Franchise Agreement
The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
CARPET NETWORK FRANCHISE AGREEMENT
FRANCHISEE NAME(S): ___________________________
FRANCHISE TERRITORY:
EFFECTIVE DATE:
THIS FRANCHISE AGREEMENT (hereinafter sometimes referred to as "Agreement") is made and entered into as of the effective date above written by and between Carpet Network, Inc., a New Jersey corporation (referred to in this Agreement as "Carpet Network," "We", "Us" or "Our") with an address at 109 Gaither Drive, Suite 302, Mount Laurel, New Jersey 08054 and the above named individual(s) or entity (hereinafter referred to as "You", "Your", or "Franchisee").
BACKGROUND
We and/or Our affiliates have developed a business system for the operation of mobile "shop-at-home" retail carpet, floor covering and window treatment sales businesses which feature, without limitation, distinct standards and specifications for products, inventory, supplies and service; uniform standards, specifications and procedures for operations; procedures for management control; marketing, advertising, and accounting systems; training and assistance (the "System"); and
The System is identified by means of certain trade names, trademarks, service marks, logos, emblems and other indicia of origin including, without limitation, the service mark "Carpet Network The Traveling Floor and Window Store (and design)," "Some Decisions Are Better Made at Home" and those which We may hereafter designate in connection with the System (the "Proprietary Marks"); and
You have applied to Us for a franchise and such application has been approved in reliance upon all of the representations made therein; and
You hereby acknowledge that adherence to the terms of this Agreement and Our standards and specifications are essential to the operation of Your mobile business and to the collective operation of the System and to protect and preserve the goodwill of the Proprietary Marks, as well as each Carpet Network franchisee.
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, commitments and understandings contained in this Agreement, the parties agree as follows:
1. GRANT OF FRANCHISE
1.1 Nature of Grant. We hereby grant You and You hereby accept the right to establish and operate the Carpet Network Franchise within the limits of Your particular territory, as defined below, upon the terms and conditions stated in this Agreement. During the term of this Agreement, You may adopt and use the Proprietary Marks. As a Carpet Network Franchisee, You shall have the right to hold Yourself out to the public as an authorized Franchisee of Carpet Network, Inc., and have access to certain of Our marketing and business expertise, as each may be modified from time to time.
1.2 Territory. You are hereby granted an exclusive area (the "Territory") comprised of the zip codes identified in this Agreement. So long as You comply with all of Your obligations under this Agreement during its term, We will not locate, operate or grant another franchise for a mobile business within the Territory. The exclusivity of Your Territory relates solely to operation of a mobile business. We do not otherwise intend to limit Our rights of product or service distribution or to engage in other business activities in Your Territory.
1.3 Acknowledgments. You agree that the terms and provision of this Agreement are reasonable and necessary to maintain Our high standards of quality and service and uniformity of those standards.
You acknowledge that the success of the business venture contemplated to be undertaken by You is speculative, is and will be dependent upon the personal efforts of You, that entry into any business enterprise is always associated with risk and that no assurance of success has been or can be given to You.
In signing this Agreement, You acknowledge: (a) the importance of operating Your franchise in strict conformity with Our standards and each aspect of the System as modified from time to time; and (b) that You have conducted an independent investigation of other franchises and recognize that, like any other business, their nature will evolve and change over time as the System changes.
You represent and warrant that You have made no misrepresentations or omissions in obtaining Your Franchise.
You understand that entry into any business venture necessarily involves some unavoidable risk of loss or failure, that while the purchase of a franchise may improve Your chances for success, Your purchase of the Carpet Network franchise (or any other) is a speculative investment, that significant investment beyond that outline in the Offering Circular ("UFOC") may be required to succeed, that there exists no guaranty against possible loss or
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failure in this or any other business and that the most important factors in the success of any Carpet Network franchise, including the one to be operated by You, are Your personal efforts and Your technical, business, marketing, sales, management, judgment and other skills. You agree that You will lend Your best efforts to achieve success and that You will faithfully follow the marketing, business and other elements of the System as contained in the Carpet Network Operations Manual as it may change from time to time.
You acknowledge that Your entire knowledge of the operation of the Carpet Network Franchise, including without limitation the contents of the Operations Manual, Carpet-Net Intranet site and the specifications, standards and operating procedures of the Carpet Network Franchise, is derived from information disclosed to You by Carpet Network and that such Operations Manual, Carpet-Net Intranet site and such other information is confidential and a trade secret of Carpet Network. You agree that You will maintain the absolute confidentiality of the Operations Manual and all such other information during and after the term of the franchise, disclosing same to the other employees of Your Carpet Network Franchise only to the extent necessary for the operation of Your Carpet Network Franchise in accordance with this Agreement, and that You will not use the Operations Manual and such other information in any other business or in any other manner not specifically authorized or approved in writing by Carpet Network.
1.4 No Guarantees. We expressly disclaim the making of, and You acknowledge that You have not received or relied upon, any representations, claims or guaranties, express or implied, as to the revenues, sales, profits or success of any Carpet Network business or the extent to which We will continue to develop and expand the number of Carpet Network franchises. You acknowledge that any statement regarding potential or actual revenues or profits of Carpet Network franchises are made solely in the UFOC delivered to You prior to the signing of this Agreement and the payment of any funds by You. Any statements regarding potential or actual revenues or profits of any Carpet Network franchise or statistical information regarding any existing Carpet Network franchises that is not contained in Our UFOC is unauthorized, unwarranted, unreliable and should be reported to Us immediately. You acknowledge that any information You obtained from franchisees (or any other source other than Our UFOC) relating to sales, profits or otherwise does not constitute information obtained from Us and We make no representation as to the accuracy of, and expressly disclaim, any such information. You acknowledge that You have not received or relied on any representations about any Carpet Network franchise made by Us, or Our officers, directors, employees or agents, that are contrary to the statements made in Our UFOC or the provisions of this Agreement. If there are any exceptions to any of Your acknowledgments or statements in this Agreement, You will: (a) immediately notify Our chief executive officer in writing; and (b) note such exceptions by attaching a statement of exceptions to this Agreement prior to signing it. Any such statement of exceptions must be signed by Us to be binding on Us.
1.5 Your Representations. As an inducement to Our entering into this Agreement with You, You represent and warrant that: (a) in all of Your dealings with Us, Our officers, directors, employees and agents act only in a representative capacity and not in an individual capacity; (b) You have made no misrepresentations or omissions in obtaining Your Carpet
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Network Franchise; and (c) You have fully read and understand this Agreement and the UFOC, all questions raised by You have been satisfactorily answered.
2. SERVICES TO BE OFFERED; CHANGES, TERM, SUCCESSOR FRANCHISE,
ETC.
2.1 Development of Business, Changes in System, etc. Subject to the provisions of this Agreement, You are licensed only to use the System and Proprietary Marks, as modified from time to time, to offer and to perform Services in the Territory.
You will use the System and Proprietary Marks only as permitted by this Agreement and the Operations Manual and only for the operation of the franchise providing Services in the Territory and not for any other purpose. You will use Your best efforts to effectively and profitably conduct the Carpet Network franchise in Your Territory.
From time to time, We may (but are not obligated to), on reasonable notice, and following appropriate research and testing, change and/or update the System, including but not limited to customer sales programs, uniform truck and career apparel standards, national account requirements, professional image, team player standards, new and/or changed trade names, service marks, trademarks, logos or copyright material. We may change the standards, specifications and other requirements set forth in the Operations Manual and may change the methods of operation, marketing, products and services to be offered by You and otherwise change the Carpet Network methods of doing business.
In order to maintain the value of Our Proprietary Marks, to adapt to changing business conditions and opportunities and to maintain uniformity throughout the System, You will, at Your own expense, adopt, comply with, use and display on a timely basis [but in no case later than ninety (90) days after notice] any and all such changes, updates and supplements as if they were a part of the System at the time of the signing of this Agreement. In the event that We determine that We and/or You should modify or discontinue any use of any aspect of the System and/or Proprietary Marks, You will do so at Your sole expense and We will have no liability or obligation as a result thereof.
Bearing in mind Your and Our strong mutual interests in maintaining and improving the value of the System and franchises, We shall meet or confer quarterly or as needed with committees designated by the Carpet Network Franchisee Advisory Council to consult with and advise Us regarding the operation and development of the System, including such matters as strategic marketing plans, advertising programs, public relations, research and development, operating policies and practices, revisions to future forms of the Franchise Agreement, relationships with national and regional accounts, etc. We will give due consideration to input from such council(s), as well as from You individually, but We retain the ultimate authority and responsibility for all such decisions.
You cannot sell products or services not authorized by Us and You must offer all of the products and services authorized by Us, unless We agree differently, in writing, due to special local circumstances or other reasons. If You wish to not offer any products and/or services
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authorized by Us, You must make arrangements to have such products and/or services offered by another franchisee or Us or (if We so approve in writing) by a subcontractor for whom You will be responsible. The list of authorized products and/or services may be updated from time to time.
2.2 Term of Agreement. Your rights under this Agreement are for a term of 15
years starting on the Agreement Date. This agreement shall expire on____________, unless
terminated earlier under the provisions of this Agreement or under any applicable law.
2.3 Successor Franchise.
(a) Your Rights. On the expiration of the Agreement and provided that You are not in default under the terms of the Agreement and further provided that You have substantially complied with this Agreement and all other agreements between You and Us, We will offer You the opportunity to enter into a new Franchise Agreement with Us upon the terms and conditions as the then-current form of Franchise Agreement. We reserve the right to make changes that We reasonably believe in Our good faith judgment are in the best interest of the Carpet Network System. Any award of a successor franchise to You must meet each of the conditions set forth below, along with all other terms and conditions as are reasonable at the time.
(b) Notices; New Agreement; Releases. We will send You a new then-current standard Carpet Network Franchise Agreement (the "New Agreement") and ancillary documents and general releases at least sixty (60) days prior to the expiration of this Agreement, and You will have until the expiration date of this Agreement to accept the New Agreement and return the fully executed copies to Us. You (and if a corporation or partnership is the Franchisee, its shareholders or partners) (the "Franchise Entities") must sign and deliver to Us: (i) the New Agreement and any ancillary agreements We are then customarily using in the award of new Carpet Network franchises (which will include appropriate modifications to reflect the fact that the agreement relates to the award of the successor franchise); and (ii) general releases, in a form satisfactory to Us, of any and all claims, known and unknown, against Us, Our affiliates, and all of Our and their officers, directors, employees, agents, attorneys subsidiaries, successors, assigns (the "Carpet Network Entities") and Our licensees. If We do not receive fully executed copies of the New Franchise Agreement and ancillary documents by the expiration date of this Agreement, Your franchise relationship with Us will expire as You will be deemed to have elected to not obtain the successor franchise; provided, however, if We fail to send You Our new Agreement and general release before the expiration of this Agreement, the terms and conditions of this Agreement will automatically renew for a one (1) year period from the date of expiration or , if earlier, when You have executed and We accept the new Agreement and general release. Your right to obtain the successor franchise will be further contingent on Your continued full compliance with this Agreement and any other agreement(s) between You and Us.
The New Agreement may contain different terms, provisions and conditions from those set forth in this Agreement and may include, without limitation, higher royalty and advertising fees. The New Agreement, when executed, will supersede this Agreement in all respects; provided, however, that You shall not be required to pay Us the initial franchise fee which will be charged in the New Agreement.
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(c) Compliance with Operational Standards. In order to obtain the successor franchise You must bring Your operation into conformity with all standards then applicable to new Carpet Network franchisees, including (but not limited to) such items as methods of operation, possession and use of Our up-to-date samples and products package meeting Our then-current service and other standards, office, image, appearance and other System standards. Your vehicle(s) must also be brought into conformity with Our then current appearance and maintenance specifications, including those regarding color, graphics, size and exterior and interior design.
(d) Training and Refresher Programs. You (or a manager of Yours approved by Us) must satisfactorily complete any new training and refresher programs as We may reasonably require.
(e) Fees and Expenses. It is not currently Our policy to charge a fee in connection with renewal of the Agreement. You must, however, reimburse Us for any out-of-pocket costs incurred by the processing of the proposed successor franchise.
2.4 Rights to System and Marks Retained by Us. We retain the exclusive right to and ownership of the System and Proprietary Marks, subject to Your rights as provided in this Agreement. On termination of this Agreement for any reason, You will immediately and completely discontinue all use of the System and Proprietary Marks. Nothing in this Agreement will be construed as an assignment or grant to You of any right, title, interest, or license in and to the System and/or Proprietary Marks, except for the limited license provided in this Agreement, all rights with respect to the same being reserved by Us.
2.5 Roster and Manuals. The Carpet Network franchise roster and other lists of franchisees, the Operations Manual and all information provided on Our Carpet-Net Intranet site are and will remain Our sole and confidential property, are only loaned to You, and You agree not to disclose or Use such for any purpose without Our prior written consent.
3. PROPRIETARY MARKS AND INTERNET
3.1 Ownership. Nothing in this Agreement assigns or grants to You any right, title or interest in or to the Proprietary Marks, it being understood that all rights relating thereto are reserved by Us except for Your license to use the Proprietary Marks only as specifically and expressly provided herein. Your use of the Proprietary Marks shall inure to Our benefit, and You shall not at any time acquire any rights in the Proprietary Marks. You agree that You will not challenge Our title or rights in and to the Proprietary Marks, or do any act to jeopardize or diminish the value of the Proprietary Marks. You expressly agree that any and all goodwill associated with the Proprietary Marks and Our copyright material, including any goodwill that might be deemed to have arisen through Your activities, inures directly and exclusively to Our benefit. You shall execute from time to time any necessary papers, documents, and assurances to effectuate the intent of this paragraph and shall fully cooperate with Us or any other System franchisee in securing all necessary and required consents of any state agency or legal authority to the use of any of the Proprietary Marks.
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3.2 Infringement. You shall promptly notify Us of any infringement of, or challenge to, the Proprietary Marks, and We shall in Our discretion take such action as We deem appropriate. We will indemnify and hold You harmless from any suits, proceedings, demands, obligations, actions or claims, including costs and reasonable attorneys' fees, for any alleged infringement under federal or state trademark law arising solely from Your use of the Proprietary Marks in accordance with this Agreement or as We otherwise set forth in writing, if You have promptly notified Us of such claim. If We undertake the defense or prosecution of any litigation pertaining to any of the Proprietary Marks, You agree to execute any and all documents and do such acts and things as may, in the opinion of Our counsel, be necessary to carry out such defense or prosecution. We have the right, in Our sole discretion, to require You to discontinue, modify or substitute any of the Proprietary Marks as a result of pending or threatened litigation involving Your use of such Proprietary Marks; provided We indemnify You for the actual out-of-pocket costs You incur to effectuate such change.
3.3 Advertising. All advertising shall prominently display the Proprietary Marks and shall comply with any standards for use of the Proprietary Marks which We have established as set forth in the Operations Manual or otherwise in writing. All such advertising shall be subject to Our prior written approval, which We shall not unreasonably withhold. We reserve the right to approve all signs, stationery, business cards, forms and other materials and supplies bearing the Proprietary Marks. You shall use the Proprietary Marks including, without limitation, trade dress, color combinations, designs, symbols, and slogans, only in the manner and to the extent specifically permitted by this Agreement or by Our prior written consent. All advertising, publicity, signs, decorations, furnishings, equipment or other materials employing in any way the words "Carpet Network" or any derivative thereof or any other Proprietary Marks shall be submitted to and approved by Us prior to first publication or use. Such approval will not be unreasonably withheld.
3.4 Franchisee's Name. You shall not use the Proprietary Marks or any part thereof in Your corporate name. Your corporate name and all fictitious names under which You propose to do business must be approved in writing by Us before use. You shall use Your corporate name either alone or followed by the initials "D/B/A" and the business name "Carpet Network." You shall promptly register at the office of the county in which the franchise business is located or such other public office as provided for by the laws of the state in which Your mobile business is located as doing business under such assumed business name.
3.5 Authorized and Unauthorized Use. You shall use the Proprietary Marks in
conjunction with the symbol " " or , as applicable, in order to indicate that the Proprietary Marks are protected under federal law. You shall not use any of the Proprietary Marks in connection with the offer or sale of any unauthorized products or in any other manner We have not explicitly authorized in writing.
3.6 Our Use of Marks. You acknowledge and agree that We and Our affiliates may use and register the Proprietary Marks as We deem advisable in Our discretion including, without limitation, developing and establishing other systems using the same or similar
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Proprietary Marks alone or in conjunction with other marks and granting licenses and/or franchises in connection therewith without providing any rights therein to You.
3.7 Internet. You may not maintain a World Wide Web site or otherwise maintain a presence or advertise on the Internet or any other public computer network in connection with the franchised business without Carpet Network's prior written approval, which Carpet Network may withhold for any reason or no reason. Franchisee agrees to submit to Carpet Network for approval before use true and correct printouts of all Web site pages Franchisee proposes to use in its Web site in connection with the franchised business. Franchisee understands and agrees that Carpet Network's right of approval of all such Web materials is necessitated by the fact that such Web materials will include and be inextricably linked with Carpet Network's Proprietary Marks. Franchisee may only use material, which Carpet Network has approved. Should Carpet Network grant Franchisee the right to establish a Web site, Franchisee's Web site must conform to all of Carpet Network's Web site requirements, whether set forth in Our Manual or otherwise. Franchisee agrees to provide all hyperlinks or other links that Carpet Network requires. If Carpet Network grants approval for a Web site, Franchisee may not use any of the Proprietary Marks at the site except as Carpet Network expressly permits. Franchisee may not post any of Carpet Network's proprietary, confidential or copyrighted material or information on the Web site without Carpet Network's prior written permission. If Franchisee wishes to modify its approved site, all proposed modifications must also receive Carpet Network's prior written approval. Franchisee explicitly understands that it may not post on its Web site any material, which any third party has any direct or indirect ownership interest in (including, without limitation, video clips, photographs, sound bites, copyright test, trademark or service marks, or any other text or image which any third party may claim intellectual property ownership interest in). Franchisee agrees to list on its Web site, should Carpet Network ever grant Franchisee the right to have a Web site, any Web site maintained by Carpet Network, and any other information Carpet Network requires in the manner Carpet Network designates. Franchisee agrees to obtain Carpet Network's prior written approval for any Internet domain name and/or home page address. The requirement for Carpet Network's prior approval set forth in Paragraph 3.7 will apply to all activities on the Internet or other communications network to be conducted by Franchisee, except that Franchisee may maintain one or more E-mail addresses and may conduct individual E-mail communications with Carpet Network's prior written approval. Franchisee agrees to obtain Carpet Network's prior approval as provided above if Franchisee proposes to send advertising to multiple addressees via E-mail. You shall promptly respond to all customer E-mails in the manner We specify in the Operations Manual, which We may expand and revise over Our Carpet-Net Intranet site from time to time.
3.8 Modification. You hereby acknowledge and agree that during the term of this Agreement and all subsequent renewals hereof, We shall have the exclusive right to add, modify, discontinue and/or substitute the Proprietary Marks or any of them, as We deem appropriate in Our sole discretion. You shall discontinue using all Proprietary Marks which We have notified You, in writing, have been modified or discontinued within 10 days of receiving written notice and at Your sole cost and expense, shall begin using such additional, modified or substituted Proprietary Marks, as We specify in writing, within 10 days of receiving written notice. Nothing under this Paragraph 3.8 shall materially alter Your fundamental rights under this Agreement.
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4. CONFIDENTIAL INFORMATION
You acknowledge and agree that the Operations Manual, all information provided You on Our Carpet-Net Intranet site, Our trade secrets and copyright materials, methods and other techniques and know-how are Our exclusive and confidential property which We provide to You in confidence ("Confidential Information"). You agree to use the Confidential Information only for the purposes and in the manner We authorize in writing, which use will inure exclusively to Our benefit. Our trade secrets consist of, without limitation, sales techniques, merchandising and display techniques, advertising formats, accounting systems, operations systems, policies, procedures, systems, compilations of information, records, specifications, manuals and other confidential information which We or Our affiliates have developed for use in the operation of the franchise System. You may not directly or indirectly contest Our ownership of Our trade secrets, methods or procedures or contest Our right to register, use or license others to use any of such trade secrets, methods and procedures. You and Your heirs, successors and assigns (including Your partners, officers, directors, shareholders, and their respective heirs, successors and assigns) and Your employees and their respective heirs, successors and assigns, are prohibited from using and/or disclosing any Confidential Information in any manner other than as We permit in writing.
5. INITIAL FRANCHISE FEE; ROYALTIES; OTHER FEES
5.1 Initial Franchise Fee. In consideration for the granting of this Franchise, You agree to pay Us the sum of Twenty-one thousand five hundred No/100 Dollars ($21,500.00) as the Initial Franchise Fee. The Initial Franchise fee shall become due when You sign the Franchise Agreement and not refundable. We may agree to accept payment of the Initial Franchise Fee by You executing a Promissory Note to Us for a term up to eighteen (18) months bearing interest at 1.5% per month. A copy of the Promissory Note with the principal amount, interest, number of months, monthly payment date and monthly payment amount shall be specified in the Promissory Note and a copy shall be attached to this Franchise Agreement and is made a part of this Agreement as if the terms and conditions were fully set out herein. The obligations under the Promissory Note are secured by the franchise, computer and equipment pursuant to a Security Agreement, which You must also sign. The terms and conditions of the Security Agreement are made a part of this Franchise Agreement as if they were fully set out herein. If this Agreement is executed as a New Agreement in connection with the renewal of a prior Franchise Agreement, no "Initial Franchise Fee" is required.
5.2 Royalty Fee. During the term of this Agreement You must pay Us a monthly royalty fee based upon the percentage of Gross Revenue set out in the schedule below. "Gross Revenue" includes all revenue generated through the operation of Your mobile business, including without limitation, all sums received from the sale of merchandise and for the installation of merchandise in any form received. Gross Revenue does not include deposits You may receive from customers at the time You place an order, or sales, use, or equivalent taxes. Gross Revenue shall be deemed to have been received at the earlier of the date of installation of merchandise or the date You actually received payment in full from customers.
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The schedule of monthly Royalty Fees due by You is as follows:
|
GROSS REVENUE DURING EACH CALENDAR YEAR |
PERCENTAGE |
|
Portion up to and including $100,000 |
7% |
|
Portion from $100,001 to and including $200,000 |
6% |
|
Portion from $200,001 to and including $300,000 |
5% |
|
Portion from $300,001 to and including $400,000 |
4% |
|
Portion from $400,001 to and including $500,000 |
3% |
|
Portion over $500,000 |
2% |
If the Royalty Fee due for any particular month is less than $100 You will be required to pay Us a $100 minimum Royalty Fee in lieu of the lesser amount. If the actual Royalty Fee exceeds $100 You must pay to Us the actual Royalty Fee.
The Royalty Fee shall be received by Us no later than the 10 day of each month following the month for which the fee is calculated. A late fee in the amount of $5.00 per day will be charged, beginning on the 11th day, and for every day after the 10th day that Your royalty fee remains unpaid. We shall have the right to require in the Operations Manual or otherwise in writing that You make such payments to Us or to such bank account We specify by electronic fund transfer, pre-authorized auto-draft arrangement, or such other means as We may specify from time to time in writing.
On or before the 10th day of the month for which the Royalty Fee is calculated, You must submit a written report to Us specifying the Gross Revenues of the franchise business for the preceding calendar month in such form and detail as We prescribe, from time to time, along with the Royalty Fee due. You must maintain financial records in conformity with Our accounting methods.
5.3 Initial Opening Package. You must purchase from Us, before the date you are required to commence operations of the Mobile Business, Our Initial Opening Package containing those items set forth in Exhibit E to this Franchise Agreement (Paragraph 11.1.2.4). The price of the Initial Opening Package is $7,400, it is non-refundable, and must be paid upon execution of this Agreement. Shipping costs will be invoiced separately.
5.4 Carpet Sample Updates. We shall have the right to update, from time to time, the Carpet Network carpet, window treatment and area rug, laminate, wood, ceramic, vinyl and window samples. We have the right to require You to purchase these updated materials or samples as We deem necessary from time to time; provided, however, that Your annual cost for these updates shall not exceed $700 per year.
5.5 Collection Costs, Attorneys' Fees, Interest. All payments shall be timely delivered to Us or Our affiliates together with any reports or statements which We may prescribe. Any payment or report not actually received by Us on or before the date due shall be deemed overdue. If any payment is overdue, You shall pay Us, in addition to the overdue amount, interest on such amount from the date it was due until paid at the rate of 18% per annum or the maximum rate permitted by law, whichever is less. Entitlement to such interest shall be in
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additional to any other remedies We may have under this Agreement, at law or in equity. You shall not be entitled to set-off any payments required to be made under this Agreement against any monetary claim You may have against Us. If You are in breach or default of any monetary or non-monetary material obligation under this Agreement or any related agreement between You and Us and/or Our affiliates, and We engage an attorney to enforce Our rights (whether or not formal judicial proceedings are initiated), You shall pay all reasonable attorneys' fees, court costs, arbitration cost and litigation expenses We incur. If You institute any legal action to interpret or enforce the terms of this Agreement, and Your claim in such action is denied or the action is dismissed, We shall be entitled to recover Our reasonable attorneys' fees, and all other reasonable costs and expenses incurred in defending against same, and to have such an amount awarded as part of the judgment in the proceeding.
5.6 Taxes on Payments to Us. In the event any taxing authority, wherever located, shall impose any future tax, levy or assessment on any payment made by You to Us, You shall, in addition to all payments due to Us, pay such tax, levy or assessment.
6. MARKETING
Recognizing the value of marketing and promotion, and the importance of marketing and promotional synergies to enhance the goodwill image of the System, the parties agree as follows:
6.1 Generally. You shall use in connection with such business only such signs, emblems, lettering, logos and displays and advertising and marketing materials as We have approved in writing from time to time. You shall submit to Us, prior to Your use, samples of all sales promotional and advertising materials You desire to use, including, but not limited to, newspaper, radio and television advertising, specialty and novelty items, signs, cups, boxes, bags and other packaging which We have not previously approved. Such submission shall not affect Your right to determine the prices at which You sell Your products. Within 10 business days of the date We receive any sample sales promotional material or advertising materials from You, We shall notify You in writing of Our approval or disapproval in Our sole and absolute discretion of the materials; provided, however, Our failure to approve or disapprove the materials within 10 days of receipt shall be deemed a disapproval. You shall not use any advertising or promotional materials for which We have not given Our prior written approval
6.2 Territorial Marketing Restriction. You are not permitted to solicit customers and/or advertise inside the defined territory of any other System franchisees, except to the extent that You have received Our prior written authorization, which We will not unreasonably withhold. We may condition Our authorization upon Your agreement to offer System franchisees who are operating System franchises, in territories covered by the proposed advertising, the opportunity to participate in the Gross Revenue, and share the expense of, such solicitation and/or advertising.
6.3 National Marketing/Advertising Fund. In addition to the other fees and charges provided in this Agreement, You promise to pay Carpet Network monthly during the entire term of this Agreement or any renewal term, National Marketing/Advertising Fund Fee up to and including two percent (2%) per month of Your monthly Gross Revenue (defined in
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Paragraph 5.2), due and payable at the same time and with Your Royalty Fee. The National Marketing/Advertising Fund fee at the time of execution of this Agreement is a fiat amount of one hundred sixty-five ($165.00) Dollars per month. Carpet Network will notify You in writing if You are required to pay an increased amount for Your National Marketing/Advertising Fund fee. Payments shall be made by credit card approved by Us or made automatically to Carpet Network by direct deposits from Your bank account and You agree to sign any required documents to implement the automated bank draft provision. You further agree to immediately initial the automated bank draft provision in favor of Carpet Network using the form, set forth in Our Operations Manual.
6.3.1 Use of Funds. We will use National Marketing/Advertising Fund contributions, in Our sole discretion, for Internet Development and Operation and on national, regional and/or local advertising and to create advertising materials and public relations which promote, in Our sole judgment, the services offered by System franchisees to the public. In addition, these funds may also be expended for market research and development, test or target marketing, conducting surveys, creative and production cost. We shall have the sole right and sole authority to determine, without limitation, the selection of the advertising materials and programs, provided, however, that We shall make a good faith effort to expend such funds in the general best interests of the System on a national or regional basis. Nevertheless, You acknowledge and agree that not all System franchisees will benefit directly or on a pro rata basis from such expenditures. While We do not anticipate that any part of National Marketing/Advertising Fund contributions will be used for advertising which is principally a solicitation for franchisees, We reserve the right to include a notation in any advertisement indicating "Franchises Available."
6.3.2 Reimbursement for Costs and Overhead. We reserve the right to reimburse ourselves from National Marketing/Advertising Fund contributions for such reasonable costs and overhead, if any, as We may incur in activities reasonably related to the direction and implementation of the National Marketing/Advertising Fund and advertising programs for franchisees and the System, including, among other things, costs of personnel for creating and implementing advertising, promotional and marketing programs, accounting, administrative, and legal and outside consultants. Franchisee acknowledges that Carpet Network currently has a contract for Internet Development and Operations for the System and that National Marketing/Advertising Fund fees will be expended by Carpet Network to fulfill Carpet Network's obligations under the contract. At Your request, We will provide You with an unaudited accounting of National Marketing/Advertising Fund expenditures. You must pay Us the monthly National Marketing/Advertising Fund fee so that it is received no later than the 10th day of the month following the calendar month for which the fee is calculated. Any required National Marketing/Advertising Fund contribution not paid when due shall be a violation of this Agreement and subject this Agreement to termination.
6.3.3 Surpluses. It is anticipated that all contributions to the National Marketing/Advertising Fund will be expended for their intended purposes during Our fiscal year in which contributions are made. National Marketing/Advertising Fund surpluses, if any, may be expended in the following fiscal year(s). Although We intend the National Marketing/Advertising Fund to be of a long term duration, We maintain the right to terminate the
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National Marketing/Advertising Fund at any time. The National Marketing/Advertising Fund shall not be terminated, however, until all monies in the National Marketing/Advertising Fund have been expended for advertising and promotional purposes.
7. SERVICES BY FRANCHISOR
7.1 Operations Manual/Intranet. We will loan You one copy of a price book, confidential cost book and window treatment manual containing product information, trade and operating procedures, suggested standards, and rules which We prescribe, as well as information relating to Your obligations under this Agreement, which may be expanded and revised on Our Carpet-Net Intranet site from time to time (referred to collectively as the "Operations Manual"). You agree to operate Your Mobile Business in strict compliance with the Operations Manual, as it may be reasonably changed from time to time. The Operations Manual shall be confidential and at all times remain Our property. You shall not make any disclosure, duplication or other unauthorized use of any portion of the Operations Manual. The provisions of the Operations Manual constitute provisions of this Agreement as if fully set forth herein. You shall insure that Your copy of the Operations Manual is current and up-to-date. If there is a dispute relative to the contents of the Operations Manual, the master copy which We maintain at Our principal office will control.
7.2 Off-Site Training. We will provide, either ourselves or through Our designee, and You (if You are an individual or one of Your principals if You are a corporation, partnership or limited liability company) and one other person must attend and complete to Our satisfaction Our initial training program prior to beginning operation of the mobile business. Our training program consists of home study materials and 6 days of off-site training at Our headquarters in Mount Laurel, New Jersey or such other place as We designate. Our initial training program includes marketing and sales instruction; training in the use of carpet, hard surface floor covering, window treatment and area rug samples; measuring; color and design; floor and window fashions; in-home selling; product orientation; operations; warranty procedure; inventory control; advertising; accounting displays; and basic techniques of management skills. All training related expenses, including transportation to and from the training site, lodging, meals and salaries for You and Your employees during training are Your sole responsibility. Your additional and/or replacement managers are/are not required to attend Our initial training program.
We reserve the right to offer, from time to time, additional training programs and/or refresher courses to You, Your manager and/or Your employees. You are obligated to attend such training. You are responsible for all training related expenses, including transportation to and from the training site, lodging, meals and salaries for You and Your employees during training. The additional training programs and refresher courses will be offered tuition-free.
7.3 Home Study Materials. Before You begin Our initial training program, We will provide You a home-study training regimen and materials including videos, CDs, DVDs and work books providing introductory information about Us and the System, as well as instruction and training concerning the operation of the Mobile Business.
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7.4 Merchandising. We will consult with You about use of samples, price and cost books for Your mobile business and advise You with respect to merchandising and retailing, display, sales techniques, personnel development and other business, operational and advertising matters that directly relate to the franchise operation.
7.5 Continuing Consultation, Advice and Assistance. We will provide, either ourselves or through Our designee, periodic assistance as We deem appropriate and advisable. Subject to availability of personnel and at Your request, We will provide ongoing telephone support and assistance, furnish to You information concerning continuing research and development, provide marketing assistance, and make available printing assistance and supplies to the extent they are available.
7.6 Supplies. We will sell to You, subject to availability, invoices, stationery and supplies, clothing and promotional items bearing the Proprietary Marks.
8. FRANCHISEE'S OBLIGATIONS
8.1 Commencement of Business. You must attend training within 60 days from the date You sign this Agreement and You must commence operation of Your mobile business within 60 days of the date You complete training and You must maintain operation of Your mobile business continuously throughout the term of this Agreement. If You fail to commence operation of Your mobile business within the required period or fail to maintain such operation continuously throughout the term of this Agreement, such failure shall constitute "good cause" for terminating this Agreement and We may, in Our discretion, terminate this Agreement.
8.2 Training. You (if You are an individual, or Your principals if You are a corporation, partnership or limited liability company) and one other individual must attend and successfully complete Our initial training program as set forth in Paragraph 7.2 of this Agreement.
8.3 Purchasing Requirements.
8.3.1 Compliance with Standards. You acknowledge and agree that Your obligations under this Agreement and the requirements of Our Operations Manual, which may be expanded and revised from time to time through Our Carpet-Net Intranet site, are reasonable, necessary and desirable for the operation of Your Mobile Business and the Franchise System. You agree to adhere to Our standards and specifications as set forth in this Agreement and the Operations Manual, which may be expanded and revised from time to time through Our Carpet-Net Intranet site, and any revisions or amendments to same. You are required to use signs, supplies, equipment and inventory which comply with Our then-current standards and specifications (including, but not limited to, specifications of product and service quality and uniformity established by Us from time to time). We have the right to change the standards and specifications applicable to the operation of Carpet Network franchises, including, without limitation, standards and specifications for signs, supplies, equipment and inventory. You
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acknowledge that You may incur an increased cost to comply with such changes and You agree to incur such costs as We reasonably deem necessary.
8.3.2 Designated and Approved Suppliers. Recognizing that the success and preservation of the Carpet Network System depends upon product and service uniformity, You agree to purchase certain signs, supplies, equipment and samples from Us, Our affiliate or an approved or designated third party supplier as We shall prescribe, from time to time, in the Operations Manual or otherwise in writing. You shall use merchandise purchased from approved and designated suppliers solely in connection with the Mobile Business and not for any competitive business purpose.
8.3.3 Supplier Approval and Disapproval. In the event You wish to purchase any merchandise for which We have designated or approved suppliers, from an unapproved supplier, You must provide Us the name, address and telephone number of the proposed supplier, a description of the merchandise You wish to purchase, and the purchase price, if known. At Our request, You must provide Us, for testing purposes, a sample of the supplier's goods. We will make a good faith effort to notify You of Our approval or disapproval within 5 days from the date We receive Your request of approval; however, Our failure to respond within such 5-day period shall be deemed a disapproval. If We incur any costs in connection with evaluating a supplier at Your request, You must reimburse Us Our reasonable testing costs, regardless of whether We subsequently approve the supplier. We have the right to revoke Our approval of particular suppliers when We determine, at Our sole discretion, that such suppliers no longer meet Our standards. Upon receipt of written notice of such revocation, You must cease purchasing products from such suppliers.
8.4 Authorized Products and Services. You shall offer for sale all products which We prescribe and only those products that We prescribe. Any other products or services You desire to offer for sales in connection with the Mobile Business must be first approved in writing by Us. You shall at all times offer, and maintain a complete set of samples for sale of, the full Carpet Network product line.
8.5 Inventory Purchases.
8.5.1 Carpet Network System Suppliers. You are required to purchase floor covering, window treatments and area rugs directly from carpet mills and wholesale suppliers which We identify in the Operations Manual and otherwise in writing ("System Suppliers").
8.5.2 Carpet Network System Credit Terms. We reserve the right to establish a centralized purchasing facility to warehouse and distribute certain or all inventory items to You. Currently, We negotiate purchase rates for all affiliate and franchisee owned Carpet Network businesses (the "Carpet Network System Credit terms'); System Suppliers generally drop ship inventory to You, and bill You according to the Carpet Network System Credit terms. If You do not pay System Suppliers, they will not ship You merchandise. You hereby acknowledge that Your failure to pay System Suppliers as and when due may jeopardize the Carpet Network System Credit Terms with such vendors which would result in irreparable harm to the Carpet Network System. In the event of a dispute with any System Supplier, You must first notify Us of
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the dispute before Your account has become delinquent with such System Supplier. Failure to timely notify Us shall result in a default as set forth in Paragraph 11.1.2.1 of this Agreement.
8.6 Operations.
8.6.1 You must aggressively market the mobile business, and provide prompt, efficient and courteous services to all customers and potential customers.
8.6.2 You must have a unicell van which may be purchased or leased and which conforms to the standards and specifications We prescribe in the Operations Manual or otherwise in writing. You must maintain Your van(s) in accordance with Our standards of maintenance and cleanliness and with a clean and neat appearance.
8.6.3 You and Your employees must give prompt, courteous and efficient service to the public and otherwise operate the mobile business so as to preserve, maintain and enhance the reputation and goodwill of the System.
8.6.4 You must at all times maintain such working capital as may be reasonably necessary to enable You to properly and fully carry out and perform all of Your duties, obligations and responsibilities hereunder and to operate the Mobile Business in a businesslike, proper and efficient manner.
8.6.5 You must keep a complete and current set of carpet, floor covering, window treatment and area rug samples as We prescribe in writing from time to time.
8.6.6 You must provide Us with an approved Business Plan within 60 days from the date you complete training.
8.7 Computer Software and Hardware. Before commencing operations, You must purchase a computer system with Internet access. In the event We develop or designate a computer software program for the operations of the Mobile Business, You shall be required to purchase and use such computer software program(s) ("Software"). In addition, We have the right to require You to update or upgrade computer hardware components and/or Software as We deem necessary from time to time but not more than three times per calendar year. In addition, We may require You to enter into a separate maintenance agreement for such computer hardware and/or Software.
8.8 Best Efforts. You shall use Your best efforts to promote and increase the demand for the goods and services offered by the Mobile Business. All advertising and promotion by You shall be completely factual and shall conform to the highest standards of ethical advertising. You agree to refrain from any business or advertising practice which may be injurious to Our business, the goodwill associated with Our Proprietary Marks or to the business of other franchisees.
8.9 Personal Supervision. We recommend that You (if You are an individual, or Your principals if You are a corporation, partnership or limited liability company) personally
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supervise the day-to-day operations of the Mobile Business. If You do not personally supervise day-to-day operations, You must designate a full-time manager ("Designated Manager") to engage in such supervision. Such Designated Manager shall devote his or her personal full-time attention and best efforts to the management and operations of the Mobile Business. We have the right to require that Your Designated Manager sign, prior to assuming management responsibility, a confidentiality and noncompete agreement containing provisions similar to those contained in this Agreement.
8.10 Telephone. You shall obtain at Your own expense a new telephone number and listing, to be listed under the "Carpet Network" name and not under Your corporate, partnership, company, or individual name, to be used exclusively in connection with Your operation of the Mobile Business. Upon the expiration, transfer or termination of this Agreement for any reason, You shall terminate Your use of such telephone number and listing and assign same to Us or Our designee. Your Mobile Business shall be serviced by a suitable telephone system approved by Us. You shall answer the telephone and return telephone calls in the manner We specify in the Operations Manual. You must promptly return all telephone calls and must treat each customer or potential customer with respect and courtesy at all times.
8.11 Installation of Carpet and Window Treatments. As a Carpet Network Franchisee, You must offer installation services through a competent installation contractor. You are solely responsible for engaging competent installation contractors to perform such services. You shall undertake a reasonable investigation before engaging any contractor and shall require that each contractor be fully insured.
8.12 Insurance. At all times during the term of this Agreement and at Your own expense, You must obtain and keep in force a minimum; (i) public liability and property damage insurance covering the operation of the franchised business and the location where the business is conducted with a minimum combined single limit of $1,000,000; (ii)real and personal property insurance including fire and extended coverage on all risk replacement cost basis; (iii) automobile insurance on each vehicle used in connection with the Mobile Business with commercial limits of not less than $300,000 per occurrence; and (iv) workers' compensation insurance as required by the laws of the state in which Your Territory is located. In the event You enter a lease which requires You to purchase insurance with higher limits, Your lease insurance requirements shall control. All insurance policies must contain a separate endorsement naming Us as an additional insured and shall be written by an approved insurance carrier. Our acceptance of an insurance carrier does not constitute Our representation or guarantee that the insurance carrier will remain a going concern or capable of meeting claim demands during the term of the insurance policy. No insurance policy shall be subject to cancellation, termination, non-renewal or material modification, except upon at least 30 days' prior written notice from the insurance carrier to Us. At all times, You must provide Us with a currently issued certificate of insurance evidencing coverage in conformity with the provisions of this paragraph. If You fail to comply with at least the minimum insurance requirements set forth in this paragraph, We may obtain such insurance and keep same in force and effect and You must pay Us, on demand, the premium and Our administrative costs in connection with obtaining the insurance. We may increase or otherwise modify the minimum insurance requirements upon 30 days prior written notice to You, and You must comply with any such modification.
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8.13 Compliance with Applicable Laws. You must comply with all applicable federal, state and local laws, ordinances and regulations regarding the operation of the Mobile Business, which includes obtaining all required permits, certificates and licenses, including the prompt payment of all taxes and business expenses.
8.14 Trade Secrets and Confidential Information. You must maintain the confidentiality of all Confidential Information as set forth in Section 4 of this Agreement.
8.15 Right of Inspection. In order to preserve the validity and integrity of the System, and goodwill associated with the Proprietary Marks, We have the right to observe the manner in which You operate Your Mobile Business, to confer with Your employees and customers to enforce Our quality control standards. In addition, We have the right to inspect Your books and records including Your computers through site visits, modem or otherwise. We may inspect Your Mobile Business fixtures, furnishings, equipment and operating methods to determine whether the business is being conducted in accordance with Our standards and in accordance with the terms of this Agreement.
8.16 Changes to the System. We may, from time to time, change the standards and specifications applicable to operation of Your Mobile Business, including standards and specifications of inventory, products, supplies, signs, fixtures, furnishings and equipment, by written notice to You or through changes in the Operations Manual. You may incur an increased cost to comply with these changes, and agree to implement such changes at Your own expense as if they were part of the System when this Agreement was executed, including discontinuing or modifying the use of any of the Proprietary Marks. If We modify the products or services offered by the System, You must immediately order such products and upon receipt of the products begin to offer and sell the products and services, as applicable. However, no change will materially alter Your fundamental rights under this Agreement.
8.17 Financial Records and Reports. You must maintain for at least 3 fiscal years from their preparation complete financial records for the operation of Your Mobile Business in accordance with generally accepted accounting principles and must provide Us with (i) a monthly sales report signed by You and in the form We specify during the preceding calendar month indicating such information which We deem necessary to properly evaluate Your progress, to accompany Your royalty and advertising fees; (ii) annual financial reports and operating statements in the form We specify, prepared by a certified public accountant or state licensed public accountant, within 90 days after the close of each calendar year; (iii) state and local sales tax returns or reports and federal, state and local income tax returns for each year in which Your Mobile Business is operated, within 30 days from their timely completion; and (iv) such other reports as We may from time to time require, in the form and at the time We prescribe. To assist You in recording and keeping accurate and detailed financial records for reports and tax returns, We may, at Our discretion, specify the form in which the business records are to be maintained, provide a uniform set of business records for You to use, and specify the type of computer system to be used in connection with the Mobile Business.
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8.18 Books and Records. You must maintain business records, reports, accounts, books and data relating to the operation of Your Mobile Business. We or Our designees has the right to inspect and/or audit Your business records at any time during normal business hours, to determine whether You are current with suppliers and are otherwise operating in compliance with the terms of the Franchise Agreement and Operations Manual. If any audit reveals that You have understated Your Gross Revenues or local marketing expenditures by more than 2%, or if You have failed to submit Royalty payments or monthly reports or Your National Marketing/ Advertising Fund payment for any 2 reporting periods within any 12-month period, You must pay the reasonable cost of such audit and/or inspection, including the cost of auditors and attorneys (if We incur such costs), together with Royalty payments and National Marketing/Advertising Fund contributions and other fees which become due as a result of such underreporting and/or failure to submit reports, and interest from the date when such fees should have been submitted.
8.19 Annual Conventions. You must attend Our Annual Convention at such location as We designate from year to year. You are responsible for all expenses, including transportation to and from the Annual Convention site, lodging and meals.
9. ACKNOWLEDGMENTS OF FRANCHISEE
9.1 Independent Contractor Status. You are an independent contractor responsible for full control over the internal management and daily operation of Your Mobile Business, and neither party to this Agreement is the agent, principal, partner, employee, employer or joint venture partner of the other. You may not act or represent Yourself, directly or by implication, as an agent, partner, employee or joint venture partner of Us, nor may You incur any obligation on Our behalf or in Our name.
9.2 Indemnification. You must defend, indemnify and hold Us, Our principals, agents and employees harmless from all fines, suits, proceedings, claims, demands, obligations or actions of any kind (including costs and reasonable attorneys' fees) arising in whole or in part from the operation of Your Mobile Business, including Your advertising and business practices, except as otherwise provided in this Agreement.
9.3 Payment of Debts. You understand that You alone are responsible for selecting, retaining and paying Your employees, suppliers and taxing authorities; and that You are solely responsible for the payment of all invoices for the purchase of goods for use in connection with the Mobile Business; and determining whether, and on what terms, to obtain any financing or credit which You deem advisable or necessary to operate the Mobile Business.
9.4 Notice of Potential Profit. You acknowledge and agree that We may receive a reasonable profit on all items You purchase from Us, Our affiliates or third party suppliers. We and/or Our affiliates, if any, may from time to time receive consideration from suppliers with respect to sales of signs, supplies, equipment and inventory to You or in consideration of rights licensed to such persons. You agree that We and/or Our affiliates are entitled to such profits and/or consideration.
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9.5 Noncompetition.
9.5.1 During the Term of This Agreement. During the terms of this Agreement, neither You, Your principals nor any member of the immediate family of You or Your principals shall directly or indirectly, for Yourselves or through, on behalf of, or in conjunction with any other person, partnership or corporation own, maintain, engage in, be employed by, lend money to, extend credit to or have any interest in any other business which operates or licenses businesses featuring the sale of floor coverings, window treatments and/or area rugs or related products; provided, however, that this paragraph shall not apply to Your operation of any other Carpet Network franchise.
9.5.2 After Termination. Expiration or Transfer.
9.5.2.1 For a period of 3 years after the expiration, transfer or termination of this Agreement, regardless of the cause, neither You, Your principals or any member of the immediate family of You or Your principals shall directly or indirectly, for Yourselves or through, on behalf of, or in conjunction with any other person, partnership or corporation own, maintain, engage in, be employed by, or have any interest in any other business which operates or licenses businesses featuring the sale of carpet or flooring materials or related products within 5 miles from the parameter of the territory franchised under this Agreement, or any other Carpet Network Business in operation or which is contemplated as of the date of expiration or termination of this Agreement.
9.5.2.2 For a period of 3 years after the expiration and nonrenewal, transfer or termination of this Agreement, regardless of the cause, neither You, Your principals nor any member of the immediate family of You or Your principals shall, directly or indirectly, for Yourselves or through, on behalf of, or in conjunction with any other person, partnership or corporation solicit business from customers of Your former Carpet Network Mobile Business or contact any supplier of Carpet Network for any competitive business purpose nor solicit any of Our employees, Our affiliates' employees, or the employees of any other Carpet Network franchisee to discontinue employment.
9.5.2.3 For a period of 3 years after the expiration and nonrenewal, transfer or termination of this Agreement, regardless of the cause, neither You, Your principals nor any member of the immediate family of You or Your principals may directly or indirectly, for Yourselves or through, on behalf of, or in conjunction with any other person, partnership or corporation enter into any business competing in whole or in part with Carpet Network granting franchises or licenses.
9.6 Intent and Enforcement. It is the intent of the parties that the provisions of this Section 9.6 shall be judicially enforced to the fullest extent permissible under the applicable law; accordingly, the parties agree that any reduction in scope or modification of any part of the noncompetition provisions contained herein shall not render any other part unenforceable. In the event of the actual or threatened breach of Section 9.5 including all paragraphs and subparagraphs thereof by You, any of Your partners or shareholders or any member of the immediate family of same, We shall be entitled to an injunction restraining such person from any
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The original documents were scanned as an image. The original file can be downloaded at the link above.