Franchise, beginning approximately 14 days before, and continuing for approximately 28 days after, the opening of your 1st Propane® Franchise.

No part of the Initial Franchise Fee, or any other amounts paid to us or any affiliate, are refundable.

If we, in our sole and absolute discretion, determine that you (or a managing partner or shareholder consented to by us) or your manager has not successfully completed (or are not making satisfactory progress in) your initial training, we may cancel all of your rights (and all of our obligations) under the Franchise Agreement and/or any other agreements with you. You will return all manuals and you (and each affiliate of yours) will execute documentation providing for a general release, in a form prescribed by us, of any and all claims, liabilities and/or obligations, of any nature whatsoever, however arising, known or unknown, against us and/or any or all of the Franchisor-Related Entities and we will provide you with a similar release, except that your indemnity, confidentiality obligations, and the dispute avoidance and resolution provisions of the Franchise Agreement, including those of Article 19, together with the provisions of Article 21, will be preserved.

Since the possibility of such termination exists, you understand that if you make any investments or sign any documents prior to completion of training, you're at risk. Alternatively, we can (in our sole and absolute discretion) require you to hire a substitute manager and arrange for him/her to complete the initial training program to our satisfaction. (Franchise Agreement, Section 5.1)

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6.          OTHER FEES1

Name of Fee2

Amount

Due Date

Remarks

Royalty3

6% of Gross Volume for the first $500,000 annually.

For any calendar year, for any Gross Volume over $500,000 but less than $750,000 per year, 5% of that Gross Volume. For any calendar year, for any Gross Volume over $750,000 per year 4% of that Gross Volume. Minimum of $140 per week (subject to inflation adiustment)

Every calendar week via electronic funds transfer (ACH)

Amounts due by 5:00pm every Wednesday of each calendar week for preceding week. Gross Volume includes all revenue from the franchise location. Gross Volume does not include sales tax or fuel tax.

Marketing Fund Contribution4

1 % of Gross Volume against a minimum $47 per week

Every calendar week via electronic funds transfer

Amounts due each calendar week. Subject to inflation adjustment.

Local Marketing

Minimum of $800 per calendar month

You will spend at least this amount per calendar month

Includes telephone directory listings, and advertising, but doesn't include discounts, coupons or free products. You will submit, in form and at times prescribed by us, verification of your expenditures. Subject to inflation adjustment

Inflation Adjustment

Will vary

April 1 adjustment date

Adjusted annually in proportion to the Consumer Price Index.

Optional Additional Training/Assistance

$800 per person per day plus expenses

Payable at time of training/assistance

Fees may be charged for optional or additional training/assistance requested by you and held outside our home office. You are responsible for all expenses related to optional or additional training/assistance-

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Name of Fee2

Amount

Due Date

Remarks

Interest, Late Fees, Dishonored Check Fees5

Maximum legal interest (not to exceed 1.5% per month), $50 late or dishonored check fee plus $20 per day after 10 days for late reports and/or payments.

Payable on Demand

The late fee and check charge apply to each report form and each late payment received 10 days past the due date.

Computer and Hardware Rental Costs6

$1,000-$2,000 annually

Monthly

Paid to 1st Propane Franchising, Inc.

Audit Expenses

Costs of audit

On demand

If you fail to submit reports or you understate Gross Volume by 2% or more.

Telephone Service Deposit

$1,500

At our option

If we require your phone listing to be in our name, and billings are sent to us.

Transfer Fee

80% of then-current initial franchise fee (minimum $1,000)

Before transfer of franchise

If transfer to corporation is made within 90 days of 8 signing the Franchise J Agreement, transfer fee is j $500.

Costs to Manage Your Franchise in the Event of Death or Disability

Reasonable amount

At time of occurrence

If we operate the business on your behalf, we can pay ourselves for our management services and other costs.

Confidential Shopper Inspections

Reasonable amount

As agreed

We may pay these fees and costs from the Marketing Fund.

Successor Franchise Fee7

$1,000

On renewal of franchise

Subject to inflation adjustment-

Management Fees(81 (only on default by you)

$500 per day plus expenses.

Deducted from funds of your Businesses.

Expenses include compensation, other costs, travel and living expenses of appointed manager.

Subject to inflation adjustment.

(1)  All fees which are collected by and/or payable to us are non-refundable.

(2)   If your 1st Propane® Franchise is closed due to casualty, governmental action, street closure, etc., you're still responsible for your financial obligations to us. (Franchise Agreement, Section 10.9)

(3)  You will participate in our electronic funds transfer program authorizing us to utilize a pre-authorized bank draft system every week. (Franchise Agreement, Section 9.4)

(4)  Any 1st Propane units owned by us will make contributions to the Marketing Fund at the level of our then-current Franchise Agreement. (Franchise Agreement, Section 11.1)

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We can establish one or more associations and/or sub-associations of 1st Propane franchisees covering territories that include your 1st Propane® Franchise, to be known collectively as the 1st Propane® Franchise Owners Association ("1st Propane® FOA"). You must join 1st Propane® FOA and actively participate in 1st Propane® FOA and must contribute such amounts as are determined from time-to-time by the 1st Propane® FOA. No requirements for contributions to 1st Propane® FOA are currently in effect. (Franchise Agreement, Section 11.3)

(5)  All amounts bear interest at the highest applicable legal rate for open account business credit, but not to exceed 1.5% per month.

(6)  You are required to use accounting software which is provided by us.

(7)  As more fully discussed in Item 17 and Section 15 of the Franchise Agreement, you may obtain one successor franchise or right of renewal for a single 10 year period if you meet all the requirements in the Franchise Agreement, including paying a non-refundable successor franchise fee of $1,000 (subject to inflation adjustment.)

(8)  If we determine in our sole and absolute discretion that your franchise is not in compliance with our Safety Policies and Procedures and/or those required under federal, and/or state and/or local laws, and/or codes and regulations and/or the authority having jurisdiction in effect at the time, then upon notice of default we may recruit and hire a manager or other person of our choice and designated by us be placed in your 1st Propane® franchise to manage and supervise its day-to-day operations for the purpose of assuring compliance with our Safety Policies and Procedures and/or those Federal, State and Local laws, codes and regulations. (Franchise Agreement, Sections 10.5 and 16.8.)

See Items 8 and 9 for additional information.

7.

INITIAL INVESTMENT

Nature of Investment

Estimated Amount or

When Due

To Whom Payment

Estimated Low-High

is Made

Range

Franchise Fee'1'

$30,000

Signing of Franchise

1 st Propane

Agreement

Franchising, Inc.

Grand Opening

$4,000

Signing of Franchise

1st Propane

Advertising'2'

AgreementBoginning 2

Franchising,

wooks before and

Inc.Supplioro

continuing A wooks aftor

tho time of opening

Purchase of Computer

$500

Before Opening

Supplier

Insurance'3'

$6,000

Annually - typically 25%

Insurance Supplier. If

to

down with balance

you fail to maintain

$12,000

financed over 9 months

coverage we may obtain insurance on your behalf and you will reimburse us.

Real Estate and

$10,000

As needed over the first

Contractor, landlord,

Leasehold

to

5 years.

real estate broker

Improvements'4'

$200,000

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Nature of Investment

Estimated Amount or

Estimated Low-High

Range

When Due

To Whom Payment is Made

Propane Bulk Storage Facility*5*

$5,000

to

$167,500

As required prior to opening

Contractor

Equipment'6*

$170,000

to

$190,000

Upon receipt - financing may be available

Equipment Company or leasing company.

Opening Inventory

$12,000

to

$18,000

30 days after delivery

Suppliers

Miscellaneous Costs to Begin Operations

$1,000

to

$2,000

Before Opening

Suppliers

Travel and Living Expenses While Training'7'

$0 to $3,000

During Training

Motels, Restaurants, airlines, car rentals, etc.

Additional Funds (3 months)'81

$10,000

to

$25,000

During first 3 months

Various suppliers

Totals'9'

$248,500

to

$652,000

Note: All amounts are non-refundable.

(1)         The initial franchise fee to purchase a 1st Propane Franchise is $30,000. No portion of the franchise fee is refundable. We do not offer any direct or indirect financing to franchisees for the initial franchise fee. Please see Item 10 regarding equipment financing.

(2)         You must deposit $4,000 with us, which we will disburse for a grand opening advertising and promotional program covering your 1st Propane® Franchise, beginning approximately 14 days before, and continuing for approximately 28 days after, the opening of your 1st Propane® Franchise. The advertising and promotional program will utilize marketing and public relations programs and media and advertising materials as selected by us. We'll furnish additional advice and guidance to you with respect to your grand opening advertising and promotional program.

Wo'll furnish advico and guidanco to you related to conducting a grand opening advertising and promotional program conoontod to by uo, and you will spend no ioss than $4,000 on marketing and public relatione programs, media and advertising materials conoontod to by ug. (Franchise Agreement, Section 3.7)

(3)         See Section 10.7 of the Franchise Agreement for information on types of insurance (and limits) you have to obtain. We also recommend, but do not require, Life Insurance (necessary to cover liabilities), Business Interruption Insurance and Disability Insurance. Amounts shown are estimates for the first 3 months. Total cost for the first year may exceed $20,000.

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8


(4)         This is not a business that relies on walk-in traffic or requires typical retail-type space. Real estate needs fall into 3 categories, which are discussed below. These 3 categories can all be in the same location but it is not necessary to have them in the same location, and it is not always desirable.

A)   Propane storage location - You must locate on industrial-zoned land that can be used for storing hazardous materials. A special use or conditional use permit (along with other permits and licenses) is typically necessary for this kind of storage. A lease location for this storage is acceptable. Monthly lease costs of this location are expected to range from $200 to $800.

B)   Yard location - This is where the tank truck and service truck are parked and where customer tanks awaiting placement are stored. Again, a special use or conditional use permit (along with other permits and licenses) may be necessary for this kind of use. You will also need secure storage for parts on this site. Monthly rental costs are expected to range from $200 to $500. Purchase costs for this type of real estate can range widely and are not anticipated in this analysis because purchase is not generally necessary.

C)   Office space - This may be the same location as the yard or storage location, but it is not necessary. The office can be located in a strip center, or you can share office space with a complementary business (such as plumbing supply, feed store, service station, etc.) You may also operate the office out of your home. Monthly rental costs are expected to range from $200 to $500. Purchase costs for this type of real estate can range widely and are not anticipated in this analysis because purchase is not generally necessary.

(5)         Propane Bulk Storage - The use of a leased, or temporary, location for the placement of a storage tank of 12,000 to 30,000 gallons in size is adequate. The range of costs for the installation of a propane storage tank can be from $5,000 (for a site requiring minimal improvements upon which you install a rented portable storage tank), and $167,500 (for a fully developed one-acre site, excluding buildings, upon which you install a permanent propane storage).

(6)         This includes a service truck, bobtail delivery truck and an initial purchase of a truckload of domestic tanks. See Item 10 for more information regarding equipment financing. You'll use in the development and operation of your 1st Propane® Franchise only those brands, types and/or models of equipment fixtures, tanks, vehicles, signs, Products, Services, etc. as are consented to and required by us. You'll purchase or otherwise obtain approved brands, types and/or models of equipment, fixtures, vehicles and signs only from suppliers designated by us, which may include ourselves and/or our affiliates. We can require you to purchase, lease, finance or otherwise acquire all items through us and/or an affiliate. (Franchise Agreement, Section 3.5; also, see Item 8)

7)          We require you and your manager(s) to attend and successfully complete training with

respect to the 1st Propane® format and methods of operation. We expect that part of this training will be at our headquarters in California, a 1st Propane® Franchise operated by us or another location that we designate. We don't charge a separate fee for your initial training program. However, we may charge a fee for optional or additional training/assistance. All costs in connection with training (travel, meals, lodging, etc.) are your responsibility. (Franchise Agreement, Section 5.1)

(8) Additional Funds is an estimate of the funds needed to cover business (not personal) expenses during the first 3 months of operation of the franchised business. You will need capital to support on-going costs of your business, such as payroll, utilities, taxes, loan payments and other expenses, to the extent that business costs are not covered by revenues. New businesses (franchised or not) often have larger expenses than revenues. As with most businesses, your costs will depend on factors such as how much you follow our recommended systems and procedures, your technical,

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marketing and general business skills, local economic conditions, the local market for your business, competition, local cost factors and the sales levels achieved by you. This is only an estimate, however, and there is no guarantee that the amounts specified will be adequate or that additional investment by you will not be necessary during the three months of initial operation or afterwards. We do not furnish or authorize our salespersons or any other persons or entities to furnish estimates or otherwise as to the capital or other reserve funds necessary to reach "break-even" or any other financial position nor should you rely on any such estimates. The 3-month period from beginning business covers the time by which most Franchisees are fully in operation but does not necessarily mean that you will have reached "breakeven", "positive cash flow", or any other financial position by that time. In addition, the estimates presented relate only to costs associated with the franchised business and do not cover any personal, "living" or other expenses you may have. In addition, you may very well need to invest (or have access to) significant additional amounts in connection with the operation and possible growth of the franchised business, including (among other things) for purchases/leases of domestic propane tanks, storage tanks, other operating equipment and/or otherwise.

Although your business may be through its Initial phase" by 3 months, you should not expect it to have reached "break-even" or any other financial level by that time and you may need startup capital (exclusive of franchise fee) of $100,000 or more. The business may have negative cash flow for the first year or longer. There's no assurance that further funds will not be needed, and the actual needs of the business are highly variable and subject to factors beyond our control, such as location and your managerial ability, among others. We've based this estimate of "additional funds" on our experience with our franchisees. You should carefully consider these possible additional capital needs before making any investment or signing any binding documents. See Item 10 for related information.

(9) All of the above figures are estimates and we cannot guarantee you will not have additional expenses in starting your 1st Propane® business. Your costs will vary depending on such factors as: how much you follow 1st propane® systems and procedures; your management and marketing skill, experience and general business ability; the size and location of your facility; whether the facility will be required to be adapted or refurbished and other conversion costs, local and general economic conditions including disposable income; the local market for 1st Propane services; levels of competition; prevailing wage rates and the sales levels reached by you during the initial period.

Miscellaneous costs to begin operations and other financial requirements may be more or less than the figures specified above, as a function of the size of business (number of staff, anticipated volume of business, etc.) which you intend to operate and other factors, some of which are mentioned above. Many of these factors are primarily under your control in your independent operation of the business. No provision has been made for capital or other reserve funds necessary for you to reach "break-even" or any other financial position nor do any of these estimates include any finance charges, interest or debt service obligations. You should review these figures carefully with a business advisor (such as an accountant) before making any decision to purchase the franchise.

Since costs can vary with each Franchisee (particularly if you're purchasing an existing 1st Propane Franchise), it is strongly recommended that you (1) obtain, before purchasing a franchise or making any other expenditures or commitments, independent estimates from third-party vendors and your accountant of the costs which would apply to your proposed establishment and continued operation of a 1st Propane Franchise, (2) discuss with past and current 1st Propane Franchisees their economic experiences (including initial costs) in opening and operating a 1st Propane Franchise and (3) carefully evaluate the adequacy of your total financial reserves.

Although we make no estimates or representations regarding financial performance of a 1st Propane Franchise, we strongly recommend that, in addition to the additional funds shown, you have

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sufficient personal savings and/or income so that you will be self-sufficient and need not draw funds from the franchised business for at least six months after start-up.

8.          RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

Nature of Restrictions and Items Subject to Restrictions

The reputation and goodwill of each 1st Propane® Franchise is based on, and can be maintained only by, the satisfaction of all customers, which (in turn) depends on the availability of a wide variety of quality Designated Equipment, Products and Services, compliance with the 1st Propane® System and courteous and efficient service provided by all employees of 1st Propane® Franchises. We've already specified, and plan to specify in the future, various suppliers of Designated Equipment, Products and/or Services to be used or provided by 1st Propane® Franchises and that meet our standards and requirements, in each case in our sole and absolute discretion. Your 1st Propane® Franchise will purchase, use and offer each of, and only, such types, brands and/or quality of Designated Equipment, Products and Services as we designate and, where we so require, use only suppliers as designated by us. Designated suppliers may include, and may be limited to, us and/or companies affiliated with us. (Franchise Agreement, Section 10.2)

You'll use in the development and operation of your 1st Propane® Franchise only those (and each of those) brands, types and/or models of equipment fixtures, tanks, vehicles, signs, Products, Services, etc. as are consented to by us. You'll purchase or otherwise obtain approved brands, types and/or models of equipment, fixtures, vehicles and signs only from suppliers designated by us, which may include ourselves and/or our affiliates. We can require you to purchase, lease, finance or otherwise acquire all items through us and/or an affiliate. (Franchise Agreement, Section 3.5)

How We Issue and Modify Standards and Approvals of Suppliers and Related Items

We may designate a single supplier or limited number of suppliers, may designate a supplier only as to certain items and may concentrate purchases with one or more suppliers to obtain lower prices, advertising support and/or other benefits in our sole and absolute discretion. Specification of a supplier may be conditioned on requirements relating to frequency of delivery, standards of service, including prompt attention to complaints, or other criteria, and may be temporary, pending a further evaluation of such supplier by us, in each case in our sole and absolute discretion.

You'll notify us in writing (and submit to us the information, specifications, and samples as we request) if you propose to purchase, use or offer any type, brand and/or quality of items that have not been previously specified by us, or if you propose to use any supplier who has not been previously specified by us for the proposed item. We'll notify you within a reasonable time whether or not you're authorized to purchase or use the proposed type, brand and/or model of such items or to deal with the proposed supplier. We may withhold and/or revoke our approval of particular items or suppliers in our sole and absolute discretion. On receipt of written notice of revocation, you must immediately cease to sell or use any disapproved items and cease to deal with or use items from any such suppliers. (Franchise Agreement, Section 10.2)

We don't currently maintain or issue specific criteria, specifications or standards for approving suppliers or for goods or services used by our Franchisees, although we do have a list of approved suppliers and certain approved goods and services. Any supplier, however, who is able to provide equipment and/or supplies which have been approved in writing by us is, in effect, an approved supplier. We're glad to discuss the appropriate criteria for any existing or proposed item or supplier with any

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Franchisee, on a case-by-case basis. When we develop specifications and standards, we're pleased to share them with our Franchisees, on a confidential basis.

We will, occasionally and as we reasonably determine, upgrade, improve and make available equipment, literature and manuals as necessary and advisable for the benefit of 1st Propane® Franchisees generally. We welcome suggestions from you. Each idea will be given consideration and information regarding these will be made available to all franchises if found to be beneficial to the 1st Propane® System.

Items Where We or Our Affiliates Are Approved Suppliers or the Only Suppliers

You must purchase or rent and use computer and other systems (including point-of-sale systems) and software programs which meet our specifications as they evolve over time and which, in some cases, may only be available through us and/or our affiliates. (Franchise Agreement, Section 4)

The proprietary software "PLATO" is only available to you through us.

Your portable handheld computers, and truck ticket printers are available only on a rental basis through us.

You must purchase from us or our approved vendors, designated 1st Propane uniforms; hats; stationery and specified decals, labels and logos bearing the 1st Propane® name. These items must be used in accordance with 1st Propane regulations and are available only through us or our authorized suppliers.

Our Revenues Based on Your Use of Approved Items

We and our affiliates may receive revenues from your purchase or lease of various items including computers, software, equipment and other supplies. In the fiscal year ending June 30,

20052006, our total revenues were approximately $464,922________. Our revenues from all purchases

or leases by franchisees from us was $8,855-0- which represents 20% of our total revenues. The amounts were derived from our statement of operations and include situations where we purchase equipment and other supplies and resell the items to you.

Proportions of Required Purchases

It is extremely difficult to reliably estimate the proportion of the cost of rental of the computer and other systems and software programs to all purchases and leases by you of goods and services in establishing and operating your 1st Propane® Franchise.

Assuming that the estimated minimum initial costs to begin operations and other financial obligations are within the ranges described in Item 7, the proportions of cost of the computer and other systems and software programs to begin operations and other financial obligations would range from 1% to less than 0.5%. It's extremely difficult to formulate a meaningful estimate of the proportion of required purchases (or leases) to all purchases and leases by a 1st Propane® Franchise over a particular period of operation of a 1st Propane® Franchise, since this varies depending on the usage and size of your operations and other factors. However, we estimate that in most cases the proportion of required purchases (or leases), which includes all purchase and leases by a 1st Propane® Franchisee in operation would be less than 1 %

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Negotiation of Purchase Arrangements Purchasing or Distribution Co-operatives

We don't have any formal purchasing or distribution cooperatives. We may (but can't guarantee that we will) negotiate purchase arrangements with suppliers (including price terms) for the benefit of 1st Propane Franchises.

Legal Benefits Based on Use of Designated or Approved Sources

We don't condition providing benefits (such as the award of a successor or additional franchise) on use of designated or approved sources. However, failure to use approved items and suppliers might, like other matters, be a default under the Franchise Agreement and, in general, any Franchisee in default would not be awarded a successor or additional franchise and might even be subject to termination.

Purchasing or Distribution Cooperatives

There are no formal or mandatory purchasing or distribution cooperatives in the 1st Propane® System, although our Franchisees may get together to purchase various items on a voluntary basis.

9.          FRANCHISEE'S OBLIGATIONS

THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR.

Obligation

Section in Agreement

Item In Offering Circular

a. Site selection and acquisition/lease

3.1-3.2,3.8

8 and 11

b. Pre-openinq purchases/leases

3.1-3.2,3.4-3.6

8 and 11

c. Site development and other pre-opening requirements

3.1-3.8

11

d. Initial and onqoinq traininq

5.1

5,6 and 11

e. Openinq

3.4, 3.6 -3.7

7

f. Fees

5.1-5.2,9.1-9.7, 10.6, 10.8, 11.1-11.3,14.3-14.4, 15.2

5,6,11 and 17

g. Compliance with standards and policies/Operatinq Manual

3.3,5.3,10.1-10.9,16.2

8 and 11

h. Trademarks and proprietary information

6.1-6.4,8.1

13 and 14

i. Restrictions on products/services offered

1.2,3.3,3.5,10.2-10.3

8

j. Warranty and customer service requirements

10.1-10.8

Not Applicable

k. Territorial development and sales quotas

2.2,16.2, Exhibit 2.2

12

I. On-going product/service purchases

4,10.1-10.4, 10.9,10.6

8

m. Maintenance, appearance and remodelinq requirements

10.1-10.9

17

n. Insurance

10.6

7

o. Advertisinq

3.7,11.1-11.3

7 and 11

p. Indemnification

7.1-7.4, 14.2

Not Applicable

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Obligation

Section in Agreement

Item in Offering Circular

q. Owner's participation/ management/staffing

10.5

15

r. Records/Reports

12

6

s. Inspections/Audits

13

6

t. Transfer

14.2-14.5, 14.7

6 and 17

u. Renewal

15.1-15.2

6 and 17

v. Post-Termination obligations

16.11,17.1-17.6

6 and 17

w. Non-Competition covenants

8.2, 17.4

17

x. Dispute resolution*1*

19.1-19.16

17

y. Entire Agreement

21

Not Applicable

(1) The Franchise Agreement contains a mandatory arbitration clause governing nearly all disputes between you and us, as well as other clauses covering dispute resolution and which may affect your rights. You should read Articles 19 and 21 of the Franchise Agreement and you may want to consult an attorney regarding the effect of these provisions. You and we agree that the Federal Arbitration Act governs the Franchise Agreement

10.        FINANCING

We offer indirect financing but don't guarantee your notes, leases or other obligations. We'll refer you to companies experienced in the field of financing operations similar to a 1st Propane® Franchise and may assist you in the application process, but, due to possible changes in credit markets, evaluation of your credit worthiness and other factors (many of which are beyond our control), we can't give vou any guarantees or make anv representations as to the availability, terms, conditions or otherwise of any possible financing, guarantees or financial or other support. (Franchise Agreement, Section 3.9)

11.        OUR OBLIGATIONS

A.          Our Obligations Before the Opening of Your Business

Except as listed below, we need not provide any assistance to you. Please note that the following list is only of the items we're legally obligated to provide you and that we may provide additional items on a voluntary (but not legally-required) basis.

1.          Grant of Franchise. We grantyou the Franchise. (Franchise Agreement, Section 2.1)

2.          Specification of Territory. We specify the Territory where you will be operating your business. (Franchise Agreement, Section 2.2 and Exhibit 2.2)

3.          Site Review. We review and consent or deny consent to your proposed site. (Franchise Agreement, Sections 3.1 and 3.2)

4.          Design, etc. We'll furnish you with our standard specifications and other requirements for design, decoration, layout, equipment, tanks, furniture, fixtures, signs, trade dress and other items for your 1st Propane® Franchise, including vehicles and the Office/Yard, with which you'll promptly comply. (Franchise Agreement, Section 3.3)

5.          General Guidance and Assistance. We'll furnish guidance to you with respect to: (1) specifications, standards and operating procedures utilized by 1st Propane® Franchises, including any

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modifications; (2) purchasing approved equipment, tanks, vehicles, fixtures, signs, inventory, operating materials and supplies; (3) developing and implementing local advertising and promotional programs; (4) administrative, bookkeeping, accounting, inventory control and general operating and management procedures; (5) establishing and conducting employee training programs at your 1st Propane Franchise; (6) marketing strategy; and (7) help identify and negotiate with sources for wholesale propane supplies and identify liability insurers. This guidance can, in our sole discretion, be furnished in the Manuals, bulletins, written reports and recommendations, other written materials, refresher training programs and/or telephonic consultations or consultations at our offices or at your 1st Propane® Franchise. You'll follow and utilize this guidance. (Franchise Agreement, Sections 3.10 and 5.2)

|                6.          Manuals. We'll loon or make available to you, during the term of the Franchise

Agreement, 1 copy of our Manuals. The Manuals will contain specifications, standards, policies and procedures prescribed from time-to-time by us for the operation of a 1st Propane® Franchise (including but not limited to all goods and services to be sold and/or provided at or from your 1st Propane® Franchise and/or in association with the Marks.) The Manuals include one or more handbooks, manuals, bulletins and/or volumes, other materials (including materials distributed electronically or otherwise), and video, audio and/or software products (Franchise Agreement, Sections 1.2 and 5.3) The table of contents

| of the Manual is attached to this Offering Circular as Exhibit C. The Manual contains a total of 486 pages.

7.          Pre-Qpenina Review. You won't open your 1st Propane® Franchise for business until: (1) we notify you that all of your pre-opening obligations have been fulfilled; (2) pre-opening training of all of your personnel has been completed; (3) all amounts then due us (or any affiliate) have been paid; and (4) we've been furnished with copies of all insurance policies (or such other evidence of insurance coverage and payment of premiums as we request) certificates of liability insurance naming us as an additional insured with a waiver of subrogation, and leases/subleases as required by the Franchise Agreement. You'll open your 1st Propane® Franchise for business and commence business pursuant to the Franchise Agreement within 5 days after we give notice to you stating that your 1st Propane® Franchise is ready for opening. (Franchise Agreement, Section 3.6)

8.          Review of Grand Opening Advertising, etc. We'll feview and consent or deny consent to your proposodostablish a grand opening advertising and promotional program. (Franchise Agreement, Section 3.7)

9.          Training. As discussed in more detail below, we'll provide you with pre-opening training. B.          Our Obligations During the Operation of Your Business

1.              General Guidance and Assistance. We'll furnish guidance to you with respect to:

(a)  specifications, standards and operating procedures utilized by 1st Propane® Franchises, including any modifications;

(b)  purchasing or leasing of approved facilities, equipment, fixtures, tanks, vehicles, signs, products, services, etc.;

(c)  administrative, bookkeeping, accounting, inventory control and general operating and management procedures;

(d)  establishing and conducting employee training programs at your 1st Propane® Franchise.

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15


This guidance can, in our sole discretion, be furnished in the Manuals, bulletins, written reports and recommendations, other written materials, refresher training programs and/or telephonic consultations or consultations at our offices or at your 1st Propane® Franchise. Note that some of this assistance may be provided before you open your business. (Franchise Agreement, Section 5.2)

2.              Marketing Assistance. We will assist you with marketing by compiling a mailing of up to 100 names from your prospect list each month. We will pay the cost of the materials mailed, postage and our time to assemble the mailing and we may be reimbursed from the Marketing Fund for our direct and other costs in connection therewith. You agree to compile and maintain the list necessary for us to do this mailing with a suggested target of 100 names. We will assist you, to the extent necessary in our sole and absolute discretion, with developing marketing materials specific to individual locations. (Franchise Agreement, Section 5.4) We will provide you with a grand opening advertising and promotional program for which you pay us. See Item 5. (Franchise Agreement, Section 3.7)

3.             Accounting Services. Provided that you're in full compliance with all of your operational, payment and other obligations to us (and/or any affiliate), including but not limited to appropriate use of our Proprietary Software, use of designated hardware and other software and providing us with all required reports, etc., we will provide, through our software, various reports that will assist you with the operation of your 1st Propane® Franchise. As soon as is practical after the end of each month, we will provide you with an (unaudited) financial statement presenting the results of your operations for the previous month and year to date. This statement will include an income statement and a balance sheet, and other reports which we feel may be useful in the operation of your 1st Propane® Franchise. We will print your customer statements each month, on a date designated by us, and will forward those statements to you for postage and mailing. We will process your payroll every two weeks, providing you with an itemized payroll statement for you to present to your employees with their payroll check, but all actual payroll (and other) payments are your sole responsibility. {Franchise Agreement, Section 5.5)

We will keep track of your payroll tax withholding and prepare monthly and quarterly payroll tax reports, forwarding the reports to you for your signature and payment. We will keep track of your sales tax and fuel tax collections and payment obligations, forwarding the reports to you for your signature and payment. We will process certain other tax reports and forms for you, including, but not limited to, property tax reports and end of year payroll tax reports and employee W-2's, but we will not prepare or otherwise be involved with tax reports concerning or related to income taxes, VAT, GST or similar taxes. All obligations (including payment) and liabilities related in any way to your taxes are solely yours and our services are limited to preparing such statements based on information received from you.

4.              Relocation of 1st Propane® Franchise Office/Yard. If your lease or sublease for your 1st Propane® Franchise Office/Yard expires or terminates without your fault, if the Office/Yard are damaged, condemned or otherwise rendered unusable, or if, in your and our judgment, there is a change in the character of the location of the Office/Yard sufficiently detrimental to its business potential to warrant its relocation, we'll grant permission for relocation of your 1st Propane® Office/Yard to a location reasonably acceptable to us and without charging you an additional initial franchise fee, but any such relocation will be at your sole expense and you (and each affiliate of yours) will sign a general release, in form prescribed by us, of any and all claims, liabilities and/or obligations, of any nature whatsoever, however arising, known or unknown, against us and/or any or all of the Franchisor-Related Entities. (Franchise Agreement, Section 3.8)

5.              Manuals. As noted above, we'll loan or make available to you our Manuals while you area franchisee.

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The original documents were scanned as an image. The original file can be downloaded at the link above.