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

Sample UFOC


ITEM                                                                                                                                                   PAGE

1.        THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES                                               1

2.        BUSINESS EXPERIENCE                                                                                                         3

3.        LITIGATION                                                                                                                               4

4.        BANKRUPTCY                                                                                                                          6

5.        INITIAL FRANCHISE FEE                                                                                                         6

6.        OTHER FEES                                                                                                                            6

7.        INITIAL INVESTMENT                                                                                                             12

8.        RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES                                       15

9.        FRANCHISEE'S OBLIGATIONS                                                                                              17

10.        FINANCING                                                                                                                              18

11.        FRANCHISOR'S OBLIGATIONS                                                                                             18

12.        TERRITORY                                                                                                                            28

13.        TRADEMARKS                                                                                                                        32

14.        PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION                                          34


OF THE FRANCHISED BUSINESS                                                                                        35

16.        RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL                                                 35

17.        RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION                              36

18.        PUBLIC FIGURES                                                                                                                   40

19.        EARNINGS CLAIMS                                                                                                                40

20.        LIST OF OUTLETS                                                                                                                  41

21.        FINANCIAL STATEMENTS                                                                                                     44

22.        CONTRACTS                                                                                                                           44

23.        RECEIPT                                                                                                                                 44

Cartridge World North America, LLC UFOC 03.2006









Cartridge World North America, LLC UFOC 03.2006


The Franchisor. Business Form. Names. Address

To simplify the language in this Offering Circular, "we", "us", "our", or "CWNA" means Cartridge World North America, LLC (the Franchisor). "You," or "your" means the person who buys the Master Franchise. If a business entity buys the Master Franchise, "you" includes the Master Franchisee's owners, as appropriate. Capitalized terms that are not defined in this Offering Circular have the meanings that are included in the Master Franchise Agreement (Section 2.01).

We were formed as a limited liability company in the State of Nevada in June 2002, and began offering Cartridge World® Master Franchises in late 2002. Our predecessor company, Cartridge World Pty. Ltd. ("CW International"), has offered Cartridge World® franchises in Australia since 1997. Our principal place of business is 6460 Hollis Street, Emeryville, CA 94608.

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

Our Business Activities and the Franchises to be Offered in this State

We offer, and award, Master Franchises to qualified applicants in the United States, Central and South America, the Caribbean and other countries. The Master Franchisee will, in turn, offer, award, and service Cartridge World Unit Franchises in a specified area, using the "Cartridge World" name and design. The Cartridge World System includes methods for marketing and operating retail operations in the business of refilling printer inkjet cartridges, remanufacturing of laser cartridges and selling toners, hardware, software, and related printer consumables (the "Cartridge World System" or the "System"). Cartridge World Pty. Ltd. has licensed to us the right to use the Marks and System, and to award Master Franchises in the United States, Mexico, South America, Central America, and countries in the Caribbean. The Cartridge World System is characterized by certain trademarks and logos, operating systems, training and marketing concepts, the Manual, distinctive color schemes and logo apparel, specialized products and confidential information.

We license you to license independent Unit Franchisees to use the Cartridge World Marks and System. You will be required to comply with all franchise disclosure and other legal requirements applicable to your Territory, and to file a Uniform Franchise Offering Circular with any applicable state agency for the offer and sale of Unit Franchises. In certain states, Master Franchisees cannot offer or grant Unit Franchises until their Unit Franchise UFOC has received an effective registration with the applicable state.

We believe that the market for cartridge remanufacturing and refilling services and for printer consumables is developed, and continues to develop and evolve with changes in technology. The market for the unit franchises you will be offering is unknown, as this is a relatively recent retail concept in the United States. The primary markets for Cartridge World services are individual consumers and businesses looking for a convenient, efficient and economic means of meeting their demands for varied printer consumables. If we award you a Master Franchise, you and the franchises you establish will compete with other businesses offering services similar to those offered by a Cartridge World Unit Franchised Business, including large and small business supply stores/chains, equipment dealers, small local businesses, original equipment manufacturers, numerous internet-based refill services/offers, and larger industrial operations with production line type refill services, other cartridge refilling franchises, internet based providers and others. The technology of the products/services with which we work can

change rapidly and materially. For this reason, it is especially difficult to attempt to foresee how this industry an/or our business model will be required to evolve to keep pace with changes in product, methods of distribution, technical needs, consumer interest, competitive products and pricing, product demand, and other marketplace forces that can significantly impact the viability of the industry and/or our system, and those people and companies associated with it, including the franchise offered with this Offering Circular.

Master and Unit Franchised Businesses have no industry specific licensing requirements, although Cartridge World Franchises are responsible for ensuring their compliance with all local, state and federal business, retail sales, zoning and similar regulations and licensing requirements, and any applicable environment related laws and/or regulations. Your advertising, offering, and selling of unit franchises is subject to federal regulation by the FTC. Some states closely regulate franchising. You will be responsible for complying with all state and federal franchise laws and regulations. You should consult with your attorney and local, state and federal government agencies before buying your Cartridge World Master Franchise or any business to determine all legal requirements that you must comply with, their effects on you and the costs of compliance. It is your sole responsibility, on an ongoing basis, to investigate and satisfy all local, state and federal laws, since they vary from place to place and can change over time.

Prior Business Experience. Predecessors. Affiliates, and Other Information

Our predecessor company, Cartridge World Pty Ltd., ("CW International") was formed in South Australia, under the laws of Australia on February 10, 1999, and has offered Cartridge World franchises in Australia since then. Its principal place of business is 39 Charles Street, Norwood 5067, South Australia. We have an affiliated company named Cartridge World, Inc., which was incorporated in the state of Nevada in May 2002. It acts as the managing member of Cartridge World North America, LLC, and operates from 6460 Hollis Street, Emeryville, CA 94608. Cartridge World, Inc. does not offer franchises. Cartridge World Pty. Ltd. does not offer franchises in the United States.

CWNA has a wholly-owned subsidiary, Cartridge World Holdings, which is a Luxemburg company with a principal place of business in that country ("CW Luxemburg") and which purchased all of the stock of Cartridge World, Ltd. ("CW UK") and Cartridge World France, SARL ("CW France") in March, 2006. CW UK and CW France are Master Franchisees of CW International and have been licensed to grant Unit Franchises in their respective territories since 2000 and 2004, respectively. As of March, 2006, CW UK has approximately 300 Unit Franchises operating in its territory, which is comprised of the United Kingdom, Cyprus, Malta, and the Channel Islands, and is registered in England and Wales. CW France, a French company, has approximately 50 Unit Franchises in France, which is its territory. CW France and CW UK also sell ink, compatible cartridges and related consumables to Cartridge World Unit Franchises in their respective territories.

The Cartridge World concept was founded in Adelaide, Australia. CW International first began franchising in 1997 under the name Australian Cartridge Co. and changed its name in 1999 to Cartridge World Pty. Ltd. The company began franchising outside of Australia in 2000. As of December 31, 2005, CW International had 22 Master Franchises operating in Australia and other countries around the world. Currently there are 2 company owned Cartridge World retail Stores in Australia. CW International has been operating businesses of the type described in the Offering Circular since 1999.

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As of December 31, 2005, there are 329 Unit and 18 Master Cartridge World Franchises that have been awarded in the United States. We have 1 Master Franchisee in Mexico as of the same date. The first Cartridge World Master Franchisee began offering Cartridge World Store Unit Franchises in the U.S. in February 2003.

We do not own or operate any Master Franchised Businesses, but our CEO owns and operates a Master Franchised Business that has awarded Unit Franchises in various states, and our CEO and COO have an interest in a second Cartridge World Master Franchise (See Items 2 and 20 of this Offering Circular).

We do not offer Cartridge World Store Unit Franchises as of the effective date of this Offering Circular and. but expect to grant them in states in which no Master Franchisee has been licensed to operate. As of February 1, 2006, those states include West Virginia, Kentucky, Louisiana, New Mexico and Arkansas. If we grant a Master Franchise for any of the listed states, we plan to assign any existing Unit Franchises to the applicable Master Franchisee. We do not own and operate any Cartridge World Stores. We do not offer franchises in any other line of business, but we reserve the right to do so. We also maintain a warehouse for products that we sell to Unit Franchisees.

This Offering Circular sets forth the terms on which we currently offer Cartridge World Master Franchises in this state. All money amounts described in this document are in U.S. Dollars. If we grant you a Cartridge World Master Franchise, you will have only a contractual relationship with us and only you and we will be parties to the Master Franchise Agreement. CW International will have no obligations to you, and you may look only to us for performance under the Franchise Agreement. We may have offered Cartridge World Master Franchises in the past, or may currently offer Cartridge World Master Franchises in other states or countries, on economic and/or other terms which differ from those offered by this Offering Circular. There may be instances where we have varied, or will vary, the terms on which we offer franchises to suit the circumstances of a particular transaction and as permitted by law. We urge you to carefully review all documents, as well as this Offering Circular, with independent advisors who can provide legal, business and/or economic guidance, such as lawyers and/or accountants.

We retain the right to award, or not award, a Cartridge World Master Franchise to you, regardless of the stage of the franchise award process, costs expended by you or otherwise.

You should also understand the following business realities: A franchised Cartridge World Business involves business risks. We don't have the ability to reliably make any promises, estimates, representations, guarantees or other assurances concerning your potential success as a Cartridge World Franchisee. We do not guarantee your success or any level of sales volume, profits (if any) or otherwise. Any volume, profit and possible success are primarily dependent on your sales ability and efforts as an independent business operator, as well as your proper use of the Cartridge World System. The Cartridge World concept is relatively young and our systems and methods form working with Master Franchisees and Unit Franchisees is relatively new and business model is evolving. The initial Cartridge World Master Franchise in the U.S. began operating in 2003 and other Master Franchises have been operating for shorter periods of time.

Master franchising poses special risks, since your possible success will depend, among other things, on your abilities to market, motivate, support and retain Unit Franchisees and to maximize their business volume.

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For all of these reasons, the purchase of a Cartridge World franchise is a speculative investment. Significant investment beyond that outlined in this Offering Circular may be required to succeed, and there are no guarantees of success. We will not secure any pre-existing or future accounts, leads, or other sources of business for your use in the operation of your Cartridge World Business.


President - Paul Leslie Wheeler

Paul Leslie Wheeler has been our President since our formation in June 2002. He served as CEO from June 2002 to January 2003. He has served as Director of our predecessor since March, 1999. Mr. Wheeler is a co-founder of CW International, and has been since May, 2002 Director and President of Cartridge World, Inc. ("CW Inc."), the managing member of CWNA.

CEO - Burt Yarkin

Mr. Yarkin became our CEO on January 2, 2003. He served as the Director of Franchise Development for Gymboree Corporation, in Burlingame, California, from April 1998 until December 2002. Since its formation in December 2002, Mr. Yarkin also has been the CEO of Wildwood Franchising, Inc. a Cartridge World Master Franchisee operating in Northern California and licensed to award unit franchises in Northern California. Wildwood Franchising, Inc. also has been licensed to grant Unit Franchises in Hawaii, Louisiana, Kentucky, and New Mexico, but is not actively marketing unit franchises in any locations other than California. Additionally, Mr. Yarkin is an owner and managing member of PC Ink, LLC, a Master Franchise licensed to award Unit Franchises in a portion of Southern California, and is a member of another limited liability company, which is being formed and will be licensed as the Master Franchisee for Hawaii. Mr. Yarkin also holds a minority interest in CWNA and is a Director of CW Luxemburg, since March, 2006.

Secretary - Bryan Maxwell Stokes

Bryan Maxwell Stokes became our Secretary in June 2002. Mr. Stokes is (with Paul Wheeler) co-founder of our predecessor and has served as its Director since 1999, first in Adelaide and now Norwood, South Australia. Prior to that time, he owned and operated (from 1994 to 1999) the Australian Cartridge Co., a business substantially similar to us and our predecessor, and located in Adelaide, Australia. Mr. Stokes also has been since May, 2002 a Director and Secretary for CW, Inc., the managing member of CWNA.

Chief Financial Officer ("CFO") - Steven L. Yeffa

Steven L. Yeffa joined CWNA as their Chief Financial Officer in September 2005. Prior to that, he served as a consulting CFO for two companies in the San Francisco Bay Area. From July, 2001 to March, 2004, Mr. Yeffa was the Chief Financial Officer of the Western Region of IKON Office Solutions in Walnut Creek, CA. Mr. Yeffa also is a Director of CW Luxemburg, since March, 2006.

Executive Vice President and Chief Operating Officer ("COO") John Dring

John Dring became our Executive Vice President in June 2004 and was promoted to COO in September 2004. From May 1995 to June 2004, he was Senior Director of Franchise Development and Business Administration for Mail Boxes Etc. in San Diego, California. . Additionally, Mr. Dring is an owner

Cartridge World North America, LLC Master UFOC 03.2006

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and member of PC Ink, a Master Franchise licensed to award Unit Franchises in a portion of Southern California. Mr. Dring also holds a minority interest in CWNA and is a Director of CW Luxemburg, since March, 2006.

Vice President - Operations Shawn Lynam

Shawn Lynam became our Vice President - of Operations in May 2005. From 1996 until joining CWNA, he was a Senior Director of Franchise Operations and of Product Development & Management for Mail Boxes Etc. in San Diego, CA.

Director of Franchise Development Tim Easton

Tim Easton became our Director of Franchise Development in June 2005. Mr. Easton is also the Director of Franchise Development for PC, Ink, LLC, the Master Franchisee for Southern California, owned by Mr. Dring and Mr. Yarkin. From September 1995 to June 2005 he was Area Development Manager for Mail Boxes Etc. in San Diego, California.

Franchise Brokers

We employ various franchise brokers to assist us in identifying qualified Master Franchise applicants. These franchise brokers are authorized to refer prospective franchisees to us. A list of these franchise brokers is attached as Exhibit G.

3.          LITIGATION

Yvonne Rvzak v Wildwood Franchising, Inc.. Cartridge World North America LLC, and Burt Yarkin. Superior Court of California, County of Alameda (Case No. RG05198697). Filed February 16, 2005. The complaint filed by Plaintiff, a Foster City, CA franchisee of Wildwood Franchising Inc., the master franchisee for that area, included allegations of intentional and negligent misrepresentations regarding failures to deliver training and support services, among others, as well as breach of contract. Plaintiff sought rescission and costs of suit and damages in the amount of at least $165,000. Burt Yarkin, CWNA's CEO, is the principal shareholder of Wildwood Franchising, Inc. The defendants each vigorously denied the allegations of the complaint. Wildwood Franchising, Inc. advised CWNA that training and a variety of support services were delivered to this franchisee. Further, the defendants asserted that the franchisee's failure to follow the mutually agreed upon dispute resolution procedure stated in her franchise agreement was a material breach of that agreement. Nevertheless, in an effort to avoid a costly, protracted dispute and an unproductive use of resources, the matter was settled on April 15, 2005. Under this agreement, Wildwood Franchising, Inc. purchased the plaintiffs franchised business for $160,000 and the parties released all claims. The plaintiffs complaint has been dismissed with prejudice. Wildwood Franchising, Inc. has subsequently resold and franchised the business to an unrelated franchisee.

Jack Pete as trustee of the Australian Cartridge Company - Holden Hill Unit Trust v. Australian Cartridge Company Ptv Ltd (ACN 008 291 914) and Cartridge World Ptv Ltd (ACN 086 234 826) and John Henry Nominees Ptv Ltd (ACN 007975 902), Action No. 99 of 2002, District Court of South Australia, Adelaide, South Australia (Jan. 23, 2002). A complaint was filed against Cartridge World Pty Ltd and the other named defendants by the trustee of a Cartridge World franchisee previously operating in Holden Hill, South Australia. The plaintiff alleged that the defendants committed various misrepresentations and misused the advertising fund. The complaint sought various forms of relief, including a declaration that the franchisee validly terminated the franchise agreement and was not bound by the covenants against competition, an accounting of an advertising fund, and an award of damages in excess of $115,000 for

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breach of contract and violations of various Australian statutes, including the Trade Practices Act and the Fair Trading Act. The defendants filed a counterclaim, alleging various breaches of the franchise agreement, including $4,000 for non-payment of royalties and ad fees, and seeking other relief. In December 2003, the court found in favor of the defendants on their counterclaim and ordered the plaintiff to pay the defendant's costs in both the action and the counterclaim. The court also struck out the plaintiffs complaint.

Cartridge World Ptv Ltd (ACN 086 234 826) (formerly Australian Cartridge Company Pty Ltd (ACN 008 291 914) and John Henry Nominees Ptv Ltd (ACN 007975 902) v. Latull Ptv Ltd (ACN 008 030 000). Christopher John Biggs and Norma Geraldine Biggs, Action No. 1480 of 2001, District Court of South Australia, Adelaide. South Australia (Sept. 27, 2001). Our predecessor filed suit against a Cartridge World Franchisee in Norwood, South Australia, for non-payment of royalties owed. The franchisee filed a counterclaim against the plaintiff, also naming as defendants Messrs. Wheeler and Stokes and John Henry Nominees Pty Ltd. The franchisee alleged that it had an oral agreement with our predecessor to pay a reduced royalty fee. The franchisee asserted in its counterclaim that misrepresentations and breaches of warranty were committed by various defendants in connection with franchisee's purchase of the Norwood store operations and in the award of the franchise agreement. The counterclaim sought varying forms of relief from different defendants, including among them an order voiding the Business Purchase Agreement under which the franchisee acquired the franchised business, an accounting of an advertising fund, and an award of damages in an unspecified amount for breach of contract and warranty and violations of various Australian statutes, including the Trade Practices Act, the Fair Trading Act, the Franchising Code of Conduct, the Land and Business Act and the Misrepresentations Act.

In June, 2003 the parties entered into a settlement agreement, which involved: (i) a mutual discontinuance (termination) of the parties' respective claims; (ii) the parties agreeing to bear their own costs of and incidental to the action; and (iii) the parties releasing and discharging each other in relation to the claims made without requiring any payment to be made by one to the other in respect of those claims.

Additionally, the Franchisee consented to the formal termination of the Franchise Agreement, and the discharge of any future rights that it might otherwise have had under the Franchise Agreement. Cartridge World Pty Ltd agreed to buy, and the former Franchisee agreed to sell, the business, plant, equipment and stock of the former Franchisee's previously franchised business upon terms negotiated by the parties.

Other than the above 3 actions, and except as to any litigation information that may be related to our brokers (see Exhibit G), no litigation is required to be disclosed in this Offering Circular.

Neither we nor any person listed in Item 2 of the UFOC is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.C.A. 78a et seq., or suspending or expelling such persons from membership in such association or exchange.

4.          BANKRUPTCY

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


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On signing the Master Franchise Agreement, you must pay us an Initial Master Franchise Fee which is expected to range from $75,000 to $500,000, depending upon the population, demographics, geographic size of the Territory, and other factors. The Initial Master Franchise Fee may be less for a Territory that is smaller than customary or for a portion of a Territory. We anticipate that Territories generally will be defined by state boundaries, but large states may be divided into several Territories.

This fee is non-refundable. Initial Master Franchise Fees usually are used for operating expenses as part of our general operating fund.

The Initial Master Franchise Fee will not be the same for all franchisees, depending on factors such as (but not only) prior relationship, number of Master Franchises awarded, and other factors. We had 18 Cartridge World Master Franchisees in the United States and 1 in Mexico as of December 31, 2005. The Initial Franchise Fees have ranged from $175,000 to $350,000 through 2004 and 2005.

6.         OTHER FEES

Name of Fee1


Due Date


Portion of Unit Initial Franchise Fees

Greater of 50% or $10,000

Within 5 Days after the earlier of Unit Franchise signing, opening, or date of required opening.

The $10,000 is subject to adjustment for inflation. Required date of opening is set by your Master Franchise Agreement development standards.

Unit Training Fee

$6,300 for the classroom portion of the training in Northern California (1 Attendee); $700 for the classroom portion for additional attendees per Unit Franchise), and $1,000 for the pre and post training for all attendees per Unit Franchise.

Within 5 days of Unit Franchise signing, unless we authorize a later payment date. Currently, payment is due when Unit Franchisee acquires rights to Store site, which is usually at lease signing.

Subject to reasonable adjustment, based upon training costs and other factors.

If you provide satisfactory pre and post training per Unit Franchise at a location in your territory, we will pay you the $1,000 fee we receive for pre/post training

Unit Royalty Revenues2

Greater of 40% of Royalty Revenue from each Unit, or else 2.4% of Gross Volume and 2.4% Gross Profit from each Unit.3

Within 10 days after Royalty period.

Royalty period is currently a month. We may change the Royalty period.

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Name of Fee1


Due Date


Fee Revenues4

50% of Unit Fee Revenues

Within 5 Days after signing any Application Agreement and Letter of Intent; Within 5 days after receipt of other fee revenues by you and/or of the applicable due date.

Any application fee refunds paid equally

Product Revenues5

50% of Product Revenues


Paid within 10 days after calendar month.

Other Revenues

50% of Other Revenues


Paid within 10 days after calendar month. Includes revenue received by, or due to, you and your Affiliates relating to Cartridge World business.

Master Marketing Fund Contributions

The greater of .5% of your Initial Master Franchise Fee, or a minimum of $1,000.

Quarterly. Must be received no later than the first day of the applicable calendar quarter.

Minimum is subject to inflation adjustment. Starts with first full calendar quarter after Effective Date of Master Franchise Agreement. Period may be adjusted. Paid in advance. See Item 11.

Local Advertising and Promotions



Paid to vendors, verified to us upon request.6 We may encourage you to spend more than the minimum amount for local marketing, but you cannot spend less that this amount.

Internet-Intranet Service Fee7

Currently $100 per month

(maximum amount subject to adjustment due to vendor price increases, etc.)

Payable in advance, on a monthly or annual basis (or whatever other basis we select.)

Payable by credit card or auto draft as we select; maximum fee may increase due to vendor price increases and/or inflation adjustment as in franchise agreement. We will notify you of adjustments.

Renewal Master Franchise Fee

20% of our then-current Initial Master Franchise fee, but not less than $20,000.

When you elect a Renewal franchise.

Minimum is subject to inflation adjustment. We may reduce and/or waive this fee in our sole discretion.

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Name of Fee1


Due Date


Renewal Master Franchise Costs

Amount incurred.

Prior to grant of Renewal Master Franchise.

You pay our related legal and other expenses.

Transfer Fee


Before transfer of your franchise.

Subject to inflation adjustment. Applies only if 50% control or more changes hands. If the assignment occurs more than 120 days after your Franchise Agreement and is to a Business Entity wholly-owned by you, we can require you to pay an administrative services fee of $500.

Initial training for more than 1 person;

Initial training for Master Franchisee acquiring existing Masters Franchise;8

Possible Fee for Additional Training Programs;

$ 700 if more than 1 person attends initial training.

If you are acquiring an existing Master franchise you must a pay the then-current initial training fee. (Currently $6,300 for the classroom portion for a single attendee and $ 700 for additional attendees of the classroom portion, and $1,000 for the combined pre and post opening training for all attendees) There is no fixed fee for additional training programs. A reasonable amount may be charged

As Incurred

You're responsible for all travel, living, incidental and other expenses and compensation for you and your personnel attending any training program.

Extra On-Site Consultations (at your request)9

Fee of not more than $500 per day, plus all expenses.

Payable on Demand

Subject to limitations and inflation adjustment.

Interest on Late Payments

Maximum legal interest (not to exceed 1.5% per month).

Payable on Demand

Failure to pay can be grounds for termination. For repeated late payments, we can require cashier's check.

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Name of Fee1


Due Date


Late Report Fees; Costs of Collection

$25 per late report

Payable as incurred for late or missed payment or funds transfer or report due

We may waive this charge in our sole discretion. Subject to inflation adjustment, but not to exceed legal limits.

Audit Expenses

Amount of understatement of revenues, with interest and late charges, plus costs of audit, if applicable.

Payable on Demand

Audit costs payable if reports not provided or understatement exceeds 2%. If understatement is intentional or exceeds 5%, we can terminate your Master Franchise.

Costs to Manage Your Master Franchised Business in the Event of Death or Disability

Reasonable amount.

At time of occurrence

If we operate the business on your behalf, we can pay ourselves a reasonable amount for such management services.

Management Fee10

Onlv if vou qet notice of default from us and we appoint manager; $500 per day management fee, plus expenses.

Deducted from funds of your business.

Daily management fee subject to inflation adjustment. Compensation, other costs, travel and living expenses of appointed manager payable by you.

Supplier Approval Fee

We may require you to pre-pay any reasonable charges connected with our review, testing, and evaluation of any proposal.

Prior to review of product or supplier.

We may reduce and/or waive these fees in our sole discretion.

Grant of Security Interest

You grant us a security interest in assets and proceeds of business.11

Granted with Franchise Agreement

You must complete and sign any financing statements and related documents within 10 days of receipt from us.

Convention Support Fee

Determined at time of event, to offset cost of program.

At time of the event.

You must attend the annual convention and any other mandatory meetings unless we excuse you. You are responsible for all other costs of attending.

Facility Services Fee12

$2,500 per Unit Franchise

Within 5 days after receipt by you and/or of the applicable due date.

We are the exclusive supplier for facility services as of this Offering Circular

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(1)         All fees collected by and/or payable to us are non-refundable, unless otherwise agreed, in writing. and signed by vou and us. You must pay all payments due us on time and in full, regardless of the actual amount you collect, or choose to defer, finance, or off-set from Unit Franchisees. We can apply any payments owed by you to any debt of yours that we choose (except for Marketing Fund payments), set off any amounts owed to you against any amount owed by you to us/specified third parties and retain amounts received on your account for debts owed. We may elect to waive and/or credit, reduce or defer payment of any and all fees and charges of any kind in connection with the franchise on a case by case basis as we consider appropriate and as permitted by law. We may choose to collect any or all of these amounts through an electronic funds transfer program under which Unit Franchisees' payments are swept directly to an account of ours. If we do, we will keep the amounts validly owed to us, including any appropriate offsets, and promptly remit the balance to you, if you are in Good Standing. As of the date of this Offering Circular, all franchise (Unit and Master) royalties and other fees are paid by direct account debit credited to a CWNA account. We will attempt to perform these payment collection programs in a commercially reasonable manner, but make no guarantee that any program will be error-free. Nor do we guarantee the collection of any amounts due to you for royalties, fees, Products/Services, or any other amounts. We are not responsible for any Unit Franchisee account delinquencies or payment failures. You are free to decide upon the financial terms of any Unit Franchise Agreement, except that you are not permitted to establish new fees without our prior written authorization and we can specify maximum amounts for Royalties, fees, Products or Services and other amounts to the greatest degree permitted by law.

(2)         Payments begin with the Royalty period in which the Master Franchised Business begins operations, pro-rated for opening date.

(3)         Gross Volume includes all billings, whether collected or not, with no deduction for credit card or other charges. It excludes all sales or similar taxes and impositions paid to appropriate government authorities.

(4)         This includes all fees due from Unit Franchises other than initial franchise fees, for example, application, transfer, renewal, and resale program fees; payments by Transferees; late payment fees, etc.

(5)         Applies to any revenues from sale of Products and Services. As of the date of this Offering Circular, master franchisees are not authorized to sell any products or items to unit franchisees. The services they provide are franchise sales and support services as we specify.

(6)         We may change the payment period, and pro-rate your payment to adjust to the new period. Refer to Item 11 for information on local advertising requirements.

(7)         We have implemented an internet/intranet system to enhance communications by and among us and Franchisees, to help support various system maintenance services, and to permit the efficient/economic delivery of a variety of information. You must participate in any intranet/internet activities and maintain the necessary hardware, software, POS Systems, equipment, High-Speed Internet Service (Cable, DSL) (based on availability) or dial-up modem and other items as required by us to enable you to do so on an ongoing basis at your expense. Amounts may be adjusted to reflect increases in pricing by service providers. Refer to Item 11 of this Offering Circular for additional information regarding use of the Internet for your Business.

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(8)         This applies to additional attendees at the Master Training Program, mandatory additional or refresher training, required training of supervisory and franchise marketing personnel, optional meetings, or when retraining is required for a renewing Master Franchise or to cure a default on the development standards.

(9)         This fee only applies if we are asked to provide extra on-site consultations. We routinely provide 1 personal on-site consultation, at our expense, in connection with the opening of the first Unit Franchise in your Territory. Subsequently, we make one personal on-site consultation, also at our expense, within every 24-month period. These consultations will be made by at least 1 Trained Employee, and will not last more than 3 days unless you we agree otherwise.

(10)       If we deliver a notice of default to you pursuant to the Master Franchise Agreement, we may appoint a manager to operate the Master Franchise and Stores until you have cured all defaults. All funds from the operation of the Master Franchise and Stores during this period will be kept in a separate fund and all expenses of the Master Franchise and Stores including compensation, other costs, and travel and living expenses of our appointed manager, will be charged to the fund. If the fund is insufficient to pay the expenses of the Master Franchise and Stores in a reasonable business-like manner, we'll notify you and you must within 5 business days deposit in the fund the amount we require to attain a reasonable balance in the fund. We will still have the right to terminate.

(11)       The security interest granted by you is prior to all other security interests in the collateral except for (a) bona fide purchase money security interests and (b) the security interest granted to a third party in connection with your original financing for your Cartridge World Master Franchise or Store(s), if any. In connection with any request for our approval of a security interest, we will make commercially reasonable efforts to accommodate reasonable lender's requirements, including the subordination of our interests to the lender's and/or lessor's, as applicable, in our judgment, bearing in mind the interests of the borrower, lender, ourselves and the System. If an event occurs that allows us to terminate your rights under the Master Franchise Agreement, or any other agreement between you and us, or if we are not assured that all of your (and any Affiliates') obligations will be met, we will have all the rights and remedies of a secured party under the Uniform Commercial Code of the State in which your Master Franchise is located, including the right to possession of the collateral.

(12)       We provide your Unit Franchisee with a Store plan template and consult with them in the build out of their facility to provide space plan suggestions, among other advice, and help facilitate compliance with applicable Design Standards by interacting with their architect, contractor, materials suppliers and/or other persons they hire. This Fee is not due and no such services are provided for Unit Franchisees obtaining a renewal franchise agreement or acquiring an existing Cartridge World Store. If you provide satisfactory guidance on build-outs by your Unit Franchisees which comply with Cartridge World Store standards and specifications, we will pay to you up to $1500 of the Facility Services Fee.

Items 5, 7, 8, 9, 11, and 17 of this Offering Circular also provide information about costs that you may incur in connection with your Master Franchised Business.

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7.          INITIAL INVESTMENT Certain Estimated Costs (3 Months Only)


Estimated Amount or Estimated Low-High Range

When Payable

Method Of Payment

To Whom Paid

Initial Master Franchise Fee2

$75,000 - $500,000

On signing Franchise Agreement



Real Estate (Rent and Security Deposit)


(Base rent

estimate only)

Usually on signing lease and then monthly

As Agreed






As Incurred

As Agreed


Office Equipment and Supplies


As Incurred

As Agreed




As Required

As Agreed

Outside Suppliers

Expenses While Training6


As Incurred

As Agreed


Professional Fees7


As Incurred

As Agreed




Initial Marketing

$5,000 - $20,000

As Incurred

As Agreed


Travel Costs

$1,000 -$5,000

As Incurred

As Agreed


Miscellaneous Opening Costs8


As Incurred

As Agreed




Additional Funds 3 months9

$4,000 - $30,000

As Incurred

As Agreed

Vendors, Suppliers




(1) Expenditures. The initial investment table shows certain estimated expenditures required to develop a Cartridge World Master Franchise Territory. This chart does not reflect any costs associated with the establishment of a Traditional Cartridge World Store under a Unit Franchise Agreement. Note that these amounts may vary widely. Amounts payable to us are nonrefundable unless otherwise noted. Amounts payable to suppliers/vendors are refunded according to arrangements you make with the vendor, if any. These figures are estimates of the range of your initial costs in the first 3 months of operation only. Amounts may vary significantly from market to market. Cartridge World North America, LLC Master UFOC 03.2006

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(2)         Initial Franchise Fee. We do not offer any direct or indirect financing for the initial franchise fee. This fee includes the price of training for you or your Designated Individual. Some jurisdictions (i.e., New Mexico) impose a tax upon Franchise and Royalty Fees, which is subject to change without notice to you. -You are responsible for paying any such tax and should consult a tax expert in your area for guidance.

The amount of the Initial Franchise Fee varies depending upon the population, demographics, geographic size of the Territory, and other factors. No Territory will have an Initial Master Franchise Fee of less than $50,000. We awarded 1 Master Franchise in the United States during the last fiscal year. The Initial Franchise Fees have ranged from $175,000 to $350,000 through 2004 and 2005.

(3)         Real Estate. It is extremely difficult to accurately estimate real estate related costs. Currently, we have a policy of allowing Master Franchisees to establish an office in their own home. We can change this policy. If you elect to find separate office space, real estate costs will vary significantly, depending upon a multitude of factors, including whether the property is purchased or leased, the landlord, the size, type, condition, and location of the property, the local real estate market, general and local economic conditions, and the availability of financing on commercially reasonable terms. The approximate size of a Cartridge World Master Franchise office may be 500 to 1,000 square feet. Although they vary widely, typical minimum rental costs range from $500 to $2,000 per month. The estimated range provided is based upon these square footage and cost/foot assumptions. In addition to rent, there are often a variety of additional charges that you may be obligated to pay, including a proportionate share of real estate taxes, utility, heat, air conditioning, security, common area maintenance, and other expenses of the building or structure in which the office is located. None of these costs are reflected in the estimates provided. A security deposit is also generally required by the landlord. The security deposit is usually refundable. Any or all of these costs may be different in your area, and you should research these costs and other lease terms before making any commitments.

(4)         Improvements and Fixtures: Currently, our policy permits the operation of the Master Franchised Business from their home-based office. Although this policy is subject to change by us, there currently are no office improvements required by us. If you choose to lease an office, it is extremely difficult to accurately estimate real estate related improvement expenses. These improvement expenses will vary significantly, depending upon a multitude of factors, including the landlord, the size, type, condition, and location of the property, the local real estate market, general and local economic conditions.

(5)        Insurance. You must maintain in force policies of insurance issued by carriers approved by us covering various risks, as specified by us, including the following: (i) comprehensive general liability insurance against claims for bodily and personal injury, death and property damage caused by, or occurring in conjunction with, your Master Franchised Business and any Master-Owned Stores; (ii) all risk property and casualty insurance for the replacement value of your Master Franchised Business and any Master-Owned Stores and all associated items; and (iii) business interruption insurance providing for continued payment of all amounts due us and/or any Affiliate of ours under this Agreement. You must also secure and pay premiums on a worker's compensation (or similar) policy covering your employees as required by law. We may specify the types and amounts of coverage required under such policies and require different and/or additional kinds of insurance at any time, including excess liability insurance. Each insurance policy must a) name us and our Affiliates as additional named insureds; b) contain a waiver of all subrogation rights against us, our Affiliates and any Successors and assigns; c) and provide thirty (30) days' prior written notice to us of any material modifications, cancellation, or expiration of such policies. Current required insurance levels are given below:

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Type of Insurance                              Limits and Other Details

Commercial General Liability                   $1,000,000 General Aggregate

$1,000,000 Products Aggregate $1,000,000 Each Occurrence $1,000,000 Personal Injury/Advertising Injury $1,000 Medical Payments

Business Interruption Insurance              $100,000. Must provide continued payment of amounts

due (or to become due) us, any applicable Related Company and/or any affiliate under the Franchise Agreement.

Fire Damage                                            $50,000

All Risk Property and Casualty              . Must cover the replacement value of the business

operations and all associated items (e.g., inventory, signs, equipment, etc.)

Worker's Compensation                          Statutory

$1,000,000 Employer's Liability

(6)         Training Expenses. The Initial Master Franchise Fee covers the training program tuition, travel and accommodations for 1 person attending training at our training center in Emeryville, California. If more than one person attends initial training, you are responsible for travel and accommodation costs for the second person. Currently, the training fee for an additional attendee is Seven Hundred Dollars ($700). In all cases, you are responsible for all other costs associated with attendance at initial training, such as wages, meals, incidentals and living expenses. The amount you expend will depend on several factors, including your number of attendees, the distance you must travel, and the type of accommodations you choose, among others.

(7)         Professional Expenses. The advertising, offering, and selling of unit franchises are subject to federal regulation by the FTC. Additionally, some states closely regulate franchising and require that offers be registered before franchise sales can begin, and on an ongoing basis. You will be responsible for complying with all state and federal franchise laws and regulations, including those related to financial statements and independent audits. You should consult with your attorney and accountant and local, state and federal government agencies before buying your Cartridge World Master Franchise to determine all legal requirements that you must comply with, their effects on you, and the ongoing costs of compliance.

(8)         Miscellaneous Opening Costs. Includes security deposits, utility costs, costs associated with obtaining business licenses and permits.

(9)        Additional Funds. Additional Funds is an estimate of certain funds needed to cover your business (not personal) expenses during the first 3 months of operation of your business. You will need capital to support on-going costs of your business, such as payroll, utilities, taxes, loan payments and other expenses, to the extent that revenues do not cover business costs. New businesses (franchised or not) often have larger expenses than revenues. This is only an estimate, and we do not guarantee that the amounts specified will be adequate. You may need additional funds during the first 3 months of initial

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operation or afterwards. Additionally, modifications to the Cartridge World System and practices at times may require additional and as yet undetermined expenditures. We do not furnish or authorize our salespersons or any other persons or entities to furnish estimates as to the capital or other reserve funds necessary to reach "break-even" or any other financial position, nor should you rely on any such estimates. The 3 month period from beginning business covers the time by which most Master Franchisees are fully in operation but does not necessarily mean that you will have reached "break-even", "positive cash flow", or any other financial position. In addition, the estimates presented relate only to costs associated with the franchised business and do not cover any personal, "living," unrelated business or other expenses you may have, such as fees due to us, referral fees to Unit Franchisees, Master Marketing Fund contributions and other marketing/advertising expenses, debt service on any loans, state sales, and/or use taxes on goods and services, salesperson draws and commissions, and a variety of other amounts not described above. Although we make no estimates or representations regarding financial performance of a Cartridge World Master Franchise, we recommend that, in addition to the additional funds shown, you have sufficient personal savings and/or income so that you will be self-sufficient and need not draw funds from your franchised Cartridge World Master Franchise for at least 3 months after start-up.

(10) Total Estimated Initial Investment. All of the above figures are estimates of certain initial start up expenses. It is not all inclusive as noted in footnote 9, above, and we cannot guarantee you will not have additional expenses in starting your Cartridge World Master Franchised Business. Your costs will vary depending on such factors as: how much you follow Cartridge World Master Franchise Systems and procedures; your management and marketing skill, experience and general business ability; local and general economic conditions; the local market for Cartridge World Master Franchises; levels of competition; prevailing wage rates, and the sales levels reached by you during the initial period.

Miscellaneous costs to begin operations and other financial requirements may be more or less than the figures specified above, as a function of the size of business (number of staff, anticipated volume of business, etc.), the area in which you intend to operate and other factors, as mentioned above. Many of these factors are primarily under your control in your independent operation of the business. We have made no provision for capital or other reserve funds necessary for you to reach "break-even" or any other financial position nor do any of these estimates include any finance charges, interest or debt service obligations. You should not assume that revenues from your franchisees will necessarily cover your initial (or other) expenses, particularly since once a franchise agreement is signed, it can takes a Cartridge World Store up to 6 months to open for business, and some take longer. You should review these figures carefully with a business advisor (such as an accountant and an attorney) before making any decision to purchase the franchise. In preparing the figures in this chart, we relied on our 3 years of industry experience. These figures are estimates, and we cannot guarantee that you will not have additional expenses.


You must use in the development and operation of the Master Franchise and any Unit Franchises in your Territory those fixtures, items of equipment, including cash registers, computer systems and software, storefront, supplies and signs that we have approved as meeting our specifications and standards.

Your Cartridge World Master Franchise and the Unit Franchises in your Territory will purchase, use and offer such Designated Equipment, Products and Services, as are specified by us. We can designate a single or multiple suppliers for any given item or service and can concentrate purchases with

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one or more suppliers. Suppliers may include, and may be limited to, us and/or companies affiliated with us. We can approve, or revoke or deny approval, of particular items or suppliers, as we consider appropriate. You can request the approval of an item, service or supplier by notifying us in writing submitting such information and/or materials we may request. We may require you to pre-pay any reasonable charges connected with our review and evaluation of any proposal. We'll notify you of our decision in 30 to 60 days. You are not authorized to designate or approve any suppliers of any products or services in your Territory, including you, unless we expressly consent to the same in advance and in writing.

We may delete, substitute, modify or add to the Products, Services, suppliers, and may select a supplier on the basis of whatever requirements we find appropriate. Requirements may relate to frequency of delivery, product life and quality; standards of service; as well as payments, contributions or other consideration being paid to us, or our Affiliates, or other criteria.

A Unit Franchisee must purchase certain equipment and initial inventory from us. The Unit Franchisee's POS system, vacuum filling machine, freight charges, and opening inventory are included in the Initial Opening Inventory and Equipment Package, which is $36,000, as of the date of this Offering Circular ($37,000, if paid by credit card). The Unit Franchisee is required to obtain the Store POS system as part of its opening package from us to ensure that franchisees use a common transaction/reporting system in their Store operations. The Unit Franchisee must also obtain the vacuum filling machine and related equipment from us. We also are the only designated supplier of inks, ink cartridges and related printer consumables to help ensure that these branded products are of a uniform, high quality and are uniformly available in all Traditional Cartridge World Stores, and warehouse these products near our headquarters. Consistent, high quality is critical to our ability to offer and maintain the customer refund policy described below in this Item. We also currently are the designated supplier for training services and programs; and construction assistance and facility design and construction management services. (Refer to Item 6 of this Offering Circular for information on training and facility services fees). In the 2005 fiscal year, our revenue from sales of all these products to Cartridge World Stores was $9,225,000 or 59% of our total revenue of $15,691,000 from all sources.

Inclusive of the Initial Master Franchise Fee, we estimate that approved suppliers will provide you with between 70% and 90% of your total costs in connection with the establishment of your Master Franchise. We anticipate that approved suppliers will provide less than 15% of total ongoing operating costs.                                                                                   ,

You must operate your Cartridge World Master Franchise in full compliance with the then-current Cartridge World System and applicable Manuals. You must promptly comply at your expense with all then current requirements, standards and operating procedures relating to every aspect of a Cartridge World Master Franchise and its operations (including use of Designated Equipment, Products and Services, computer hardware and software; signs, logos, designs, advertising and marketing materials, and forms; website designs and formats). Under the Master Franchise Agreement, you have to undertake all changes that we require. You must ensure that your Unit Franchises conform to Cartridge World System standards and comply with changes to these standards.

Additionally, you are required to participate in our franchise marketing programs, such as our franchise referral programs. We currently have two referral programs. Under our franchisee referral program, participating franchisees are paid a $2,000 referral fee for leads to qualified candidates who acquire a franchise, subject to program criteria. You and we split the cost of this fee. Under the current form of Unit Franchise Agreement, Unit Franchisees that want to sell their business must pay a referral

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fee of 10% of their Store purchase price, if your or we direct a buyer to them, subject to certain criteria/qualifications. If a referred prospect buys the selling franchisee's Franchised Business the seller will pay the referral fee. You and we share these fees on an equal basis. Referral programs are subject to change and/or elimination at any time.

It is our policy (though we reserve the right to change it) to guarantee all refilled cartridges. You and the Unit Franchisees in your Territory will uphold this guarantee. When a customer has a problem with a refilled cartridge, it will be repaired or the customer will receive a refund for the amount of ink or toner used. If our product causes damage to a printer, and the customer provides a written, detailed report from a technician showing that this is so, the franchisee must pay the cost of repairs. You will ensure that this policy is upheld by Unit Franchisees in your Territory.

We do not provide you with any material benefit (such as successor or additional franchises) if you use our recommended or approved suppliers. However, the continuation of the franchise agreement depends on your compliance with product and supplier requirements. We may, but are not obligated to, negotiate certain purchasing arrangements, including price terms, for the benefit of the franchise system.

Purchasing or Distribution Cooperatives

There currently are no formal purchasing or distribution cooperatives in the United States. If one is formed, we can require that you and your unit franchisees make your purchases through a Cartridge World cooperative.




Section in Master Franchise Agreement (MFA)

Item in Offering Circular

a. Site selection and acquisition/lease

9.01, Exhibits A and F of MFA

Items 7 and 11

b. Pre-opening purchases/leases


Items 7, 8 and 11

c. Site development and other pre-opening requirements


Items 7 and 11

d. Initial and ongoing training

7.01-7.03, 8.01, 9.01-9.02, 13.03, Exhibit F of MFA

Items 6 and 11

e. Opening


Items 6, 7 and 11

f. Fees

4.01-4.07, 4.09-4.10, 6.02, 7.01-7.03, 8.01, 10.01-10.4, 13.03, 15.08, 17.03, 19.01, 19.03

Items 5, 6, 7 and 17

g. Compliance with standards and policies/Operations Manual

1.01, 3.01, 3.04, 6.01, 6.03, 9.01-9.04, 13.03, 15.01-15.02, 17.03, 22.08, Exhibit F of MFA

Items 8 and11

h. Trademarks and proprietary information

3.01-3.02, 11.01, 14.01, 15.01, 15.11, 15.13, 17.04, 22.06, 22.06, Exhibit D

Items 13 and 14

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