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Sample Franchise Agreement
EXPETEC CORPORATION FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (Agreement) is entered into between EXPETEC CORPORATION, a South Dakota corporation, ("OUR", "US", WE") whose address is 12 2nd Avenue SW, Aberdeen, South Dakota 57401, and YOU, whose name and address are specified in section 23 of this Agreement; this Agreement is effective on the date specified in section 26.
The parties acknowledge the following facts:
WE have developed and are the owner of a System through which independently owned and operated businesses offer and sell information technology products and services related to network security, business continuity, web services, and design and administration of networks and systems; in addition those businesses offer and sell information technology consulting services, and mobile repair, maintenance, upgrade, installation, and warranty services for computers, telecommunications, and other office equipment; those businesses can also sell computers and computer hardware, parts and accessories. These products and services are provided from business locations which are readily accessible to the public.
OUR franchisees conduct business under the names "Expetec" and "Expetec Technology Services". The name "Expetec" has been registered, on the principal register, with the United States Patent and Trademark Office.
The Expetec System (System) provides uniform methods of operation, using the distinctive service mark and other distinguishing characteristics, designed and developed by US.
WE have developed and will continue to develop, additional, or different, services,
and marks for the System.
All franchisees must comply with standards, specifications, methods, procedures, and techniques established by US (all of which may be changed, improved, and further developed by US).
WE have the exclusive right to license the System through the granting of franchises.
YOU desire to acquire a franchise to use the System, and WE agree to grant YOU a franchise to use the System, governed by the terms and conditions contained in this Agreement.
The definitions in this section apply to only a few of the terms used in this Agreement. This section is not intended to be all-inclusive, and terms, not specifically defined, shall be given their usual and customary meaning in accordance with the context of this Agreement.
"Abandon" means any action or omission, which indicates YOUR desire or intent to discontinue YOUR business.
"Business" means the offer and sale of information technology products and services related to network security, business continuity, web services, and design and administration of networks and systems; business also means the offer and sale of information technology consulting services, and mobile repair, maintenance, upgrade, installation and warranty services for computers, telecommunications and other office equipment as well as the sale of computers and computer hardware, parts, and accessories. These business activities are conducted from an office location readily accessible to the public in accordance with the quality standards and uniformity requirements of the System as provided in this Agreement and in any other of OUR written requirements.
"Expetec" means OUR Large Market and Mid Market franchises.
"Franchise" means the cumulative group of rights granted to, and obligations incurred by, YOU in accordance with this Agreement.
"YOU", "YOUR", and "YOURS" means the person or entity (franchisee) granted the franchise rights pursuant to this Agreement. References to YOU, YOUR, and YOURS include any shareholders, directors, officers, partners, limited partners, members, or joint venturers of entities granted a franchise pursuant to this Agreement, and to sole proprietors granted a franchise pursuant to this Agreement.
The terms "OUR", "US", and "WE", mean the franchisor, EXPETEC CORPORATION, which grants YOU the franchise.
(G) Gross Profit
"Gross Profit" means the cumulative total of YOUR sales of products and services reduced only by the actual cost of the products YOU sell.
"Products" means all software, computers, hardware, parts, materials, supplies, business equipment, and any other tangible items provided by YOU, directly or indirectly, for a fee, or in exchange for any product, service, benefit, or consideration of any type.
"Sales" means the revenue, in United States money, attributable to, or actually assessed for, the provision of products or services, by YOU, to any person or entity; there shall be no deductions for any of YOUR expenses; and no governmental tax shall be included in the sales sums.
"Section" or "Sections" mean the designated parts and subparts of this Franchise
"Services" means any advice, assistance, benefit, installation, maintenance, repairs, upgrades, work, or other help provided by YOU, directly or indirectly, for a fee, or in exchange for any product, service, benefit, or consideration of any type.
"System" means the cumulative group of Expetec franchises operating pursuant to franchise agreements with US, and the respective rights and benefits which accrue to all franchisees pursuant to the provisions of the franchise agreements.
2. GRANT OF FRANCHISE - FRANCHISED AREA
(A) WE grant YOU, subject to the terms of this Agreement, a franchise to use the System within the Franchised Area described in section 25 of this Agreement. The rights and privileges granted to YOU in this Agreement are applicable only to the Franchised Area; those rights and privileges are personal in nature, and may not be used, directly or indirectly, by YOU outside of the Franchised Area except as specifically provided in this section. If YOU are not fulfilling YOUR obligations pursuant to this Agreement, WE can designate other franchisees, or other parties, to provide products and services in YOUR Franchised Area. YOUR ability to sell products and services outside of YOUR Franchised Area is nonexclusive and YOU may be competing with other franchisees. WE can sell franchises, and create exclusive Franchised Areas, in the area outside of YOUR Franchised Area. When WE sell a franchise, and establish a Franchised Area, YOU will no longer be able to sell products or provide services in the Franchised Area of the new franchisee. YOUR nonexclusive ability to solicit business outside of YOUR Franchised Area is subject to the conditions that:
(1) At the time that the products and/or services are provided, YOU are in full compliance with all obligations to US pursuant to this Agreement; and
(2) No products sales are solicited, and no services are performed, in the Franchised Area of another franchisee, whether the Franchised Area currently exists or is established by US in the future; and
(3) No System franchisee has other rights to the area in which the sale of products and services is being solicited or performed; and
(4) YOU provide only those products and/or services authorized by US; and
(5) All fees provided for in this Agreement are paid to US for the products and services provided outside of YOUR Franchised Area; and
(6) WE have not opened a company controlled business, using the System, in the area; and
(7) WE have not notified YOU that YOU cannot solicit and/or sell products and/or provide services outside of YOUR Franchised Area, generally, or specifically.
If any of the listed conditions occur or are violated, then YOU must, upon receiving notice from US, immediately stop soliciting sales and/or selling products and/or providing services in, and YOU shall have no other rights with regard to, the area outside of YOUR Franchised Area.
(B) YOU do not have the right to subfranchise or sublicense any of YOUR rights granted in this Agreement. WE will not develop or franchise any business concept in YOUR Franchised Area which involves the offer and sale of information technology products and services related to network security, business continuity, web services, and design and administration of networks and systems; further, WE will not develop or franchise any business concept which involves the offer and sale of information technology consulting services, or mobile repair, maintenance, upgrade, installation, and warranty services for computers, telecommunications, and other office equipment or the sale of computers and computer hardware, parts, and accessories. WE may, however, in OUR sole discretion, develop and franchise different systems, and methods of distribution and operation, within the Franchised Area; if such systems are developed and franchised, and if YOU have had no default, of any type, and if YOU are current with all sums owed to US, YOU will have a right of first refusal to acquire the newly developed franchise system within the Franchised Area. YOU must sign all documents and comply with all requirements in the same manner as any other franchisee of the newly developed franchise system. YOU must also exercise the right of first refusal, in writing, within 90 days after WE offer it to YOU, in writing. WE have the unconditional right to establish franchises anywhere outside of YOUR Franchised Area whether the franchise is the same as that granted to YOU in this Agreement, or a different franchise.
3. TERM OF FRANCHISE
The franchise, granted pursuant to this Agreement, shall be in effect for a term commencing on the effective date and continuing until terminated.
(A) Term Period
The franchise is granted to YOU for a term often (10) years, and it will automatically terminate on the tenth (10th) anniversary of the effective date of this Agreement, subject to YOUR right of renewal as provided in section 3(B). Upon any effective date of termination, and if YOU are not in default of this Agreement, YOU shall comply with the terms and
conditions of sections 9(C) and 9(D).
YOU have the right to renew YOUR franchise for one (1) additional five (5) year term only if YOU have fulfilled the following conditions:
(1) YOU have given US written notice of YOUR intention to renew at least one hundred eighty (180) days prior to the end of the initial term; and
(2) YOU have complied with all of the material terms and conditions of this Agreement; and
(3) All monetary obligations owed by YOU to US have been satisfied, and have been paid in a timely manner throughout the term of this Agreement; and
(4) YOU have, at YOUR expense, successfully completed all training, required by US, for products and services which have been added or modified after the effective date of this Agreement; and
(5) YOU have, at YOUR expense, replaced and modernized YOUR vehicles, signage, equipment, stationery, brochures, other sales and promotional items, and supplies, in a manner which is equal to OUR then current standards and image for new franchisees; and
(6) YOU sign the standard Franchise Agreement then being used by US; however, YOU will not be required to pay the Initial Franchise Fee required in the new franchise agreement.
At the end of the five (5) year renewal term, YOU shall have no further rights to extend or continue the franchise granted pursuant to this Agreement.
4. INITIAL AND RECURRING FEES
(A) Initial Franchise Fee
At the time that YOU sign this Agreement, YOU shall pay US Forty-five Thousand Dollars ($45,000.00) for a Large Market franchise or Thirty-five Thousand Dollars ($35,000.00) for a Mid Market franchise. With YOUR franchise, YOU shall receive a Franchised Area, which will be identified by geographical boundaries. WE will pay for YOUR travel expenses, as arranged by US, to and from Aberdeen, South Dakota, for attendance at OUR training program; WE will also pay for YOUR lodging, as arranged by US, while YOU participate in the training program.
A Large Market franchise consists of an area which includes a population of more than forty thousand (40,000) people. A Mid Market franchise consists of an area which includes a population of between fifteen thousand (15,000) and forty thousand (40,000) people. Generally, WE will not sell franchises for any area which has a population of less than fifteen thousand (15,000) people.
YOU shall not, under any circumstances, receive a refund of any portion of the Initial Franchise Fee.
(B) Royalty Fees
YOU shall pay a Royalty Fee to US, equaling twelve percent (12%) of YOUR Gross Profit,, at OUR address, or any other place designated by US. That payment is due on or before the twentieth (20th) day of each calendar month following the calendar month in which the Gross Profit was generated. YOU must pay Royally Fees each calendar month throughout the ten (10) year term of YOUR franchise, and any five (5) year renewal term.
(C) Marketing Fund Fee
YOU shall pay a Marketing Fund Fee to US, equaling three percent (3%) of YOUR Gross Profit, at OUR address, or any other place designated by US. That payment is due on or before the twentieth (20th) day of each calendar month following the calendar month in which the Gross Profit was generated. YOU must pay Marketing Fund Fees each calendar month throughout the ten (10) year term of YOUR franchise, and any five (5) year renewal term.
No requirement exists that all or any part of the Marketing Fund Fee be disbursed within any accounting period; any marketing placement shall be at OUR sole discretion. WE do not insure that YOU benefit directly, or on a proportional basis, from any marketing. YOU must pay for all of YOUR local marketing and advertising, and those payments cannot be credited against or deducted from the monies due for the Marketing Fund Fee. YOU agree that all sums paid by YOU into the Marketing Fund can be combined with all other sums paid by System franchisees.
(D) Late Fees and Dishonored Checks
If YOUR payment, is received, later than twentieth (20th) day of each month, YOU must pay US, on demand, a late fee of Thirty Dollars ($30.00) to cover the additional costs incurred by US in handling delinquent payments. Additionally, a penalty fee of Five Dollars ($5.00) per day, shall be paid for each day, past the twentieth (20th)day of each month, that a payment is not received by US. The Thirty Dollar ($30.00) late fee, and the Five Dollar ($5.00) per day penalty, apply to each late payment. If the twentieth (20th) day of the month is a federally recognized holiday on which the national banking system is not operating, YOUR payment must be received on the first business day following the federal holiday.
If YOU give US a check, as payment for any sums owed pursuant to this Agreement, which is dishonored for any reason, YOU shall pay US, on demand, a dishonored check fee of Thirty Dollars ($30.00), for each dishonored check. No late fees or dishonored check fees will be charged which exceed the sums allowed by applicable law.
YOU shall pay US, as an additional franchise fee, a sum equal to any excise, sales, use, value added, or privilege tax imposed by any governmental agency upon US on account of this Franchise Agreement; this obligation does not include any corporate income or franchise tax as enacted and applied on the effective date of this Agreement.
(F) Electronic Fund Transfer
YOU shall make any payments due to US by electronic fund transfer. YOU agree to execute any documents needed to accomplish payment by electronic fund transfer and YOU shall pay all reasonable costs associated with the electronic fund transfer process.
(G) Maintenance Fee for Service CEO
Beginning on the first anniversary of the opening of YOUR business, YOU must pay US, or a designated vendor, an annual fee of Three Hundred Dollars ($300.00) for the first license, and Two Hundred Dollars ($200.00) for the second license, for the support and maintenance of YOUR Service CEO computer program. YOU must pay an increased annual fee if any increases are assessed by the service provider.
(H) Internet Website Hosting
YOU must pay US a monthly fee of Twelve Dollars ($12.00) to host YOUR internet website. That payment is due on or before the twentieth (20th) day of each calendar month. YOU must pay an increased fee whenever OUR cost for providing the hosting service increases.
(I) Firewall License Fee
YOU must pay US, or a designated vendor, an annual fee of Ninety Dollars ($90.00) for the license, and for the support and maintenance of, a "firewall" for YOUR computer system. YOU must pay an increased annual fee if any increases are assessed by the service provider.
5. OUR RIGHT TO SYSTEM
(A) Exclusive Ownership
YOU agree that WE have the exclusive ownership of the System, including the names "Expetec" used alone, or in association with trademarks, service marks, copyrights, signs, slogans, logos, emblems, and other distinguishing characteristics, whether developed now or
in the future. YOU agree that no right, express or implied, is granted to YOU to subfranchise or license others to use any part of the System.
(B) Licensing of Marks
YOU have no right to license, or otherwise permit, any other party to use or reproduce the trademarks, service marks, and other distinguishing characteristics of the System; YOU further agree that YOU will not dispute, or assist others in disputing, the validity, or OUR ownership, of the trademarks, service marks, and other distinguishing characteristics of the System.
(C) Right to Revise System
WE reserve the right to revise, amend, or change the System. Any changes in the System developed by US, YOU, or other franchisees shall be OUR sole property, and WE may incorporate the changes into the System and shall have the sole right to copyright, register, or patent such changes, in OUR name without any payment to YOU. YOU shall have no right to copyright, register, or patent such changes in OUR name, nor to use such changes except as specified in this Agreement.
(D) Franchisor's Right within Franchised Area
YOU agree that, except for the rights specifically granted to YOU in this Agreement, and except as OUR rights are limited in this Agreement, WE reserve the usual and customary rights of franchising companies to operate and administer the System, as WE deem appropriate, within, and outside of, YOUR Franchised Area.
6. YOUR OBLIGATIONS TO THE SYSTEM
(A) Standards of Operation
To protect the distinction, valuable goodwill, and uniformity represented and symbolized by the marks and System, which protects YOU, US, and other franchisees of the System, YOU shall:
(1) Comply with the standards and rules of operation, quality assurance standards, and any other requirements developed by US during the term of this Agreement.
(2) Comply with all local, state, and federal laws and regulations, pay all taxes, and obtain and maintain all required permits, certifications, or licenses, and provide proof of compliance as reasonably requested by US.
(3) Fully and diligently provide all System products, services, and programs to the public.
(4) Engage in direct sales solicitations and marketing efforts on an active and
(5) Provide all customers with prompt, courteous, efficient, high quality, and ethical service, and act in a competent and professional manner.
(6) Promote the use of the System and encourage the use of the System wherever System franchises are available.
(7) Continuously operate YOUR business as a System franchise in YOUR Franchised Area, using the trademarks, service marks, and distinguishing characteristics of the System as required by US.
(8) Attend and successfully complete (and YOUR manager if one is hired) OUR training program, or a training program approved by US; additionally, as new products, services, and methods are developed, YOU, and any manager, must attend and successfully complete any additional training WE determine to be necessary; WE cannot require YOU to attend more than one (1) additional training session per year.
(9) Provide US with requested information on a daily basis.
(10) Grant discounts and participate in promotions required by US.
(11) Accept cash, checks, credit cards, debit cards, and other methods and forms of payment required by US.
(12) Sell only those products and services approved, in writing, by US.
(13) Retain and exercise, at all times, management control over YOUR franchise; YOU shall not enter into any lease, management agreement, or other similar arrangement for the operation of YOUR business, or any part of the business, without OUR prior written consent.
(14) Provide customers with all, but only those, uniform warranties and guaranties, as may be expressly provided, in writing, by US; all customer complaints must be handled promptly and courteously to the reasonable satisfaction of the customer.
(15) Maintain products, equipment, and supplies, of the types that WE require, and in quantities which are reasonable for the proper operation of YOUR business.
(16) Not employ, or seek to employ, any person who is, at that time, employed by US, or by any System franchisee, nor shall YOU, directly or indirectly, induce such person to leave his/her employment.
(17) Hire and supervise efficient, competent, and courteous persons for the operation of YOUR business, and, require all employees, including YOURSELF, to work in clean, neat, and well-maintained attire (uniforms) as reasonably required by US.
(18) Advise US, within four (4) hours, of any sales leads, or potential customers, known to YOU, and who YOU cannot sell to or serve because of the provisions of this Agreement, or who, for whatever reason, YOU do not choose to sell to or serve.
(19) Maintain a business telephone that is answered and identified as "Expetec" (or other trade name required or approved by US) during the customary operational hours for businesses in YOUR Franchised Area.
(20) Provide US with information, in the form and format WE require, regarding YOUR revenue, expenses, inventory, and other information reasonably related to YOUR operation of a System franchise.
(21) Participate in, and contribute a proportionate share of the cost for, any internet worldwide web site developed and maintained by US.
(22) Include OUR toll-free telephone number with the telephone number to be used by YOU for YOUR Expetec business. All Yellow Pages and "white page" listings, and any advertisements used for YOUR business, shall include OUR toll-free telephone number. WE can conduct telephone communications with customers. WE can schedule appointments or requests for service obtained by US on YOUR behalf via the Service CEO system.
(23) Purchase. lease, or otherwise acquire a vehicle for operating YOUR business. The vehicle will be used by YOUR technician. The vehicle must be all white in color, and must have the approved Expetec marks affixed to both sides of the vehicle. The vehicle must be maintained in a neat, clean, and undamaged condition; if damage occurs, it must be repaired in a prompt and timely manner. YOU must also have a vehicle to use for making sales calls; this can be YOUR personal vehicle; it must be maintained in a neat, clean, and undamaged condition.
(1) Not use any of the trademarks, service marks, or other distinguishing characteristics of the System, except in a manner provided by this Agreement, or in a manner approved, in writing, by US.
(2) Submit to US, for approval, any variation or deviation from OUR required trademarks, service marks, and distinguishing characteristics, mandated by a governmental entity, political subdivision, or other party. WE shall have the right to deny approval and contest, in OUR sole discretion, such mandate by any party, and YOU shall cooperate with US in prosecuting such action.
(3) Immediately advise US if, regarding YOUR business, there should be asserted a claim of prior use of any of OUR trademarks, service marks, or distinguishing characteristics, in the name of any business, and, if required by US, YOU shall use names, and combinations of service marks, trademarks, or other distinguishing characteristics in a manner that will clearly avoid any possible confusion between YOUR business and any claimant, subject to OUR right to approve such name or use; it shall be OUR sole obligation to defend against claims as WE deem appropriate.
(4) Inform US of any known or suspected abuse or infringement, by others, of the trademarks, service marks, or other distinguishing characteristics of the System; WE shall, as WE deem appropriate, defend the System against limitations or infringements on trademarks, service marks, or other distinguishing characteristics protected by law.
(5) Not use the trademarks, service marks, and other distinguishing characteristics of the System as a part of YOUR corporate, partnership, limited partnership, limited liability company, limited liability partnership, joint venture, or fictitious trade name.
(6) Not use the trademarks, service marks, and other distinguishing characteristics of the System, or identify the System, in any private or public investment offering without OUR prior written consent.
(7) Not use the trademarks, service marks, and other distinguishing characteristics of the System, or identify the System, with any product or service not approved, in writing, by US.
(8) Make every effort to protect, maintain, and advance the trademarks, service marks, and other distinguishing characteristics of the System.
Advertising YOU shall:
(1) Implement OUR pre-opening marketing plan for YOUR business. YOU must complete the implementation of the pre-opening marketing plan before YOU can open for business.
(2) Advertise and promote the sale of products and services provided by YOU through YOUR business. WE highly recommend that YOU expend at least three percent (3%) of YOUR Gross Profit for local advertising and marketing excluding any expenses related to Yellow Pages
(3) Participate in and pay YOUR reasonably designated share for cooperative
advertising agreed upon by the majority of the franchises in any advertising market area reasonably designated by US.
(4) Use only advertising and promotional materials provided, or previously authorized, by US; any other advertising or promotional information which use the trademarks, service marks, and other distinguishing characteristics of the System, must be approved by US, in writing, prior to any use or publication by YOU.
Identification of Franchise Relationship
(1) YOU shall display a sign, in an unobstructed and conspicuous location, near the business counter in any System business operated by YOU; the sign shall be in a size and style approved by US, and shall state:
Each franchise is independently owned and operated pursuant to a Franchise Agreement with Expetec Corporation
(2) In the use of any trademarks, service marks, or other distinguishing characteristics of the System, on all printed materials, and in YOUR advertising, YOU shall state the following:
Each franchise is independently owned and operated.
(3) YOU shall inform customers, investors, lenders, offerees of any security, employees, and every other person or entity, that no other legal relationship exists between YOU and US except that of independent contractors as franchisor and franchisee.
(E) Business Premises Specifications
(1) YOU must construct, remodel, renovate, furnish, and decorate YOUR business premises according to plans and specifications approved by US. Prior to the commencement of construction, if YOU are building a new facility for YOUR business premises, or prior to the commencement of remodeling and renovation if YOU are leasing a facility or remodeling a facility already owned by YOU, YOU must submit to US YOUR completed plans for construction, remodeling, renovating, furnishing, arranging, and decorating, as appropriate, for approval by US. WE have the right to inspect YOUR facility while work is in progress and may require alterations or modifications as WE deem reasonably necessary. Prior to the time that YOUR business premises opens for business, WE may inspect the business premises to determine YOUR compliance with the approved plans and specifications; YOU shall not commence operation within the System until YOUR business premises are approved, in writing, by US.
(2) No part of the examination or approval of plans and specifications, or approval and acceptance of the business premises by US, shall be deemed to be an examination to determine if YOUR plans and specifications, or business premises, comply with local, state or federal building codes or are sufficient for the protection or safety of the public; the examination, inspection, and approval are only to determine if YOUR plans and specifications, construction methods, and completed business premises comply with OUR minimum standards with respect to business premises size, furnishings, fixtures, layout, appearance, decor, and convenience.
(3) No change in the configuration of the business premises, remodeling, renovation, or reconstruction of the business premises shall be commenced or completed without OUR written approval.
(F) Inspection of Premises
YOU shall permit US to inspect YOUR business premises to assure compliance with this Agreement, the rules of operation, quality assurance standards, trademark identity standards, and other rules WE establish. All manuals furnished to YOU shall be kept at YOUR business premises, or any other location approved, in writing, by US, and maintained, up to date, as amendments are made by US. The manuals shall be available for inspection by US at all reasonable times.
Indemnification and Insurance
(1) YOU are solely responsible for, and agree to indemnify and hold US, OUR subsidiaries and affiliates, and the respective directors, officers, shareholders, employees, agents, and assigns harmless from, any claims, liability, and damages, compensatory, punitive, and other, or any costs or expenses, by reason of any loss of life or injuries and/or claimed injuries to persons or property that may be sustained in connection with the operation of YOUR business, or any associated business, including claims against US, OUR subsidiaries and affiliates, and the respective directors, officers, shareholders, employees, agents, and assigns, based upon agency or vicarious liability.
(2) YOU must also indemnify and hold US, OUR subsidiaries and affiliates, and the respective directors, officers, shareholders, employees, agents, and assigns harmless with regard to any contractual claims and/or debts that may be incurred in connection with the operation of YOUR business.
(3) YOU must purchase and maintain for the mutual benefit of YOURSELF, and
US, OUR subsidiaries and affiliates, and the respective directors, officers, shareholders, employees, agents and assigns, as additional insureds, all forms of liability insurance providing coverage, on an occurrence basis, against claims for personal injury, death or property damage, including claims against US, OUR subsidiaries and affiliates, and the respective directors, officers, shareholders, employees, agents, and assigns, based upon agency or vicarious liability, and when appropriate, products liability insurance, automobile liability insurance, worker's compensation insurance, and fire insurance, with extended coverage endorsement, on YOUR vehicle and business premises. The various forms of insurance shall be in such minimum amounts, with such maximum deductibles, and with such insurance companies as WE shall periodically approve. YOU shall deliver, to US, Certificates of Insurance proving that the insurance is in full force and effect and proving that WE, OUR subsidiaries and affiliates, and the respective directors, officers, shareholders, employees, agents, and assigns are named as additional insureds and, when appropriate, loss payees. All forms of insurance shall be non-cancelable, and shall not be materially amended, except upon thirty (30) days prior written notice to US and YOU.
(4) YOU shall indemnify and hold US, OUR subsidiaries and affiliates, and the respective directors, officers, shareholders, employees, agents, and assigns harmless as to any liability and/or costs incurred by reason of any mechanic's lien, or claims for materials furnished or claimed to have been furnished, or labor performed or claimed to have been performed, when such materials have been furnished or labor performed at the insistence or request of, or under contract with, YOU.
(1) All monthly reports and statements must be received by US on or before the fifteenth (15th) day following the previous month's business. The reports and statements shall be in the form specified or approved by US. The process for reporting shall be automated electronic reporting. If the fifteenth (15th) day of month is a federally recognized holiday, YOUR report must be received by US on the first business day following the federal holiday.
(2) All reports and statements delivered by YOU shall substantially comply with generally accepted accounting principles (GAAP) using an accrual basis and be on forms or in a format provided or approved by US.
(3) YOU shall deliver to US any other reports and information as WE may request and in the form and manner prescribed by US.
(4) If YOU fail to provide US with any required reports and statements, within the required time, YOU must pay US a late fee of Fifty Dollars ($50.00) per report and/or statement, per incident; such late fee shall be withdrawn by US from YOUR account by electronic fund transfer in the same manner provided in section 4(F).
(1) YOU shall not use, advertise, or otherwise display the names, service marks, trademarks, or distinguishing characteristics of any business other than System franchises, except as may be approved, in writing, by US.
(2) YOU shall participate in all advertising and promotional programs required by US, and display other advertising of products and services as approved by US.
(J) System Quality
(1) Quality standards and specifications for products and services sold by YOU are established by US to insure operation in accordance with the standards of the System. To preserve the uniformity of the System, YOU shall sell only products, and other tangible property, which equal, or exceed, OUR standards and specifications. WE can require YOU to sell products which contain the proprietary information of the product vendor/manufacturer; when WE require YOU to sell proprietary products, only those proprietary products can be sold; no similar products, from other vendors/manufacturers, can be sold without OUR prior written consent.
(2) Except for proprietary products, which must be purchased from US or a designated vendor, purchases of products may be made from any source whose products equal, or exceed, OUR standards and specifications.
(3) YOU shall purchase only materials, tools, signs, equipment, supplies, and other tangible property, which equal, or exceed, OUR standards and specifications. Purchases may be made from any source whose materials, tools, signs, equipment, supplies, and other tangible property equal, or exceed, our standards and specifications.
(K) Meeting Attendance
YOU shall, at YOUR sole expense, attend meetings, including OUR annual meeting (convention), as WE require.
(L) Pre-Termination Options
Prior to the termination of this Agreement and upon YOUR failure to pay any amounts owed to US, or OUR subsidiaries, affiliates, agents, or assignees, by the date due, or upon YOUR failure to comply with any term in this Agreement, WE may, at OUR option:
(1) Remove YOUR franchise from any customer/business referral system developed by US;
(2) Suspend all franchise services, including parts sourcing and distribution, electronic mail services of any type or nature, web site references and any other web based tools or services, quality assurance reviews, training, and marketing assistance;
(3) Suspend YOUR right to use OUR trademarks, service marks, and other distinguishing characteristics.
(4) Designate other franchisees, or other parties, to provide products and services in YOUR Franchised Area
OUR actions may continue until YOU have settled YOUR accounts and complied with OUR requirements, and WE acknowledge YOUR compliance in writing.
(M) Sale of Business
Throughout the effective term of this Agreement:
(1) YOU shall not discontinue the operation of YOUR business under OUR trademarks, service marks, and other distinguishing characteristics, nor sell, transfer, or assign, nor offer to sell, transfer, or assign, any interest in YOUR business or any part of it, or in the business conducted in connection with it, or in the buildings, equipment, or furnishings used in connection with it, or any interest in YOU (whether a partnership, corporation, or other business entity) without OUR prior written consent.
(2) YOU cannot offer the business, or any interest in it, nor any interest in YOU, through public auction or by advertising, in any media, without obtaining OUR prior written consent.
(3) Nothing in this section shall be construed to prevent, delay or otherwise interfere with the sale, or confirmation of sale, of YOUR business in any mortgage foreclosure proceeding, provided that WE receive thirty (30) days prior written notice of any proceedings, and further provided that if the purchaser of YOUR business at the foreclosure sale wishes to continue the business's affiliation with US, the purchaser must be approved by US, in accordance with section 17(B), and must execute the then existing Franchise Agreement for a new term.
(N) Competitive Pricing
Acknowledging that the System is dependent upon a reputation as a high quality, yet price competitive System, YOU recognize and agree that a high quality, price competitive reputation is an important asset to YOUR business and to the System as a whole.
(O) Periodic Refurbishing
YOU must pay all expenses associated with the refurbishment of YOUR business premises which shall be completed at the times and in the manner reasonably required by US. As new and different competitors of the System enter the marketplace, as existing competitors of the System change, and as the needs of customers change, YOU may be
required, in OUR sole discretion, to rehabilitate, modernize, and upgrade YOUR business premises; as a part of that refurbishment, YOU may be required to replace YOUR signs, furniture, fixtures, equipment, vehicle, supplies, stationery, brochures, and sales and promotional materials. Except for replacement of fixtures, furniture, furnishings, and equipment required by normal wear and tear associated with the operation of YOUR business, the periodic refurbishing provided for in this section shall not be required before the fifth (5th) anniversary of the effective date of this Agreement, and shall not be required, if at all, more than one (1) time during the term of this Agreement.
(P) "The Smart Connection" Call Center
YOU must accept referrals of business and continue to accept such referrals, from OUR National Call Center ("The Smart Connection") program, or any successor program, throughout the effective term of this Agreement. Any failure by YOU to fulfill the following conditions shall constitute a default pursuant to this Agreement:
(1) YOU must accept referrals of business from US subject to OUR terms and conditions; and
(2) YOU, or YOUR staff, must have the necessary technical capability and/or certifications to properly perform the service; and
(3) YOUR Expetec business must provide service and/or products in a prompt and timely manner; and
(4) YOU, and YOUR staff, must provide quality workmanship; and
(5) YOU, and YOUR staff, must communicate in a timely and satisfactory manner with the customers; and
(6) YOU, and YOUR staff, must communicate with US in a timely and
satisfactory manner; and
(7) YOU and YOUR business must be acceptable to the customer requesting the warranty/service; and
(8) YOU must purchase and maintain, at YOUR sole expense, all equipment, component parts, and software required by US to connect YOUR business to OUR business referral system. .
If all of the conditions are not fulfilled, WE have the right to declare a default and terminate YOUR franchise; WE also have the right, at OUR election, to designate another Expetec franchisee, or a non-franchisee service provider, to perform the service work, even if
the service work will be performed in YOUR Franchised Area. The business referral service provided by OUR National Call Center ("The Smart Connection") program can be discontinued by US, at any time, for any reason.
YOU must respond promptly whenever business is referred to YOU through the "The Smart Connection" program. If a response time is specified, YOU must, to the extent reasonable, respond within the specified time. If no response time is specified, YOU must contact the party requesting service within twenty-four (24) hours after YOU receive the referral from US.
YOU shall comply with the requirements established in OUR rules of operation manual, trademark identity standards manual, quality assurance standards manual, or other similar manuals, as amended, copies of which have been, or will be furnished to YOU. WE reserve the right to amend all manuals and written requirements, and the right to modify standards for construction, furnishings, maintenance, repair, and operation deemed by US to be in the best interest of the System. YOU agree to comply with any amendments or modifications. YOU shall deliver all manuals to US upon termination or transfer of the franchise. If YOU fail to deliver the manuals within thirty (30) days after termination or transfer, YOU shall pay US a fee of One Thousand Dollars ($1,000.00) for the loss of the manuals. YOU shall not make copies of any manuals without OUR prior written consent. The term "manuals" includes written information, audio and video recordings, photographs, CD-ROM, computer disks, and other descriptions of methods, procedures, or techniques.
(R) Confidential Information
YOU must keep secret, and not divulge to any other party, OUR proprietary and confidential information. Proprietary and confidential information includes manuals, methods of operation, proprietary supplies and products, information concerning other franchisees of the System, and any other information received by YOU, or provided to YOU by US, which is not a part of any public records filed by US.
(1) WE may, in OUR discretion, assess interest at the highest rate allowed by applicable law, which cannot exceed two percent (2%) per month, on any delinquent sum owed to US.
(2) Sums owed to US shall be delinquent on the day following the date such sums are required to be mailed or transmitted to US pursuant to this Agreement or any other agreement between YOU and US; interest on delinquent sums owed shall accrue on a daily basis until paid.
(T) Business Practices
YOU shall operate YOUR business in a manner which maximizes Gross Profit, consistent with sound marketing and industry practices, and YOU will not engage in any business practice which reduces YOUR Gross Profit.
7. OUR OBLIGATIONS TO YOU
(1) WE shall make available to YOU the officers and employees at OUR headquarters offices for consultation concerning the operation of YOUR
(2) Services requiring professional or specialized training, not possessed by US, shall be provided, at OUR discretion upon the payment by YOU of any fees negotiated between YOU and US.
(B) Preliminary Plans and Specifications
WE will review construction-ready plans and specifications for YOUR System business, including its general architectural appearance. YOU understand that the only purpose for reviewing construction-ready plans and specifications shall be to determine YOUR compliance with OUR minimum standards. WE do not review YOUR plans and specifications to determine engineering or architectural adequacy or quality, nor compliance with applicable laws and building codes; such a determination is YOUR responsibility.
WE shall provide OUR standard training program to YOU and any representatives YOU designate. WE shall pay for YOUR travel and lodging expenses, as arranged by US; YOU shall pay for all food and miscellaneous expenses. YOU shall also pay for any other trainee's wages, insurance of all types, lodging, meals, and traveling expenses for the training program. All training shall be provided at OUR training facility in Aberdeen, South Dakota, or at such other location as WE designate. If YOU request training other than the standard training program, WE, in OUR sole discretion, shall select the necessary staff and site, and YOU shall pay US all expenses for meals, lodging, travel, salaries of staff, and other reasonable expenses for such training.
(D) System Promotion
WE shall encourage the use of the System by members of the public.
The original documents were scanned as an image. The original file can be downloaded at the link above.