UFOC
The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample UFOC
FRANCHISE OFFERING CIRCULAR MAILCOUPS, INC. Avon Industrial Park 180 Bodwell Street Avon, Massachusetts 02322 (800)626-2620 [www.supercoups.com]
The franchisee will develop, own and operate a cooperative direct mail coupon advertising business.
[We offer a Traditional franchise for a territory with about 80,000 Homes and a Metro franchise for a territory with about 400,000 Homes.]
The initial franchise fee for a Traditional start-up franchise is $29,000 (for an 80)000 Home territory (See Ittm 5), In addition to the initial franchice fee, you must pay ue $1)090 for a license to use AdTraskTM software-and one year's maintenance and support. The estimated initial investment varies from $33,890 to $52,295 for a Traditional franchise, from $15,890 to $13,295 for an Industry Experienced Professional franchise, and from $3,000 to $31,895 for a Convercion franchice}. The initial franchise fee for a (Conversion) [Metro] franchise is ($3,000) [$60,000]. The initial franchise fee for an Industry Experienced Professional franchise is $12,000. [The initial franchise fee for a Conversion franchise is $5,000. (See Item 5) In addition to the initial franchise fee, you may pay us $1,090 for a license to use AdTrack software and one year's maintenance and support. The estimated initial investment varies from $34,950 to $62,500 for a Traditional franchise, from $65,950 to $93,500 for a Metro franchise (assumes a 400,000 Home territory), from $17,950 to $53,500 for an Industry Experienced Professional franchise, and from $5,600 to $15,800 for a Conversion franchise.]
You should consult Items 5-7 of this Offering Circular for further information concerning the total investment required.
RISK FACTORS:
1. THE FRANCHISE AGREEMENT PERMITS YOU TO ARBITRATE OR SUE US ONLY IN MASSACHUSETTS. OUT OF STATE ARBITRATION OR LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO ARBITRATE OR SUE US IN MASSACHUSETTS THAN IN YOUR HOME STATE. STATE FRANCHISE REGISTRATION AND RELATIONSHIP LAWS MAY AFFECT THE ENFORCEABILITY OF CHOICE OF VENUE PROVISIONS (SEE UNIFORM UFOC ADDENDUM AND STATE AMENDMENTS TO THE FRANCHISE AGREEMENT).
2. THE FRANCHISE AGREEMENT STATES THAT MASSACHUSETTS LAW GOVERNS THE FRANCHISE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
3. YOU MUST MEET MINIMUM MAILING REQUIREMENTS TO AVOID TERMINATION OF YOUR FRANCHISE AGREEMENT. SEE ITEM 12 FOR THE SPECIFIC MINIMUM REQUIREMENTS.
January 9, 2003
DC 121949vl 43509-00002
Super
Coupsj
Local Coupons. Super Savings.
4. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
Information comparing franchisors is available. Call the state administrators listed in Exhibit A or your public library for sources of information.
Registration of this franchise by any state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in the offering circular is untrue, contact the Federal Trade Commission and the applicable state authorities listed in F.vbihit A
Date of Issuance: (March 1, 2003, ac amendsd May 31] [December 27], 2002. This Offering Circular may be registered in certain states that require pre-sale registration of franchise offerings. The effective date in those states in which this offering is registered is listed on the UFOC Addendum following this page.
THE FRANCHISOR MAY, IF IT CHOOSES, NEGOTIATE WITH YOU ABOUT ITEMS COVERED IN THE PROSPECTUS. HOWEVER, THE FRANCHISOR CANNOT USE THE NEGOTIATING PROCESS TO PREVAIL UPON A PROSPECTIVE FRANCHISEE TO ACCEPT TERMS WHICH ARE LESS FAVORABLE THAN THOSE SET FORTH IN THE PROSPECTUS.
January 9, 2003
DC 121949vl 43509-00002
MAILCOUPS, INC. UFOC ADDENDUM
As to any state law described in this Addendum that declares void or unenforceable any provision contained in the Franchise Agreement, the Franchisor reserves the right to challenge the enforceability of the state law by, among other things, bringing an appropriate legal action or by raising the claim in a legal action or arbitration that you have initiated.
The following states have statutes that may supersede the Franchise Agreement and other related agreements in your relationship with the Franchisor. These statutes may affect the enforceability of provisions in the Agreements related to termination; transfer; renewal; covenants not to compete; choice of law; jurisdiction venue selection; execution of waivers and releases of claims under the statute; injunctive relief; waiver of rights to jury trial; punitive and liquidated damage provisions, and other remedies; arbitration, and discrimination between franchisees: Ark. Code Ann. § 4-72-201 Michie (1993); Cal. Corp. code §§ 31000 - 31516 (West 1994); Cal. Bus. & Prof. Code §§ 20000 - 20043 (West 1994); Conn. Gen. Stat. § 42-133e (1994); Del. Code Ann. tit. 6 § 2552 (1993) Haw. Rev. Stat. § 482E-1 - 482E-12 (1993); 111. Rev. Stat. ch. 815 para. 705/1 - 705/44 (1994); Ind. Code §§1-51 (1994); Ind. Code Ann. § 23-2-2.7 (West. 1994); Iowa Code § 523H.1 - 523H.17 (1994); Md. Code Ann., Bus. Reg. §§ 14-201 - 14-233 (1994); Mich. Comp. Laws §§ 445.1501 - 445.1545 (1994); Minn. Stat. §§*80C01 -80C.22 (1994); Minn. Stat. §§ 80C.01 - 80C.14 (1994); Miss. Code Ann. § 75-24-51 (1993); Mo. Ann. Stat. § 407.400 (Vernon 1994); Neb. Rev. Stat. § 87-401 (1993); N.J. Stat. Ann. § 56:10-1 (West 1994); N.Y. Gen. Bus. Law §§ 680 - 695 (1994); N.D. Cent. Code § 51-19-01 (1993); Or. Rev. Stat. §§ 650.005 - 650.085; R.I. Gen. Laws §§ 19-28.1-1 - 19-28.1-34 (1993); S.D. Codified Laws Ann. §§ 37-5A-1 - 37-5A-87 (1994); Tex. Rev. Civ. Stat. Ann. art. 16.01 (1994); Va. Code Ann. §§ 13.1-557 - 13.1-574; Wa. Rev. Code §§ 19.100.010- 19.100.940 (1994); Wis. Stat. §§ 553.01 - 553.78 (1996); Wis. Stat. §§ 135.01 - 135.07 (1984). These and other states may have fair practice laws and other civil statutes affecting contracts and state and federal court decisions that may also affect the enforcement of provisions in the Franchise Agreement and other related agreements.
A provision in the Franchise Agreement that terminates the agreement upon your bankruptcy may not be enforceable under Title 11, United States Code Section 101.
This Offering Circular is registered, on file or exempt from registration in the following states with franchise registration and disclosure laws:
California - Effective date: "______________________( April 15, 2002, ac
amended ■)
Illinois- Effective date: __________________________{ May 11, 3003, ac
amended ■)
Indiana- Effective date: __________________________{ April 36, 3003, ac
amended .)
Maryland - Effective date: __________________________{ April 18, 2002, ac
amended ■}
Michigan - Effective date: __________________________{ March 35, 3003}
Minnesota - Effective date: __________________________{April3,2QQ2,as
amended ■)
New York - Effective date: __________________________( April 33, 3003, ac
amended ■)
North Dakota- Effective date: __________________________{ April 11, 3003, ac
amended ■)
Rhode Island - Effective date: ___________________________
South Dakota- Effective date: __________________________[ March 35, 3003, ac
amended ■)
January 9, 2003
DC 121949vl 43509-00002
{March 36,3003)
{ March 35, 3003, ae
( March 35, 3003, ae
January 9, 2003
DC I21949vl 43509-00002
Utah-Virginia -
amended,)
Washington -Wisconsin -
amended ■)
Effective date:
Effective date:
Effective date: Effective date:
TABLE OF CONTENTS
ITEM PAGE
ITEM 1 FRANCHISOR, ITS PREDECESSORS AND AFFILIATES........................................1
ITEM 2 BUSINESS EXPERIENCE.............................................................................................2
ITEM 3 LITIGATION..................................................................................................................4]
ITEM 4 BANKRUPTCY...............................................................................................................6
ITEM 5 INITIAL FRANCHISE FEE...........................................................................................7]
ITEM 6 OTHER FEES.................................................................................................................9]
ITEM 7 INITIAL INVESTMENT..............................................................................................15]
ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES.......................19]
ITEM 9-FRANCHISEE'S OBLIGATIONS...............................................................................21]
ITEM 10 FINANCING......................................................................................................*.......22]
ITEM 11 FRANCHISOR'S OBLIGATIONS............................................................................23]
ITEM 12 TERRITORY...............................................................................................................29
ITEM 13 TRADEMARKS.........................................................................................................32]
ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION.....................34]
ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION!
]OF THE FRANCHISED BUSINESS......................................................................34]
ITEM 16 RESTRICTIONS ON WHAT FRANCHISEE MAY SELL......................................34]
ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION........35]
ITEM 18 PUBLIC FIGURES.....................................................................................................38]
ITEM 19 EARNINGS CLAIM...................................................................................................38]
ITEM 20 OUTLETS...................................................................................................................40]
ITEM 21 FINANCIAL STATEMENTS....................................................................................42]
ITEM 22 CONTRACTS.............................................................................................................42]
ITEM 23 RECEIPTS..................................................................................................................43]
EXHIBITS
EXHIBIT A - State Agencies/Agents for Service of Process
EXHIBIT B - Table of Contents of the Confidential Manual
EXHIBIT C - Franchisees
EXHIBIT D - Financial Statements
EXHIBIT E - Franchise Agreement and Related Agreements
EXHIBIT F - (Promissory Notes
EXHIBIT G} Independent Sales Agent/Broker Disclosures
EXHIBIT {Hf [G] - Receipts
DC 121949vl 43509-00002
1
ITEM1
FRANCHISOR, ITS PREDECESSORS AND AFFILIATES
To simplify the language in this offering circular, "us" and "we" means MailCoups, Inc., ("MailCoups") the franchisor. "You" means the person who is awarded a franchise, the franchisee. If the franchise owner is a corporation, partnership or other business entity, "ynn" includes the shareholders, members or partners.
We do business under our corporate name, MailCoups, Inc., and the Service Mark "SuperCoups." Our principal business address is Avon Industrial Park, 180 Bodwell Street, Avon, MA 02322. Our agents for service of process are disclosed in Exhibit A.
We were incorporated in Delaware on February 23, 1998. We grant franchises that offer targeted advertising services principally to local businesses. Our advertising services include cooperative direct mail coupon advertising, Internet and television advertising. We began our operations after purchasing the assets of our predecessor, The Mailhouse, Inc. ("Mailhouse") (Avon Industrial Park, 180 Bodwell Street, Avon, MA 02332), which was a Massachusetts corporation that had granted franchises to operate direct mail coupon advertising businesses since 1984. Mailhouse did not offer franchises in any other businesses.
Mailhouse was created in April 1982 by combining the assets of Douglas Savidge's sole proprietorship, Creative Mailing Services (120 Centre Street, Walpole, Massachusetts) and the assets of Scott Berry's Massachusetts corporation, Super Coups, Inc. (131 Adams Street, Braintree, Massachusetts). Creative Mailing Services operated for about three years and did not offer franchises in this or any other line of business. The first Super Coups, Inc. operated for about three years and did not offer franchises in this or any other line of business.
Like our predecessor, Mailhouse, we grant franchises to operate Cooperative Mailing businesses which {mail} [distribute] local and national advertising via the United States Postal Service [("USPS")] directly to residences and businesses within specified zip codes [("Mail")]. We refer to the addresses to which our franchisees Mail advertising as "Homes." [We offer distribution of Mailings either directly through us, in which a franchisee's "solo mailing" is sent independently to Homes, or through other "shared mail" distribution devices, such as the ADVO ShopWise wrap or the ADVO National Network Extension ("ANNE"). Mailings sent in ADVO's ShopWise wrap is less expensive to distribute than "solo mail". "Shared mail" is not available in all zip codes. (See Item 6)]
Our franchisees also offer advertising on the Internet and on television. Our current Internet program is offered in cooperation with Esave, Inc., an online direct marketing service which enables consumers to locate and select offers of interest to them 24 hours a day{, and which permits advertisers to track the effectiveness of their offers, profile consumers who do respond to their offers and retarget future advertising to those customers, j [.]
{Since the fall of 1998) we have operated a SuperCoups business in Phoenix, Arizona, which is the same as our Franchised Businesses. In the future, we} [We] may acquire or operate {additional} SuperCoups businesses [similar to our franchised businesses in the future. However, we do not own any now]. ADVO, Inc., the largest full-service direct marketing company in the United States owns 100% of our stock. ADVO also is in the direct mail advertising business and each week {mails envelopes} [distributes shared mail packages] to
DC 121949vl 43509-00002
1
more than 60,000,000 households. ADVO has never offered franchises in this or in any other line of business. ADVO's address is One Univac Lane, Post Office Box 755, Windsor, Connecticut, 06095-0755. ADVO has been conducting [a] business ■{©}. [similar to] the type carried on by the franchise since 1980. Founded in 1929 as a hand-delivery company, ADVO entered the direct mail industry as a solo mailer in 1946. We have no affiliates that offer franchises in any line of business or that provide products or services to our franchisees.
As a franchisee, you will ask businesses to advertise by having their message printed on a coupon, generally 3%.inches by 8'/2 inches ("coupon"). Coupons you have sold to local businesses together with coupons we have sold to our National Accounts and coupons sold by other SuperCoups franchisees are Mailed in one envelope to residences in your territory ("coupon Mailing"). The process of Mailing different advertisers coupons in a single envelope is known as "Cooperative Mailing." You also will have the opportunity to solicit the same customers to advertise [with Esave, our current internet program provider,] on our web site and to participate in our television advertising programs.
We Mail approximately {30} [60] million SuperCoups envelopes annually. The {U.S. Poetal Service's) [USPS] rules, regulations and policies will impact your business, as will some state laws that impose use taxes on the manufacturing and Mailing services we perform for you. No specific laws regulate your business, but you must comply with all copyright laws and other laws applicable to the operation of a business. Also, if you conduct business from a home residence, you should confirm that your business operation is consistent with applicable zoning laws. The market for the services you will offer is varied, depending on the geographic area. Some areas are well developed and you will compete with existing independent and franchised businesses offering similar services. You also may compete with ADVO's "ShopWise" program for certain accounts. Competition in each market may vary and the focus of your competition could change at any time as well.
Although some of your competition will come from local newspapers, shopping guides, newspaper circulars, the World Wide Web and broadcast media, your primary competition is from other national and local cooperative direct mail coupon advertising companies.
We do not offer franchises in any other lines of business.
ITEM 2 BUSINESS EXPERIENCE
Director: {Stephanie B. Molna4 [Ed Harless]
[Stephanie B. Molnar became our Director in May 3000. She} [Ed Harless has been our Director and ADVO's Executive Vice President and Chief Administrative Officer since 2002. Ed] has also been Senior Vice President (of Client Logistics and Local Clients) [and Chief Human Resources Officer] for ADVO, Inc. since {April 3000. From May 1987 to April 2000, Stephanie was P.egional Vice President of ADVO, Inc. in Columbia, Maryland. Stephanie works in our office in Columbia} Maryland.) [August 2002. From October 1997 to August 2000, he was Senior Vice President and General Manager for Adventis-Behring. From 1995 to October 1997, he was Vice President of Human Resources for Adventis-Behring. Ed's office is located at ADVO corporate headquarters in Windsor, Connecticut]
DC 121949vl 43509-00002
2
President: William M. Matthews
Bill Matthews became our President in November 2000, after serving as Vice President of Franchise [Support and) Development between August and November 2000. From May 2000 to August 2000, his title was Vice President of {Franchise) Sales and Marketing. He was our Vice President of Franchise Training and Support from Tune 1998 to May 2000. From June 1985 to June 1998, Bill was Sales Manager for Direct Home Advertising Inc. (DHA) in Avon, Massachusetts, SuperCoups' largest franchisee during that time. As the Sales Manager of DHA, Bill opened new territories, recruited, hired and trained salespeople and had the opportunity to gain valuable experience in all areas critical to the success of new and/or existing SuperCoups franchise owners. Bill works in our Avon, Massachusetts office.
Director of Finance: David Murphy
David Murphy joined us in April 2001 as Director of Finance. From August 1997 to April 2001, David was Controller of the Shaw Group in Boston, Massachusetts. Before that, he was Manager of Financial Plan/Analysis for Telco from August 1996 to August 1997. David works in our Avon, Massachusetts office.
[Vice Precident of Marketing and Training; Philip A. Mettra
Philip A. Mettra joined ue in May 2000 as Vice President of Marketing and became our Vice President of Training in January 2002. From December 1997 to May 3000, Philip wac Vice President of Marketing for Money Mailer, LLC located in Garden Grove; California. From May 1996 to December 1997, Philip was Vice President of Marketing for Money Mailer, Inc. Before that, he wac Director of Marketing for Money Mailer, Inc. from April 1991 to May 1996.}
Secretary: David M. Stigler
David M. Stigler joined us in April 1998 as Secretary. David has also been General Counsel for ADVO, Inc. since April 1986. [David's office is located at ADVO corporate headquarters in Windsor, Connecticut.
Director of Training] [Assistant Vice President, Franchise Training and Support^: David R.
("Randy") Naser
David R. Naser joined us in November 1998 as Assistant Vice President, Franchise Training and Support [and was named Director of Training in 2001]. From September 1997 to November 1998, David was President of Results Only Marketing, Inc. in Westboro, Massachusetts. Before that, he was General Manager of Val-Pak of Massachusetts from November 1992 to September 1997. David works in our Avon, Massachusetts office.
(Franchise Trainer; H. Kenneth Bird} [Director of Operations: Bruce Krangel]
[H. Kenneth Bird became Mail Coups' Franchise Trainer in October 1997. From April 1980 to April 1999, Kenneth was also a Real Estate Broker for the Ken Bird Agency in Hamilton, New Jersey. Ken) [Bruce Krangel joined us in June 2002 as our Director of Operations. From April 2000 to March 2002, Bruce was Plant Manager for Cox Target Media in Las Vegas, Nevada. From 1987 to February 2000, he was Finishing Manager for
3 DC 121949vl 43509-00002
Brown Printing Co. in East Greenville, Pennsylvania. Bruce works in our Avon, Massachusetts office.
Director of Marketing: Heather Strohl
Heather Strohl joined us in November 2002 as our Director of Marketing. From May 2000 to July 2002, Heather was Worldwide Product Marketing Manager for Excelon Corporation in Burlington, Massachusetts. From November 1996 to May 2000, she was Marketing Consultant for Strohl Marketing Strategies in Norfolk, Massachusetts. Heather works in our Avon, Massachusetts office.
Franchise Sales Executive: William Wilson, Jr.
William Wilson, Jr. joined us in April 2000 as Franchise Sales Executive. From March 1999 to March 2000, William was Director of Franchising for Total Car Franchising, Inc. in Atlanta, Georgia. From January 1996 to March 1999, William was Director of Franchise Licensing for Aaron Rents, Inc. in Atlanta, Georgia. William] works
from his office in [Hamilton, New Jersey.) [Atlanta, Georgia.
Franchise Licensing Coordinator: John ("Jay") Mitchell
Jay Mitchell joined us in April 2002 as our Franchise Licensing Coordinator. From July 2000 to March 2002, Jay was Marketing Manager for Corvette City USA/LCC Financial Corp. in Atlanta, Georgia. From March 2000 to July 2000, Jay was Assistant Broker for Etrade Securities in Atlanta, Georgia. From August 1998 to July 2000, he was an optician and lab tech for Lenscrafters in Atlanta, Georgia. From February 1997 to May 1999, Jay was Senior Resident Assistant for Johnson & Wales University in Providence, Rhode Island. Jay works in our Avon, Massachusetts office.
Internet Technology Manager: Christopher W. Valli
Christopher W. Valli became our Internet Technology Manager in December 1999. From June 1996 to December 1999, Christopher was our Programmer. Christopher works in our Avon, Massachusetts office.]
Franchise Brokers:
We use certain independent sales agents and franchise brokers to offer franchises. The agents/brokers listed do not have the authority to negotiate the offer of the Franchise Agreement or to otherwise contract or act on our behalf. We will not be bound by any statements or representations they may make, and we are under no obligation to offer a Franchise Agreement or any other rights to anyone whom they refer to us. See Exhibit -{G± [F] for a description of the agent/broker servicing your territory.
ITEM 3 LITIGATION
DC 121949vl 43509-00002
4
Other than the following {four) actions, no litigation (is required to) [must] be disclosed in this offering circular.
Pending Litigation:
[Connie A. Nagrampa v. MailCoups, Inc., before the American Arbitration Association and Does 1-25, Case No. C02-03148, Superior Court, of California. Con* Costa County, November 12,2002.
On November 26, 2001 we filed a demand for arbitration against Connie A. Nagrampa claiming she had unlawfully breached her franchise agreement with us, and that she owed us $81,684.62 in damages for sums due before the termination, plus lost future profits arising from the early termination of her franchise agreement, our costs and attorneys fees. She denied liability. She then attempted to assert counterclaims against us in the arbitration, but because she failed to pay the filing fees required by the American Arbitration Association ("AAA"), her counterclaims were not accepted for filing.
On November 12, 2002 she filed a lawsuit against us and the AAA in the Superior Court of California, County of Contra Costa alleging certain statements or omissions of information relating to earnings and costs constituting intentional misrepresentation] 4Q&
June 27, 2001, we sued Robert Philpott, Marietta Philpott and Yellow Jacket Franchise Corporation in the United States District Court for the Central District of California, Case No. 01-5651-RDK (Mcx.). Our case alleges that the Philpotts, who sold the assets of the Yellow Jack Franchise Corporation in January 2000; breached the Asset Purchase Agreement and also breached certain other related agreements that were executed at the same time. In addition, we terminated the Philpott's Franchise Agreement for their failure to pay fees due us, and we terminated Robert Philpott's Employment Agreement with us and Marietta Philpott's Consulting Agreement. On July 17, 2001. the Philpotts filed an Answer and an eleven count Counterclaim which includes claims for fraud (intentional misrepresentation)), negligent misrepresentation, [fraud and deceit, and violations of California franchise law. She further alleges that the arbitration provision in our franchise agreement violates the California Consumer Legal Remedies Act, because it violates her constitutional right to trial by judge and jury, to due process of law and to have a public forum for the resolution of her legal claims. She also claims that the arbitration clause violates the California Unfair Trade Practices Act and seeks to enjoin enforcement of the arbitration clause. We are filing a motion to remove the case to federal court and to compel Ms. Nagrampa to arbitrate her claims as required by the Federal Arbitration Act. We] {failure to deliver franchise disclosures, material omissions ■from unfiledcommunications, failure todisclose material modificationsaadimproper termination of the Franchise Agreement. They subsequently amended the Counterclaim to add ADVO as a counter defendant. As this disclosure was being prepared, we have filed an Answer in which we and ADVO deny any wrongdoing, and both parties were conducting discovery.
On November 21, 3001, franchisees Robert and Linda Duncan sued us, ADVO) Inc., Super Coups, Inc. (sic) and Does 1 100 in the Superior Court of California, County of Orange, Case No, 01CCM976, The Duncans owned a Yellow Jacket franchise at the time we acquired the Yellow Jacket Franchise chain. In August 2001, the Duncans, who owed us money for mailings, terminated their franchise after we informed them that if they wished to continue using the SuperCoups trademarks, they must sign a SuperCoups Franchise Agreement. Otherwise, they must revert to use of the Yellow Jacket trademarks. In the lawsuit, the Duncans claim that our demand constituted either an unlawful offer of a franchise, or a material modification of an
5
DC 121949vl 43509-00002
existing franchise in violation of the California Franchise Investment Law. They also allege that we breached their Franchise Agreement by failing to permit them to aeeign their written Franchice Agreement to qualified purchasers sometime during the four years before they filed the lawsuit. Finally, they allege that we committed negligent misrepresentation and fraud by representing that if they would cease using the Yellow Jacket trade dress, they would be permitted to use Super Coups' trade dress. They claim damages of $35,000 and also seek punitive damages and attorney's fees. We and ADVOj. deny liability for any .(of their ?1 legations nnd plan to file breach of contract counter-claims to recover amounts they owed ue when they terminated their franchise, as well as the profits we would have realized had they continued to operate their franchise through the remainder of its term, plus attorney's fees.) [and all of her claims.]
Concluded Litigation:
[State of New York v. The Mailhouse, Inc. and Scott B. Berry, Supreme Court of New York, New York County, index § 92. On August 11, 1992, the State of New York filed a Complaint against our predecessor, Mailhouse and Scott B. Berry ("defendants") alleging that the defendants had offered and sold franchises in New York without registration, in violation of the New York Franchises Act. On September 2, 1993, the State of New York also filed a Concent Judgment, in which the defendants agreed to stop celling franchises in New York until the franchises were properly registered and agreed not to violate the New York Franchises Act in the future. In addition, the defendants agreed to pay $10,000 to the State of New York.)
State of Wisconsin v. The Mailhouse, Inc., before the commissioner of Securities of the State of Wisconsin, File No X-93066 (F). On February 10, 1994, the State of Wisconsin entered an order of Prohibition against our predecessor, Mailhouse ("defendant") prohibiting the defendant from offering or selling franchises in Wisconsin unless the franchises were properly registered with the Commissioner of Securities. The defendant agreed to the entry of this Order, which alleged that the defendant had sold a franchise to a Wisconsin resident without first registering the franchise with the Commissioner of Securities. No penalties were assessed.
ITEM 4
BANKRUPTCY
No proceedings under the United States Bankruptcy Code must be disclosed in this offering circular.
DC 12I949vl 43509-00002
6
ITEM 5
INITIAL FRANCHISE FEE
We {will charge you a lump sum, non-recurring, non-refundable franchise fee when you cign the Franchise Agreement. The initial franchise fee for a traditional franchise starts at $29,000 for an 80,000 Home territory. "Home" means an individuals family dwelling and/or a business. Additional Homes may be available at a cost of $100 per 1,000 Homes. Ifj [offer franchises based on the size of the Territory granted and your experience in our industry. Our franchise offerings are:
|
Type of Franchise |
Fee |
Territory Size |
Qualifications |
|
Traditional |
$29,000 |
80,000 Homes |
No previous experience required. |
|
Industry Experienced Professional |
$12,000 |
80,000 Homes |
At least 1 year bona fide sales experience in direct mail coupon industry. |
|
Conversion |
$5,000 |
Based on existing business |
Only for owner/operators of direct mail coupon businesses. |
|
Metro |
$60,000 |
400,000 Homes |
Only for people with extensive business and sales management experience. |
Fees must be paid in full when] you sign a Franchise Agreement[. Fees are not refundable. "Homes" are individual or family dwellings and/or businesses. We may offer to grant you larger than standard size territories for a] {in the states of Illinois or Washington, you must also sign a promissory note (Exhibit F 2) and a guaranty (attached to the Franchise Agreement) for an amount equal to the initial franchise fee and other initial payments you owe us. The promissory note will be due and payable once we have completed our initial (pre opening) obligations to you under the Franchise Agreement and you have commenced doing business. The Illinois Office of the Attorney General and the Washington Department of Financial Institutions require this deferral of fees. If you are purchasing your first Traditional franchise, the initial franchise fee includes the cost of training for you and one additional person (but not living expenses), all costs except postage for the first 25 standard one sided 314 k 814 inch coupons Mailed to the first two 10,000 Home areas. There are no refunds under any circumstances.
If you are awarded an additional territory, you must pay us an initial} fee of $100 per 1,000 (Homes.) [additional Homes.]
(If you are awarded a franchise in the states of Illinois or Washington, no initial franchise fee of other initial payments will be due to us until we have completed our initial (pre, opening} obligations to you under the Franchise Agreement.} [Mailing Discounts)
(Initial) [Traditional franchisees do not pay a Royalty Fee or a Base Fee on the first 10 Community Marketing Profiles ("CMPs") to which they mail. Metro franchise territories are divided into 4 10-CMP areas. Metro franchisees do not pay a Royalty Fee or a Base Fee on the first 10 CMPs to which they Mail in each area. A CMP consists of approximately 10,000 Homes which share certain demographic characteristics.
DC 121949vl 43509-00002
7
Conversion and Industry Experienced franchisees and franchisees acquiring additional territories do not qualify for these discounts.
Training
Persons acquiring their first SuperCoups franchise receive in-house classroom training for two people without additional charge. Additional persons attending training will be charged $500 each. Traditional and Metro franchisees will receive mandatory infield training without additional charge. In-field training is available for Conversion and Industry Experienced Professionals at a fee of $750 per day, plus expenses, but in-field training is not required for them. Franchisees acquiring their franchises through a transfer from a SuperCoups franchisee are charged a $5,000 training fee. Training] fees are not refundable. [You must pay wage] {If you are awarded an additional franchise territory, you will not be entitled to receive initial training, unless you pay us the initial training fees set out in Item 6. Moreover, you shall not be entitled to receive the complimentary Mailing of the first 25 coupons Mailed to 10,000 Homes in your first two coupon Mailings.
*
If you are acquiring your first SuperCoups franchise, we will provide you, at no extra charge, classroom training and training materials for up to two trainees. If you send more than two people to training, we will charge you $500 for each additional person. You must pay for all your and your attendees' wages}, insurance, travel, (meals and lodging. Training fees are not refundable under any circumstances} [meal and lodging expenses associated with attending training]. See Item 11 for additional information on training.
[Miscellaneous
If you acquire a renewal franchise, you must pay us the renewal fee specified in you , franchise agreement.
We may negotiate initial franchise fees for ]{We reserve the right to negotiate the initial franchise fee for new} franchisees acquiring a territory that (was previously Mailed for one year or more by us or a SuperCoups franchise owner.} [previously was Mailed for one or more years by a SuperCoups franchisee.]
[If you are acquiring a renewal franchise, you will pay us the renewal fee specified in your current Franchise Agreement.
If you own and operate a direct mail company and meet our criteria, we may authorize you to convert your business into a SuperCoups franchise under our Conversion Franchise Program. The initial franchise fee for a Conversion franchise is $3,000. Conversion franchises do not receive "free Mailings."
If you have had at least one year of bona fide sales experience with a company in the direct mail coupon industry, your experience may qualify you as an Industry Experienced Professional franchisee. Industry Experienced Professional franchisees pay a $12,000 initial franchise fee. They receive our 5-day in-house training program, but no in field training. No Mailings are included in the fee. Additional initial franchise fees for territories larger than 80,000 Homes are assessed at the same rate charged Traditional franchisees.
8
DC 12I949vl 43509-00002
All new franchiseeE muet acquire from us AdTrackTM Goftware) [New franchisees may acquire AdTrack'"1 software from us] for use in operating their (Franchised Bucineee) [franchised businesses]. We charge $1,090 for a single {user) [use] license for the {Software} [software, which includes one year's support].
ITEM 6
OTHER FEES
Name of Fee(1)
JAmount
]Due Date
]Remarks4
(Royalty Fes (2) $15.25/1,000 Homes Mailed 7 days before scheduled Mailing data. If you ever default, 11 days before Mailing date) [Mailing Charges per 1,000 envelopes Mailed:]
{ Charged) [Manufacturing Charges
- Base Fee(2)
- Production Charge
(3)
Royalty Fee(4) Distribution Charge( ' Trucking(6) Total Mailing Charges
$53.50 $356.20
$15.25
$85.65-$126
$5 - $30
$515.60 - $580.95
30% 3 weeks before Mailing. Balance Friday before Mailing
Charges] on Cooperative Mailings (only).
[Varies based on volume and distance.]
] License Fee ['7)]
]2- 8% of Gross Receipts on other products and services4(3)^
ith
I10 day of each month for sales made during previous month
] Charges are for products and services other than Cooperative Mailings. Precise fees to be set in advance by MailCoups. Fees are not now assessed. (Fees are subject to change,
] Minimum Bimonthly Royalty Fee {*153'SOperMnmailgd
Community Marketing Profile ("CMB^ subject to then applicable current Mailing requirement 4-1(4) (8)
$15.25 per 1,000 envelopes not mailed during previous 2-month period]
:th
]15 day of January, March, May, July, September and November
]Only due when you fail to Mail 4«4 [to] all (CMPs) [Homes] required by your Agreement.
DC 121949vl 43509-00002
9
Name of Fee (1)
(Amount
]Due Date
]Remarks4
(Manufacturing Charge (1) (2) Per current price list (Approximate current coet for a 25 3x8 coupon Mailing to iu,u00 Homes is usually $3,440) 7 days before scheduled Mailing date. If you ever default, 14 days before Mailing date Includes art design, type setting) paper, printingi cutting, collating, inserting, sort fraying) envelopes) addressing and direct mailing.
Postage Charge (1) (2) 11.2c per envelope 7 days before scheduled Mailing date. If you ever default, 14 days before Mailing date Approximate current poetage cost for a Mailing to 10,000 Homes is $1,090 Eubject to change. Trucking Charge (1) (2) Usually between $0 and $200 7 days before scheduled Mailing date. If you ever default, 1A days before Mailing date Varies based on distance, j Mailing Cancellation & Adjustment FeesI(9)]
]$750 per cancelled Mailing [for each CMP that was not mailed]
$250 per changed Mailing [for each CMP effected by the change
$100 for each CMP effected by the change]
($100)
]The earlier of the date you notify us or 10 days before the scheduled Mailing date
JCancellation of Scheduled Mailing less than (six (6)) [6] weeks before the scheduled Mailing date.
Change of Mailing date within 90 days of scheduled Mailing date.
Change of Mailing date more than 90 days before scheduled Mailing date.[
4-}« Initial Training for
Additional
Representativel^i^-
]$500 per person
]Before training
]You must pay out-of-pocket expenses for trainees or our trainer or both. No fee is charged for your first two representatives.!
Standard Training(10)
- Classroom
- In-field
-$5,000 per week - $750 per day, plus expenses
Before training
Required on the appointment of a new operating franchisee or if Franchise Agreement indicated initial training is not included in initial franchise fee.]
DC 121949vl 43509-00002
10
|
Name of Fee(1) |
i ] Amount |
]Due Date |
i ]Remarks{ |
|
]Additional Optional Training4(i^. |
]Varying amounts, usually between $100 and $500 |
JBefore training |
|
|
covers payments to us for training, but not your travel and related expenses-4 |
|||
|
i JAdditional Mandatory Training |
]Not more than $250 per year |
i JBefore training |
i ]None scheduled now, but when implemented there will be a maximum of two per year.-f |
|
JAdvertising Fee {(2)) |
i JAnnual amount based upon number of Homes in your territory. 0- 250,000 Homes: $500; 250,000-1,000,000 Homes: $1,000; 1,000,000 +Homes: $2,000 |
]30 days after invoice date |
|
|
year.) May be increased by a majority vote of Franchisee Advisory Board |
|||
|
11.4 |
|||
|
i JAudit and Business Inspection |
i JOur actual costs, such as travel, room, board, accountants fees |
] 10 days after invoice date |
]You incur costs only if an audit is done because you fail to timely submit the financial information we request .4 |
|
i JAdditional Territory |
]$100 per 1,000 Homes |
JBefore amending your Franchise Agreement |
] Written change to the territory description in your Franchise Agreement.4 |
|
i ] Renewal Fee |
]$2,50<H |
i ]When you sign the then 4-4current Franchise Agreement^ |
JRenewal is for 10 years. |
|
i ] Transfer Fee |
]$2,500 |
JWithinlOdaysof receipt of our approval of your transfer request^ i |
1 JMust be paid before date of transfer. |
|
i ]Financing Charges |
i JHighest lawful rate but not more than 2% per month{ |
i JWhen invoiced |
1 JAssessed on all past due amounts. |
DC 121949vl 43509-00002
11
Name of Fee(I)
{Amount
]Due Date
]Remarks4
]TV Production 4WKU)]
]$50 for first 10 commercial productions, $40 per commercial thereafter
] When invoiced
] Optional program is operated by a franchisee, CoupsCorp. Fees are paid to CoupsCorp. and are subject to change. We may charge fees as program develops. Cost of -{aif time) [airtime] varies by market.^
JAdTrack Software Maintenance and Support^
]$295 {Anniversary) [per year
Each anniversary]
of when you acquired
software
]Contract is optional {after first year).
JIMarket - ^Marketplace {Solo Mail) Lead Generation Software
]$400 License first year only. (Production and mailing costc separate! When invoiced We will mail out at least 500 solo lead businesses prior to your first mailing at no cost to ye«4[
{Targeter Express Maps and Reports $20 per hour (5) When invoiced This charge only applies to maps and reports which exceed the number provided without chargei} [When invoiced
{ Targeter Express Additional Maps) [Optional program.
{ $5 to $25 men invoiced Depends on map size.) [Crossbow Maps and Reports (12)
$20 per hour
When invoiced
lEversave Internet Coupon Fees l(13>]
]New Merchant Set-
upIU
-$5.00 (up to 5
locations)
- $2.00 for each additional 4
^■set of 5 locations.
Monthly Powering FeeM
- varies per target area. (See Remarks. (6) }[(See Remarks)]
]When invoiced
| Target Area
- $4.00 per coupon (5 mile area)
-$8.00 per coupon (15 mile area)
- $10.50 per coupon (35 mile area)
-$37.00 per coupon (State)*
]Cross Sale Compensation ("CSC")^I(14)]
]As negotiated [between franchisees]. Otherwise as (established for Region) [we establish]
] 15 days before Scheduled Mailing
]Applies to "Cross Sales," sales you make in another franchisee's territory.
DC 121949vl 43509-00002
12
Footnotes:
(1) All fees are imposed by and payable to us. All fees and charges are subject to change. Increases in manufacturing charges will be announced by October 1 for the following year. (Postal rate) [Distribution charge] increases may be passed on at any time. [Fee estimates assume a minimal Mailing size of 1 CMP.] Royalty fees and Minimum Bimonthly Royalty
.Fees increases are effective {February) [January] 1. Other fees may be increased at any time following notice.
(2) [Manufacturing charges consist of 2 elements: a Base Fee and Production Charges. The Base Fee is a charge for envelopes, lists, labels, setup and warehousing.
(3) The Production Charge is an estimate, based on an envelope containing 25 - 3"x8" coupons. It covers the cost of art, prepress, plating, printing, inserting and direct mail
services. In the past,] ((2) If you ever fail to pay royalty fees, manufacturing charges, postage charges or trucking charges at least 7 days before a scheduled Mailing date, the due date will become \A days before scheduled Mailing dates. If you pay royalty fees, manufacturing charges, postage charges or trucking charges and we do not put your Mailing into distribution within 1*1 days after your Mailing date, these fees or charges will be refunded to you. In the past) we have offered discounts {on manufacturing charges to franchisees who performed their own desktop publishing and who were) [to I high volume, high frequency Mailers. {We are phasing out that program and do not plan to offer it in the future.) Discounts are provided in our sole discretion and may be (reduced or) revoked at any time.[
(4) JRoyalty {Fees) and Minimum Bimonthly Royalty Fees may be increased annually, but not by more than 6% per year.[
(5) ]The {current royalty fee is $15.35 per 1,000 Homes Mailed) [Distribution Charges depend on the weight of each envelope and whether your Mailing is sent via "solo distribution," directly through the USPS, or through a shared distribution service, such as the ADVO ShopWise wrap. Shared distribution pricing is normally materially less costly than solo distribution, but it is not available in all markets. The chart assumes that a 25 -3"x8" coupon Mailing weighs 1.7 ounces. In the chart, the lower number assumes a 1.7 ounce envelope delivered in the ADVO ShopWise wrap. The higher number assumes a 1.7 ounce envelope Mailing through the USPS. The current Distribution Charge for Mailings delivered in the ADVO ShopWise wrap is $44.50 per ounce per 1,000, plus $10 per 1,000. The fee currently is assessed in 1/10* ounce measurements]. If an ADVO Mailing {can accommodate additional materials without increasing postage chargee) [is available on or near your scheduled Mailing date], we may offer to {include) [distribute] your SuperCoups Mailing within the ADVO {"Wrap;") [ShopWise wrap,] thereby reducing your postage charges. The extent of this benefit will differ from Mailing to Mailing and by location. It may be unavailable in certain areas. [Neither we nor ADVO is bound to offer this program in the future.
(6) Trucking charge varies based on weight, volume and distances shipped.
(7) The License Fee (for products and services other than Cooperative Mailings)]{{>
The License Fee ) will be a flat fee calculated at a rate which will not exceed 8% of our suggested prices. Gross Receipts is defined as the aggregate gross amount of all revenues from whatever source derived (whether in form of cash, credit, the redemption of gift certificates,
13
DC 121949vl 43509-00002
agreements to pay or other consideration, including the actual retail value of any goods or services traded, bartered, or otherwise received by the Franchisee in exchange for any form of non-monetary consideration, whether or not payment is received at the time of sale or any (such) amount is proved uncollectible) from (or in conjunction with the Franchisee! Business, whether such} [the franchisee! business, whether this] business is conducted in compliance with or in violation of the terms of the Franchise Agreement. Gross Receipts includes all sales of products, services or promotional items made from the {Franchised Buginesr} [franc^ed business]. Gross Receipts includes proceeds received from "loss of business" insurance. However, Gross Receipts does not include:
a) Proceeds due from the sale of Cooperative Mailings;
b) Sales or use taxes collected by (the Franchisee) [you];
c) The amount of any refunds or allowances made on products or services returned by customers;
d) Returns to shippers, vendors and manufacturers;
e) Proceeds derived from the sale of equipment or supplies used by 4&® Franchisee) [you] in the conduct of ■{*&]■ business and not provided for resale;
f) Sums received in settlement of claims of loss or damage to fixtures, equipment or leasehold improvement; and
g) Sale of gift certificates.
(8) [If, during any 2-month period, you fail to meet the schedule or carry out a Mailing which is required by your Franchise Agreement, you must pay us the Minimum Bimonthly Royalty. The fee is based on the number of envelopes you were required to have Mailed during that 2-month period.
(9) If you ever fail to pay royalty fees, manufacturing charges, distribution charges or trucking charges before the Due Date, we may refuse to produce or distribute your Mailings, and you will owe us a Mailing Cancellation or Adjustment Fee. If no Mailing has been delivered during a 2-month period, the Minimum Bimonthly Royalty Fee will be charged. If you pay royalty fees, manufacturing charges, distribution charges or trucking charges, and we do not put your Mailing into distribution within 14 days after your Mailing date, these fees or charges will be refunded to you. In the past we have offered discounts on manufacturing charges to franchisees who performed their own graphic design and who were high volume, high frequency Mailers. We are phasing out that program and do not plan to offer it in the future. Discounts are provided in our sole discretion and may be reduced or revoked at any time. Royalty Fees and Minimum Bimonthly Royalty Fees may be increased annually, but not by more than 6% per year.
(10) If you acquire your franchise from a SuperCoups franchisee, and you or your operating franchisee have not completed our initial training, you must pay the fee and complete the training.
(11) ]((4)) Clients must buy coupons to participate in this program.
(12) ((5)) You will receive one map, analysis and report each month without charge, plus one additional map, analysis and report per month for each 100,000 Homes you Mail in excess of your first 100,000 Homes. The (Targeter Express) [Crossbow] program and fees are subject to change or cancellation in our discretion.
DC 121949vl 43509-00002
14
The original documents were scanned as an image. The original file can be downloaded at the link above.