UFOC
The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample UFOC
TABLE OF CONTENTS ITEM PAGE
1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES.......................................1
2 BUSINESS EXPERIENCE.......................................................................................................3
3 LITIGATION..............................................................................................................................4
4 BANKRUPTCY..........................................................................................................................4
5 INITIAL FRANCHISE FEE.....................................................................................................4
6 OTHERFEES.............................................................................................................................5
7 INITIAL INVESTMENT...........................................................................................................9
8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES...............................15
9 FRANCHISEE'S OBLIGATIONS.........................................................................................16
10 FINANCING.............................................................................................................................18
11 FRANCHISOR'S OBLIGATIONS........................................................................................18
12 TERRITORY............................................................................................................................25
13 TRADEMARKS.......................................................................................................................27
14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION................................29
15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS........................................................................................................29
16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL........................................30
17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION..................30
18 PUBLIC FIGURES..................................................................................................................34
19 EARNINGS CLAIMS..............................................................................................................35
20 LIST OF OPERATIONS.........................................................................................................38
21 FINANCIAL STATEMENTS..................................................................................................40
22 CONTRACTS...........................................................................................................................40
23 RECEIPT
EXHIBITS
Exhibit A Franchise Agreement
Exhibit B ~ List of Franchisees
Exhibit C Financial Statements
Exhibit D Promissory Note
Exhibit E -- Table of Contents of Operations Manual
#220265 050412 oc CA (20121)
Exhibit F ~ List of State Franchise Agencies
Exhibit G - Form of Guaranty
Exhibit H ~ Description of Computer Components
Exhibit I Conversion Addendum
Exhibit J ~ Addendum for Acquisition of Competing Business
Exhibit K Software License Agreement
Exhibit L - Additional Territory Agreement
Exhibit M Terms of Use for Intranet
Exhibit N ~ Restoration Addendum
Exhibit O State Addenda
#220265 050412 ocCA (20121)
ii
ITEM1 THE FRANCHISOR. ITS PREDECESSORS AND AFFILIATES
The Franchisor. Its Predecessor
To simplify the language in this Offering Circular, "COIT" means COIT Services, Inc., the franchisor. "You" means the person who buys the franchise. If the owner of the franchise is a business entity, "you" also includes each partner, shareholder or other owner of that entity. COIT is a California corporation incorporated on December 30, 1966 as COIT Drapery Cleaners, Inc. that changed its name to COIT Services, Inc. in 1993. COIT does business as COIT, COIT Drapery and Carpet Cleaners, COIT Carpet Cleaners and COIT Services. COITs principal office is located at 897 Hinckley Road, Burlingame, California 94010. COIT's agents for service of process are listed in Exhibit F.
COIT has not acquired the major portion of its assets from anyone within the last 10 years. Louis J. Kearn founded COIT Drapery Cleaners in 1950 as a sole proprietor and in 1966 formed COIT as a corporation to operate the business. COIT has no affiliates that provide any goods or services to COIT franchisees or offer franchises in any other line of business.
Business of the Franchisor and the Franchise Offered
All COIT franchised businesses specialize in high quality retail and commercial cleaning. The "Core Services" offered by these businesses currently include cleaning of draperies, carpets, area rugs, upholstery and air ducts. COIT offers the franchise for Core Services under the form of Franchise Agreement attached to this Offering Circular as Exhibit A. COIT Franchised Businesses must provide all of the Core Services. COIT may offer to qualified candidates the right to also provide disaster restoration services, which are services for restoration and cleaning of dwellings and other structures and their contents after damage by fire, smoke, water, sewage and other causes. COIT offers the right to provide these "Restoration Services" under an addendum to the Franchise Agreement attached to this Offering Circular as Exhibit N.
COIT may continue to develop new services. COIT is not obligated to develop or offer you the right to provide new services, but if they are offered, COIT may impose requirements in addition to those described in this Offering Circular, which may include, among others, completion of additional training, payment of additional fees and the execution of additional agreements.
COIT offers franchises to those who want to start a new business and to those wanting to convert an existing cleaning business into a COIT franchise. Conversion franchisees sign the form of Conversion Addendum attached as Exhibit I.
COIT owns and operates in the United States 9 cleaning businesses ("company-owned facilities") under the name COIT that are similar to the franchise described in this Offering Circular. COIT also owns Weldon Brothers and VACCO in Los Angeles, California which offer services similar to COIT's company-owned facilities but not under the COIT name.
You will offer services and products to customers on a pick up and delivery basis (for draperies, area rugs and other removable items) or on-site at the customer's location. You may
#220265 050412 oc CA (20121) 1
operate the franchise (sometimes called "the Franchised Business") in combination with another, noncompetitive garment cleaning business provided you keep that business independent from the Franchised Business by using separate names, signs, bookkeeping and administrative procedures. While some existing franchisees own their own cleaning plants, COIT is not currently selling franchises that would include the build-out of a new cleaning plant. If you own an existing cleaning plant, you may modify it, if necessary, to include drapery cleaning and other required equipment. Otherwise, you would operate strictly as a mobile cleaning service unit with pick up and delivery of draperies on-site. In that case, you would obtain drapery cleaning services from the nearest COIT cleaning plant, or if none is located in your area, from a cleaning plant approved by COIT.
Franchises use specialized business formats and systems, called the "System," which may be modified by COIT. Franchises use certain service marks and other commercial symbols of COIT called the "Proprietary Marks" and a series of proprietary computer programs developed or which may be developed by or for COIT called the "Software Program".
Cleaning plants are affected by the Clean Air Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response Compensation and Liability Act, which are administered by the Environmental Protection Agency (the "EPA"). Additionally, there are OSHA regulations, and there may also be state regulations applicable to the Franchised Business. These regulations may, among other things, require you to abide by certain standards for the use and disposal of certain chemical compounds, to only purchase equipment meeting certain specifications and to undertake other measures for the protection of employees and the public. If you will be operating a cleaning plant, you should contact the EPA, OSHA and local and state authorities for detailed information on these requirements. Carpet cleaning generates wastewater. There are many local and state regulations regarding wastewater disposal. You should check with local and state authorities to get more information on requirements. In addition, some Restoration Services projects will include repair work to structures. Your state may require this work to be performed by someone having a general contractor's license. You will need to determine whether a contractor's license is required and in that case, if you do not have a general contractor's license, you will need to subcontract this part of the work to someone who does. You should also check for any bonding requirements that may apply in your state. There are other laws and regulations of general applicability that could impact your operation.
COIT believes the market for the Core Services is growing. Increased demand for in-home services will result from the growth of two income families who have adequate funds and limited time to spend. Your business will be mostly residential. Many other local, regional and national retail and commercial cleaning businesses, some of which are franchised, compete aggressively for the same customers and business as the Franchised Business. There is seasonality in the specialty cleaning business. COIT has diversified services to offset seasonality. However, severe weather, extreme cold, extreme heat, snowstorms or rain can have a significant negative impact on sales of Core Services.
COIT believes the market for Restoration Services is well established. The demand for the services can fluctuate with the seasons and between geographic areas. The market would also be impacted by the occurrence of natural disasters and catastrophic events in your market area that would temporarily increase demand for the services. Restoration Services are marketed to insurance companies and claims adjusters as well as to residential and commercial customers. Your
#220265 050412 oc CA (20121) 2
competition in Restoration Services will include nationally franchised and independent regional or local companies that offer similar services.
Prior Business Experience
COIT has operated company-owned facilities, and has offered COIT franchises, since its incorporation in 1966. Louis Kearn sold the first COIT franchise in 1964. As of the effective date of this Offering Circular there were 59 franchises in operation in the United States, Canada and Thailand. COIT does not and has not offered franchises in any other line of business.
ITEM 2 BUSINESS EXPERIENCE
President and Chief Executive Officer: Robert L. Kearn
Robert L. Kearn has been President of COIT since 1993 and served as Vice President from July 1982 until that time.
Chief Operating Officer: Nick Granato
Nick Granato joined COIT in as Vice President of Franchise Services in July 1992. He became Chief Operating Officer of COIT in June 2001. For five years prior to that he was President of Cleaning Systems, Inc. in Toronto, Ontario. From 1978 until 1987, he worked for COIT in various positions including Operations Manager, General Manager and Vice President of Operations. The International Franchise Association has awarded Mr. Granato the degree of Certified Franchise Executive.
Vice President Operations Officer: Janet Donelan
Janet Donelan was promoted to Vice President Operations in 2000. From 1999 until her promotion, she was a Regional Director for COIT. From 1990 until 1999, she was General Manager of COIT's Los Angeles operation. She joined COIT in 1989 as Operations Manager of the Houston operation.
Vice President Operations and Business Development: Venv Pirochta
Veny Pirochta joined COIT as a customer service representative in 1986. He became Vice President of Operations and Business Development for COIT in July 2001. Prior to that he was General Manager of COIT's company operations in the Bay Area from August 1995. From April 1992 until August 1995 he was Assistant General Manager of COIT's company operations in the Bay Area.
Vice President Marketing: Sally Was sink
Sally Wassink joined COIT's marketing department in 1987 and held the positions of Advertising Manager and Director of Marketing before she was promoted to her current position in 1998. Before joining COIT, Ms. Wassink owned and operated a bakery/cafe in San Francisco.
#220265 050412 oc CA (20121)
3
Franchise Systems Manager: Ellison Penos
Ellison Penos joined COIT in 1996 and has served in various operational and sales capacities. In January 2003, he became Franchise Systems Manager for COIT.
Director of Restoration Services: Stephen Bovce
Steve Boyce joined COIT as Director of Restoration in February 2002. From January 2001 until January 2002, he held a marketing and training position with Chempoint.com in Bellevue, Washington. From April 1998 until November 2000, Mr. Boyce was Manager of Chemical Development and Training for Hydramaster.
ITEM 3 LITIGATION
No litigation is required to be disclosed in this Offering Circular. Please see addendum to Offering Circular in Exhibit O for New York's required disclosures.
ITEM 4 BANKRUPTCY
No person previously identified in Items 1 or 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item. Please see addendum to Offering Circular in Exhibit O for New York's required disclosures.
ITEM 5 INITIAL FRANCHISE FEE
You will pay an initial franchise fee upon signing the Franchise Agreement calculated as follows: $20,000 plus four cents ($0.04) per household in the Territory you are purchasing. The range of the initial franchise fee is between $24,000 and $40,000 assuming, at the low end, a territory with a population of 100,000 and, at the high end, a population of 500,000. Household numbers are determined by reference to the SRDS Newspaper Advertising Source. The typical territory contains at least 100,000 households.
If you are also signing the Restoration Addendum, you will pay an additional fee of $20,000 plus four cents ($0.04) per household in the Territory you are purchasing, so your total initial franchise fee for both the Core Services and Restoration Services, based on the same Territory calculations, would be between $48,000 and $80,000. However, our existing franchisees as of April 1, 2004 will only pay a $5,000 initial fee under the Restoration Addendum and we will waive this initial fee entirely for these existing franchisees who sign the Restoration Addendum by December 31, 2004.
#220265 050412 oc CA (20121)
4
Except as explained above and in Item 12 for existing franchisees, the initial franchise fee is uniformly calculated under the above terms. COIT also reserves the right to waive or discount initial franchise fees for its own employees who wish to become franchisees.
COIT will refund your initial franchise fee payment, less $2,500 (or $5,000 if you also signed a Restoration Addendum at the same time you signed the Franchise Agreement) if: (1) you request a refund and termination of your franchise agreement in writing at any time prior to your commencement of the initial training program; and (2) you return to COIT at that time any items, materials, manuals, computer software or supplies you may have received from COIT in connection with starting the Franchised Business and (3) you sign a general release of any and all claims against COIT in a form satisfactory to COIT. Your refund will be made within 10 days of COIT's receipt of your request. The initial franchise fee is not refundable under any other circumstances.
If you are also signing the Restoration Addendum, you will pay an initial training fee for Restoration Services of $495 per attendee. This fee is payable at the commencement of training and is not refundable for any reason.
ITEM 6 OTHER FEES
In addition to the initial franchise fee, you are obligated to make payments to COIT as described in the table that follows. All payments are assessed by and payable to COIT except payments for cooperative advertising, if any. All payments are nonrefundable.
NAME OF FEE |
AMOUNT |
DUE DATE |
REMARKS |
Royalty Fee on Core Services |
Greater of 6% of Gross Receipts from sale of Core Services (subject to certain reductions) or the minimum royalty as described below. |
15th day of each month for prior month's receipts. |
"Gross Receipts" include all money and other consideration of any kind received as a result of ownership or operation of the Franchised Business. COIT may require payment by EFT. |
Royalty Fee on Restoration Services |
6%, 4%, or 3% depending on Gross Receipts level. . Also see "Remarks" |
15th day of each month for prior month's receipts. |
Rate is 3% of all Gross Receipts from Build back/Put back and Re-install services and other services provided by any Subcontractor who is not an 2 Affiliated Subcontractor |
Royalty Fee on Goods |
Royalties from sales of goods currently authorized are 3% of Gross Receipts. |
15th day of each month for prior month's receipts. |
#220265 050412 oc CA (20121) 5
NAME OF FEE |
AMOUNT |
DUE DATE |
REMARKS |
Restoration Services Training Fee |
$495 for each attendee |
Before training commences |
Applies only if you sign Restoration Addendum |
Referral Fees for Restoration Services |
5% of the Gross Receipts generated by the work referred |
30 days after you are paid for the work |
Payable to the referring party if COIT or another franchisee refer Restoration Services work to you |
Lead Fees |
Fee charged by 3r party providing leads on Restoration Services customers |
On invoice |
Currently these fees are paid by COIT but this may change in the 3 future. |
Team Leader Fees for Restoration Services |
$500 per day that the team leader spends at or in transit to your location plus travel expenses or 2% of the Gross Receipts generated from the project, whichever amount is more |
On invoice |
Fee is payable if you request a "team leader" from COIT on a Restoration Services project |
National Advertising Fees |
To be established, but not to exceed 3% of Gross Receipts. |
To be established. |
There are currently no national advertising fees. A national advertising program can be established by a 2/3 vote of COIT franchisees, and if so established, you would have to participate and pay any advertising fees included in the program. |
Cooperative Advertising Payments |
To be established. |
To be established. |
COIT may form regional advertising cooperatives. Your cooperative, if formed, will include as members any COIT company-owned businesses in your region. You must participate in and pay, on a pro rata basis, for your participation in any advertising program approved by a majority of members in your cooperative. COIT can break a tie vote even if it is not a member. |
#220265 050412 oc CA (20121)
6
NAME OF FEE |
AMOUNT |
DUE DATE |
REMARKS |
Targeted Data Base Marketing |
"Cost+10+10" pricing |
On invoice |
If you request, and we provide, data base marketing targeted to your Territory, you will pay our production cost plus 10% of cost for overhead plus another 10% of cost. Available only for Restoration Services. |
Software Fees |
Monthly user fee is $125 single user, $225 multiple userj pay for upgrades; reimburse COIT for any travel expenses incurred to install your program. |
User fee payable monthly; upgrade fees upon delivery of upgrade, if any. |
Price of possible upgrades unknown; must be reasonable. Installation support by phone only, may be possible (no travel expenses). |
Interest |
Highest legal rate not to exceed 1.5% per month. |
Upon invoice. |
Paid on any amounts not timely paid by you to COIT. |
Insurance |
Amount of premium paid by COIT. |
Upon invoice. |
If you fail to buy required insurance, COIT may buy it for you and you must reimburse COIT. |
Additional Training and Meeting Fees |
Reasonable fees set by COIT at its option that, based on current estimates, should range from $0 to $350 per day of attendance. |
Upon your registration for program or meeting. |
Applies to additional training COIT may offer beyond the initial training provided. |
Transfer |
$5,000. |
Prior to transfer of franchise. |
"Transfer" defined in Section 13.B'of Franchise Agreement. |
Renewal |
$1,000. |
At least 60 days prior to expiration of the franchise. |
|
Audits |
All costs of inspection and audit. |
Immediately upon notice. |
You must reimburse costs if audit is done because you fail to submit required reports and documents or if audit shows greater than 5% understatement of receipts. |
Note 1: Royalties from the sale of Core Services drop to 3% on Gross Receipts from Core Services over $1.2 million annually and 2% percent on Gross Receipts from Core Services over $3.5 million annually. Only Gross Receipts from Core Services count towards achieving these
#220265 050412 oc CA (20121) 7
benchmark amounts. COIT can increase these benchmark amounts to reflect increases in the Consumer Price Index. See Section 10.B of the Franchise Agreement for details. You must remain in good standing under your Franchise Agreement in order to receive any decrease in your applicable royalty rate from the 6% maximum regardless of your Gross Receipts attained. The minimum monthly royalty applies after the first twelve-month period ("year") from signing the franchise agreement as follows:
Years 2 and 3 $250 per month
Year 4 $500 per month
Year 5 $750 per month
Year 6 and after $1,000 per month
If new goods or services are authorized for sale under your Franchise Agreement other than Core Services, the royalty will be the same as above for Core Services and currently authorized goods (6% of Gross Receipts or the minimum royalty for services and 3% of Gross Receipts for goods) unless some other rate is specified by COIT in writing. The reductions noted above only apply to the sale of Core Services and no other sales.
If you are converting an existing cleaning business to a COIT Franchised Business, for each of the first four twelve-month periods after becoming a franchisee you will pay no royalty fee on Gross Receipts up to the dollar volume of your existing business for the twelve-month period prior to your becoming a franchisee. For business above your existing volume, you will pay the full amount shown in the table. After the first four years, you will pay royalties in the full amount shown in the table on all Gross Receipts. See the COIT Conversion Addendum attached as Exhibit I for details.
COIT also provides an incentive for you to acquire competing businesses in your territory and merge them with the Franchised Business in the form of royalty exemptions on part of the Gross Receipts of the acquired business for the first four twelve-month periods after the acquisition. See the COIT Addendum for Acquisition of Competing Business, attached as Exhibit J for details.
Additionally, many franchisees are operating under prior versions of our franchise agreement and may pay a different royalty than what is available under your agreement.
COIT may require any payments due from you to be made via electronic funds transfer. You must agree to designate a bank account for that purpose and sign all authorization forms we and your bank may require.
Note 2: Royalties on Gross Receipts from all Restoration Services, other than those subject to the flat 3% rate as noted in Remarks column above, are paid according to this sliding scale:
6% of annual Gross Receipts up to $1,000,000
4% of annual Gross Receipts over $1,000,000 and up to $3,000,000
3% of annual Gross Receipts over $3,000,000
#220265 050412 oc CA (20121) 8
"Build Back/put back" means services performed after the structure has been dried and/or cleaned and is ready for construction/repair work, but excluding re-installation of carpets that were removed during the project.
"Re-install" means services related to removal of original structural items such as baseboards and their re-installation at the completion of the project.
"Affiliated Subcontractor" means a Subcontractor affiliated by common ownership or control with you that performs any part of the Restoration Services provided to your customers.
Note 3: COIT may develop agreements with third parties, such as insurance adjusters, insurance companies and managed care providers, to provide leads on customers needing Restoration Services. Our current practice is to pay for all lead fees charged by these third parties, but we may change this practice in the future in our sole discretion. In that case, you will need to pay for all or part of any lead fees charged by a third party lead source for work you accept that was generated by that lead source. However, it is up to you whether to accept any work that requires payment of a lead fee.
Note 4: This range of estimated fees is subject to change in future years. Please see Section 4.A of the Franchise Agreement and Item 11 of this Offering Circular for a full description of your obligations regarding additional training.
Note 5: Except for Referral Fees (if the source is another franchisee), Lead Fees and Cooperative Advertising Fees, if applicable, all of the fees shown in the table above are paid to COIT and are not collected on behalf of third parties.
ITEM 7 INITIAL INVESTMENT
ON LOCATION SERVICE START-UP. CORE SERVICES ONLY:
DESCRIPTION |
ESTIMATED AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAYMENT IS TO BE MADE |
Initial Franchise Fee1 |
$24,000 $40,000 |
Lump Sum |
Upon Execution of Franchise Agreement |
COIT |
Advertising and Promotional Costs2 |
$3,000 -$8,000 |
Lump Sum or Open Account |
Trade Terms |
Paid to Suppliers as Negotiated |
Rent3 |
$0 - $2,000 |
LumpSum |
Monthly |
Landlord |
Lease Deposit |
$0 - $2,000 |
Lump Sum |
Lease Inception |
Landlord |
Utility Deposits |
$0 -$200 |
LumpSum |
Service Inception |
Utility |
#220265 050412 oc CA (20121)
9
DESCRIPTION |
ESTIMATED AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAYMENT IS TO BE MADE |
Companies |
||||
Leasehold Improvements |
$0 |
|||
Equipment/ Fixtures4 |
$6,300 -$25,300 |
Lump Sum or 3rd Party Finance |
Per Vendor or Finance Company Terms |
Vendor or 3rd Party Finance Company |
Software User Fee5 |
$125 |
Lump Sum |
Monthly |
COIT |
Vehicle6 |
$1,000 -$20,000 |
Cash/MFG Financing, Conventional Financing, 3rd Party Lease Option |
Per Negotiated Terms |
Dealer/Bank or 3rd Party Finance Company |
Insurance Deposit |
$0 - $1,000 |
Lump Sum |
Per Negotiated Terms |
Insurance Carrier |
Travel/Room/ Board for Training7 |
$1,000 -$2,000 |
Cash/Open Account |
Per Vendor Terms |
Various Vendors |
Internet Services |
$60 - $150 |
Lump Sum |
Per Vendor Terms |
Service Provider |
Professional Fees |
$500 - $3,000 |
Per Provider |
Per Provider |
Service Provider |
Additional Funds9 |
$10,000 -$25,000 |
Cash/Open Account as Negotiated |
Per Various Vendor Terms |
Vendors/ Employees |
TOTAL |
$45,985 -$128,775 |
ON LOCATION SERVICE CONVERSION. CORE SERVICES ONLY:
DESCRIPTION |
ESTIMATED AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAYMENT IS TO BE MADE |
Initial Franchise Fee1 |
$24,000 -$40,000 |
Lump Sum |
Upon Execution of Franchise Agreement |
COIT |
Advertising and Promotional Costs2 |
$3,000 -$8,000 |
Lump Sum or Open Account |
Trade Terms |
Paid to Suppliers as Negotiated |
Rent3 |
$0 - $2,000 |
#220265 050412 oc CA (20121)
10
DESCRIPTION |
ESTIMATED AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAYMENT IS TO BE MADE |
Lease Deposit |
$0 - $2,000 |
|||
Utility Deposits |
$0 |
|||
Leasehold Improvements |
$0 |
|||
Equipment/ Fixtures4 |
$1,000 -$15,000 |
Lump Sum or 3rd Party Finance |
Per Vendor or Finance Company Terms |
Vendor or 3rd Party Finance Company |
Software User Fee5 |
$125 - $225 |
Lump Sum |
Monthly |
COIT |
Insurance Deposit |
$0 - $1,000 |
Lump Sum |
Per Negotiated Terms |
Insurance Carrier |
Travel/ Room/ Board for Training7 |
$1,000 -$2,000 |
Cash/Open Account |
Per Vendor Terms |
Various Vendors |
Additional Funds9 |
$5,000 -$15,000 |
Cash/Open Account as Negotiated |
Per Various Vendor Terms |
Vendors/ Employees |
TOTAL |
$34,125-$85,225 |
PLANT CONVERSION. CORE SERVICES ONLY:
DESCRIPTION |
ESTIMATED AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAYMENT IS TO BE MADE |
Initial Franchise Fee1 |
$24,000 - $40,000 |
Lump Sum |
Upon Execution of Franchise Agreement |
COIT |
Advertising and Promotional Costs2 |
$3,000 -$8,000 |
Lump Sum or Open Account |
Trade Terms |
Paid to Suppliers as Negotiated |
Exterior Signage |
$200 - $500 |
Cash/Open Account |
Per Vendor Terms |
Sign Vendor |
Rent3 |
$0 - $2,000 |
|||
Lease Deposit |
$0 - $2,000 |
|||
Utility Deposits |
$0 |
|||
Leasehold Improvements |
$0 - $8,000 |
Cash/Open Account |
As Negotiated |
Equipment Supplier or 3rd Party Finance Company |
#220265 050412 oc CA (20121) 11
DESCRIPTION |
ESTIMATED AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAYMENT IS TO BE MADE |
Equipment/ Fixtures4 |
$6 - $40,000 |
Lump Sum or 3rd Party Finance |
Per Vendor or Finance Company Terms |
Vendor or 3rd Party Finance Company |
Software User Fee5 |
$125 - $225 |
Lumpsum |
Monthly |
COIT |
Insurance Deposit |
$0 - $1,000 |
Lump Sum |
Per Payee's Terms |
Insurance Carrier |
Travel/Room/ Board for Training7 |
$1,000 -$2,000 |
Cash/Open Account |
Per Vendor Terms |
Various Vendors |
Additional Fundsy. |
$5,000 -$25,000 |
Cash/Open Account as Negotiated |
Per Various Vendor Terms |
Vendors/ Employees |
TOTAL |
$33,325 -$128,725 |
Note 1:
Note 2:
Note 3:
COIT does not offer, either directly or indirectly, financing to its franchisees for any of the above items. All amounts paid to COIT are nonrefundable except as described in Item 5. Typically, amounts paid to third parties will not be refundable unless otherwise agreed.
The amount of your initial fee will depend on the size of your territory as described in Item 5. The range is based on the same assumptions described in Item 5 above.
Advertising expense given is the minimum. You may spend more at your discretion. Local advertising rates will vary. This amount includes the estimate for the yellow pages advertising you are required to place.
If you operate an on-location service franchise, COIT recommends you operate from your residence until your volume justifies renting a separate office. In that case you would not incur any initial expenses related to establishing or maintaining a separate office. A conversion franchisee will have an existing facility and should not incur any additional leasehold expenses. If you are a conversion franchisee, you are aware of the amount of rent you must pay under your lease. COIT does not have this information, so no estimate is given.
Equipment for the mobile service includes one COIT truck mounted carpet cleaning unit, one portable carpet cleaning unit, one portable upholstery cleaning unit and some accessories. Office equipment includes a computer, telephone, and fax machine. The amount paid for equipment by conversion franchisees depends on how much suitable equipment they already own. The amount needed for a computer system depends on what equipment you currently own and how many terminals you will need for your business.
Note 4:
#220265 050412 oc CA (20121)
12
If you are converting a cleaning plant, you will need a COIT quick form cleaning machine and a 110-inch hot head press or comparable equipment, as well as office and mobile service equipment. Your expenses will depend on the suitability of the equipment you already own. A plant conversion franchisee may also need to install additional plumbing, electrical items and drapery racks, the expenses for which will vary depending on what you negotiate with your contractor.
The low end of the ranges given for equipment and fixtures represent leasing or financing costs and the high end is the purchase price.
Note 5: The software user fee also depends on the number of users. The table assumes a start-up franchisee will only use one terminal.
Note 6: You will need at least one carpet cleaning van or truck with enough space to handle pickups/deliveries of draperies and other goods. A one ton vehicle is recommended. The tables assume conversion franchisees already own a suitable vehicle. The cost of a new vehicle is about $18,000 and vehicle registration is about $1,000 depending on your state
rates.
Note 7: Travel expenses for training assumes one attendee.
Note 8: Professional fees include charges for an accountant to assist you in setting up your books and an attorney to review the franchise, lease and other agreements you may enter into in starting the business. Rates charged by these professionals vary significantly and you should ask for an estimate and fee agreement in advance.
Note 9: Additional funds include amounts you will need for vehicle operation, employee salaries, office supplies, and miscellaneous expenses not covered elsewhere in the table. The ranges were estimated on the basis of COIT's experience in starting up its own cleaning service businesses, knowledge gathered from field experience with franchisees, and COIT's general knowledge of the industry and the suppliers that service it. The actual amount you need will depend on many factors, including the size of your operation, the amount of business you generate, costs in your market area and your business acumen.
ADDITIONAL INVESTMENT NEEDED FOR RESTORATION SERVICES:
DESCRIPTION |
ESTIMATED AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAYMENT IS TO BE MADE |
Initial Franchise Fee1 |
$24,000 -$40,000 |
Lump Sum |
Upon Execution of Franchise Agreement |
COIT |
Marketing and Administration |
$4,500 |
Lump Sum or As Negotiated |
As Negotiated |
Suppliers |
Training and |
$2,500 |
Lump Sum |
On invoice |
COIT and third |
#220265 050412 oc CA (20121)
13
DESCRIPTION |
ESTIMATED AMOUNT |
METHOD OF PAYMENT |
WHEN DUE |
TO WHOM PAYMENT IS TO BE MADE |
Certifications3 |
party training organizations |
|||
Equipment, Tools and Supplies4 |
$12,050 |
LumpSum |
As Negotiated |
Suppliers |
Insurance Deposit5 |
$1,800 -3,000 |
Lump Sum or As Negotiated |
On invoice |
Insurance Carriers |
Travel/Room/ Board for Training;6 |
$1,000 -$2,000 |
Cash/Open Account |
Per Vendor Terms |
Various Vendors |
Additional Funds7 |
$5,000 -$15,000 |
Cash/Open Account as Negotiated |
Per Various Vendor Terms |
Vendors/ Employees |
TOTAL |
$50,850 -$79,050 |
Note 1: The amount of your initial fee will depend on the size of your territory as described in Item 5. The range is based on the same assumptions described in Item 5 above. This payment is in addition to the initial fee for Core Services.
Note 2: This is our estimate of additional amounts you will need to market Restoration Services in your Territory plus miscellaneous administrative costs.
Note 3: The estimate for training includes training fees you will pay to COIT plus fees charged by third parties for training needed to obtain the certifications required for you to provide Restoration Services. You must always have on staff a person or persons currently certified by the Institute of Inspection, Cleaning and Restoration Certification, or equivalent certifications as approved by COIT: (i) in Water Damage; (ii) as an Applied Structural Drying Technician; and (iii) as an Applied Microbial Remediation Technician See Section 3.B of the Restoration Addendum.
Note 4: This estimate is for the additional equipment and tools you will need to provide Restoration Services.
Note 5: This estimate is for additional insurance you will need to provide Restoration Services, i.e. pollution liability coverage for mold remediation services.
Note 6: This estimate of the travel expenses related to the Restoration Services training and certifications assumes one attendee.
Note 7: Additional funds include amounts you will need for vehicle operation, employee salaries, office supplies, and miscellaneous expenses relating to Restoration Services not covered elsewhere in this table or this Item. The ranges were estimated on the basis of COIT's
#220265 050412 oc CA (20121) 14
experience in operating its own Restoration Services business, knowledge gathered from field experience of a limited number of franchisees, and COIT's general knowledge of the industry and the suppliers that service it. The actual amount you need will depend on many factors, including the size of your operation, the amount of business you generate, costs in your market area and your business acumen.
ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
Currently, you may purchase products and equipment that meet specifications from any reputable and dependable supplier of them. COIT does not currently maintain a list of approved suppliers of products and equipment, but reserves the right to do so. COIT maintains a purchasing catalog listing recommended suppliers and pricing information.
COIT has issued and may in the future issue specifications as to the types of products and equipment to be used in the Franchised Business, including those relating to carpet and drapery cleaning equipment, pressing equipment, cleaning solutions, software and computer equipment, vehicles and employee uniforms. You must maintain insurance coverage in the types and amounts designated by COIT. Current minimum coverage requirements are for: $1,000,000 per occurrence general liability coverage including bodily injury, property damage, personal injury, advertising injury and contractual liability coverage; coverage of property under your care and custody for the greater of $100,000 per loss of five times the value of the work in progress; commercial auto liability insurance of at least $1,000,000 per accident; worker's compensation insurance; employer's liability insurance of $1,000,000 per accident and property insurance written on a cause of loss-special form covering your owned real and personal business property for 90% of replacement value. If you provide Restoration services and your general liability policy does not cover mold remediation services, you must obtain pollution liability coverage of $1,000,000 per occurrence, with an aggregate limit of $2,000,000. All liability policies must name COIT as an additional insured.
COIT will disclose to you in writing any specifications on products and equipment by designating approved brands, types, compositions, performance qualities or suppliers. Except for the Software Program, COIT does not currently require you to acquire any other equipment, goods or services from COIT or designated sources.
If COIT in the future designates or approves suppliers for the particular products or equipment, COIT will not unreasonably withhold approval of your use of another source if: (1) you give us adequate prior notice; (2) the items conform to our specifications and standards; (3) the supplier is reputable and dependable; and (4) you deliver to COIT, if requested, samples from your proposed supplier for evaluation.
There are currently no other criteria for approval of suppliers. COIT does not currently charge any fees for approval of suppliers, but reserves the right to condition approval of a supplier on reimbursement of its costs in evaluating whether the items conform to COIT standards. COIT will notify you promptly of the approval or disapproval of a supplier after it receives notice and all information and samples necessary to process your request. COIT may revoke approval of suppliers for reasonable cause upon written notice to you. The time period for notification may differ
#220265 050412 oc CA (20121) 15
depending on the circumstances, but it is not expected to exceed 30 days from the date COIT receives all information necessary to evaluate supplier.
COIT has developed a proprietary Software Program that you must use in the operation of the Franchised Business subject to the terms of the COIT Software License Agreement (the "Software Agreement") attached as Exhibit K. Currently, COIT is the only supplier of the Software Program. There is no separate initial license fee for the Software Program. You must use and may be required to pay for upgrades, modifications, replacements and changes to the Software Program adopted by COIT. You will pay COIT monthly Software User Fees (see Item 6). You will purchase compatible computer hardware, software and accessories for operation of the Software Program (see Item 11).
The total revenue received by COIT from Software User Fees for the 2003 fiscal year was approximately $76,871 or about two tenths of one percent (.02 %) of total revenue from all sources according to COIT's audited financial statements.
COIT has established a toll-free number for telephone service for customer calls that you will use if it is available in your area. COIT selects the carrier for this service. You will pay monthly service fees and calling fees to the carrier for this service. COIT receives no fees or other consideration in connection with the toll-free number. COIT may establish other toll-free numbers in the future, and you must use them if they are available in your area.
Franchisees do not get any material benefit or inducement from COIT for using designated or approved sources.
COIT negotiates purchasing discounts for the benefit of franchisees with some recommended suppliers. COIT receives from some suppliers cash rebates based on the volume of franchisee purchases from them.
COIT may, in its discretion, modify its specifications and requirements regarding any equipment, goods or services. When your existing equipment is depleted or becomes obsolete or worn out to the extent it requires replacement, you agree to replace it in accordance with COIT's modified specifications for the same types and kinds of equipment in effect at the time of replacement.
COIT estimates the cost of the required purchases (Software User Fees) is from between four-tenths of one percent and one and eight-tenths percent (.4% and 1.8%) of the cost to establish your franchise and between one and one-half percent and two and seven-tenths percent (1.5% and 2.7%) of the cost to operate the franchise assuming one user of the COIT Order Entry System.
There are no purchasing or distribution cooperatives.
ITEM 9 FRANCHISEE'S OBLIGATIONS
THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION
#220265 050412 oc CA (20121)
16
ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR For purposes of this table the Sections referred to are those in the Franchise Agreement unless otherwise noted.
OBLIGATION |
SECTION IN AGREEMENT |
ITEM IN THIS OFFERING CIRCULAR |
Site Selection and Acquisition/Lease |
Section 3. A |
Item 11 |
Pre-Opening Purchases/Leases |
Sections 3.B, 3.D and 3.E; Section 4.A of Restoration Addendum |
Items 7 and 8 |
Site Development and Other Pre-Opening Requirements |
Sections 3.B, 3.D, 3.E and 3.G; Section 3.B and 3.C of Restoration Addendum |
Items 7 and 11 |
Initial and Ongoing Training |
Section 4.A; Sections 3.A of Restoration Addendum |
Items 7 and 11 |
Opening |
Section 3.G |
Item 11 |
Fees |
Sections 10.A and 10.B; Section 5 of Restoration Addendum; Section 3 of Software Agreement |
Items 5, 6 and 11 |
Compliance With Standards and Policies/Operating Manual |
Sections 4.C and 5; Section 8 of Restoration Addendum |
Items 8 and 11 |
Trademark and Proprietary Information |
Sections 9 and 12.A; Sections 1, 5 and 6 of Software Agreement |
Items 13 and 14 |
Restrictions On Products/Services Offered |
Section 5.C |
Items 8 and 16 |
Warranty and Customer Service Requirements |
Section 5.C |
N/A |
Territorial Development and Sales Quotas |
N/A |
N/A |
Ongoing Product/Service Purchases |
Section 5.B; Section 4 of Software Agreement |
Items 8 and 11 |
Maintenance, Appearance and Remodeling Requirements |
Sections 5.A and 5.D |
Item 8 |
Insurance |
Section 5.G; Section 4.B of Restoration Addendum |
Items 6 and 7 |
Advertising |
Sections 6.B, 6.C and 6.D |
Items 6, 7 and 11 |
Indemnification |
Section ll.D |
N/A |
Owner's Participation Management/Staffing |
Section 5.F |
Item 15 |
#220265 050412 oc CA (20121) 17
OBLIGATION |
SECTION IN AGREEMENT |
ITEM IN THIS OFFERING CIRCULAR |
Records/Reports |
Section 7 |
Item 6 |
Inspections/Audits |
N/A |
Item 6 |
Transfer |
Section 13 |
Item 17 |
Renewal |
Section 14 |
Item 17 |
Post-Termination Obligations |
Sections 15.D, 15.E, 15.Fand 15.G |
Item 17 |
Noncompetition Covenant |
Section 12.B |
Item 17 |
Dispute Resolution |
Section 16.D |
Item 17 |
Software Use and Restrictions |
Software Agreement |
Items 6,11 and 14 |
ITEM 10 FINANCING
COIT does not offer direct or indirect financing. COIT does not place financing with anyone, and does not receive any payment for the placement of financing. COIT does not guarantee your note, lease or other obligations.
ITEM 11 FRANCHISOR'S OBLIGATIONS
Except as listed below, COIT need not provide any assistance to you.
Pre-Qpening Obligations
1. Under Section 3.B of the Franchise Agreement, COIT will provide you with miscellaneous carpet, drapery and upholstery cleaning supplies and operational supplies.
2. Under Sections 3.B and 3.E of the Franchise Agreement and Section 1 of the Software Agreement, COIT will grant you a license to use the Software Program.
3. Under Section 3.E of the Franchise Agreement and Section 4 of the Software Agreement, COIT will assist you with the installation of the Software Program.
4. Under Section 3.E of the Franchise Agreement, as part of the initial training program, COIT will train you in the use of the Software Program.
5. Under Section 3.C of the Franchise Agreement, COIT will provide specifications for your COIT Vehicles.
6. Under Section 4. A of the Franchise Agreement, COIT will provide you with an initial training program as further described in this Item.
#220265 050412 oc CA (20121)
18
The original documents were scanned as an image. The original file can be downloaded at the link above.