UFOC
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Sample UFOC
TABLE OF CONTENTS
ITEM PAGE
1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES.................... 1
2 BUSINESS EXPERIENCE..................................................2
3 LITIGATION.............................................................3
4 BANKRUPTCY...........................................................4
5 INITIAL FRANCHISE FEE..................................................4
6 OTHER FEES............................................................5
7 INITIAL INVESTMENT....................................................10
8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES................ 12
9 FRANCHISEE'S OBLIGATIONS........................................... 14
10 FINANCING ........................................................... 15
11 FRANCHISOR'S OBLIGATIONS........................................... 15
12 TERRITORY........................................................... 20
13 TRADEMARKS ........................................................ 21
14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION................. 23
15 OBLIGATION TO PARTICIPATE IN
THE ACTUAL OPERATION OF THE FRANCHISED BUSINESS.................. 23
16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL..................... 24
17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION .......... 26
18 PUBLIC FIGURES...................................................... 30
19 EARNINGS CLAIMS .................................................... 30
20 LIST OF OUTLETS ..................................................... 30
21 FINANCIAL STATEMENTS............................................... 31
22 CONTRACTS.......................................................... 31
23 RECEIPT .................................................... LAST PAGES
EXHIBIT 1
EXHIBIT 2 EXHIBIT 3 EXHIBIT 4 EXHIBIT 5 EXHIBIT 6 EXHIBIT 7
CANNON HYGIENE FRANCHISING (USA) INC. FRANCHISE AGREEMENT AND RELATED MATERIALS
STATE ADDENDA TO FRANCHISE AGREEMENT
EXHIBIT A
FRANCHISED TERRITORY; PREMISES LOCATION; ANNUAL MINIMUM UNIT REQUIREMENT
EXHIBIT B - CONFIDENTIALITY/NON-COMPETITION AGREEMENT
EXHIBIT C - GUARANTEE
EXHIBIT D - PRINCIPAL SHAREHOLDER'S UNDERTAKING
EXHIBIT E - GENERAL RELEASE - RENEWAL
EXHIBIT F - GENERAL RELEASE -ASSIGNMENT
EXHIBIT G - SOFTWARE LICENSE AGREEMENT
FINANCIAL STATEMENTS
STATE ADMINISTRATORS
AGENTS FOR SERVICE OF PROCESS
STATE ADDENDA TO OFFERING CIRCULAR
CONFIDENTIALITY AGREEMENT FOR PROSPECTIVE FRANCHISEES
RECEIPT
ITEM1
THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES
To simplify the language in this offering circular, "Cannon" means Cannon Hygiene Franchising (USA) Inc., the franchisor. "You" means the individual, corporation or partnership who buys the franchise. If the franchise will operate through a corporation or partnership, "you" also includes the franchisee's owners or partners. Cannon's agent for service of process in the states whose franchise laws require Cannon to name a state agency as agent for service is shown on Exhibit 4.
Cannon is a Delaware corporation incorporated in January, 1999, which does business under the names "Cannon Hygiene" and "Cannon". Cannon's principal business address is 1600 Shore Road, Suite A, Naperville, Illinois 60563 and its telephone number is (630) 753-9625.
Cannon franchises businesses selling personal hygiene disposal services through the installation, reinstallation and routine servicing of disposal units for the safe, hygienic and discreet disposal of sanitary napkins, tampons, babies' diapers and incontinence waste (the "Cannon Hygiene Businesses" or the "Businesses"). Cannon has no predecessors.
Cannon is a subsidiary of Cannon Hygiene (USA), Inc. ("Cannon USA"), a Delaware corporation incorporated in March, 1993, with its principal business address at Middlegate, White Lund Estate, Morecambe, Lancashire, LA3 3BJ, United Kingdom, telephone number 011 -44-1524-60894. Cannon USA is a holding company which does not directly engage in business activities.
Cannon is an affiliate of Cannon Hygiene International Limited ("Cannon International"), a company incorporated in the United Kingdom in 1994, with its principal business address at Middlegate, White Lund Estate, Morecambe, Lancashire, LA3 3BJ, United Kingdom. Cannon International is a subsidiary of Cannon Hygiene Limited ("Cannon Limited"), a company incorporated in the United Kingdom in 1976, with its principal business address at Middlegate, White Lund Estate, Morecambe, Lancashire, LA3 3BJ, United Kingdom. Cannon Limited is a subsidiary of O.C.S. Group Limited, a company incorporated in the United Kingdom in 1977, with its principal business address at 79 Limpsfield Road, Sanderstead, Surrey CR2 9LB, United Kingdom.
Cannon's affiliate Cannon Limited, which owns the Cannon System and the proprietary marks and other intellectual property used in the Cannon Hygiene System, and Cannon Hygiene (USA).(which has an exclusive license from Cannon Limited to use and sublicense the Cannon Hygiene proprietary marks, other intellectual property and System in the United States), have licensed Cannon to use the System, marks and other intellectual property and to sublicense them to franchisees in a cross-license agreement dated as of April 1, 1999. The principal address of Cannon Hygiene (USA) Inc. is Middlegate, White Lund Estate, Morecambe, Lancashire, LA3 3BJ, United Kingdom, and its telephone number is 011-44-1524-60894.
Cannon Limited has operated a business of this type since 1955, and has sold franchises for a business of this type since 1984. Cannon Limited conducts more than 400,000 services monthly within the United Kingdom at approximately 110,000 customer locations from 25 company-owned Cannon Hygiene service centers. Cannon Limited also operates company-owned Cannon Hygiene centers in Canada, France, Hong Kong, India, the Netherlands, Portugal, South Africa, Spain, Finland, Switzerland and Norway, and has granted franchises for Cannon Hygiene Businesses in the following countries at the date of this Offering Circular: Andorra, Australia, Cyprus, Denmark, El Salvador, Guadeloupe, Italy, Jamaica, Japan, Malta, Mauritius, Mexico, Portugal, Peru, Spain, Sweden, St Lucia and Turkey. Cannon Limited expects to grant franchises in Brazil, Isle Reunion, Mexico and Turkey in the next year.
In addition, Cannon Hygiene, Inc., an affiliate of Cannon, has conducted a business similar to the type being franchised in Illinois since 1996. The principal address of Cannon Hygiene, Inc. is 1600 Shore
Road, Suite A, Naperville, Illinois 60563, and its telephone number is (630) 753-9625. Another affiliate of Cannon, Cannon Hygiene/AWI of Virginia LLC ("Cannon Hygiene Virginia LLC"), a joint venture company partially owned by Cannon USA, has operated a business similar to the type being franchised in Norfolk, Virginia, since 1997. The principal business address of Cannon Hygiene Virginia LLC is 508E Indian River Road, Norfolk, Virginia 23523, and its telephone number is (757) 543-7261.
Neither Cannon, Cannon USA or Cannon's other affiliates have offered franchises for any other type of business.
Yourfranchised Cannon Hygiene Business will install and service disposal units for the safe, hygienic and discreet disposal of sanitary napkins, tampons, babies' diapers and incontinence waste at your customer's locations. The disposal units used in the Cannon Hygiene System (the "Units") are proprietary to Cannon. You will fill and refill the Units with a proprietary fluid (the "Cannon GRASafe Fluid") at your center before installing and reinstalling them at customer locations. The chemical formula of the Cannon GRASafe Fluid is proprietary to Cannon's designated manufacturer and is a trade secret known only to the manufacturer, Cannon and its affiliates. The manufacturer imparted the formula to Cannon and its affiliates under obligations of secrecy and confidence.
The market for your services consists of all businesses and institutions with female employees, customers or visitors, and may also include businesses which require disposal of babies' diapers and/or incontinence waste.
You will compete with other personal hygiene disposal service providers. In addition, at many locations which could retain the services of a personal hygiene disposal provider, cleaners employed by the location or a cleaning service empty untreated waste receptacles.
The U.S. Department of Labor, the Occupational Safety and Health Act ("OSHA") and the regulations promulgated under OSHA require your customers to make adequate provisions for the disposal of personal hygiene waste. Cannon is unaware of any other regulations specific to the industry in which the franchised business will operate. The laws, rules and regulations which apply to businesses in general will affect you. Consult your lawyer about them.
ITEM 2
BUSINESS EXPERIENCE
Chairman and President: Norman Haworth
Mr. Haworth has served as Chairman of the Board of Directors and President of Cannon since its incorporation in January, 1999. Mr. Haworth has also served as Chairman of Cannon Limited since April, 1995 and as Managing Director of Cannon Limited since October, 1983. Mr. Haworth has served as Chairman and Managing Director of Cannon International since its incorporation in 1994. In addition, Mr. Haworth has served as a Director of O.C.S. Group Limited with responsibility for the Group's hygiene division since April, 1988. Mr. Haworth served as Sales Director of Cannon Limited between July, 1967 and October, 1983. Mr. Haworth has been employed by Cannon Limited in various capacities since 1964.
Vice President. Treasurer and Secretary: James I. Harper
Mr. Harber has served as Vice President, Treasurer and Secretary of Cannon since its incorporation. Mr. Harber has also served as a Director of Cannon Limited since April, 1991 and as a Director of Cannon International since October, 1996.
Account Manager: Steven Plevev
Mr. Plevey has served as an Account Manager of Cannon since its incorporation. Mr. Plevey has also served as an International Accounts Manager of Cannon International since April, 1997, and has served as a Franchise Consultant for Cannon Limited since October, 1994. Mr. Plevey has been employed by Cannon Limited in various capacities since 1988.
Account Manager: Gavin Haworth
Mr. Haworth has served as an Account Manager of Cannon since its incorporation. Mr. Haworth has also served as an International Accounts Manager of Cannon International since April, 1997, and has served as a Franchise Consultant for Cannon Limited since April, 1994. Mr. Haworth has been employed by Cannon Limited in various capacities since 1990.
Cannon uses no franchise brokers.
ITEM 3
LITIGATION
Other than the three actions described below, there is no litigation that must be disclosed in this offering circular.
In Re Cannon Hvaiene/AWI of Virginia LLC. Cannon Hygiene. Ltd.. Cannon Hygiene International and Cannon Hygiene USA. Inc.. Environmental Protection Agency, Region III, Docket No. FIFRA 3-2000-0002. On December 16, 1999, Cannon Limited, Cannon International, Cannon USA and Cannon Hygiene Virginia LLC (referred together as the "Cannon affiliates" in this paragraph) executed a Consent Agreement and Final Order in an Environmental Protection Agency ("EPA") administrative action. The EPA alleged that the Cannon affiliates violated the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA") by distributing and selling their HiQ product as a pesticide without registering HiQ with the EPA and by producing HiQ at their Virginia facility without registering the facility with the EPA. Without admitting or denying the factual allegations and conclusions of law in the Consent Agreement and Final Order, the Cannon affiliates certified that they were in compliance with the relevant provisions of FIFRA and the regulations promulgated under that Act (the "FIFRA regulations") at the time they executed the Consent Agreement and Final Order, and agreed to pay a civil penalty of $13,750 in full satisfaction of all claims for civil penalties for alleged violations under the relevant provisions of FIFRA and the FIFRA regulations. The Final Order became effective on December 30, 1999.
Cannon Hygiene Limited v. Caretech L.L.C.. Dubai Civil Court, United Arab Emirates, Case No. 205/97, filed March 4,1997. Cannon Hygiene, Cannon's affiliate, brought this suit against Caretech, its Dubai franchisee following termination of the franchise agreement for non-payment of franchise fees. Cannon Hygiene requested that the court confirm its ownership of the Cannon units used by Caretech. Caretech then petitioned for appeal to the Cassation Court of Dubai on the issue of the ownership of the units. On May 24,1998, the Cassation Court of Dubai confirmed Cannon Hygiene's ownership of the units.
Cannon Hygiene Limited v. Masterclean CC. HB Beukes and National Hygiene. Supreme Court of South Africa, Cape of Good Hope, Case No. 10916/914, filed September 9, 1994. Cannon Limited, Cannon's affiliate, brought this suit against three related companies which had been its South African franchisees following Cannon Limited's termination of their franchises, seeking to enforce the post-termination covenants not to compete in the franchise agreements. The court entered a judgment in
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favor of Cannon Limited on September 29, 1994. The defendants moved for leave to appeal the judgment to the Provincial Division of the Supreme Court of South Africa, Cape of Good Hope, but the court denied their motion on October 22,1994. The defendants then petitioned for an appeal to the Appellate Division of the Supreme Court of South Africa, Cape of Good Hope. Their petition to appeal was dismissed by the Chief Justice on February 16,1995.
ITEM 4 BANKRUPTCY
No person identified in Item 1 or 2 of this offering circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code which must be disclosed in this Item.
ITEM 5 INITIAL FRANCHISE FEE
All franchisees pay an Initial Franchise Fee of $5,000.
You must pay the Initial Franchise Fee in full on the date you sign the Franchise Agreement. Cannon uses the proceeds from Initial Franchise Fees to defray a portion of its expenses in connection with the sale and establishment of franchises, such as: (1) costs related to developing and improving Cannon's services; (2) expenses of preparing and registering this Offering Circular; (3) legal fees; (4) accounting fees; (5) costs of obtaining and screening franchisees; and, (6) general administrative expenses.
Cannon will not refund any of the Initial Franchise Fee except under the following circumstances: If you are unable to obtain all government approvals, consents and licenses you need to lawfully open and operate the Cannon Hygiene Business by the scheduled opening date, you and Cannon each have the right to terminate the Franchise Agreement on notice to the other. If either of you does so, Cannon will return to you 75% of the Initial Franchise Fee and of any Unit Fees you paid Cannon (or 50% if Cannon has furnished its Initial Training Program to you), and you must bear all costs of shipping any Units you received from Cannon to the location within the United States Cannon designates.
Cannon will supply you with waste disposal Units for use in your Business, but Cannon will remain the owner of the Units. Before your Business opens, you must order at least 100 Units from Cannon (you must order the total number of Units shown on Exhibit A to your Franchise Agreement by the end of the first year following your scheduled opening date - see Item 6). As Item 6 describes in full, you will pay Cannon a monthly Unit Fee. Whenever you order Units, you must pay Cannon an advance payment equal to the Unit Fees for the Units you order for six months (the "Advance Payment"). You must also pay Cannon all shipping charges and any customs duties from the place where the Units are manufactured to your delivery destination. You must also purchase an opening inventory of Cannon GRASafe Fluid from Cannon International before your Business opens (see Item 6). The approximate cost for the initial 100 Units and the opening inventory of Cannon GRASafe Fluid is $3,000, plus shipping.
Cannon provides you with the first two uniforms and your first set of signs free of charge. If you wish to purchase other uniforms and/or signs from Cannon, you may do so, or you may purchase uniforms and signs from any supplier which Cannon approves and which meets its specifications (see Item 8). Cannon's current price for uniforms is $70 per uniform, and its current price for a set of signs is $300.
You pay Cannon no other fees or payments for services or goods before your Business opens.
ITEM 6 OTHER FEES*
|
Name of fee |
Amount |
Due Date |
Remarks |
|
Unit Fees |
Current fees: Model A and B Units - $3.00 per Unit per month Model C Units, $3.50 per Unit per month Foot pedals for Model A and B Units - $0.57 per Unit per month. Foot pedals for Model C Units - $0.71 per Unit per month. Plus shipping charges from U.S. location which Cannon designates (currently Naperville, Illinois). |
Advance Payment for the first six months; then payable monthly on the last day of the month |
The applicable rate for each type of Unit will increase annually on April 1 by the percentage of increase in the Consumer Price Index ("CPI") during the preceding twelve months. You must send an Advance Payment to Cannon with each order for Units. The Advance Payment is equal to the Unit Fees for the requested Units for six months. See Note 1. |
|
Cannon GRASafe Fluid |
Currently $87.00 per 200 sachets, plus shipping costs from U.S. location which Cannon designates (currently Naperville, Illinois) and all applicable taxes. See Note 2. |
Within 30 days after products clear customs at U.S. See Note 2. |
You must buy the Cannon GRASafe Fluid from Cannon. See Note 2 and Item 8. |
|
Uniforms (purchase from Cannon is optional) |
Cannon's current price: $70 per uniform. |
When you order uniforms from Cannon. |
Cannon provides you with the first two sets of uniforms free of charge. If you wish to purchase other uniforms from Cannon, you may do so. |
|
Signs (purchase from Cannon is optional) |
Cannon's current price: $300 for a set of signs. |
When you order signs from Cannon. |
Cannon provides you with your first set of signs free of charge. If you wish to purchase other signs from Cannon, you may do so. |
|
Initial and Subsequent Training |
Travel and transportation expenses only. See remarks. |
As incurred. |
No charge for Initial training for your personnel. Your Business Manager and all Business Managers appointed later must pass the Initial Training Program. You pay all travel and transportation expenses, but Cannon will pay for the meals, lodging and other living expenses of your trainees. |
|
On-Site Training and Assistance |
$100 per day |
When Cannon requests |
You can request on-site training and/or assistance at any time. Cannon is not obligated to provide on-site training and/or assistance. You must communicate the request to Cannon in accordance with guidelines. For each day of on-site training or assistance, Cannon can impose a fee. |
* Unless otherwise specified, Cannon or its affiliates impose all the fees in this table, you pay them to Cannon or its affiliate, and Cannon (or its affiliate) does not refund them.
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77
|
Name of fee |
Amount |
Due Date |
Remarks |
|
On-Going Training |
Travel and transportation expenses only. See remarks. |
As incurred. |
If Cannon holds an annual conference, convention or training session, you and your Business Manager must attend if Cannon requires attendance. No training charge, but you pay all travel and transportation expenses. Cannon will pay for the meals, lodging and other living expenses of your trainees. |
|
Insurance |
Estimated premium - $100 per month |
As insurance agent requires |
See Note 3. If you fail to buy required insurance, Cannon may pay premiums and charge you for them. Premiums set by insurance company. Your premiums will depend in part on your claims experience. Cannon expects companies may raise premiums by amount of inflation in insurance industry and any increases in their costs above inflation (due to material shortages, natural disasters, strikes, Acts of God, etc.). |
|
Taxes |
Promptly when due |
See Note 4. |
|
|
Proprietary Computer Software (not developed or adopted at this time) |
Because Cannon has not yet developed or adopted proprietary software. Cannon has not established prices for future updates or revisions, new or upgraded software or materials. |
New or updated software and related materials -when ordered. |
If Cannon decides to adopt proprietary software for the Cannon Hygiene System, then you must use Cannon's proprietary computer software. The Initial Franchise Fee will include the software purchase price, but you must pay for any future updates or revisions, and you must buy new or upgraded software and related materials from Cannon if it adopts them system-wide, at the prices Cannon sets. See Item 11. |
|
Advances |
When Cannon requests |
You must pay Cannon all amounts it advances to third parties for you. |
|
|
Late Charge |
Maximum law allows, or if no legal maximum, then 4% above prime rate |
When Cannon requests |
Late charge on any past due amounts owed to Cannon. Cannon will not increase charge beyond formula in column 2 during term of Franchise Aqreement. |
|
Renewal Fee |
$2,000 |
Before Cannon signs Renewal Agreement. |
See Item 17. |
|
Transfer Fee |
$5,000 |
Before Cannon approves the transfer. |
See Item 17. |
|
Indemnification of Cannon |
You indemnify Cannon from certain losses and expenses - see Section 8.12 of the Franchise Aqreement. |
||
|
Application of Funds |
Cannon can apply your payments to the oldest obligation due. |
||
|
Attornevs' Fees |
See Note 5. |
NOTES
[1] Model A and Model B Units" are Units used for the disposal of sanitary napkins and
tampons. "Model C Units" are Units used for the disposal of babies' diapers and incontinence waste. The applicable rate for each type of Unit will increase annually,
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effective April 1 of each year, by the percentage of increase in the Consumer Price Index ("CPI") during the preceding twelve months. The rate for a Unit which has already been delivered to you will be the rate in effect on the first day of the calendar month following the calendar month during which the Unit was actually delivered to you. The rate for a Unit expected to be delivered during the following calendar month will be the rate which will be in effect on the first day of that month. The Unit Fee may not be prorated for partial months.
You must send an Advance Payment to Cannon with each order for Units. The Advance Payment must be equal to the Unit Fees for the requested Units for six months. If you do not enclose an Advance Payment with your order for Units, Cannon can refuse to deliver the requested Units, and Cannon will not include the requested Units in your Annual Minimum Unit Requirement (see Item 12). If the order, date of delivery or any portion of the six months following the date of delivery falls after April 1 but before Cannon has informed you of the amount of the increase, then you must remit the additional Advance Payment owed to Cannon promptly after Cannon informs you of the amount of the increase. Cannon will credit the Advance Payment towards the Unit Fees for the Units in question for the last six months of the Use Periods of the Units.
The "Use Period" for a Unit means the period between (1) the date of its "deemed delivery" and (2) the fifth anniversary of its deemed delivery or, if sooner, the date of expiration or termination of the Franchise Agreement. A Unit will be deemed delivered on the first day of the calendar month following the calendar month during which it is actually delivered to you. You must retain all Units which you obtain from Cannon for their Use Period and no longer. On the expiration of the Use Period for each Unit, you must ship the Unit back to Cannon's headquarters. You must pay the costs of shipment to you from a location in the U.S. which Cannon designates (currently Naperville, Illinois).
If you are in default under the Franchise Agreement, Cannon will have no obligation to supply Units to you.
You must purchase the Cannon GRASafe Fluid you will use to fill and refill the Units from Cannon. Cannon can raise its prices at any time on notice to you, but Cannon must maintain the prices in effect on the day your Business commences operations for six months following the commencement of operations of your Business. You will have to pay shipping costs from a location in the U.S. which Cannon designates (currently Naperville, Illinois) and all applicable taxes. Cannon will sell you all Cannon GRASafe Fluid at the same prices as paid by other U.S. franchisees of Cannon who are similarly situated. Cannon does not expect to increase its prices beyond inflation in the applicable industry segment unless its costs increase due to shortages, catastrophes, strikes, Acts of God, or other causes beyond its control.
You must pay for Cannon GRASafe Fluid within 30 days after the products clear customs at their place of importation in the United States. However, Cannon will have the right to demand payment in full for Cannon GRASafe Fluid (including, if Cannon elects to arrange for shipment, estimated shipping charges, VAT and applicable taxes and duties) at the time you place an order and before the Cannon GRASafe Fluid are loaded for shipment.
You must pay for all Cannon GRASafe Fluid in U.S. dollars by (at Cannon's option) check or bankers draft payable to Cannon or by wire transfer or other form of electronic transfer to Cannon's designated bank account in the United Kingdom.
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Cannon will have no responsibility to ship Cannon GRASafe Fluid to you. Cannon will sell you Cannon GRASafe Fluid F.O.B. their place of manufacture or other locations that Cannon may designate. Cannon may (but need not) arrange shipment to you for your convenience. Cannon will have no responsibility for the selection or actions of a carrier. You waive any claim against Cannon related to shipment or the selection of a carrier.
Your only remedy and Cannon's only liability for claims concerning delivered Cannon GRASafe Fluid, for delayed delivery or for non-delivery, will be the purchase price of the Cannon GRASafe Fluid (plus any shipping costs you paid) or, if Cannon wishes, the replacement of the Cannon GRASafe Fluid at your destination. Cannon will not be liable for special, incidental, indirect or consequential damages, whether or not from Cannon's negligence.
If you are in default under the Franchise Agreement, Cannon will have no obligation to sell Cannon GRASafe Fluid or non-proprietary products (such as uniforms and signs), equipment or services to you.
You must also purchase other commercially available, non-proprietary products and services for the franchised Business. Cannon may offer to sell you some of these on a non-exclusive basis.
You must at all times maintain adequate inventory of the Units and Cannon GRASafe Fluid, and all other products and supplies to provide Cannon Hygiene services to your customers with reasonable efficiency.
You must maintain the following insurance:
1. Broad form comprehensive general liability coverage, and broad form contractual liability coverage of at least $1,000,000 aggregate. This insurance may not have a deductible or self-insured retention of more than $5,000.
2. Adequate Fire and Extended Coverage Insurance on your Premises and property to replace after an insured loss.
3. If any vehicle is operated in connection with the conduct of the franchised Business, automobile liability coverage, including coverage of owned, non-owned and hired vehicles, with minimum limits of liability in the greater of (a) the amount required by all applicable state and federal laws, or (b) $1,000,000 for each person killed or injured, and, subject to that limit for each person, a total minimum liability of $2,000,000 for any number of persons injured or killed in one accident, and a minimum limit of $300,000 for injury, destruction or loss of use of property of third persons as the result of any one accident.
4. Business Interruption Insurance to cover the rental of the Premises, previous profit margins, maintenance of competent personnel and otherfixed expenses;.
5. Worker's compensation and employer's liability insurance (in statutory amounts), unemployment insurance and state disability insurance (as governing law requires), for your employees.
If you fail to purchase the required insurance, Cannon may obtain the insurance for you. Cannon has no duty to do so. If Cannon obtains insurance for you, you must pay
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the premiums or reimburse Cannon for them. Cannon can change the required coverages and amounts.
You must pay all amounts you pay Cannon (or its affiliates) free and clear of, and without deduction or withholding for any Taxes. See Franchise Agreement for definition of the term "Taxes". If you must deduct or withhold any Tax under applicable law on any amounts payable to Cannon (or its affiliates), you must pay Cannon (or the affiliate) whatever additional amount may be necessary so that the net amount Cannon (or its affiliate) receives after the required deduction or withholding (including any required deduction or withholding on the additional amount) equals the amount that Cannon (or its affiliate) would have received if there had been no deduction or withholding.
If Cannon (or its affiliates) obtains any relief from or credit against any Taxes asserted against it in any country because of any Taxes for which there has been a deduction or withholding in another country and for which you made additional payments to Cannon (or its affiliate), then Cannon (or the affiliate) will repay you the part of their net amount of the total credits or reliefs from Taxes as Cannon considers fairly and reasonably attributable to the deduction or withholding.
You must pay Cannon all taxes it pays on account of (a) services or goods it furnishes to you, or (b) the Initial Franchise Fee or Continuing Royalties you pay.
If Cannon becomes a party to a proceeding concerning an agreement between Cannon and you, and Cannon wins, or if Cannon becomes a party to litigation or insolvency proceedings regarding your franchise, then you will be liable for Cannon's reasonable attorneys' fees and court costs.
If Cannon terminates the Franchise Agreement for your default, or if you terminate the Agreement through non-payment (see Item 17, section d.), you must pay Cannon all its expenses from your default or termination, including reasonable attorneys' and experts' fees.
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ITEM 7 INITIAL INVESTMENT*
|
CATEGORY OF INVESTMENT |
AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAID |
|
INITIAL FRANCHISE FEE |
$5,000 (See Item 5 and Notel) |
Lump Sum |
When you sign the Franchise Agreement |
Cannon |
|
REAL PROPERTY |
See Note 2 |
|||
|
CONSTRUCTION/ LEASEHOLD IMPROVEMENT |
0- $2,000 |
See Note 3 |
As seller or landlord requires |
As seller or landlord requires |
|
OFFICE EQUIPMENTS SUPPLIES |
0 $2,500 See Note 4 |
As sellers require |
As sellers require |
Sellers |
|
EQUIPMENT |
$8,000 See Note 5 |
As seller requires |
As seller requires |
Seller |
|
UNITS AND CANNON GRASAFE FLUID |
$3,000 See Note 6 |
Lump sum |
Before opening |
Cannon |
|
UNIFORMS |
$140 See Note 7. |
When you order from Cannon or as seller requires |
When you order from Cannon or as seller requires |
Cannon or other seller |
|
VEHICLE/ TRANSPORTATION |
$2,400 See Note 6. |
As seller or lessor requires |
As seller or lessor requires |
Seller or lessor |
|
SIGNS |
$300 See Note 9. |
When you order from Cannon or as seller requires |
When you order from Cannon or as seller requires |
Cannon or other seller |
|
ORGANIZATIONAL EXPENSE |
$1,000-$5,000 See Note 10 |
As you agree with accountant/attorney |
As you agree with accountant/attorney |
Accountant/ Attorney |
|
PERMITS AND LICENSES |
$500-$1,000 See Note 11 |
As agency requires |
As agency requires |
|
|
INSURANCE |
$300 See Note 12 |
As Agent requires |
Before opening |
Agent |
|
TRANSPORTATION FOR TRAINING |
$500 - $900 See Note 13 |
As airline requires |
As airline requires |
Airline |
None of the expenses described in this chart is fully refundable. Cannon does not expect the costs of items you purchase from third parties to rise faster than general inflation, but cannot guarantee this, since a third party's costs will go up with inflation in its industry segment and because of material shortages, natural catastrophes, strikes, Acts of God, and other causes beyond their control.
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|
CATEGORY OF INVESTMENT |
AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAID |
|
ADDITIONAL FUNDS (3 months]________ |
$13,000 See Note 14 |
As expenses occur |
Payroll weekly, other purchases according to agreed-on terms |
Employees, sellers of goods and services |
|
TOTAL $34,140 to $43,540 (Note 15) (excluding real property) |
||||
NOTES
[1] See Item 5 for circumstances when Cannon refunds the Initial Franchise Fee. Cannon
does not finance any fee.
[2] If you do not have acceptable space for your Premises, you will have to lease
approximately 2,000 square feet in a suitable industrial building for a Premises Location. Your Premises Location is likely to be on the outskirts of a city or town, at a site with easy access to the city ortown. Since real estate values vary dramatically from region to region based on factors such as size, condition and location of the Premises, Cannon cannot accurately estimate your rent, but annual rental costs range from approximately $18,000 to $20,000 or more per month for a Premises Location. To estimate the rental expense for your Premises Location, apply the above square footage requirements to the local real estate rental costs in the area in your Territory where there are suitable buildings.
[3] You may already have an appropriate Premises, or your cost of construction or
leasehold improvement for your Premises may be minimal. The cost of construction or leasehold improvements will vary depending on your construction and renovation costs and how many of those costs the landlord will pay (if any).
[4] You will probably have only minimum expenses for office equipment and supplies,
since you probably already possess a desk, chair, file cabinet, typewriter, telephone and desk-top calculator. The high figure on the table shows the cost of acquiring these items.
[5] The only equipment (other than the Units) required for your Business will be an
industrial washing machine, which you will use to wash the Units. You must purchase washing machines from an approved supplier. The specifications for the washing machine are in the Manual.
[6] Cannon will supply you with waste disposal Units for use in your Business, but Cannon
will remain the owner of the Units. Before your Business opens, you must order at least 300 Units, and you must order a total of 600 Units by the end of the first year following your scheduled opening date. You must pay Cannon an Advance Payment equal to the Unit Fees for the Units you order for six months. The figure on the chart is for 300 Units (your initial minimum order can be of any type or combination of types of Units). In addition to the estimates shown on the chart, you must pay Cannon all shipping charges. The figure shown also includes the initial supply of Cannon GRASafe Fluid which you must order. Cannon GRASafe Fluid currently costs $87.00 per 200 sachets. In addition, you must pay shipping costs and all applicable taxes.
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[7] You must provide uniforms for your employees. Cannon provides you with the first two
sets of uniforms. If you wish to purchase other uniforms from Cannon, you may do so. You may instead purchase uniforms from any supplier which Cannon approves and which meets its specifications (see Item 8). Cannon's current price for uniforms is $70 per uniform. The estimate shown is for two uniforms.
[8] The figure shown on the table is the lease cost for an average van or truck for three
months, plus the estimated cost of gas for three months.
[9] Cannon provides you with your first set of signs free of charge. If you wish to purchase
other signs from Cannon, you may do so. Cannon currently charges $300 per set of signs.
[10] Actual cost dependent on work done by accountant and attorney, and standard
regional rates.
[11] As states and localities require.
[12] Three months' premium for required insurance coverage - see Item 6.
[13] Travel expenses depend on where your home base is located, whether you and your
trainees can commute by car to Cannon's training base, and the number of people you wish to receive Initial Training. Cannon pays lodging and food expenses for your trainees.
[14] The estimate of additional funds for the initial phase of your Business is based on your
staff salaries and operating expenses for the first three months of operation. The additional funds required will vary by your area; how much you follow Cannon's methods and procedures; your management skill, experience and business acumen; the relative effectiveness of your staff; local economic conditions; the local market for your products and services; the prevailing wage rate; competition; and the sales level reached during the initial period. You must provide security deposits for utilities and rent (and possibly for other items).
[15] Cannon and its affiliates do not finance your initial investment. In compiling these
estimates Cannon relies on its affiliates' experience in operating and franchising similar businesses. You should review these figures carefully with a business advisor before making any decision to purchase the franchise.
ITEM 8
RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
You must purchase Cannon GRASafe Fluid from Cannon. See Item 6. Cannon does not expect to increase its prices for Cannon GRASafe Fluid beyond inflation in the applicable industry segment unless its costs increase due to shortages, catastrophes, strikes, Acts of God, and other costs beyond its control.
Since Cannon has not yet granted any franchises, it currently receives no income from sales of Cannon GRASafe Fluid to franchisees by it or a designee, but Cannon will receive income from this source in the future.
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You do not technically lease the Units from Cannon, but as part of the services Cannon provides to you under the Franchise Agreement, you obtain the Units from Cannon, Cannon retains title to them, and you pay Cannon a monthly Unit Fee for each Unit. Since Cannon has not previously sold franchises, it currently receives no income from franchisees' Unit Fees, but Cannon will receive income from this source in the future.
The Units and the Cannon GRASafe Fluid are the only items for which Cannon is currently the sole approved supplier.
The only items which you must purchase from suppliers approved by Cannon are washing machines, uniforms and signs. Cannon will offer to sell you these items, but you can buy them from any supplier approved by Cannon. If Cannon sells any of these items to franchisees, it will receive income from these sales. Since Cannon has not previously sold franchises, it currently receives no income from these sales to franchisees, but Cannon expects to receive income from this source in the future.
If Cannon requires supplier approval for a product or service and you propose a supplier, then to obtain Cannon's written approval:
You must submit a written request to Cannon for approval of the supplier.
The supplier must meet Cannon's specifications to Cannon's reasonable satisfaction.
The supplier must demonstrate to Cannon's reasonable satisfaction that it is in good standing in the business community for financial soundness and reliability of its product or service.
Cannon has the right to test, at your expense, the product or service of any supplier you propose, whether or not the supplier is then approved by Cannon. Cannon will give you notice of its approval or disapproval within a reasonable time. If Cannon revokes approval of any supplier, it will give you written notice (in its Manual or otherwise). Cannon does not maintain written criteria for approving suppliers, and thus these criteria are not available to you or your proposed supplier.
Cannon issues and modifies specification through its Manual and will send you a written notices of any new and modified specifications. All items bearing the Cannon Hygiene logo must meet Cannon's specifications.
Cannon does not expect the prices you pay for purchases from third party suppliers to increase beyond inflation in the applicable industry segment unless the supplier's costs increase due to shortages, catastrophes, strikes, Acts of God, and other causes beyond its control.
You must purchase the required insurance - see Item 6.
You must maintain adequate inventory at all times of the Units, Cannon GRASafe Fluid and all other products and supplies to provide Cannon Hygiene services to your customers with reasonable efficiency.
At the date of this Offering Circular, Cannon does not require you to purchase a computer system, but Cannon intends to do so in the future. When Cannon directs, you must purchase and install the computer hardware, software, peripherals and accessories which Cannon specifies (Cannon has not yet developed these specifications). If Cannon decides to adopt proprietary software for the Cannon Hygiene System, then when Cannon directs, you must use Cannon's proprietary computer software and sign Cannon's standard form Software License Agreement (Exhibit G to the Franchise Agreement in this offering circular). See Item 11.
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Cannon currently negotiates no purchase arrangements with suppliers for the benefit of franchisees. There are no purchasing or distribution cooperatives. Cannon provides you with no material benefits (such as renewal or granting additional franchises) based on your use of designated or approved sources. Cannon receives no payments from any supplier, nor does Cannon receive any special discount on purchases from any supplier for itself.
Cannon estimates that the required purchases and Unit Fees described above are 8% to 10% of the cost to establish a franchised Cannon Hygiene Business and approximately 15% of operating expenses.
ITEM 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 |
Article 6 of Franchise Agreement |
Items 7 and 11 |
|
b. Pre-opening purchases/leases |
Sections 7.7, 7.8, 8.7 and 8.8 of Franchise Agreement |
Items 6, 7, 8 and 11 |
|
c. Site development and other pre-opening requirements |
Article 6 of Franchise Agreement |
None |
|
d. Initial and ongoing training |
Sections 7.2 and 7.3 of Franchise Agreement |
Item 11 |
|
e. Openinq |
Section 8.1 of Franchise Agreement |
Item 11 |
|
f. Fees |
Articles 5 and 12 of Franchise Agreement |
Items 5 and 6 |
|
g. Compliance with standards and policies/Operating Manual |
Sections 7.1, 8.2, 8.4, 8.7, 8.8, 8.10, 8.13, 8.14, 8.20 of Franchise Agreement |
Items 7, 8,11,15 and 16 |
|
h. Trademarks and proprietary information |
Articles 17 and 20 of Franchise Agreement |
Items 13 and 14 |
|
I. Restrictions on products/services offered |
Sections 7.7, 7.8, 8.7 and 8.8 of Franchise Agreement |
Item 16 |
|
j. Warranty and customer service requirements |
Sections 8.8 (B) and ©), 8.19 of Franchise Agreement |
Item 16 |
|
k. Territorial development and sales quotas |
Section 8.7 of Franchise Agreement |
Item 12 |
|
I. Ongoing product/service purchases |
Sections 7.7, 7.8, 8.7 and 8.8 of Franchise Agreement |
Items 6 and 8 |
|
m. Maintenance, appearance and remodellinq requirements |
Section 8.3 of Franchise Agreement |
Item 11 |
|
n. Insurance |
Article 9 of Franchise Agreement |
Item 6 |
|
o. Advertising |
Article 10 of Franchise Agreement |
Item 11 |
|
D. Indemnification |
Section 8.11 of Franchise Agreement |
Item 6 |
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|
Obligation |
Section in Agreement |
Item in Offering Circular |
|
q. Owner's participation/management/ staffinq |
Sections 8.6 and 8.7 of Franchise Agreement |
Item 15 |
|
r. Records and reports |
Article 11, Section 12.2 of Franchise Agreement |
Item 6 |
|
s. Inspections and audits |
Section 8.13 of Franchise Aqreement |
Item 6 |
|
t. Transfer |
Article 16 of Franchise Agreement |
Item 17 |
|
u. Renewal |
Article 15, Section 4.2 of Franchise Aqreement |
Item 17 |
|
v. Post-termination obligations |
Article 20 of Franchise Agreement |
Item 17 |
|
w. Non-competition covenants |
Article 14 of Franchise Agreement |
Item 17 |
|
x. Dispute resolution |
Articles 21, 22, 23 and 27, Sections 14.3; 20.1 (8) of Franchise Agreement |
Item 17 |
|
y. Compliance with Laws, Rules and Regulations |
Section 8.5 of Franchise Agreement |
Item 16 |
ITEM 10
FINANCING
Cannon does not offer direct or indirect financing. Cannon does not guarantee your note, lease or obligation. Cannon and its affiliates have no past practice or future intent of selling, assigning or discounting franchisees' financing arrangements to a third party. Cannon and its affiliates do not receive any direct or indirect payments from any person for the placement of financing.
ITEM 11 FRANCHISOR'S OBLIGATIONS
Except as listed below, Cannon need not provide any assistance to you. Pre-Opening Obligations
Before you open your Premises, Cannon will:
(1) Designate your Territory. (Franchise Agreement, Section 3.1)
(2) Approve or disapprove a site for your Premises Location. You select the sites of your Premises Location in your Territory. Cannon approves or disapproves your proposed site. (Franchise Agreement, Section 6.1) If you and Cannon cannot agree on a site for your Premises Location, then Cannon will terminate the Franchise Agreement and refund your Initial Franchise Fee.
Cannon considers the following factors in approving sites: the size of your Territory; the market potential and estimated volume of your Business; the general location and accessibility to customers; the availability of locations and necessary zoning; and, expected overhead.
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(3) Approve or disapprove all signs in writing before installation or display. (Franchise Agreement, Section 6.5)
(4) Lend you a copy of the Confidential Operating Manual (the "Manual") during the Initial Training Program (described below). You must strictly comply with the Manual in operating your Business. Cannon can change the Manual, and you must comply with these changes when you receive them, but they will not materially alter your rights and obligations under the Franchise Agreement.
The Manual is currently divided into two parts: the Operational Manual and the Sales Manual. The following is the Table of Contents of the Manual as of the date of this offering circular:
|
TOPIC |
NUMBER OF PAGES |
|
Operational Manual |
|
|
Premises |
3 |
|
Human Resources |
8 |
|
Transport |
2 |
|
Cleaning Process |
9 |
|
Administration |
5 |
|
Servicing Customers |
1 |
|
Health and Safety |
12 |
|
TOTAI |
dn |
|
Sales Manual |
|
|
Introduction |
6 |
|
Range of Services |
24 |
|
Sales Planning and Strategy |
13 |
|
Sales Administration |
6 |
|
Corporate Identity |
7 |
|
Brochures and Promotional Materials |
10 |
|
Advertising and PR |
8 |
|
Market Research |
4 |
|
Testimonials |
1 |
|
TOTAL |
79 |
(5) Provide you with Units. See (7) below and Item 6. (Franchise Agreement, Section 7.7)
(6) Sell you the Cannon GRASafe Fluid. See (7) below and Item 6. (Franchise Agreement, Section 7.8)
(7) Exert reasonable efforts to fulfill your requests for Units and Cannon GRASafe Fluid on a timely basis. If Cannon (or its suppliers) cannot supply Cannon's clientele (including you and other Cannon Hygiene franchisees) with the quantity and type of Units or Cannon GRASafe Fluid requested, as a result of any cause beyond the control of Cannon or its supplier, then Cannon
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will allocate the available respective quantities and types of Units or Cannon GRASafe Fluid on an equitable basis among the businesses them. If you do not receive Units or Cannon GRASafe Fluid from Cannon or its suppliers because of any reasons beyond Cannon's (or its supplier's) control, this will not be a breach by Cannon of the Franchise Agreement and Cannon will not be liable to you for it. (Franchise Agreement, Section 7.9)
(8) Furnish you with specifications for required products bearing the Cannon logo, such as uniforms and signs. (Franchise Agreement, Section 8.8)
(9) Provide you with consultation and advice. (Franchise Agreement, Section 7.5)
(10) Approve or disapprove any advertising, direct mail, identification and promotional materials and programs you propose within 10 business days of receipt. If Cannon does not respond in 10 business days, the material is approved. (Franchise Agreement, Section 10.2)
(11) Set maximum prices or suggest prices for your services from time to time. Cannon will not attempt to set minimum prices for your services. See Item 16. (Franchise Agreement, Section 7.10)
(12) Before your Cannon Hygiene Business opens, train you, your Business Manager and any other employees you wish Cannon to train as follows:
|
SUBJECT |
TIME BEGUN |
INSTRUCTIONAL MATERIAL |
HOURS OF CLASSROOM TRAINING |
HOURS OF ON THE JOB TRAINING |
|
Introduction to Cannon Hygiene |
Day 1 |
N/A |
30 minutes |
0 |
|
Explanation of the Cannon Hygiene business |
Day 1 |
N/A |
30 minutes |
0 |
|
Service administration |
Day1 |
Operational manual |
1 hour |
0 |
|
Routing |
Day 1 |
Operational manual |
1 hour |
0 |
|
Product knowledge |
Day 1 |
Operational manual |
1 hour |
0 |
|
Sales training |
Day 1 |
Sales manual |
4 hours |
0 |
|
Field sales traininq |
Day 2 |
Sales manual |
0 |
8 hours |
|
Practical service training |
Day 3 |
Operational manual |
0 |
8 hours |
Cannon conducts the Initial Training Program approximately once a year (or more frequently, if needed) at Naperville, Illinois. Cannon's Initial Training Program currently includes approximately three days of training as described in the table above - one day each for classroom training, field sales training and practical service training. Steven Plevey and Gavin Haworth, Cannon's Account Managers, are in charge of the Initial Training Program. The minimum experience of the instructors that is relevant to the subject taught and Cannon's operations is from 8 to 12 years.
The Initial Franchise fee includes the cost of the Initial Training Program for you and your Business Manager - who must attend the training - and for any other trainees you wish to send. You must pay all transportation costs for yourself and your trainees, but Cannon will pay for meals and lodging during training.
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The original documents were scanned as an image. The original file can be downloaded at the link above.