The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
^INTELLIGENT OFFICE FRANCHISE AGREEMENT
THIS AGREEMENT ("Agreement") is made this____day of________, 20__, by and between
THE INTELLIGENT OFFICE SYSTEM, LLC, a Colorado limited liability company, located at 4450
Arapahoe Avenue, Boulder, Colorado 80303 ("Franchisor") and_______________________________,
located at___________________________________________("Franchisee"), who, on the basis of the
following understandings and agreements, agree as follows:
1.1. The Franchisor has developed methods for establishing, operating and promoting offices offering individuals and businesses advanced telecommunications and office support services, including, but not limited to, virtual office services, integrated, seamless, geographically non-specific telecommunications services, on-site and off-site reception and secretarial services, office technology, non-dedicated conference rooms and dedicated or non-dedicated office space ("^INTELLIGENT OFFICE Centers" or "Centers") which use the service mark "-INTELLIGENT OFFICE" and related trade names and trademarks ("Marks") and the Franchisor's proprietary methods of doing business ("System").
1.2. The Franchisor grants the right to others to develop and operate a Center, under the Marks and pursuant to the System.
1.3. The Franchisee desires to establish -an INTELLIGENT OFFICE Center at a location identified herein or to be later identified, and the Franchisor desires to grant the Franchisee the right to operate a Center at such location under the terms and conditions which are contained in this Agreement.
2. GRANT OF FRANCHISE
2.1. Grant of Franchise
The Franchisor grants to the Franchisee, and the Franchisee accepts from the Franchisor, the right to use the Marks and System in connection with the establishment and operation of one ^INTELLIGENT OFFICE Center, at the location described in Article 3 of this Agreement. The Franchisee agrees to use the Marks and System, as they may be changed, improved and further developed by the Franchisor from time to time, only in accordance with the terms and conditions of this Agreement.
2.2. Scope of Franchise Operations
The Franchisee shall at all times comply with the Franchisee's obligations hereunder, and shall continuously use best efforts to promote and operate the Center. The Franchisee shall utilize the Marks and System to operate all aspects of the business franchised hereunder in accordance with the methods and systems developed and prescribed from time to time by the Franchisor, all of which are a part of the System. The Franchisee's Center shall offer all telecommunications and office support services and related products as the Franchisor shall designate and shall be restricted from offering or selling any telecommunications and office support services and related products not previously approved by the Franchisor in writing.
3. FRANCHISED LOCATION AND TERRITORIAL RIGHTS
3.1. Franchised Location
The Franchisee is granted the right and franchise to own and operate -an INTELLIGENT OFFICE Center at the address and location which shall be set forth in Exhibit I. attached hereto ("Franchised Location"). If, at the time of execution of this Agreement, the Franchised Location cannot be designated as a specific address because a location has not been selected and approved, then the Franchisee shall promptly take steps to choose and acquire a location for its Center within the "Assigned Area," set forth in Exhibit I. In such circumstances, the Franchisee shall select and propose to the Franchisor for the Franchisor's prior approval a specific location for the Franchised Location which, once approved by the Franchisor, shall then be described in the rider to Exhibit I. In addition, if at the time of execution of this Agreement the Protected Territory cannot be designated pursuant to Section 3.2 below, once the Franchised Location is selected and approved, the Franchisor shall designate the Protected Territory. The Protected Territory shall then be described in the rider to Exhibit I and the Franchisee shall immediately execute and return the rider to the Franchisor.
3.2. Protected Territory
So long as the Franchisee is in compliance with this Agreement, and subject to the Franchisor's reservation of rights herein, the Franchisor shall not establish or license another person or entity to establish %nJI^lXLLl(^ENJlX)JililCE Center within that certain geographic area set forth in Exhibit 1 ("Protected Territory").
3.3. Limitation on Franchise Rights
The rights that are granted to the Franchisee are for the specific Franchised Location and Protected Territory and cannot be transferred to an alternative Franchised Location or Protected Territory, or any other location, without the prior written approval of the Franchisor, which approval shall not be unreasonably withheld. The Franchisee shall not operate another Center or offer services or related products which are part of the System from any location other than the Franchised Location, transship or reship products or sell services or products to other -INTELLIGENT OFFICE franchisees, without the Franchisor's prior written approval, which approval can be withheld for any reason, in the Franchisor's sole discretion.
3.4. Market and Clients
The Franchisee is free to advertise for potential clients and to offer and sell services to clients of the Center ("Clients") regardless of where the Clients live or where the principal office of their business is located, just as other franchisees are free to advertise for, and serve Clients from any geographic area. Upon termination or expiration of this Agreement, all Client information, including computer software data, shall be returned to the Franchisor for use solely by the Franchisor, its designated agent or other^ INTELLIGENT OFFICE franchisees.
3.5. Franchisor's Reservation of Rights
The Franchisee acknowledges that its franchise rights as granted are non-exclusive and that the Franchisor retains the rights, among others: (1) to use, and to license others to use, the Marks and System in connection with the operation of Centers at any location other than in the Protected Territory; (2) to use the Marks to identify and sell any type of services and products, promotional and marketing efforts or related items, -which may be the same as or similar to those which the Franchisee will sell, made available
by the Franchisor, in its sole discretion, through alternative channels of distribution (other than Centers), at any location; and (3) to use and license the use of different proprietary marks -and methods in connection with the sale of products and services similar to those which the Franchisee will sell, whether in alternative channels of distribution or in connection with the operation of businesses providing advanced telecommuting and office support services, at any location, which businesses are the same as, or similar to, or different from- INTELLIGENT OFFICE Centers (for example, if the Franchisor acquires another system which provides telecommuting or office support services which uses a different mark or name), on any terms and conditions as the Franchisor deems advisable.
4. INITIAL FRANCHISE FEE
4.1. Initial Franchise Fee
In consideration for the right to develop and operate one -INTELLIGENT OFFICE Center, the Franchisee shall pay to the Franchisor an initial franchise fee in the amount set forth in Exhibit I. due and payable contemporaneously with the execution of this Agreement. The Franchisee acknowledges that the initial franchise fee represents payment for the initial grant of the rights to use the Marks and System, that the Franchisor has earned the initial franchise fee upon receipt thereof and that the fee is under no circumstances refundable to the Franchisee after it is paid, unless otherwise specifically set forth in this Agreement.
5. DEVELOPMENT OF FRANCH1SED LOCATION
5.1. Approval of Franchised Location
The Franchisee shall follow the Franchisor's site selection procedures in locating a Franchised Location for the Center. The Franchisee shall seek the Franchisor's approval of any site proposed as a Franchised Location, by submitting a complete site submittal package, including demographics and other materials requested by the Franchisor, containing all information reasonably required by the Franchisor to assess a proposed Franchised Location. The Franchisor will not unreasonably withhold approval of a proposed site that meets all of the Franchisor's site selection criteria. ThcFranchisor shalLhave a right to designate a nationaLtenant brokerjhatassists the_£ranchis_ee with site evaluation and lease review and, if the Franchisee chop_ses_not use the designated_broker. the_Franchisor_shalj have the right to chargejhg Franchisee a fee per visit to the Protected Territory, plus ou_t-o_f;POcket expenses, to perform or_assist in site evaJiiation and lease review. ..If the Franchisor approves a site which the Franchisee refuses to adopt as its Franchised Location, then the Franchisor may open its own Center at the approved location or franchise a third party at the approved location, in which case, the Franchisor may, in its sole discretion, terminate this Agreement and refund a portion of the Franchisee's initial franchise fee. -Xhe Franchisee shall obtain the Franchisor's approval of a Franchised Location within -120 days of the date of execution of this AgreemenU_unless the Franchisor and the Franchisee have entered into an^Axea Development Agreement ("ADA") which giants_theJranchise_e_Jhe rightjo_develop multiple INTELLIGENT OFFICE Centers (in which cas_e_the 120 day deadline .shall be modified by,the ADA). If the Franchisor disapproves of any site proposed by the Franchisee, the Franchisor will grant the Franchisee an additional, reasonable period of time to obtain approval of a Franchised Location, as may be determined in the Franchisor's reasonable business judgment.
5.2. Approval of Site Acquisition or Lease
^ On or beforejhe date that is 90 davs prior to the date that Franchisee is required to commence operations of the Center. Franchjseejihall either: (O executejhe lease for the premises where the Center will be located: or (2) obtain title for the premises where the Center wiHbe located; provided, however.
the Franchisee shall obtain the Franchisor's prior written approval before executing any lease or purchase agreement for the Franchised Location. Any lease for the Franchised Location shall, at the option of the Franchisor, -provide that:
actual rental amounts must be specified in the lease"), is at least 20 years;
b. lesspx£Ojis_ent_sJo the JExanchjs_ee's use oOheJMarJtS-»ndJhs^gpageJaitiaUy_Drjesfi]cil^ bv the Franchisor for the Franchisee's Center;
c. the Jxanchisojr js grante_d_the__right to enter_the_ELancJiisee!s_Center_tQ_ make such modifications that the Franchisor deems necessary to protect the Marks and the System:
d. the tonghJSPJT-PJrJtSJtesigr^^ to take assignment of the leased in the event that this Agreement is terminated or not renewed for any reason and the right, without lessor's approval, lo_ass_ifinJhe lease or sublet the jKe.mis^-SJQrJhexe_m_ainder of thejeasejexm; £
e._____the Franchisor_be_given written notice and the right to cure any default by the Franchisee
under such lease; and ^
f._____there,is,ajise_provis.ion_which.is_accep_table_to the Franchisor.
The lease shall be collaterally assigned to the Franchisor as security for the Franchisee's timely performance of all obligations under this Agreement and the Franchisee shall obtain the lessor's consent to such collateral assignment. The Franchisee shall deliver a copy of the signed lease for the Franchised Location and the collateral assignment of lease to the Franchisor within 15 days of execution. - In the event the Franchisee 'Engages a supplier of site evaluation and lease review services other than the supplier currently designated by the Franchisor, the Franchisee shall pay to the Franchisor prior to approval of the Franchised Location by the Franchisor a fee in the amount of $^5.000. paid in .advance, .for,eAchJrjriJhe_Franchisiir_m_akes to the Franchisee's Protected Territory ("Site Evaluation and Lease Review Fee"), and shall thereafter reimburse the Franchisor for its out-of-pocket expenses incurred in assisting the Franchisee and any designee of the Franchisee in site selection and lease review. The. Etanchigee—acknpwledges that approya.LojLaJe_asAJ^riurchas^e_agte_ement for the branchis_ed_LQcatiaQ_by the Franchisor does not constitute a recommendation^ndi?r^ejriejiXiir^uaantfie_bv the Franch.isQiLOJLlhe siiita.b_ilitY_Qr_pmfijabil'ty—oLtheJi^^
lake_al.Lsteps necessary to ascertain whether such location_andJLease or purchase agreement are acceptable to the Franchisee.
5.3. Conversion and Design
The Franchisee acknowledges that the leasehold improvements, layout, design, decoration and color scheme of ^INTELLIGENT OFFICE Centers are an integral part of the Franchisor's proprietary System and, accordingly, the Franchisee shall convert, improve, design, decorate and furnish the Franchised Location in accordance with the Franchisor's plans and specifications and with the assistance of contractors, architects and other suppliers designated by or otherwise approved by the Franchisor. The Franchisee shall obtain the Franchisor's written consent to any conversion, improvements, design, decoration or furnishing of the premises before remodeling or decorating begins, recognizing that any related costs are the Franchisee's sole responsibility. It shall be the Franchisee's responsibility to have prepared and to pay for all required blueprints and construction plans and specifications to suit the shape and dimensions of the Franchised Location and to insure compliance with applicable laws and the lease. The -Franchisee shall pay a -fee to a third^ party archilec_tural_design firm ^designated by the Franchisor^Jqr
the provision of space planning and interior design -service, whicJufeejthe Franchisee acknowledfie^jjjn addition to costsjjhjjt_ar^incur^^ local ar^jtectxand an engineer's provisiojrLoi'
services rejated to construction drawings, local approval and construction oversight. Any changes to the design must be pre-approved in writing by the Franchisor or the design firm prior to implementation.
5.4. Sign Boards. Build-Out Equipment and Furnishings
The Franchisee shall purchase or otherwise obtain for use at the Franchised Location and in connection with the Center a sign board, to list the names of all Clients of the Center, and related signs which comply with the standards and specifications of the Franchisor as set forth in the Operations Manual, as that term is defined in Section 8.1 of this Agreement. It is the Franchisee's sole responsibility to insure that any signs comply with applicable local ordinances, building codes and zoning regulations. Any modifications to the Franchisor's standards and specifications for signs which must be made due to local ordinances, codes or regulations shall be submitted to the Franchisor for prior written approval. The Franchisee acknowledges the Marks, or any other name, symbol or identifying marks on any signs shall only be used in accordance with the Franchisor's standards and specifications and only with the prior written approval of the Franchisor. JTheJitanchisee shallalso purchase or Qthei^isAAbtainJar_u&e_atJbe Franchised Location carpeting, mailboxes, light fixtures, key padlock, folding wall, furniture_and artwork, all of which shall be available for purchase through the Franchisor or through an alternative sunpJier^ihat is firsLappLQye_d__bv the Franchisojr^thaLcanjrovide such items wliich-meet the minimum standardi_and specifications^ theJFranchisQr.^the totaj_purchase_price shall be
paid^y_t.he_Fraachise_e:^J.X^jiezhalf_upon_pl^cement of th_e_c_rder for the items_;_and_(2)_th_e_xenjaininfi amp_unt on_ojr_before the date on the invoice mailed to the by the Franchisor_i.ust_priar, to shipment,o£.the_items in the package. AU,suj:_h_p_ayments are non-refundable once made.
5.5. Equipment and Computers
The Franchisee shall obtain arid_u_tilize_for the Center such office equipment, telecommunications equipment and computer hardware ^"Designated Equipment") as is consistent with the standards and specifications of the Franchisor. The Franchisee shall purchase, install and utilize in its Center operations the computer software and related materials approved or designated by the Franchisor ("^Programs") (the Progjr_ams_and_the Designated Equipment are collectively referred to in this A^teernent_as "Technology Systems"). The Technology Systems and related proprietary systems installation, configuration and integration services must be ^purchased and ordered from^ the Franchisor and payment of a fee ("Technology Charge") for the same^Jn the amount set farjhjn Exhibit I. which shali_he__due and payabJ^^U-Jupne-half as of the earlier of the date of the Franchisee's Technology Systems order or the first day ofjheJFranchisee's attendan_oe__at the Franchisor's .initial-training program, described in Section 6.1 below: and (2) Qnej:ha!.Li.ust.prior_-to shipment of the Technology Systems to theJEranchtseeis Center. Th_e_Xechnology Charge isjaflnzrejfundable once paid. The Franchisor shall pay_ce_r_taJQj:hird party vendors for the Technology Systems,,, as may be supplied by th_e_m_and the Franchisor, itself or through its_em or other_designate_d representatives. wiJUnstall. configure and integrate the Technology Syj5tems_at the Franchisee's Center. The Franchisee shall, at the Franchisee's sole cost, purchase and install a modem and join an electronic network connection service which meets the Franchisor's standards and specifications, to facilitate communication between the Franchisor and the Franchisee. The Franchisee shall provide the Franchisor with 24/7 access to the Technology Systems and to information and data regarding the Center by computer modem or other means designated by the Franchisor. The Franchisor reserves the right to require on 30 days notice that the Franchisee purchase, install and implement Program updates and revisions in the operation of the Center.
5.6. Permits and Licenses
The Franchisee shall obtain all such permits and certifications as may be required for the lawful construction and operation of the Center together with all certifications from government authorities having jurisdiction over the site. The Franchisee shall, before commencing the build-out of the Center, complete all requirements for zoning, access, sign, health, safety requirements, building and other required construction permits and, before opening the Center, all licenses to do business and fictitious name registrations, sales tax permits (if applicable), health permits and ratings and fire clearances. The Franchisee shall comply with all federal, state and local laws, codes and regulations, including applicable provisions of the Americans with Disabilities Act, regarding construction, design, and operation of the Center. The Franchisee shall obtain all customary contractors' sworn statements and partial and final lien waivers for construction, remodeling, decorating and installation of equipment at the Franchised Location. Copies of all subsequent inspection reports, warnings, certificates and ratings issued by any governmental entity during the term of this Agreement in connection with the conduct of the Center which indicates the Franchisee's failure to meet or maintain the highest governmental standards, or less than full compliance by the Franchisee with any applicable law, rule or regulation, shall be forwarded to the Franchisor within five days of the Franchisee's receipt thereof.
5.7. Commencement of Operations
-Ihfi Franchisee ^shalLhaye_270 days from the date of this Agreement within which to: (1) secure all necessary financing for the Center; (2) complete the initial training programs, including the requisite technical support training described in Article 6 of this Agreement; (3) complete selection, leasing and build-out of the Franchised Location; (4) purchase or lease and have installed such furniture, equipment and software as meets the standards and specifications of the Franchisor; (5) purchase an opening inventory of office supplies; (6) obtain and provide evidence of insurance as described in Section 21.1 below; and (7) commence operation of the Center. The Franchisor will extend the time in which the Franchisee has to commence operations for a reasonable period of time in the event factors beyond the Franchisee's reasonable control prevent the Franchisee from meeting this development schedule, so long as the Franchisee has made reasonable and continuing efforts to comply with such development obligations and the Franchisee requests, in writing, an extension of time in which to have its Center open before such development period lapses. The Franchisee shall obtain the Franchisor's approval prior to opening the Center for business. If the franchisor and the Franchisee have_entemd_into an_Area JQevelopment Agreement which grants..the. Franchisee the right to develop multiple-—INTELLIGENT QEHCE Centers: (il the 270 dav^deadlineLshall bejnodified by the Area Development AfireernentL.and (if) if the Franchisee desires to extendjhe time in which the Franchisee has to commence operation of the rejnaining_undeveloped Centers, bv 180 davs each^_the_Franchisee shall obtain the Franchisor's prior written consent to the extension_at least 60 days prior to the next deadline, which consent may be withheld in the Franchisor's sol_e_dj^c_retiqn. and the Franchisee shall pav the then current fee charged bv the Franchisor for the grant of the extension ("Development Schedule Extension Fee"1 and shall otherwise_satisjy the terms and_cQ.nditi-QOS-CiLthe Area DevelopmenlAgreement,
6. TRAINING AND TECHNICAL SUPPORT TRAINING
6.1. Initial Training Program
The Franchisee or, if the Franchisee is not an individual, the person designated by the Franchisee to assume primary responsibility for the operation of the Center ("Principal Operator") is required to attend and successfully complete the initial training program. The Franchisee, if an individual, or if the Franchisee is not an individual, the principal owner of the Franchisee, is required to attend the initial training program. The initial training program is offered by the Franchisor at one of the Franchisor's
designated training facilities and remotely via electronic means. Up to three individuals are eligible to participate in designated portions of the Franchisor's initial training program without charge of a tuition or fee. The Franchisee shall be responsible for any and all traveling expenses, living expenses and wages incurred by the Franchisee and its employees in connection with attendance at and completion of the training program. Training program participants will not receive any compensation from the Franchisor while attending or completing the Franchisor's training. At least one individual must successfully complete the initial training program prior to the Franchisee commencing operation of its Center.
6.2. Length of Training
The initial training program shall consist of remote technical instruction, up to five days of classroom instruction and hands-on training, and up to five days of on-the-job training, on-site at the Franchised Location at or near the time the Center opens for business. The classroom instruction and hands-on training shall be at a location designated by the Franchisor. The Franchisee, and if applicable, the Principal Operator and other persons the Franchisor may designate shall attend the on-site training at the Franchised Location. The Franchisor reserves the right to waive a portion of the training program or alter the training schedule, if in the Franchisor's sole discretion, the Franchisee or Principal Operator has sufficient prior experience or training.
63. Additional Training
From time to time, the Franchisor may present seminars, conventions or continuing development programs or conduct meetings for the benefit of the Franchisee. The Franchisee or its Principal Operator shall be required to attend any ongoing mandatory seminars, conventions, programs or meetings as may be offered by the Franchisor. The Franchisor shall give the Franchisee at least 30 days prior written notice of any ongoing seminar, convention or program which is deemed mandatory. The Franchisor shall not require that the Franchisee attend any ongoing training more often than once a year. All mandatory training will be offered without charge of a tuition or fee; provided, however, the Franchisee will be responsible for all traveling expenses, living expenses and wages which are associated with attendance at the same.
7. DEVELOPMENT ASSISTANCE
7.1. Franchisor's Development Assistance
The Franchisor shall assist the Franchisee with the initial establishment of the Franchisee's-INTELLIGENT OFFICE Center at no additional cost to the Franchisee except as described below or elsewhere in this Agreement, as follows:
a. Provision of the initial training program to be conducted at the Franchisor's designated training facilities or at another location designated by the Franchisor, as described in Article 6 above.
b. Provision of written specifications for a Franchised Location which shall include, without limitation, specifications for space requirements, build-out and the demographics and character of the surrounding market area. The Franchisee acknowledges that the Franchisor shall have no other obligation to provide assistance in the selection and approval of a Franchised Location other than the provision of such written specifications and approval or disapproval of a proposed Franchised Location, which approval or disapproval shall be based on information submitted to the Franchisor in a form sufficient to assess the proposed location as may be reasonably required by the Franchisor.
c. Directives regarding the required leasehold improvements, layout, design, decoration and color schemes of the Center premises, as prescribed by the Franchisor's designated architect. The Franchisor shall also provide specifications concerning signs, office equipment, furniture, telecommunications equipment and computer hardware and software for the Center, all of which may be purchased through the Franchisor as part of the Franchisor's equipment package purchase program.
d. Information regarding the selection of suppliers of furniture, equipment, items and materials used and inventory and services offered for sale in connection with the Center. After execution of this Agreement, the Franchisor will provide the Franchisee with the opportunity to purchase most of the furniture, artwork, equipment, computer hardware and software for the Center through the Franchisor's equipment package purchase program. Otherwise, the Franchisor will provide a list of approved suppliers, if any, of such furniture, equipment, artwork, computer hardware and software, items and materials.
e. Provision of an operations manual in accordance with Section 8.1 below.
7.2. Technology Systems and Software, Installation, Configuration and Maintenance
The Franchisee shall execute the Technology Systems Installation, Integiratio.n_and License AgreemejTjLanjj_Purchase through the Franchisor the Technology Systems and the proprietary installation, configuration and integration services^_ancLJn accordance with Section3.-5_abpye,_Day-thejr>chnO-lQgV-Charge on a timely basis. The Franchisee shall obtain any necessary ongoing Designated Equipment maintenance services from sources approved by the Franchisor.
8. OPERATIONS MANUAL
8.1. Operations Manual
The Franchisor agrees to provide to the Franchisee one or more manuals, technical bulletins or other written materials (collectively referred to as "Operations Manual") covering certain standards and specifications for advanced telecommuting and office support services and for operating and marketing techniques for- INTELLIGENT OFFICE Centers. The Franchisee agrees that it shall comply with the Operations Manual as an essential aspect of its obligations under this Agreement and failure by the Franchisee to substantially comply with the Operations Manual may be considered by the Franchisor to be a breach of this Agreement.
8.2. —Confidentiality of Operations Manual Contents
The Franchisee shall use the Marks and System only as specified in the Operations Manual. The Operations Manual is the sole property of the Franchisor and shall be used by the Franchisee only during the term of this Agreement and in strict accordance with the terms and conditions hereof. The Franchisee shall not duplicate the Operations Manual nor disclose its contents to persons other than its employees or officers who have signed a confidentiality and noncompetition agreement in a form approved by the Franchisor. The Franchisee shall return the Operations Manual to the Franchisor upon the expiration, termination or assignment of this Agreement.
8.3. Changes to Operations Manual
The Franchisor reserves the right to revise the Operations Manual from time to time as it deems necessary to update or change operating and marketing techniques or standards and specifications. The Franchisee, upon receipt of any updated information, shall update its copy of the Operations Manual as instructed by the Franchisor and shall conform its operations with the updated provisions within a reasonable time thereafter. The Franchisee acknowledges that a master copy of the Operations Manual maintained by the Franchisor at its principal office shall be controlling in the event of a dispute relative to the content of any Operations Manual.
9. OPERATING ASSISTANCE
9.1. Franchisor's Services
The Franchisor shall, during the Franchisee's operation of the Center, make available to the Franchisee the following services at no additional charge, except as described below:
a. Upon the reasonable request of the Franchisee, consultation by telephone, facsimile or electronic mail regarding the continued operation and management of the Center and advice regarding telecommunications equipment and services, office needs, Client relations, billing and collections and supplier relations issues and similar advice.
b. Access to advertising and promotional materials as the Franchisor may, but is not required to, develop, the cost of which may be passed on to the Creative Fund, defined and described in Section 12.4 below. The cost of reproducing any ofthe materiajsjitdered-fay_ihe Francb_is_e_e_s_hall be the Fxanchis_ee's responsibility.
c. Additional training courses on new methods, equipment, services and office products, as often as the Franchisor shall determine. The Franchisor reserves the right to charge the Franchisee a tuition fee commensurate with the Franchisor's then current published prices for such training payable in advance. The Franchisee shall be responsible for all travel expenses, living expenses and wages incurred by its personnel during the training program.
d. On-going updates of information and programs regarding Centers, ^he INTELLIGENT OFFICE concept and the System, as often as the Franchisor shall determine, including, without limitation, information about special or new products which may be developed and made available to^ INTELLIGENT OFFICE franchisees as a part ofthe System.
e. A telephone number and an electronic mail address for the Franchisee's technical support questions, Technology Systems maintenance, repair and trouble-shooting issues and related questions, charged to the Franchisee at an hourly rate based on use.
9.2. Additional Initial Training
The Franchisor shall make the initial training program available to replacement or additional Principal Operators during the term of this Agreement. The Franchisee shall pay to the Franchisor the then published tuition for the initial training program. The Franchisee shall be responsible for all travel expenses, living expenses and wages incurred by its personnel during the training program. The availability of space in the training programs shall be subject to prior commitments to new ^INTELLIGENT OFFICE franchisees.
9.3. Additional Franchisor Services
Although not obligated to do so, the Franchisor may make its employees or designated agents available to the Franchisee for on-site advice and assistance in connection with the on-going operation of the Center governed by this Agreement. In the event that the Franchisee requests such additional assistance and the Franchisor agrees to provide the same, the Franchisor reserves the right to charge the Franchisee for all travel, lodging, living expenses, telephone charges and other identifiable expenses associated with such assistance, plus a fee based on the time spent by each employee on behalf of the Franchisee, which fee will be charged in accordance with the then current hourly rates being charged by the Franchisor for assistance.
10. FRANCHISEE'S OPERATIONAL COVENANTS
10.1. Operation of Center
The Franchisee acknowledges that it is solely responsible for the successful operation of its Center and that the continued successful operation thereof is, in part, dependent upon the Franchisee's compliance with this Agreement and the Operations Manual. In addition to all other obligations contained in this Agreement and in the Operations Manual, the Franchisee shall comply with the following operational obligations.
a. Quality of Operations. The Franchisee shall maintain and operate 6the. INTELLIGENT OFFICE Center efficiently, professionally and in accordance with high quality standards. The Franchisee shall operate the business in accordance with this Agreement and the Operations Manual and in such a manner as not to detract from or adversely reflect upon the name and reputation of the Franchisor and the goodwill associated with ^thg INTELLIGENT OFFICE Marks.
b. Compliance With Laws and Good Business Practices. The Franchisee shall conduct itself and operate its Center in compliance with all applicable laws, regulations and other ordinances and in such a manner so as to promote a good public image in the business community. In connection therewith, the Franchisee will be solely and fully responsible for obtaining any and all licenses to carry on business at the Center.
c. Management. The Franchisee acknowledges that proper management of the Center is important and shall insure that the Franchisee or a designated Principal Operator who has completed the Franchisor's initial training program be responsible for the management of the Center.
d. Approved Services and Products. The Franchisee shall offer only such advanced telecommuting and office support services and related office products through its Center which meet or exceed the minimum standards and specifications established by the Franchisor, more fully described in the Operations Manual. The Franchisee shall offer all types of services and related office products as from time to time may be prescribed by the Franchisor and shall refrain from offering any other types of services or products, or operating or engaging in any other type of business or profession, from or through the Center and, if Franchisee is an entity, through such entity.
e. Payment of Obligations. The Franchisee will pay on a timely basis all amounts due and owing to the Franchisor pursuant to any separate agreements between the Franchisee and the Franchisor and ail amounts due and owing by the Franchisee to all third parties, including national vendors and taxing authorities, with whom the Franchisee does business at or through the Center. The Franchisor reserves the right to require the Franchisee to sign the Franchisor's form of Bank Authorization Agreement to allow the Franchisor to directly withdraw from the Franchisee's bank account, amounts due
to the Franchisor, if the Franchisee pays any amount due to the Franchisor five or more days after it is due on more than one occasion in any calendar year. In connection with any amounts due and owing by the Franchisee to third parties which in any manner relate to the Center and its operations, the Franchisee expressly acknowledges that a default.by the Franchisee with respect to such indebtedness may be considered a default hereunder and the Franchisor may avail itself of all remedies provided for herein in the event of default.
f. Other Agreements. The Franchisee shall comply with all agreements with third parties related to or affecting the Center, including, in particular, all provisions of any premises lease, any furniture or equipment lease or Software Installation, Integration and Maintenance Agreement.
g. Employees. The Franchisee and all employees of the Franchisee shall present a professional appearance, as described in the Operations Manual, and shall render competent and courteous service to Clients of the Center, and to the Client's clients, while working at the Franchised Location. The Franchisor has the right, in its sole and absolute discretion, to establish dress code guidelines for personnel.
h. Remodeling and Upgrading. The Franchisee shall renovate, refurbish, remodel, upgrade
or replace, at its own expense, the personal property, furniture, decorations, equipment and software used in the operation of the Center, when reasonably required by the Franchisor in order to comply with the image, standards of operation and performance capability established by the Franchisor from time to time. If the Franchisor changes its image or standards of operation, it shall give the Franchisee a reasonable period of time within which to comply with such changes.
i. Training of Employees. The Franchisee shall be responsible for training all of its
employees who work in any capacity in the Center and shall be fully responsible for all employees' compliance with the operational standards which are part of the System. The Franchisee must conduct its employee training in the manner and according to the standards as prescribed in the Operations Manual. Any employee who does not satisfactorily complete the training shall not work in any capacity in the Franchisee's Center.
j. Ownership of Center. The Franchisee shall at all times during the term of this Agreement
own and control the Center authorized hereunder. Upon request of the Franchisor, the Franchisee shall promptly provide satisfactory proof of such ownership to the Franchisor. The Franchisee represents that the Statement of Ownership, attached hereto as Exhibit III and by this reference incorporated herein, is true, complete, accurate and not misleading, and, in accordance with the information contained in the Statement of Ownership, the controlling ownership of the Center is held by the Franchisee. The Franchisee shall promptly provide the Franchisor with a written notification if the information contained in the Statement of Ownership changes at any time during the term of this Agreement and shall comply with the applicable transfer provisions contained in Article 16 herein. In addition, if the Franchisee is an entity, all of the owners of the Franchisee shall sign the Personal Guaranty, attached to this Agreement as Exhibit II.
k. Hours of Operation. The Franchisee shall at all times during the term of this Agreement
keep its Center open during such business hours and keep certain after hours services available as may be designated by the Franchisor from time to time in the Operations Manual. Unless the Franchisor consents in writing, the Franchisee shall, during such business hours as the Franchisor may designate, have at least one employee physically present at the Center to answer the telephone and otherwise assist Clients. The Franchisee shall maintain sufficient supplies of office products and employ adequate personnel at all times so as to operate the Center at its maximum capacity and efficiency.
1. Client Services. The Franchisee shall have its Clients execute an agreement, in a form
that has been approved by the Franchisor. The Franchisee shall provide Client services to visiting Clients of other ^INTELLIGENT OFFICE Centers and shall then bill and obtain payment from the Client's home Center for providing visiting Client services. Conversely, the Franchisee shall be responsible for handling the billing for its Clients that utilize other Centers. The Operations Manual describes recommended fee structures for visiting Clients. The Franchisee shall not discriminate against visiting Clients in its pricing structure; it shall charge visiting Clients at rates commensurate with its own Clients.
11.1. Monthly Royalty
The Franchisee shall pay to the Franchisor a monthly royalty ("Royalty") equal to 5% of the total amount of its "Gross Revenues" (defined in Section 11.2 below), which royalties shall commence when the Franchisee opens its Center for business to Clients.
11.2. Gross Revenues
"Gross Revenues" shall mean and include the aggregate amount of all sales of services and products of every kind or nature performed, sold from, at or in connection with the operation of the Center or arising out of the operation or conduct of business by the Center or, if the Franchisee is an entity, arising out of the operation or conduct of any business by such entity, including, but not limited to, any and all dues, fees, rents, rent security deposits or other assessments charged to and paid by Clients whether for cash or credit, but excluding all: (i) federal, state or municipal sales or service taxes collected from Clients and paid to the appropriate taxing authority; (ii) the amount of any cash refunds of any security deposit returned to a client; and (iii) other exclusions as may be authorized in writing by the Franchisor. The Franchisee shall not receive the services or products of Clients in exchange or barter for its products and services.
11.3. Royalty Payments
Royalty payments shall be made monthly and sent to the Franchisor, postmarked or otherwise transmitted no later than the 10th day of each month based on Gross Revenues for the immediately preceding month. Royalty payments shall be accompanied by monthly reports, as more fully described in Article 15 hereof, which reports shall be submitted to the Franchisor on the same day as the Royalty payments are due and shall be submitted to the Franchisor on standard transmittal forms containing information regarding the Franchisee's Gross Revenues and such additional information as may be requested by the Franchisor. The Franchisor reserves the right to require Royalty payments be made on a weekly or bi-weekly basis if the Franchisee does not timely or fully submit the required payments or reports. The Franchisor shall have the right to verify such Royalty payments from time to time as it deems necessary, in any reasonable manner. In the event that the Franchisee fails to pay any Royalties when they are due, the Franchisee shall, in addition to such Royalties owe a $-150 late fee, to be automatically assessed and paid along with the late payment. In addition, the Franchisor shall have the right to charge interest on any payments made after the due date at the highest applicable legal rate for open account business credit, not to exceed 1!4% per month. The Franchisee acknowledges that this Section 11.3 shall not constitute the Franchisor's or its affiliates' agreement to accept such payments after they are due or a commitment to extend credit to or otherwise finance operation of the Center. The Franchisor shall have the right, upon 30 days prior written notice to the Franchisee, to require that the Franchisee execute an authorization agreement for preauthorized payment of Royalties, Creative Fund Contributions and other amounts owed under this Agreement^, for the electronic transfer of funds from the Franchisee's bank account to the Franchisor's bank account-^throueh transactions initiated bv the
Franchisor, or payment by other means designated by the Franchisor. If the Franchisej__d_elavs or otherwise fails to cooperate in the electronic_tran_fe_r of funds process, if instituted bv the Franchisor, the Franchisee shall pay a monthly processing fee of_$100 until the Franchisee's then current payment method js_ con verted to electron ic_tr_ansfers in accordance, with the Franchisor's sp^cifjgatiQjiS-
11.4. Application of Payments
Notwithstanding any designation by the Franchisee, the Franchisor shall have sole discretion to apply any payments by the Franchisee, and any credits received by the Franchisor on the Franchisee's behalf from third party vendors, to any of the Franchisee's past due indebtedness to the Franchisor for Royalties,- Creative Fund Contributions, purchases from the Franchisor or its affiliates, interest or any other indebtedness.
12.1. Approval of Advertising
The Franchisee shall obtain the Franchisor's prior written approval of all written advertising or other marketing or promotional programs regarding the Center, including, without limitation, "Yellow Pages" advertising, newspaper ads, flyers, brochures, direct mail pieces, specialty and novelty items and advertising on the radio, television, Internet and World Wide Web. The Franchisee shall also obtain the Franchisor's prior written approval before using any promotional materials as may be provided by vendors. The proposed written advertising or a description of the marketing or promotional program shall be submitted to the Franchisor at least 30 days prior to publication, broadcast or use. Any proposed written advertising materials shall be deemed approved if no verbal or written response is received by the Franchisee within 30 days after receipt of the proposed materials by the Franchisor. The Franchisee acknowledges that advertising and promoting the Center in accordance with the Franchisor's standards and specifications is an essential aspect of the System, and the Franchisee agrees to comply with all advertising standards and specifications. The Franchisee shall display all required promotional materials, signs, point of purchase displays and other marketing materials in its Center and in the manner prescribed by the Franchisor__and shall participate in all marketing, advertising and promotional campaigns that the. Franchisor may implement from time to time Centers, or for Centers within a particular market.
12.2. Initial Advertising and Promotion
The Franchisee and the Franchisor shall mutually agree upon an initial advertising and promotional campaign, to be conducted at or around the time the Center opens and memberships to the Center are offered. Within 30 days of completion of the initial advertising and promotion campaign, the Franchisee shall submit to the Franchisor a summary of campaign expenditures.
12.3. Local Advertising
-After the Franchisee's Center opens for business, the Franchisee shall spend -annually $60,000 ($15,000 per quarter) ^on local advertising, in such manner and form with such content as then approved by the Franchisor-. During the second and ^each subsequent year after the Franchisee's Center opens for business, the -Franchisor shall have the right to increase the amount the Franchisee is required to spend .on local—adye_£tisjng^ach.y_ear during the tern_.pf thts_Agreeme_nt base_d_o_n changes in the CPI, which increase shall be calculated in the same manner as the increase in the Creative_^uncLContributioniiiis calculated pursuant to Section 12.4.b. below. The Franchisor reserves the right to obtain an accounting -from the Franch i see-_ofj_t_ local advertising expenditures^ within 10 days after the end of each calendar
quarter, which accounting shall show ^how the Franchisee spent -jtsJ^aJLadvejtkinRcommitment for the calendar_quarter iust ended.
12.4. —Creative Fund Contribution
The Franchisee shall contribute to an advertising fund established by the Franchisor ("—Creative Fund") $250 each month ("^Creative Fund Contribution"). The^ Creative Fund Contribution shall be paid in addition to the amount which the Franchisee shall expend for local advertising, as described in Section 12.3 above. The Creative Fund Contribution shall be paid to the Franchisor in addition to Royalties and the following terms and conditions shall apply:
a. The ^Creative Fund Contribution shall be payable concurrently with the payment of the Royalties, mailed to the Franchisor, postmarked or otherwise transmitted as designated by the Franchisor no later than the 10th day of each month, for the immediately preceding month.
b. The Franchisor shall have the right to adjust the amount of the Franchisee's Creative Fund Contribution each year during the term of this Agreement based on changes in the Consumer Price Index ("CPI") for the then current year as compared to the preceding year's CPI. The amount of the^ Creative Fund Contribution may be adjusted annually on each January first during the term of this Agreement and any renewals thereof, for the year beginning that January first ("Year"). The adjustment will be the difference between the Price Index for that December which immediately precedes the date of adjustment and the Price Index for the Year. "Price Index" means the Consumer Price Index published by the Bureau of Labor Statistics of the United States Department of Labor, U.S. City Average, All Items, and Major Group Figures for all Urban Consumers (CPI-U 1982 - 84 = 100). Price Index for the Year means the average of the monthly price indexes for each of the 12 calendar months immediately preceding the January first starting the Year. Creative Fund Contribution -nor the minimum required expenditures for lQcaLadvertising described in Section shall ever be increased by more than 5% over the previous Year in any successive Year^ nor shall the adjusted- Creative Fund Contribution in any successive Year decrease below the adjusted Creative Fund Contribution for the previous Year.
c. The^ Creative Fund Contributions will be subject to the same interest and late charge as the Royalties, in an amount and manner set forth in Section 11.3 above.
d. Upon the request of the Franchisee, the Franchisor will make available to the Franchisee, no later than 120 days after the end of a calendar year, an unaudited financial statement which indicates how the ^Creative Fund has been spent.
e. The Franchisor shall direct all advertising and marketing programs financed by the ^Creative Fund, with sole discretion over the creative concepts, materials and endorsements used therein, geographic, market allocation, and the administration thereof. If the Franchisor develops advertising_and promotional materials. in_a_d_d_ition to payment of the Creative Fund Contribution, the Franchisor shalLkave the rightjQ-pass the cost of reproducing such materials on to the Franchisee_,_The Franchisee agrees that the ^Creative Fund may be used to pay the costs of preparing advertising materials; employing advertising agencies and in-house staff assistance; local promotions; website development and updating; Internet advej3isin&_supporting public relations, market research and other advertising and marketing activities.
f. -The- Creative Fund shall be accounted for separately from the Franchisor's other funds and shall not be used to defray any of the Franchisor's general operating expenses, except for such reasonable administrative costs, salaries and overhead as the Franchisor may incur in activities related to the implementation and administration of the ^Creative Fund and its marketing programs, including,
without limitation, conducting market research, incurring related accounting and legal expenses, preparing material and collecting and accounting for Creative Fund contributions. The Franchisor may spend in any fiscal year an amount greater or less than the aggregate contribution of all -INTELLIGENT OFFICE Centers to the Creative Fund in that year and the^ Creative Fund may borrow from the Franchisor or other lenders to cover deficits or cause the ^Creative Fund to invest any surplus for future use. All interest earned on monies contributed to the ^Creative Fund will be first used to pay costs. The^ Creative Fund may be incorporated or operated through an entity separate from the Franchisor at such time as the Franchisor deems appropriate, and such successor entity shall have all rights and duties of the Franchisor pursuant to this Section 12.4.
g. The Franchisee acknowledges that the Creative Fund is intended to maximize
recognition of the Marks and patronage of-INTELLIGENT OFFICE Centers. Although the Franchisor will endeavor to utilize the Creative Fund to develop advertising and marketing materials and programs that will benefit all -INTELLIGENT OFFICE Centers, the Franchisor undertakes no obligation to ensure that expenditures by the Creative Fund in or affecting any geographic area are proportionate or equivalent to the contributions by ^INTELLIGENT OFFICE Centers operating in that geographic area or that any ^INTELLIGENT OFFICE Center will benefit directly or in proportion to its contribution to the Creative Fund. The ^Creative Fund is not a trust fund, and the Franchisor does not owe the Franchisee a fiduciary duty with respect to the maintenance, direction or administration of the^ Creative Fund. Except as expressly provided in this Section 12.4, the Franchisor assumes no direct or indirect liability or obligation to the Franchisee with respect to the maintenance, direction or administration of the ^Creative Fund.
h. The Franchisor reserves the right to terminate the -Creative Fund, upon 30 days' written
notice to the Franchisee. All unspent monies on the date of termination shall be distributed to the Franchisor's franchisees in proportion to their respective contributions to the ^Creative Fund during the preceding 12 month period. The Franchisor shall have the right to reinstate the- Creative Fund upon the same terms and conditions set forth herein upon 30 days' prior written notice to the Franchisee.
12.5. Regional Advertising Programs
The Franchisor reserves the right, upon 30 days prior written notice to the Franchisee, to create a regional advertising association ("^Re^ional Ad Groups for the benefit of ^INTELLIGENT OFFICE franchisees located within a particular geographic area. If a -Regional Ad Group is established for the area where the Franchisee is located, the Franchisee will be required to participate in the -Regional Ad Group. for the purpose of selecting and participating in regional marketing and promotion programs for -INTELLIGENT OFFICE Centers. The Franchisee will be required to remain a member of and be bound by the decisions of the majority of the members of the -Regional Ad Group regarding expenditures, assessments and dues of the -Regional A<LQmup, to the extent that they are approved by the Franchisor. The -Regional Ad Group, if established in a market area which includes the Franchisee's Center, will have the right, by majority vote, to require its members to pay contributions to the -Regional Ad Group, on a regular or intermittent basis, ^of up to_$60.000 per Center_annuallv. Huqn&jhe secondhand each subsequent year after the Franchisee's Center opens for business, the Franchisor shall have the right to increasejhe $60.000 amount that the Franchisee mav be required to contributejo the Regional Ad Group each year during the term of this Agreement based on the_j:hange in the CPI. which increase shall be calculated in thesamejTianne_r_as.the increase Jn^heJlreativeJuncLContribuij^nJs calculated pursuant to Section 12.4.b. above. The Franchisor shall have the right to cast the deciding vote in the case of a vote that ends in a deadlock. -Regional Ad Group contributions would be in addition to the Franchisee's-Creative Fund Contribution set forth in Section 12.4 above. If such a -Region_aJLAd Group contribution is required, the percentage amount of the -Regional,, Ad Group contributions made by the members of the -RegionaLAd-GlQUP will be counted toward the fulfillment of their required local advertising expenditure set forth in Section 12.3 above. The failure of the Franchisee to participate in the -Regional Ad Group or
pay any dues or contributions required by the -Regional Ad Group, may, at the option of the Franchisor, be deemed to be a breach of this Agreement. The Franchisor has the right, in its sole discretion, to determine the composition of all geographic territories and market areas for the implementation of such regional advertising and promotion campaigns and to require that the Franchisee participate in such regional advertising programs as and when they may be established by the Franchisor. The Franchisor has the right to change and dissolve the ^Regional Ad Group. If a regional advertising program is implemented on behalf of a particular region by the Franchisor, the Franchisor, to the extent reasonably calculable, will only use contributions from- INTELLIGENT OFFICE franchisees within such region for the particular regional advertising program. The Franchisor also reserves the right to establish an advertising cooperative for a particular region to enable the cooperative to self-administer the regional advertising program. If the Franchisor creates a -Regional Ad Group, the Franchisor has the right to charge the ^Regional Ad Group for the actual costs of forming and administering the -Regional Ad Group.
12.6. Electronic Advertising
The Franchisee shall not develop, create, distribute, disseminate or use any Internet advertising or website, or any multimedia, telecommunication, mass electronic mail, facsimile or audio/visual advertising, promotional or marketing materials, directly or indirectly related to ^INTELLIGENT OFFICE Centers_an_d_Jhe services, the Marks or the System ("Electronic Advertising"), without the Franchisor's prior written consent which may be withheld in the Franchisor's sole discretion. The Franchisor shall retain the exclusive right to develop and control the content of all Electronic Advertising for -INTELLIGENT OFFICE services and any use of a domainjQamj_£QiM.heJiU-iness conducted by or through the Franchisee's Center. The Franchisor reserves the right, upon 30 days' prior written notice, to require the Franchisee to participate in any Electronic Advertising of ^INTELLIGENT OFFICE services sponsored by the Franchisor by creating, customizing or providing access to_a linked webpage or otherwise. If the Franchisor permits the Franchisee to develop any Electronic Advertising, the Franchisee shall do so in strict compliance with the Franchisor's policies and rules regarding the creation, maintenance, use and content of such Electronic Advertising as set forth in this Agreement or the Operations Manual. The only website or webpage that the Franchisee can_maintainjbr the Center and for the business conducted bv and through the Center is bv link to t_b_e_rZr_anchisor's website at . Anv amounts that the Franchisee spends to participate in Electronic Advertising shall be credited toward the Franchisee's local advertising obligations. The Franchisee shall reference the Franchisor's URL and website on all Electronic Advertising and written advertising in a
manner as shall be prescribed by the Franchisor.__Ilye_Eranchisor^balLhaye__Jhejrjght to charge the
ELagcJuse_e__a_re_a£Qnable ifeeJfQr^iLc_e^s_to_eLectronic.or_oither communication servivided by the Franchisor or otherwise made_ayaijable to the Franchisee,
13. QUALITY CONTROL
13.1. Standards and Specifications
The Franchisor will make available to the Franchisee, through the Operations Manual or otherwise, standards and specifications for Client services and related office products offered at or through the Center and for decor, displays, furniture, equipment, materials, forms, items, supplies and services used in connection with the Center. The Franchisor reserves the right to change standards and specifications for these services and products offered at or through the Center and for the decor, displays, furniture, equipment, materials, forms, items, supplies and services used in connection with the Center, upon 30 days prior written notice to the Franchisee. The Franchisee shall, throughout the term of this Agreement, remain in compliance and strictly adhere to all of the Franchisor's current standards and specifications for the Center as prescribed from time to time.
The Franchisor shall have the right to examine the Franchised Location, including the furniture, equipment, materials, supplies or services used or sold there, to ensure compliance with all standards and specifications set by the Franchisor. The Franchisor shall conduct such inspections during regular business hours and the Franchisee may be present at such inspections. The Franchisor, however, reserves the right to conduct the inspections without prior notice to the Franchisee.
13.3. Restrictions on Services and Products
The Franchisee is prohibited from offering or selling any services or products not authorized by Franchisor as being a part of the System. However, if the Franchisee proposes to offer, conduct or utilize any services, products, materials, forms, items, supplies or services for use in connection with or sale through the Center which are not previously approved by the Franchisor as meeting its specifications, the Franchisee shall first notify the Franchisor in writing requesting approval. The Franchisor may, in its sole discretion, for any reason whatsoever, elect to withhold such approval; however, in order to make such determination, the Franchisor may require submission of specifications, information or samples of such products, services, materials, forms, items or supplies. The Franchisor will advise the Franchisee within a reasonable time whether such products, services, materials, forms, items or supplies meet its specifications.
13.4. Approved Suppliers
The Franchisee shall purchase all furniture, office equipment, telecommunications equipment, computer hardware and software, products, services, supplies and materials ("Items") required for the operation of the Center from suppliers designated or approved by the Franchisor or, if there is no designated or approved supplier for particular Items from suppliers approved in advance by the Franchisor who meet all of the Franchisor's specifications and standards as to quality, composition, finish, appearance and service, and who shall adequately demonstrate their capacity and facilities to supply the Franchisee's needs in the quantities, at the times, and with the reliability requisite to an efficient operation of the Center.
13.5. Request to Approve Supplier
In the event the Franchisee desires to purchase or use an Item from suppliers other than those previously approved by the Franchisor, the Franchisee shall, prior to purchasing from or otherwise utilizing any supplier, give the Franchisor a written request to approve the supplier. In the event the Franchisor rejects the Franchisee's requested new supplier, the Franchisor must, within 60 days of the receipt of the Franchisee's request to approve the supplier notify the Franchisee in writing of its rejection. The Franchisor may continue from time to time to inspect any suppliers' facilities and products to assure compliance with the Franchisor's standards and specifications. Permission for such inspection shall be a condition of the continued approval of such supplier. The Franchisor may not unreasonably withhold approval of any proposed supplier; however, in order to make such determination, the Franchisor may require that samples from a proposed new supplier be delivered to the Franchisor for testing prior to approval and use. A charge not to exceed the actual cost of the test may be made by the Franchisor and shall be paid by the Franchisee.
14. MARKS, TRADE NAMES AND PROPRIETARY INTERESTS
The Franchisee acknowledges that the Franchisor has the sole right to own, license and control the Franchisee's use of the service mark "^INTELLIGENT OFFICE" and other of the Marks, and that such Marks shall remain under the sole and exclusive ownership and control of the Franchisor. The Franchisee acknowledges that it has not acquired any right, title or interest in such Marks except for the right to use such marks in the operation of its Center as it is governed by this Agreement. The Franchisee agrees not to use any of such Marks as part of an electronic mail address, or on any sites on the Internet and the World Wide Web and the Franchisee agrees not to use or register any of such Marks as a domain name on the Internet.
14.2. No Use of Other Marks
The Franchisee shall use no service mark other than ^the "INTELLIGENT OFFICE" service mark or such other Marks as may be specified by the Franchisor for use in the identification, marketing, promotion or operation of the Center.
The Franchisee acknowledges that the Franchisor owns and controls the distinctive plan for the establishment, operation and promotion of the Center and all related licensed methods of doing business, previously defined as the "System," which include, but are not limited to, the Franchisor's standards and specifications for the Franchised Location, premises, lease, leasehold improvements, interior finish, furniture, office equipment, Technology Systems, telecommuting and office support services, Client relations, relations with clients of Clients, reception and secretarial services, supplies, technical equipment standards, marketing techniques, written promotional materials, advertising and accounting systems, all of which constitute confidential trade secrets of the Franchisor, and the Franchisee acknowledges that the Franchisor has valuable rights in and to such trade secrets. The Franchisee further acknowledges that it has not acquired any right, title or interest in the System except for the right to use the System in the operation of the Center as it is governed by this Agreement and that it is obligated to maintain the confidentiality of the System in accordance with Section 20.3 below. The Franchisee's changes or improvements to the System will inure to the exclusive benefit of the Franchisor.
14.4. Mark Infringement
The Franchisee shall notify the Franchisor in writing of any possible infringement or illegal use by others of a trademark the same as or confusingly similar to the Marks which may come to its attention. The Franchisee acknowledges that the Franchisor shall have the right, in its sole discretion, to determine whether any action will be taken on account of any possible infringement or illegal use. The Franchisor may commence or prosecute such action in the Franchisor's own name and may join the Franchisee as a party to the action if the Franchisor determines it to be reasonably necessary for the continued protection and quality control of the Marks and System. The Franchisor shall bear the reasonable cost of any such action, including attorneys' fees. The Franchisee shall fully cooperate with the Franchisor in any such litigation.
14.5. Franchisee's Business Name
The Franchisee acknowledges that the Franchisor has a prior and superior claim to the '^INTELLIGENT OFFICE" trade name. The Franchisee shall not use the words "^INTELLIGENT OFFICE" in the legal name of its corporation, partnership or any other business entity used in conducting the business provided for in this Agreement. The Franchisee also agrees not to register or attempt to register a trade name using the words "^INTELLIGENT OFFICE" in the Franchisee's name or that of any other person or business entity, without prior written consent of the Franchisor. The Franchisee shall not identify itself as being "The Intelligent Office System, LLC" or as being associated with the Franchisor in any manner other than as a franchisee or licensee. The Franchisee shall, in all advertising and promotion and promotional materials, display its business name only in obvious conjunction with the phrase "^INTELLIGENT OFFICE Licensee" or "^INTELLIGENT OFFICE Franchisee" or with such other words and in such other phrases to identify itself as an independent owner of the Center, as may from time to time be prescribed in the Operations Manual.
14.6- ^Change of Marks
In the event that the Franchisor, in its sole discretion, shall determine it necessary to modify or discontinue use of any proprietary Marks, or to develop additional or substitute marks, the Franchisee shall, within a reasonable time after receipt of written notice of such a modification or discontinuation from the Franchisor, take such action, at the Franchisee's sole expense, as may be necessary to comply with such modification, discontinuation, addition or substitution.
15. REPORTS, RECORDS AND FINANCIAL STATEMENTS
15.1. Franchisee Reports
The Franchisee shall establish and maintain, at its own expense, bookkeeping, accounting and data processing systems designated by the Franchisor. The Franchisee shall comply with the Franchisor's requirements for timely entry of information into data bases of the Technology Systems, periodic printouts of reports generated by the Technology Systems and the Franchisor's access to all Program and Technology Systems data and all accounting information access by modem or other immediate, complete access. Each transaction of the Center shall be processed on the Program in the manner prescribed by the Franchisor. The Franchisor shall have the right of access to the Program, the Technology Systems, and all data processed thereon with respect to the Center. The Franchisee shall provide access to the Franchisor at any time by installing a modem or other immediate complete access which meets the Franchisor's standards and specifications. The Franchisee shall supply to the Franchisor such types of reports in a manner and form as the Franchisor may from time to time reasonably require, including:
a. within 10 days after the end of each calendar month (or weekly or bi-weekly if the Franchisor requires the Franchisee to pay the Royalty described in Section 11.3 hereof on a weekly or biweekly basis), a report on the Center's Gross Revenues which shall include, if the Franchisee is an entity, a report on such entities' Gross Revenues, for such calendar month (or week or two week period) and a monthly lead and sales report compiled in the Franchisor's format;
b. within 10 days after the end of each calendar quarter, a report on the Franchisee's local advertising expenditures, as further described in Section 12.3 of this Agreement and in the Franchisor's recommended format;
c. within 10 days after the end of each of the Franchisee's fiscal quarters and within 90 days after the end of the Franchisee's fiscal year, a balance sheet and profit and loss statement for the Center which shall include, if the Franchisee is an entity, a balance sheet and profit and loss statement for such entity, for such period (the quarterly statements shall also reflect year-to-date information), prepared in accordance with generally accepted accounting principles, consistently applied, in the Franchisor's recommended format;
d. within 10 days after such returns are filed and in any event by no later than the 15th of September (each calendar year), exact copies of federal and state income, sales and any other tax returns and such other forms, records, books and other information as the Franchisor may periodically require; and
e. any other data, information and supporting records reasonably requested by the Franchisor from time to time, including without limitation daily, weekly or monthly reports of services provided to Clients by category.
The Franchisor reserves the right to require that the Franchisees submit financial statements on a monthly basis. The Franchisor also reserves the right to disclose data derived from such reports, without identifying the Franchisee, except to the extent identification of the Franchisee is required by law. The Franchisee consents to the Franchisor obtaining financial and account information regarding the Center and its operations from third parties with whom the Franchisee does business, as and when deemed necessary by the Franchisor. In the event that the Franchisee fails to submit to the Franchisor when due any reports or information required by this Section 15.1. the Franchisee shall, in addition to submitting the report or information, owe a $150 late fee, to be automatically accessed and paid along with submission of the report or information.
15.2. Books and Records
The Franchisee shall maintain all books and records for its Center in accordance with generally accepted accounting principles, consistently applied, and in a manner as reasonably prescribed by the Franchisor, and shall preserve these records for at least five years after the fiscal year to which they relate.
15.3. Audit of Books and Records
The Franchisee shall permit the Franchisor to inspect and audit the books and records of the Center at any reasonable time, at the Franchisor's expense. If any audit discloses a deficiency in amounts for payments owed to the Franchisor pursuant to this Agreement, then such amounts shall become immediately payable to the Franchisor by the Franchisee, with interest from the date such payments were due at the lesser of 1 '/2% per month or the maximum rate allowed by law. In the event such inspection or audit is made necessary by the Franchisee's failure to furnish required reports, supporting records or other information, or to furnish such information on a timely basis for two or more consecutive reporting periods, or if the Franchisee has received advance notice from the Franchisor and fails to have the books and records available for such audit or otherwise fails to cooperate therewith or if an understatement of Gross Revenues for the period of any audit is determined by any such audit or inspection to be greater than 3%, the Franchisee shall reimburse the Franchisor for the cost of such audit or inspection, including, without limitation, the charges of attorneys and any independent accountants and the travel expenses, room and board and compensation of the Franchisor's employees.
16.1. Transfer by Franchisee
The franchise granted herein is persona! to the Franchisee and, except as stated below, the Franchisor shall not allow or permit any transfer, assignment, subfranchise or conveyance of this Agreement or any interest hereunder. As used in this Agreement, the term "transfer" shall mean and include the voluntary, involuntary, direct or indirect assignment, sale, gift or other disposition by the Franchisee (or any of its owners) of any interest in: (1) this Agreement; (2) the ownership of the Franchisee; or (3) the Center or any assets of the Center. An assignment, sale, gift or other disposition shall include a transfer resulting from a divorce, insolvency, corporate or partnership dissolution proceeding or otherwise by operation of law or, in the event of the death of the Franchisee, or an owner of the Franchisee by will, declaration of or transfer in trust or under the laws of intestate succession.
16.2. —P re-Conditions to Franchisee's Transfer
The Franchisee shall not transfer its rights under this Agreement or any interest in it, or any part or portion of any business entity that owns it or all or a substantial portion of the assets of the Center, unless the Franchisee obtains the Franchisor's written consent and complies with the following requirements:
a. Payment of all amounts due and owing pursuant to this Agreement by the Franchisee to the Franchisor or its affiliates or to third parties holding a security interest in any asset of the franchised business;
b. Agreement by the proposed transferee to satisfactorily complete the initial training program described in this Agreement, which training may be completed by the transferee either prior to or immediately after assignment of this Agreement;
c. Execution of a Franchise Agreement by the proposed transferee in a form then currently offered by the Franchisor, which shall supersede this Agreement in all respects. If a new Franchise Agreement is signed, the terms thereof may differ from the terms of this Agreement; provided, however, the transferee will not be required to pay any additional initial franchise fee;
d. Provision by the Franchisee of written notice to the Franchisor 30 days' prior to the proposed effective date of the transfer, such notice to contain information reasonably detailed to enable the Franchisor to evaluate the terms and conditions of the proposed transfer;
e. The proposed transferee shall have provided information to the Franchisor sufficient for the Franchisor to assess the proposed transferee's business experience, aptitude and financial qualification, and the Franchisor shall have ascertained that the proposed transferee meets such qualifications;
f. Execution by the Franchisee of a general release, in a form satisfactory to the Franchisor, of any and all claims against the Franchisor, its affiliates and their respective officers, directors, employees and agents;
g. Payment by the Franchisee or the proposed transferee of a transfer fee equal to the greater of $12,000 or 25% of the then current initial franchise fee;
The original documents were scanned as an image. The original file can be downloaded at the link above.