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Huntington Learning Centers, Inc. Offering Circular
Pagei
Huntington Learning Centers, Inc.
A Delaware corporation
496 Kinderkamack Road
Oradell, New Jersey 07649
(201) 261-8400
The franchisee will operate a Huntington Learning Center to provide Learning Center Services and Exam Preparation Services principally to school-aged children.
The Initial Franchise Fee is $40,000. If you enter into a development agreement with the Franchisor, the development fee is $10,000 for each franchise to be developed under the development agreement. There are also the following initial fees or payments, described in Item 5: a software license fee of $12,000, a phone number installation charge of $500, and a school visit fee of $800/day for up to 4 days. The estimated initial investment to open a Huntington Learning Center will range from $160,070 to $281,600.
Risk Factors:
THE FRANCHISE AGREEMENT PERMITS YOU TO SUE THE FRANCHISOR ONLY IN THE STATE WHERE THE FRANCHISOR HAS ITS PRINCIPAL PLACE OF BUSINESS AT THE TIME YOU BRING THE LAWSUIT. OUT OF STATE LITIGATIONMAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO SUE THE FRANCHISOR IN THE FRANCHISOR'S STATE THAN IN YOUR HOME STATE.
THE FRANCHISE AGREEMENT STATES THAT DELAWARE LAW GOVERNS THE FRANCHISE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTION AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
THE FRANCHISE AGREEMENT REQUIRES THAT YOU WAIVE ANY RIGHT YOU MAY HAVE TO A TRIAL BY JURY.
Information about comparisons of franchisors is available. Call the state administrators listed in Exhibit P to this Offering Circular or your public library for sources of information.
If you learn that anything in this Offering Circular is untrue, contact the Federal Trade Commission and state administrators listed in Exhibit P to this Offering Circular.
Issuance date: April 1, 2006________________________________________________________
Effective date: _________________________________________________________________
State: California
Document Number:
Offering Circular v2006.DOC
March 27, 2006
Huntington Learning Centers, Inc. Offering Circular
Page i
INFORMATION FOR PROSPECTIVE FRANCHISEES REQUIRED BY THE FEDERAL TRADE COMMISSION
Huntington Learning Centers, Inc.
A Delaware corporation
496 Kinderkamack Road
Oradell, New Jersey 07649
(201) 261-8400
TO PROTECT YOU, WE'VE REQUIRED YOUR FRANCHISOR TO GIVE YOU THIS INFORMATION. WE HAVEN'T CHECKED IT. AND DON'T KNOW IF IT'S CORRECT. IT SHOULD HELP YOU MAKE UP YOUR MIND. STUDY IT CAREFULLY. WHILE IT INCLUDES SOME INFORMATION ABOUT YOUR CONTRACT, DON'T RELY ON IT ALONE TO UNDERSTAND YOUR CONTRACT. READ ALL OF YOUR CONTRACT CAREFULLY. BUYING A FRANCHISE IS A COMPLICATED INVESTMENT. TAKE YOUR TIME TO DECIDE. IF POSSIBLE, SHOW YOUR CONTRACT AND THIS INFORMATION TO AN ADVISOR, LIKE A LAWYER OR AN ACCOUNTANT. IF YOU FIND ANYTHING YOU THINK MAY BE WRONG OR ANYTHING IMPORTANT THAT'S BEEN LEFT OUT, YOU SHOULD LET US KNOW ABOUT IT. IT MAY BE AGAINST THE LAW.
THERE MAY ALSO BE LAWS ON FRANCHISING IN YOUR STATE. ASK YOUR STATE AGENCIES ABOUT THEM.
Federal Trade Commission Washington, D.C. 20580
Effective date: April 1,2006
Huntington
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LEARNING^CENTER
Offering Circular v2006.DOC March 27, 2006
Huntington Learning Centers, Inc. Offering Circular
Page i
TABLE OF CONTENTS
Amendments Required by the State of California
Amendment to the Offering Circular
Amendment to the Franchise Agreement
Amendment to the Development Agreement
ITEM 1. THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES............................................................1
ITEM 2. BUSINESS EXPERIENCE..........................................................................................................................4
ITEM 3. LITIGATION................................................................................................................................................6
ITEM 4. BANKRUPTCY...........................................................................................................................................8
ITEM 5. INITIAL FRANCHISE FEE.........................................................................................................................9
ITEM 6. OTHER FEES.............................................................................................................................................11
ITEM 7. INITIAL INVESTMENT...........................................................................................................................19
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES......................................................28
ITEM 9. FRANCHISEE'S OBLIGATIONS..............................................................................................................30
ITEM 10. FINANCING.............................................................................................................................................32
ITEM 11. FRANCHISOR'S OBLIGATIONS...........................................................................................................32
ITEM 12. TERRITORY............................................................................................................................................41
ITEM 13. TRADEMARKS.......................................................................................................................................45
ITEM 14. PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION...................................................46
ITEM 15. OBLIGATION TO PARTICIPATE.........................................................................................................48
IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS.....................................................................48
ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL............................................................48
ITEM 17. RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION......................................50
ITEM 18. PUBLIC FIGURES...................................................................................................................................73
ITEM 19. EARNINGS CLAIMS...............................................................................................................................73
ITEM 20. LIST OF OUTLETS.................................................................................................................................77
ITEM 21. FINANCIAL STATEMENTS..................................................................................................................81
ITEM 22. CONTRACTS...........................................................................................................................................81
ITEM 23. RECEIPT..................................................................................................................................................82
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Franchise Agreement |
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Development Agreement |
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Software License Agreement |
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D |
Phone Number License Agreement |
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Conference Service License Agreement |
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Call Center License Agreement |
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School Services Amendment |
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Territory Amendment |
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Huntington Advertising Fund, Inc. Bylaws |
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Financial Statements |
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Current Franchisees |
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Former Franchisees |
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M |
Franchisees Who Have Signed a School Services Amendment |
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N |
Franchise Brokers |
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United States State Departments of Education and Canadian Provincial Education Ministers |
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P |
Franchisor's Agents for Service of Process and State Franchise Administrators |
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Q |
Franchisor's Approved Provider Status Under the NCLB Act |
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R |
Confidential Operating Manual Table of Contents |
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S |
Minimum Insurance Requirements |
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Huntington Learning Centers, Inc. Offering Circular
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Exhibits
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Review of the Confidential Operating Manual
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Receipt
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Offering Circular v2006.DOC
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Huntington Learning Centers, Inc. Offering Circular
Pagel
AMENDMENT TO THE HUNTINGTON LEARNING CENTERS, INC.
OFFERING CIRCULAR
REQUIRED BY THE STATE OF CALIFORNIA
In recognition of the requirements of the California Franchise Investment Law, the parties to the Huntington Learning Centers, Inc. Franchise Agreement agree as follows:
Item 17 of the Offering Circular shall be supplemented by the addition of the following language:
California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination or non-renewal of a franchise. If the Franchise Agreement, Development Agreement, Software License Agreement, Phone Number License Agreement, Call Center License Agreement, Conference Service License Agreement, or School Services Amendment contains a provision that is inconsistent with the law, the law will control.
The Franchise Agreement, Development Agreement, Software License Agreement, and Phone Number License Agreement provide for termination upon bankruptcy. These provisions may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
The Franchise Agreement, Software License Agreement, and Phone Number License Agreement contain a covenant not to compete which extends beyond the termination of the franchise. These provisions may not be enforceable under California law.
The Franchise Agreement, Development Agreement, Software License Agreement, Phone Number License Agreement, Call Center License Agreement, Conference Service License Agreement, and School Services Amendment require you to sue the Franchisor where it has its principal place of business, which is currently New Jersey, with the costs being borne by the losing party. These provisions may not be enforceable under California law.
The Franchise Agreement, Development Agreement, Software License Agreement, Phone Number License Agreement, Call Center License Agreement, Conference Service License Agreement, and School Services Amendment require application of the laws of New Jersey. These provisions may not be enforceable under California law.
IN WITNESS WHEREOF, you and the Franchisor have executed this Amendment on the following date:________
For Huntington Learning Centers, Inc.,
Raymond J. Huntington___________________________________________________________________Chairman
Print name Signature Title
Name of Franchisee: ____________________________________________________________________________
For the Franchisee (This is executed by all individuals comprising the Franchisee, if the Franchisee is an individual; or all officers of the corporation, if the Franchisee is a corporation; or all partners or members, if the Franchisee is a partnership or limited liability company.)
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Print name Signature Title
Huntington
LEARNING^CENTER'
Offering Circular v2006.DOC
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Huntington Learning Centers, Inc. Offering Circular Page 1
AMENDMENT TO THE HUNTINGTON LEARNING CENTERS, INC.
FRANCHISE AGREEMENT
REQUIRED BY THE STATE OF CALIFORNIA
In recognition of the requirements of the California Franchise Investment Law, the parties to the Huntington Learning Centers, Inc. Franchise Agreement (the "Franchise Agreement") agree as follows:
1. Paragraph 17.3 of the Franchise Agreement shall be supplemented by the addition of the following language at the end of the Paragraph:
This Paragraph 17.3 may not be enforceable under California law.
2. Paragraph 26.4 of the Franchise Agreement shall be supplemented by the addition of the following language at the end of the Paragraph:
The parties agree that this Paragraph 26.4 shall not limit claims arising under Sections 31300 through 31306 of the California Franchise Investment Law, all of which shall be governed by the applicable state statutes
3. Each provision of this Amendment shall be effective only to the extent, with respect to such provision, that the jurisdictional requirements of the California Franchise Investment Law, are met independently without reference to this Amendment.
IN WITNESS WHEREOF, you and the Franchisor have executed this Amendment to the Franchise Agreement on the following date:________________________________________
For Huntington Learning Centers, Inc.,
Raymond J. Huntington____________________________________________________________ Chairman
Print name Signature Title
Name of Franchisee: ____________________________________________________________________________
For the Franchisee (This is executed by all individuals comprising the Franchisee, if the Franchisee is an individual; or all officers of the corporation, if the Franchisee is a corporation; or all partners or members, if the Franchisee is a partnership or limited liability company.)
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Offering Circular v2006.DOC
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Huntington Learning Centers, Inc. Offering Circular
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AMENDMENT TO THE HUNTINGTON LEARNING CENTERS, INC.
DEVELOPMENT AGREEMENT
REQUIRED BY THE STATE OF CALIFORNIA
In recognition of the requirements of the California Franchise Investment Law, the parties to the Huntington Learning Centers, Inc. Development Agreement (the "Development Agreement") agree as follows:
1. Paragraph 10.4 of the Development Agreement shall be supplemented by the addition of the following language at the end of the Paragraph:
The parties agree that this Paragraph 10.4 shall not limit claims arising under Sections 31300 through 31306 of the California Franchise Investment Law, all of which shall be governed by the applicable state statutes.
2. Each provision of this Amendment shall be effective only to the extent, with respect to such provision, that the jurisdictional requirements of the California Franchise Investment Law, are met independently without reference to this Amendment.
IN WITNESS WHEREOF, you and the Franchisor have executed this Amendment to the Development Agreement on the following date:_________________________________________
For Huntington Learning Centers, Inc.,
Raymond J. Huntington___________________________________________________________________Chairman
Print name Signature Title
Name of Developer: ____________________________________________________________________________
For the Developer (This is executed by all individuals comprising the Developer, if the Developer is an individual; or all officers of the corporation, if the Developer is a corporation; or all partners or members, if the Developer is a partnership or limited liability company.)
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Huntington
Offering Circular v2006.DOC
March 27, 2006
Huntington Learning Centers, Inc. Offering Circular Page J
ITEM 1. THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES
"Franchisor" means Huntington Learning Centers, Inc., the Franchisor. "You" means the person who buys the franchise, who may be an individual, a corporation, a partnership, a limited liability company, or a limited liability partnership. "Franchisee Member" means each owner of any interest in you, if you are a corporation, partnership, or limited liability company. This Offering Circular summarizes portions of the Franchise Agreement, Development Agreement, Software License Agreement, Phone Number License Agreement, Call Center License Agreement, Conference Service License Agreement, School Services Amendment, and other related agreements contained in Item 22, below; be sure to read them. Before making any decision to enter into the Franchise Agreement, read this Offering Circular and all its exhibits.
The Franchisor, Its Predecessors and Affiliates
The Franchisor is a corporation incorporated on February 25, 1985 in Delaware. The Franchisor does business as Huntington Learning Center and under no other name. The principal business address of the Franchisor and its predecessors is 496 Kinderkamack Road, Oradell, New Jersey 07649. The Franchisor grants franchises to establish and operate Huntington Learning Centers and has done so since February 25, 1985. The Franchisor does not itself own or operate a business of the type being franchised and has never done so. The Franchisor does not offer franchises in any other line of business. The Franchisor and its predecessors offer supplemental educational programs directly to schools throughout the United States. See Government Programs below in this Item 1. The Franchisor's agents for service of process are disclosed in Exhibit P to this Offering Circular.
The Franchisor's predecessor is Huntington Learning Corporation. The predecessor has granted the Franchisor a license to use and exploit the System, defined below, and a license to use and exploit certain of its assets, including the Mark, "Huntington Learning Center". Northern New Jersey Learning Center, Inc., which was founded in 1977 and merged into the predecessor in 1991, operated the first Huntington learning center under the name "The Learning Center". Huntington Learning Corporation has operated Huntington Learning Centers since March 4, 1981. The Franchisor's predecessor has not, and, as of the date of this Offering Circular, does not, offer franchises in any line of businesses. The Franchisor has no affiliates required to be disclosed in this Item 1.
The Franchise Offered
Huntington Learning Center
A "Huntington Learning Center" is a business operated at a physical location attended by customers that offers Huntington Services under the Marks and System. The Franchisor offers you a franchise to establish and operate under a Huntington Learning Centers, Inc. Franchise Agreement a Huntington Learning Center ("Franchised Center").
Huntington Services
"Huntington Services" are those services and products, described in the Franchisor's confidential operating manual (the "Manual") or authorized in writing by the Franchisor, that are provided personally to customers attending a Huntington Learning Center, including Learning Center Services and Exam Preparation Services. Learning Center Service is individualized instruction in reading, phonics, study skills, mathematics, and related areas provided personally to customers attending a Huntington Learning Center. Exam Preparation Services consists of tutoring provided personally to customers attending a Huntington Learning Center to prepare them for standardized entrance examinations, including the SAT and ACT. "SAT" refers to the SAT I, a standardized college admissions tests created by the College Board, Inc. "ACT" refers to the ACT Assessment, a standardized college admissions test created by ACT, Inc.
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Huntington Learning Centers, Inc. Offering Circular Page 2
The Marks
The Marks are certain trade names, service marks, trademarks, logos, emblems, trade dress, and indicia of origin, including the mark, Huntington Learning Center, as are now designated or as may in the future be designated by the Franchisor in writing for use in connection with the System.
The System
The System, which is identified by the Marks, is the learning center and exam preparation formal and operating system designed to provide uniform, high quality instruction in a personal and professional manner on which the Franchisor has expended time, effort, and money to develop. The System consists of uniform standards and procedures for the marketing and operation of, and procedures, business practices, and management methods for, a Huntington Learning Center, which include use of the Marks and the offer and sale of Huntington Services; preparation of customer and school contacts lists; testing and instructional materials; procedures for student administration; sales and marketing materials, curricula and instructional materials; computer software; procedures for staff recruitment and training; training for you and your full-time or part-time employees; standards and specifications for inventory, supplies, equipment, furniture, and fixtures for a Huntington Learning Center; standards and specifications for the construction and decoration of a Huntington Learning Center; promotional materials; marketing and advertising techniques and materials; design specifications; and accounting, business, and administrative systems (including accounting, bookkeeping, payroll, cash control, and finance procedures and systems); all of which may be changed, improved, and developed by the Franchisor.
Franchised Center Location
You will select your Franchised Center location, but the Franchisor approves it. Typical locations are in suburban areas in retail locations, although some are located in professional office buildings. The typical Huntington Learning Center is on the ground floor and has approximately 2,000 to 2,500 square feet of floor space.
Software and Phone Number
The Franchisor has developed and owns computer software known as the "Learning Center Operations System" (sometimes abbreviated as "LCOS") for use in the System as of the date of this Offering Circular, and has the right to develop other versions of the software, or other software, for use in the System (the "Software"). The Franchisor has the right to use the phone number, 1-800-CAN LEARN (1-800-226-5327), (the "Phone Number"). You must license the Software by executing the Software License Agreement in Exhibit C to this Offering Circular; and you must license the Phone Number by executing the Phone Number License Agreement in Exhibit D to this Offering Circular.
Development Agreement
In certain geographic areas, the Franchisor also grants the right to develop one or more Franchised Centers within a specified development area under a development agreement (the "Development Agreement"). You must sign a separate Franchise Agreement for each Franchised Center established under the terms of the Development Agreement. See Items 5, 9, and 12.
Government Programs
No Child Left Behind Act of 2001
The federal government has enacted the No Child Left Behind Act of 2001, as amended (the "NCLB Act"), which provides federal funding for supplemental educational services. The Franchisor and its predecessors have developed a program of instruction to provide educational services in connection with the NCLB Act (the "NCLB Program").
Huntington
Offering Circular v2006.DOC
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Huntington Learning Centers, Inc. Offering Circular Page 3
Under the Franchise Agreement, only the Franchisor and its affiliates have the right, but not the obligation, to apply, and to obtain approval, to provide educational services in connection with any local, state, or federal government program, including the NCLB Act and to provide these educational services.
Approved Supplemental Educational Services Provider
In connection with the NCLB Act, the Franchisor or its predecessor may apply to a state for the status of a state approved supplemental educational services provider. To provide these educational services, the Franchisor or its predecessor enters into a contract with local education agencies for it or its designees (the "School Services Contract").
As of December 31, 2005, the Franchisor or its predecessors were approved as providers in the District of Columbia and 36 states. (See Exhibit Q to this Offering Circular.).
You will not have the right to apply to provide, or provide educational services in connection with the NCLB Act or any other local, state, or federal government educational program, without the Franchisor's prior written approval. Also see Item 12.
School Services Amendment
The Franchisor may offer you the limited and non-exclusive right to participate in the NCLB Program under a separate amendment to your Franchise Agreement (the "School Services Amendment"). The current form of this amendment is attached to this Offering Circular as Exhibit G. The School Services Amendment grants you the limited and non-exclusive right and obligation to perform the Franchisor's obligations under the applicable School Services Contract entered into by the Franchisor ("School Services"). The School Services Amendment grants additional rights and contains terms substantially different from those in the Franchise Agreement.
You are not obligated to enter into any School Services Amendment or to participate in the NCLB Program and the Franchisor is not obligated to give you the opportunity to do so. If you wish to participate in the NCLB program, you may do so only if the Franchisor has been approved as a provider in the state where you will provide School Services and you have met all of the requirements under the NCLB Act and state and local law and the criteria required by the Franchisor to participate in the NCLB Program. These criteria include financial, managerial, and experience qualifications. In the future, the Franchisor may offer franchises for this program, instead of offering School Services Software Amendments. See Item 12, below.
As of December 31, 2005, the Franchisor had entered into 65 School Services Amendments with certain of its franchisees. Exhibit M to this Offering Circular lists these franchisees.
Market; Competition
Huntington Services are generally sold to parents of school-aged children. The general market for the services you will render is developing and is characterized by increasing competition. Many others offer services that compete with Huntington Learning Centers, including persons, tutoring centers, learning centers, exam preparation centers, schools, colleges, and other individuals, companies, and organizations. The Franchisor is sometimes considered part of the education industry, an industry recognized by various observers, including investment analysts and brokerage houses like Lehman Brothers, NationsBank Montgomery Securities, Piper Jaffray, and Salomon Smith Barney.
Regulations
Federal. State, and Local Regulations
The federal government, state governments, regulatory bodies, and others may regulate Learning Center Services and Exam Preparation Services now or in the future. Under the Franchise Agreement, you must comply with all
^Huntington
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Offering Circular v2006.DOC
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Huntington Learning Centers, Inc. Offering Circular Page 4
applicable laws and regulations. You should investigate all of these laws and regulations.
Huntington Services are regulated by certain states, including, for example, Pennsylvania and New Hampshire. State or local governments or agencies may regulate the facility within which instruction is provided, the curricula and materials used for instruction, the individuals providing and managing the instruction, and the administrative procedures. For example, your state or municipality may require a fire exit or panic bars on the exit doors, separate male and female bathrooms, sprinklers, or that certain individuals possess specific certification, like that of a reading specialist. Most states regulate teachers. Pennsylvania and New Hampshire and possibly other states have regulations affecting Huntington Services under laws governing nursery schools. Some municipalities may classify your Franchised Center as a school for zoning purposes. This may increase the cost of improving your Franchised Center premises.
Council of Chief State School Officers; Council of Ministers of Education, Canada
The Council of Chief State School Officers is one source for the names, addresses, and phone numbers of the public officials who head the departments of elementary and secondary education in the 50 states, the District of Columbia, and five extra-state jurisdictions. Its address and phone number are: One Massachusetts Avenue, NW, Suite 700, Washington, DC 20001-1431, 202-336-7000. The Council of Ministers of Education, Canada is one source for the names, addresses, and phone numbers of the public officials who head the departments of elementary and secondary education in the provinces of Canada. Its address and phone number are: 95 St. Clair Avenue West, Suite 1106 Toronto, Ontario M4V 1N6 Telephone: (416) 962-8100. Exhibit O to this Offering Circular lists each United States state's department of education and each Canadian province's education minister. Your business is affected by other laws that apply to business generally, including labor laws, insurance requirements, business licensing laws, and tax regulations.
ITEM 2. BUSINESS EXPERIENCE
The following is a list of the Franchisor's directors, principal officers, and other executives who have management responsibility in connection with the franchises offered by this offering circular and their principal occupations and employers during the last 5 years. Unless otherwise specified, the location of each employee is the Franchisor's headquarters in Oradell, New Jersey.
Chairman: Raymond J. Huntington. Ph.D.
Dr. Huntington has occupied this position since February 2002. From 1977 to 2002, he was President of Huntington Learning Centers, Inc.
Secretary, Director, and Chief Operating Officer: Eileen C. Huntington
Mrs. Huntington has occupied the positions of Secretary and Director since 1977. In addition, she was Vice President of Huntington from 1977 until July 2003, when she became Chief Operating Officer.
Chief Executive Officer: J.J. Sorrenti
Mr. Sorrenti has occupied this position since September 2005. From March 2003 to July 2005, he held the position of Senior Vice President and General Manager for GNC Franchising, LLC. From November 2002 until March 2003, he held the position of Senior Vice-President, Stores for GNC, Inc. From November 2000 to November 2002, he held the position of the Vice-President, Franchising for GNC Franchising, Inc. From November 1999 to October 2000, he held the position of Chief Operating Officer for the franchising division of Nevada Bob's Golf in Calgary, Alberta, Canada.
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Huntington Learning Centers, Inc. Offering Circular
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Chief Financial Officer: James Emmerson
Mr. Emmerson has occupied this position since 1997.
Vice President - Business Development; Russell Miller
Mr. Miller was promoted to his position in October 2003. From October 2001 to September 2003, he was Vice President - Franchise Development for the Franchisor. From July 1999 to September 2001, he was Vice President -Company Centers for an affiliate of the Franchisor, and from July 1995 to June 1999 he was Vice President -Operations for the Franchisor.
Director Franchise Development: Karen Emerzian
Ms. Emerzian has occupied this position since January 2004, From November 2001 to December 2003, she held the position of Manager, Corporate Training for Solartech. From August 2000 to October 2001, she held the position of Senior Account Manager for Track On Technical Education Centers. From 1987 to 1999, she held the position of Senior Account Manager for Chubb Computer Services.
Director, Franchise Development: Tiffini Carvell
Mrs. Carvell has occupied this position since March 2005. From January 2003 to September 2004, she was the Director of Franchise Sales for Jocelli Pizza. From July 1995 to January 2002, she was a Franchise Sales Manager for Papa Murphy's International. Mrs. Carvell is located in Pittsburg, Pennsylvania.
Director, Franchise Development: Janet Diaz
Ms. Diaz has occupied this position since January 2006. From July 2005 to December 2005, she was a Conference Consultant for the Franchisor. From April 2002 to June 2005, she was a Center Director for an affiliate of the Franchisor. From October 1999 to March 2002, she was a Director at the School for Language and Communication Development. Mrs. Diaz is located in Florida.
Director, Franchise Development: Robert Nunn
Mr. Nunn has occupied this position since July 2005. From December 2004 to June 2005, He was the Director of Franchise Development for The Cleaning Authority. From March 2004 to October 2004, he was Vice President of US Franchise Development for Dial-A-Husband. From May 1994 to April 2004, he was Director of Franchise Development for Signs By Tomorrow.
Vice President - Franchise Operations: Larry Liskiewicz
Mr. Liskiewicz has occupied this position since September 2004. From February 2001 to August 2004, he was Director of Franchise Operations for the Franchisor. From November 1998 to February 2001, he was Franchise Operations Manager for the Franchisor. From July 1998 to November 1998 he was a Corporate Center Operations Manager for an affiliate of the Franchisor. From 1996 to July 1998, he was Branch Manager for Kumon USA in Teaneck, NJ. From 1994 to 1996, he was Regional Manager for Kumon USA in Teaneck, NJ.
Vice President - Company Center Operations: Lisa Mlinar
Ms. Mlinar has occupied this position since March 2002, From June 2000 through February 2002, she was Director of Educational Resources for the Franchisor. From November 1999 to May 2000, she was the National Manager of Company Center Development for an affiliate of the Franchisor. From November 1997 to October 1999, she was the National Manager of Franchise Operations for the Franchisor.
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Director - School Services: Juliana DeLucca
Ms. DeLucca has occupied this position since October 2005. From August 2004 to September 2005, she was Manager - School Services for the Franchisor. From January 2003 to July 2004, she was the NCLB Coordinator for the Franchisor. From October 2000 to December 2002, she was a Center Director for an affiliate of the Franchisor. From August 2000 to September 2000, she was a Managing Director for an affiliate of the Franchisor. From April 2000 to July 2000, she was a Management Trainee for an affiliate of the Franchisor.
Director of Marketing and Advertising: Laura Gehringer
Ms. Gehringer has occupied this position since April 2003. From March 1996 to February, 2001, she was Director of Marketing - Customer Loyalty for Popular Club Plan, Inc. From October, 1990 to March 1996, she was Marketing Manager - New Account Acquisition - for Popular Club Plan, Inc.
Executive Director, Support Services: and Director of Training: Beverly Collins
Ms. Collins has occupied this position since December 2004. From February 1999 to 2004, she was Director of Educational Development for the Franchisor. From 1990 to 1999, she was Director of Training and Curriculum for the Franchisor. From 1982 to 1989, she was a Regional Director for an affiliate of the Franchisor. From 1982 to 1983, she was a Center Director for an affiliate of the Franchisor. From 1981 to 1982, she was an Assistant Director for an affiliate of the Franchisor.
Director of Educational Development: Natalie Chimento
Ms. Chimento has occupied this position since January 2005. From 2004 to January 2005, she was Educational Development Supervisor for the Franchisor. From August 2002 to December 2003, she was LCOS Operations Manager for the Franchisor. From April 2001 to July 2002, she was Center Director for an affiliate of the Franchisor. From September 2000 to May 2001, she was Assistant Company Center Operations Manager for the Franchisor. From May to October 2000, she was Managing Director for an affiliate of the Franchisor. From June 1999 to April 2000, she was Assistant Director of Administration for an affiliate of the Franchisor.
Director of Conference Services: Maura Shannon.Ph.D.
Dr. Shannon has occupied this position since January 2006. From March 2000 until December 2005, she was the Director of Training for the Franchisor. From September 1997 to March 2000, she was a Trainer for the Franchisor. From December 1995 to September 1997, she was a Center Director for an affiliate of the Franchisor.
Franchise brokers
The Franchisor has various franchise brokerage arrangements with the individuals in Exhibit N to this Offering Circular. See Exhibit N for information on these individuals.
ITEM 3. LITIGATION
Huntington Learning Centers. Inc. v. The Association of Remedial Educators Franchisee Trust. American Arbitration Association, Case No. 13-199-12302-02. The Association of Remedial Educators Franchisee Tmst (the "ARE Trust") is a group representing certain franchisees of the Franchisor. The Franchisor and the ARE Trust entered into a settlement agreement dated September 10, 2001 (the "Initial Settlement Agreement"), which was signed in connection with the matter described in Item 4 of this Offering Circular. Under the Initial Settlement Agreement, a third-party accounting firm was retained by the Franchisor and the ARE Trust to perform an audit of the Franchisor's Advertising Fund (the "Ad Fund") for the period January 1, 1995 through September 30, 2001 (the "Audit Period"). The draft audit report issued by the accounting firm presented as conclusions various scenarios under which it opined
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that the Franchisor would owe money to the Ad Fund as of September 30, 2001. The Franchisor believes the report's conclusions are erroneous and based on unfounded assumptions and incorrect interpretations of language in the Franchisor's franchise agreements in effect during the Audit Period.
Accordingly, the Franchisor filed a Demand for Arbitration against the ARE Trust on September 26, 2002 requesting, among other things, a decision by the arbitrator as to any money owed by the Franchisor to the Ad Fund for the Audit Period and asserting that the ARE Trust violated the Initial Settlement Agreement by failing to negotiate in good faith with the Franchisor regarding certain other issues described in the Initial Settlement Agreement. On February 28, 2003, the Franchisor filed an Amended Demand for Arbitration. In its Amended Demand, the Franchisor contested the conclusions of the audit report and requested (1) a decision by the arbitrator as to (a) any money owed by the Franchisor to the Ad Fund for the Audit Period and (b) allocation of the expenses of the audit and this arbitration action and (2) enforcement of the agreement between the ARE Trust and the Franchisor that the accounting firm's report not be disseminated.
Also on February 28, 2003, the ARE Trust filed a Response and Counterclaims (the "Response") to the Franchisor's original Demand. In its Response, the ARE Trust denied that it violated the Settlement Agreement or that it failed to negotiate in good faith with the Franchisor, and claimed that the Franchisor (1) failed to (a) make the required contributions to the Ad Fund for its company-owned learning centers during the Audit Period or made unauthorized use of Ad Fund monies, (b) provide certain information and records to the accounting firm, and (c) purchase advertising with the monies allegedly owed to the Ad Fund or to distribute those monies to members of the ARE Trust so they could purchase their own advertising; and (2) violated the Settlement Agreement by failing to negotiate in good faith with the ARE Trust. The ARE Trust requested (1) dismissal of the causes of action brought against it by the Franchisor, (2) an order directing the Franchisor to submit to the accounting firm the materials the ARE Trust claims have not been produced, (3) a determination as to any money owed by the Franchisor to the Ad Fund for the Audit Period, (4) an order directing the Franchisor to pay the monies allegedly owed to the Ad Fund, with interest, (5) damages in an amount to be determined, but which the ARE Trust claimed is in excess of $20,000,000, for the Ad Fund's loss of use of the monies allegedly owed to it by the Franchisor, (6) a determination that (a) the expenses of the audit be allocated to the Franchisor, (b) the Franchisor failed to negotiate in good faith and an award of damages for that alleged failure and (c) the ARE Trust's attorneys' fees and the expenses of this action be allocated to the Franchisor. On March 26, 2003, the ARE Trust filed an Amended Response and Counterclaims which it claimed addresses the Franchisor's Amended Demand for Arbitration. The ARE Trust's Amended Response and Counterclaims are restatements of the earlier filed counterclaims.
The Franchisor filed a Verified Petition in the Supreme Court of the State of New York (Huntington Learning Centers, Inc. v. The Association of Remedial Educators Franchisee Trust. S. Ct. of the State of New York, Index No. 601148/03) on April 11, 2003, requesting, among other things, that the Court permanently stay the arbitration of the $20,000,000 damages claim as being beyond the scope of the arbitration clause in the Initial Settlement Agreement. On May 14, 2003 the ARE Trust filed an Opposition to the Franchisors' Verified Petition. On July 29, 2003, the Court issued a Memorandum Decision, which granted the Franchisor's request for a stay of the arbitration of the counterclaim to the extent that it sought damages representing the diminished revenues of ARE Trust members, because the consolidated claims for which the ARE Trust sought arbitration went beyond the scope of the arbitration clauses contained in the Initial Settlement Agreement.
On January 18, 2005, the parties settled all disputes between them by entering into another settlement agreement (the "Final Settlement Agreement"). Under the terms of the Final Settlement Agreement, the parties agreed the Franchisor fully complied with the terms of the Initial Settlement Agreement; neither party admitted any liability or wrongdoing; the Franchisor received full general releases from the ARE Trust, the Association of Remedial Educators ("ARE"), all ARE members (except Peter and Marsha Hanson, Futuredge LLC, and Altaf Kagalwalla); the Franchisor released the ARE Trust from all claims relating to the Initial Settlement Agreement or pending actions; all pending arbitrations and lawsuits between (1) the Franchisor, (2) the ARE Trust, and (3) Mark Schulman, among other parties, have been dismissed; and the Franchisor paid $1,050,000 to the Ad Fund.
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Mark Schulman v. Huntington Learning Centers, Inc., American Arbitration Association, Case No. 13-114-00236-01. On approximately March 12, 2001, Mark Schulman, a franchisee of the Franchisor, filed a Demand for Arbitration against the Franchisor. Mr. Schulman contended the Franchisor breached its franchise agreement and the implied covenant of good faith and fair dealing, and an alleged fiduciary duty owed to each of them, by (a) spending over 10% of the monies in the Advertising Fund on administrative costs and overhead related to the Franchisor's administration of the Advertising Fund; and (b) spending Advertising Fund monies on activities other than those approved under the franchise agreement. Mr. Schulman sought damages in an unspecified amount, along with attorneys' fees and costs. This arbitration has been withdrawn under the Final Settlement Agreement described above. Mr. Schulman has executed a general release of all claims he might have against the Franchisor.
Raymond E. Warrick, Jr. v. Huntington Learning Centers, Inc., U.S. District Court for the S.D. of Ohio, Case No. C-1-03-527. On July 24, 2003, plaintiff Robert E. Warrick, Jr., a Huntington franchisee, filed a Complaint against the Franchisor, claiming that the Franchisor had made certain fraudulent statements or misrepresentations which induced plaintiff to purchase his two Franchised Centers, which had been operating as company-owned units. Plaintiff alleged, among other things, that the Franchisor misrepresented the profitability of the two Franchised Centers, the level of training of the staff of the Franchised Centers, and the amount of advertising plaintiff would need to engage in to successfully promote the Franchised Centers. Plaintiff sought compensatory damages in an amount to be determined, court costs and attorneys' fees, and punitive damages. In response to plaintiffs Complaint, the Franchisor (1) on August 7, 2003, filed in federal court in New York a Petition to Compel Mediation/Arbitration of the dispute (Huntington Learning Centers, Inc. v. Raymond E. Warrick, Jr., et al.. U.S. District Court for the S.D. of New York, Case No. 03-CV-5923) and (2) on August 14, 2003, filed a Motion to Stay and/or Dismiss plaintiffs Ohio case. On October 29, 2003, the parties settled the case and all disputes between them by entering into a settlement agreement and filing a Stipulation and Order of Dismissal with Prejudice and Without Costs in the District Courts. Under the settlement agreement, the parties agreed that Plaintiffs two Franchised Centers would be transferred to a purchaser approved by the Franchisor, Plaintiff would dismiss the Complaint, with prejudice; Plaintiff would pay to the Franchisor $17,655.41 upon signing of the Settlement Agreement for the Franchisor's out-of-pocket expenses; Plaintiff would pay to the Franchisor $6,000 for legal fees incurred by the Franchisor with respect to the transfer of the two Franchised Centers; Plaintiff agreed to release the Franchisor and its affiliates from claims arising out of or related to the two Franchised Centers; and the Franchisor agreed to release Plaintiff and its assigns from claims arising out of or relating to the two Franchised Centers. The Stipulation and Order of Dismissal was filed on October 29, 2003.
Other than these four actions, no litigation is required to be disclosed in this Offering Circular.
ITEM 4. BANKRUPTCY
In re: Huntington Learning Centers. Inc., U.S. Bankruptcy Court for the District of Maryland, Case No. 01-56129. On April 18, 2001, three creditors filed against the Franchisor an Involuntary Petition under Chapter 7 of the U.S. Bankruptcy Code. The three creditors alleged that the Franchisor failed to pay them certain fees for the creation and production of advertising materials and that the Franchisor was unable to do so. On August 14, 2001, the parties entered into a written agreement settling all claims relating to the Petition, and filed a joint motion to dismiss the case. The case was dismissed by court order on September 11, 2001, after an agreement was reached with a group representing certain franchisees.
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, other than this action.
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ITEM 5. INITIAL FRANCHISE FEE
Franchise Agreement
You must pay the Franchisor an initial franchise fee of $40,000 when or before you sign the Franchise Agreement. The Franchisor may reduce or finance this fee. The Initial Franchise Fee is waived, if you are renewing a Huntington Learning Centers, Inc. franchise agreement and you pay a renewal franchise fee {see Item 6). If you purchase an existing franchised business, the Franchisor may require you to pay a non-refundable initial franchise fee of $4,000 under certain Franchise Agreements. The initial franchise fee and renewal franchise fee are non-refundable.
Development Agreement
You must pay Huntington a development fee of $10,000 for each Franchised Center which you agree to develop under a Development Agreement. The Franchisor may reduce or finance this fee. You and Huntington determine the number of Franchised Centers under a Development Agreement before its execution. The development fee must be paid in full upon execution of the Development Agreement. The development fee is non-refundable. If you are in full compliance with the development schedule and with the terms of the Development Agreement, Huntington will credit your development fee toward the initial franchise fee payable under each Franchise Agreement executed under the Development Agreement.
Software License Agreement
You must license the Software from the Franchisor under the Software License Agreement in Exhibit C to the Offering Circular. You must pay the Franchisor an initial license fee of $12,000 when you sign the Software License Agreement. The Franchisor may reduce or finance this fee. The initial license fee is non-refundable See Items 6 and 7.
Phone Number License Agreement
You must license the Phone Number, 1-800-CAN LEARN (226-5327), from the Franchisor under the Phone Number License Agreement in Exhibit D to the Offering Circular. You must pay the Franchisor an installation charge of $500 when you sign the Phone Number License Agreement. The Franchisor may reduce or finance this fee. The installation charge is non-re fundable. See Items 6, 7, and 8.
School Visits
Within 180 days after signing the Franchise Agreement, and before you open your Franchised Center, you or your manager must spend up to 4 consecutive business days with a representative of the Franchisor visiting schools for the purpose of marketing Huntington Services. You must pay the Franchisor its then-current per deim fee to cover the costs and expenses related to the school visits, including the Franchisor representative's travel, food, and lodging costs. As of the date of this Offering Circular, this per diem fee is $800 per day. This fee is non-refundable.
Franchised Center Graphics
You must purchase and install graphics (based on the Franchisor's proprietary specifications) for the walls and windows of your Franchised Center from a vendor of your choice. As of the date of this Offering Circular, the estimated cost to purchase the graphics is between $3,800 and $5,000. If you purchase these graphics from the Franchisor, the payment is non-refundable.
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Call Center License Agreement
You may, but are not required to, enter into the Call Center License Agreement with the Franchisor to have the Franchisor's call center handle calls from prospective students for your Franchised Center. There is an initial set-up fee of $500 payable to the Franchisor when you sign the Call Center License Agreement. The Franchisor may reduce or finance this fee. The set-up fee is non-refundable. The Franchisor is not obligated to offer you a Call Center License Agreement. The Call Center License Agreement is Exhibit F to the Offering Circular. See Item 6 and 7.
Conference Service License Agreement
You may, but are not required to, enter into the Conference Service License Agreement with the Franchisor. There is an initial set-up fee of $500 payable to the Franchisor when you sign the Conference Service License Agreement. The Franchisor may reduce or finance tins fee. The set-up fee is non-refundable. The Franchisor is not obligated to offer you a Conference Service License Agreement, The Conference Service License Agreement is in Exhibit E to the Offering Circular. See Item 6 and 7.
School Services Amendment
You may, but are not required to, enter into the School Services Amendment with the Franchisor. There is an initial fee of $500 payable to the Franchisor when you sign the School Services Amendment. The Franchisor may reduce or finance this fee. The initial fee is non-refundable. The Franchisor is not obligated to offer you a School Services Amendment. The School Services Amendment is in Exhibit G to the Offering Circular. See Item 6 and 7.
Purchases from the Franchisor
You may purchase from the Franchisor certain marketing and office supplies and inventory items, like appointment books, file folders, pens, pencils, curricula, student workbooks, posters, and other assorted items. No payment made to the Franchisor for any item is refundable.
THE BALANCE OF THIS PAGE IS LEFT BLANK INTENTIONALLY.
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ITEM 6. OTHER FEES
The following table describes recurring or isolated fees or payments you must pay to the Franchisor, or that the Franchisor imposes or collects for a third party. You must pay all amounts due the Franchisor at the Franchisor's principal business address, or at any other address the Franchisor designates in writing. Unless otherwise indicated below, all fees are non-refundable and are imposed by, payable to, and collected by the Franchisor.
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Other Fees |
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Name of Fee |
Amount |
Due Date |
Remarks |
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Continuing Royalty |
8% of Gross Revenue |
Payable on the 10th day of each month for the preceding month |
You must pay monthly to the Franchisor a non-refundable Continuing Royalty in an amount equal to 8% of your monthly Gross Revenue. You must pay to the Franchisor a minimum Continuing Royalty of $1,200 per month beginning on the earlier of (a) the 9lh full calendar month after the date you open your Franchised Center, as determined by the Franchisor, and (b) the 15th full calendar month after the date you sign your Franchise Agreement; except, if you are renewing or assuming an existing Huntington Learning Centers, Inc. franchise agreement, you must begin paying the minimum Continuing Royalty beginning on the date you sign your Franchise Agreement. The Franchisor has the right, but not the obligation, to waive this minimum for a month, if, in each of the prior 12 months you have paid the Franchisor Continuing Royalty in excess of this minimum amount. The Continuing Royalty must be paid to the Franchisor monthly by the IO"1 day of each month, calculated on the Gross Revenue for the preceding month. Any non-electronic payment not actually received by the Franchisor on or before the 15th day of the month will be overdue, if not postmarked by the 10th day of the month. Any electronic payment not actually received by the Franchisor on or before the 15Ihdayofthe month will be deemed overdue. Each Continuing Royalty payment must be made by separate check or electronic payment payable to the Franchisor or its designee or in the manner designated by the Franchisor. Gross Revenue means all received and accrued revenue, including cash, cash equivalents, and credit, derived directly or indirectly from all business conducted with the use of the Marks or System or upon, from, or with, your Franchised Center whether evidenced by check, cash, credit, charge, exchange, or otherwise and whether for services or products provided or to be provided. Gross Revenue does not include sales or similar tax that, by law, is chargeable to customers (if those taxes are separately stated and charged to the customer, paid by the customer, and paid to the appropriate taxing authority by you) or any documented refund given to customers by you in good faith. Gross Revenue may not be offset by any expense. |
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Advertising Fee |
2% of Gross Revenue |
Same as Continuing |
You must pay monthly to the Franchisor a non-refundable Advertising Fee of 2% of your monthly Gross Revenue. Beginning on the earlier of (a) the 9th full calendar month after the date you open your Franchised |
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Other Fees
Name of Fee
Amount
Due Date
Remarks
Royalty. This fee is payable to the Franchisor
Center, as determined by the Franchisor, and (b) the 15 full calendar month after the Agreement Date, you must pay a minimum Advertising Fee of $300 per month. If you are renewing or assuming an existing Huntington Learning Centers, Inc. franchise agreement, the minimum Advertising Fee begins on the date you sign your Franchise Agreement. The Advertising Fee for the preceding month must be paid by the 10th day of each month, calculated on Gross Revenue for the preceding month. The Franchisor has the right, but not the obligation, to waive this minimum for a month, if, in each of the prior 12 months you have paid the Advertising Fee in excess of this minimum amount.
Any non-electronic payment not actually received on or before the 15th day of that month will be overdue if it is not postmarked by the 10 day of the month. Any electronic payment not actually received on or before the 15 day of the month will be deemed overdue. Each Advertising Fee payment must be made by separate check or electronic payment, or in the manner required by the Franchisor in the Manual.__________________
Cooperative Advertising Fee
Maximum is $2,000 per month, unless a majority
nf the
Association's members agree to a greater amount.
By the 10mof each month for the preceding month, unless a majority of the Association's members agree to a different schedule
The Franchisor may form Advertising Cooperative Associations composed of Huntington Learning Centers operated by you or any other party, and has the right to require you to become a member of one Association. If you are a member of an Association, that Association has the right to require you to pay il a non-refundable monthly Cooperative Advertising Fee that will not exceed $2,000 per month, unless a greater amount is determined by a majority vote of the Association's members. All Association members have the right to vote on all its expenditures. If you pay any Cooperative Advertising Fee, then, to the extent your payments do not exceed the aggregate amount of monies you are required to expend on local advertising under the Franchise Agreement, those payments will be credited against those monies. You must pay the Cooperative Advertising Fee to the Association by the 10th day of each month for the preceding month, unless a different schedule is agreed to by a majority of the members of the Association.__________________________________________
Local advertising
For Learning Center Services a minimum of $36,000 per year. For Exam Preparation Services a minimum of $7,500 per year.
As required by vendors
The minimum expenditures for promotion of Learning Center Services and Exam Preparation Services must be expended on local media in each calendar year. You are encouraged to expend additional funds for other marketing and advertising; and to conduct visits to schools to market Huntington Services. Those payments are made to third parties. Also see Advertising Fee and Cooperative Advertising Fee above, White and Yellow Pages below, and Items 7 and 11.
The payments you make for listing in the White Pages and for advertising in the Yellow Pages are in addition to any other expenditure required in the Franchise Agreement. Also see Items 7 and 11._________________
White and Yellow Pages
List your Franchised Center
As required by vendors
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Other Fees |
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Name of Fee |
Amount |
Due Date |
Remarks |
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in the White Pages in your area. Advertise under at least two headings in the Yellow Pages in your area. |
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Maintenance Fee |
$3,000 per year |
January 1 of each year |
This fee is payable under the Software License Agreement. See Item 5. |
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Software fees |
Will vary from $30 to $200 per year, depending on the computer configuration you use to support the Software. |
As required by vendors |
These fees are payable under the Software License Agreement. You must pay to the Franchisor any fees or expenses it pays or becomes obligated to pay on your behalf to any vendor or third-party provider of software, software-related services or equipment, or computer-related services or equipment in order to install, maintain, or improve the Software at your Franchised Center in the manner required by the Franchisor. As of the date of this Offering Circular, we estimate these fees and expenses to total between approximately $30 and $200, depending on your computer configuration. For example, as of this date, the annual maintenance fee for a "standalone" computer configuration is $30. If you elect to obtain a "server" configuration, you pay an annual "server maintenance fee" of $80, plus $24 for each client, with a minimum of two clients. You must pay this fee to the Franchisor on January 1 of each year. |
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Phone Number License Agreement Fees |
$49 per month for Monthly Access Fee |
When you sign the Phone Number License Agreement; monthly; or upon billing |
These fees are payable under the Phone Number License Agreement. As of the date of this Offering Circular, the Installation Charge is $500 and the Monthly Access Fee is $49 per month. All fees and charges herein may be changed by the Franchisor on January 1 of each year. Other charges may be payable by you or the Franchisor to others for your use of the Phone Number; and you must pay the Franchisor its costs in paying any other charges. See Items 5 and 8. |
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Call Center License Agreement Fees |
$275 monthly use fee; $2 per call fee; $48 hourly connection fee |
When you sign the Call Center License Agreement; monthly; or upon billing |
If you elect to enter into the Call Center License Agreement, these fees are payable under that agreement. As of the date of this Offering Circular, the installation fee is $500; the monthly use fee is $255 per month; the fee per call is $2.00 per call; and the hourly connection fee is $44 per hour. The Franchisor may modify all fees and charges on January 1 of each year. See Item 5. |
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Conference Service |
$75 per hour use fee; minimum of 2 |
When you sign the Conference |
If you elect to enter into the Conference Service License Agreement, these fees are payable under that agreement. As of the date of this Offering Circular, the installation fee is $500 and the hourly fee is $75 per |
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The original documents were scanned as an image. The original file can be downloaded at the link above.