UFOC
The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample UFOC
QPIRTEK
FRANCHISE OFFERING CIRCULAR
Pirtek USA LLC
A Delaware Limited Liability Company
501 Haverty Court
Rockledge, Florida 32955
Telephone: (321)504-4422
The franchise offered is for the right to own and operate a Pirtek® hose service center business, which will consist of the sale, custom assembly and installation of industrial and hydraulic hoses, fixed tube assemblies, fittings and related components and other distinctive products and services.
The Initial Franchise Fee for a PlRTEK hose service center business is $45,000. You also must pay to us a $10,000 Shop Set-up Fee. In addition, you must purchase from us the opening inventory, and certain items of the equipment (including the PIRTEK Data System), uniforms and other similar items with the PlRTEK trademark for your Business, for a total of approximately $89,000 to $210,000. The estimated initial investment required for a Pirtek hose service center business ranges from $210,000 to $538,000 (which includes the Initial Franchise Fee, the Shop Set-up Fee and other amounts as further described in Items 5 and 7).
Risk Factors:
1. THE FRANCHISE AGREEMENT PERMITS YOU TO ARBITRATE ONLY IN ORLANDO, FLORIDA, OR AT SUCH OTHER PLACE AS MAY BE MUTUALLY AGREEABLE TO THE PARTIES. OUT OF STATE ARBITRATION MAY RESULT IN A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO ARBITRATE WITH US IN ORLANDO, FLORIDA, THAN IN YOUR HOME STATE.
2. THE FRANCHISE AGREEMENT STATES THAT THE LAWS OF THE STATE OF FLORIDA GOVERN THE AGREEMENT. TO THE EXTENT NOT SUBJECT TO ARBITRATION, ANY CAUSE OF ACTION, CLAIM, SUIT OR DEMAND MUST BE BROUGHT IN THE FEDERAL DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA IN ORLANDO, FLORIDA, OR IN BREVARD COUNTY CIRCUIT COURT, FIFTH JUDICIAL DISTRICT, TITUSVILLE, FLORIDA, ALTHOUGH THE GOVERNING LAW MAY PROVIDE THAT ANY PROVISIONS OF THE FRANCHISE AGREEMENT DESIGNATING JURISDICTION OUTSIDE OF THE STATE ARE VOID. IT MAY COST MORE TO LITIGATE WITH US IN FLORIDA THAN IN YOUR HOME STATE.
3. EVEN THOUGH THE FRANCHISE AGREEMENT STATES THAT THE LAWS OF THE STATE OF FLORIDA GOVERN THE AGREEMENT, LOCAL LAW MAY SUPERSEDE IT EM YOUR STATE. PLEASE REFER TO ANY STATE-SPECIFIC ADDENDUM THAT MAY BE ATTACHED TO THE OFFERING CIRCULAR FOR DETAILS.
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4. YOU MUST ATTAIN OR EXCEED THE MINIMUM ANNUAL PERFORMANCE TARGET FOR YOUR BUSINESS (AS SPECIFIED ANNUALLY IN WRITING BY US). FAILURE TO COMPLY MAY RESULT IN THE DEFAULT AND TERMINATION OF YOUR FRANCHISE AGREEMENT.
5. ALL INVENTORY PRODUCTS AND CERTAIN EQUIPMENT MUST BE PURCHASED FROM THE FRANCHISOR, WHO SETS THE COST OF THE PRODUCTS. THIS PROHIBITS YOU FROM SELECTING ANOTHER SUPPLIER THAT MAY OFFER SIMILAR PRODUCTS AT A LOWER COST. THIS MAY IMPACT YOUR PROFIT MARGIN.
6. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
Information comparing franchisors is available. Call the state administrators listed in Exhibit 1 or your public library for sources of information.
Registration of this franchise by a 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 state authority listed in Exhibit 1.
Effective Date: See Exhibit 1
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PIRTEK USA LLC
EFFECTIVE DATE: SEE EXHIBIT 1
INFORMATION FOR PROSPECTIVE FRANCHISEES
REQUIRED BY FEDERAL TRADE COMMISSION
TO PROTECT YOU WE'VE REQUIRED YOUR FRANCHISOR TO GIVE YOU THIS INFORMATION. WE HAVEN'T CHECKED IT, AND PONT KNOW IF IT'S CORRECT. IT SHOULD HELP YOU MAKE UP YOUR MIND. STUDY IT CAREFULLY. WHILE IT INCLUDES SOME INFORMATION ABOUT YOUR CONTRACT, DON'T RELY ON IT ALONE TO UNDERSTAND YOUR CONTRACT. READ ALL OF YOUR CONTRACT CAREFULLY. BUYING A FRANCHISE IS A COMPLICATED INVESTMENT. TAKE YOUR TIME TO DECIDE. IF POSSIBLE, SHOW YOUR CONTRACT AND THIS INFORMATION TO AN ADVISOR, LIKE A LAWYER OR AN ACCOUNTANT. IF YOU FIND ANYTHING YOU THINK MAY BE WRONG OR ANYTHING IMPORTANT THAT'S BEEN LEFT OUT, YOU SHOULD LET US KNOW ABOUT IT. IT MAY BE AGAINST THE LAW.
THERE MAY ALSO BE LAWS ON FRANCHISING IN YOUR STATE. ASK YOUR STATE AGENCIES ABOUT THEM.
FEDERAL TRADE COMMISSION WASHINGTON, D.C. 20508
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NOTICE REQUIRED
BY
STATE OF MICHIGAN
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
(a) A prohibition on the right of a franchisee to join an association of franchisees.
(b) A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protections provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.
(c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
(d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of franchisor's intent not to renew the franchise.
(e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.
THE MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.
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(f) A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
(g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:
(i) The failure of the proposed transferee to meet the franchisor's then-current reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or sub franchisor.
(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
(i) A provision which permits the franchisor to directly or indirectly convey, assign, or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.
The fact that there is a notice of this offering on file with the attorney general does not constitute approval, recommendation, or endorsement by the attorney general.
Any questions regarding this notice should be directed to the Department of Attorney General, State of Michigan, 670 Williams Building, Lansing, Michigan 48909, telephone (517) 373-7117.
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TABLE OF CONTENTS
Item
1. THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES....................................1
2. BUSINESS EXPERIENCE.................................................................................................3
3. LITIGATION.......................................................................................................................4
4. BANKRUPTCY................................................................................................................45
5. INITIAL FRANCHISE FEE..............................................................................................45
6. OTHER FEES....................................................................................................................S
7. INITIAL INVESTMENT.................................................................................................«ifl
8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES........................4511
9. FRANCHISEE'S OBLIGATIONS................................................................................4415
10. FINANCING..................................................................................................................4^12
11. FRANCHISOR'S OBLIGATIONS...............................................................................4412
12. TERRITORY.................................................................................................................3425
13. TRADEMARKS............................................................................................................2526
14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION........................?2
15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF
THE FRANCHISED BUSINESS..................................................................................282
16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL.................................3822
17. RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION...........29JQ
18. PUBLIC FIGURES........................................................................................................32Q
19. EARNINGS CLAIMS...................................................................................................3221
20. LIST OF FRANCHISED OUTLETS............................................................................1Z$1
21. FINANCIAL STATEMENTS.......................................................................................341
22. CONTRACTS................................................................................................................3$1
23. RECEIPT.......................................................................................................................^M
UFOC STATE- SPECIFIC ADDENDA - CALIFORNIA, ILLINOIS, MARYLAND, MINNESOTA, NEW YORK, RHODE ISLAND AND WISCONSIN-------$$
EXHIBITS
1. List of Agents to Receive Service of Process
2. Franchise Agreement with Acknowledgment Addendum, State Specific Addenda to Franchise Agreement and Appendices A (Franchised Location, Territory, Promotional Zone), B (Marks), C (Addendum to Lease), D (Computer Software License Agreement), E (Draft Authorization), F (Assignment of Telephone Numbers), and G (Assignment of Domain Names and E-Mail Address)
3. Audited Financial Statements
4. Franchisee Lists
5. Receipt
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Iteml
THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES
To simplify the language in this Offering Circular, Pirtek, we, us or any similar reference means Pirtek USA LLC, the franchisor. You, your or any similar reference means the person who buys the franchise. If the franchisee is a corporation, partnership or other entity, you may also mean its owners. Certain provisions of the franchise agreement apply to your owners and are noted in this Offering Circular.
We are offering Pirtek® franchises in the United States under master franchise rights granted to us in June 1997 by Pirtek Fluid System Pty. Ltd. ("PFS"), the head franchisor based in Australia. Several items of information in this Offering Circular are stated twice where necessary, once for us and separately for PFS. This duplicate disclosure is required by federal regulation, but you should be aware that we are an independent business from PFS and operate under a master franchise agreement with PFS that obligates us to adhere to various requirements that PFS establishes and modifies from time to time. The master franchise agreement is further described in Item 13. PFS does not guarantee the performance of our franchise obligations. Your franchise agreement is a contract between you and us.
We are a Delaware limited liability company formed in June 1997. We have no predecessors. Our principal business address is 501 Haverty Court, Rockledge, Florida 32955; telephone: (321)504-4422. We do business under our corporate name and PIRTEK.
Our agents for service of process are disclosed in Exhibit 1 to this Offering Circular.
We grant franchises to qualified persons for the right to own and operate a Pirtek: hose service center business (the "Business"). We also are in the business of the administration of our franchise system. We started granting Pirtek hose service center franchises in June 1997. We have not previously offered franchises in any other line of business. As of December 31, 2001.2005. there were 32 franchised Pirtek businesses and two company-owned Pirtek businesses. Our affiliate, Hydraulic Hose of Orlando, Inc. ("HHOF'), a Florida corporation formed in May 1997 and our subsidiary, operates a PiRTEK Hose Service Center at 501 Haverty Court, Rockledge, Florida 32955; telephone (321) 504-6006. The Rockledgo center isOur affiliateT Nashville Hose Services LLC ("NHSL"). a Tennessee limited liability company formed in October 2005 and our subsidiary, operates a PiRTEK Hose Service Center at 1650 Elm Hill Pike. Suite 2. Nashville. Tennessee. 37210. telephone (615) 871-7199. The Rockledge and Elm Hill Pike centers are of the type being described in this Offering Circular. HHOI hasand NHSL have never been in the business of selling franchises of any type.
PFS is an Australian company incorporated in New South Wales, Australia inl980. December 1979. PFS' principal business address is 1/163 Prospect Highway, Seven Hills, New South Wales 2147; telephone: (02) 9838 7888. 8811-1999. PFS does not offeror sell franchises in the United States nor does it provide any products or services to franchisees in the United States. Further. PFS has no predecessors or affiliatosanv affiliates offering or selling franchises
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in the United States or providing products or services to franchisees in the United States. PFS does business under its corporate name and the trade name "Pirtek Hose Service Centers." PFS has operated the PiRTEK hose service center business in Australia since 1980, and in 19871986 it began to offer Pirtek franchises in Australia. PFS has not offered franchises in any other line of business. As of December 31, 2001.2005. there were 6370 franchises in Australia. Since 1988, PFS also has granted master franchise rights for the PiRTEK business and the operation of PiRTEK centers in many other countries throughout the world. In all, as of December 31, 200'1.2005T there were Pirtek hose service center businesses in a number of countries around the world, including Australia, Great Britain, Germany, Hollandlreland. France, Belgium, Luxemburg, Netherlands, New Zealand, Singapore and South Africa.
The franchise granted to you is the right to own and operate a PiRTEK Business pursuant to the terms of the standard PiRTEK Franchise Agreement (the "Franchise Agreement"). A copy of the Franchise Agreement is included in this Offering Circular as Exhibit 2.
Your Business will consist of the sale, custom assembly and installation of industrial and hydraulic hoses, fixed tube assemblies, fittings and related components and other distinctive products and services. You will operate your Business from a hose service center and mobile sales and service units ("MSSU's") (collectively referred to sometimes as the "Center") within a particular geographic territory (the "Territory"). During the operation of your Business, you will use our distinctive products and services, standards and specifications, sales and business techniques and image (the "System"), as well as the trademarks associated with the System (the "Marks") as further described in Item 13.
You will sell the Pirtek products and services from your Business to a vast array of mobile and stationary (fixed) plant and equipment users within the following markets, depending on the location of your Business: earthwork and construction; industrial manufacturing; food production; materials handling; air, sea and land transport; agriculture; mineral exploration and mining; and government and utilities businesses and others.
You will compete with other businesses within the "bulk" or Original Equipment Manufacturing ("OEM") hose and fitting market. This market is very competitive and includes national and international brand product suppliers like Aeroquip, Parker Hannifan and Gates Rubber Co. Other competitors may be generally associated with rubber tire production and include Goodyear, Dunlop, Yokohama and Bridgestone.
There are no laws or regulations specific to the operation of a business featuring the sale, assembly and installation of the PiRTEK products, although there may be specific regulations applicable in some industries in which your customers operate. For example, in the food industry stainless steel piping must be used in food processing. In addition, your Business will be subject to federal, state and local laws regarding the storage, use and disposal of hazardous materials. There also will be other local, state and federal laws applicable to your Business that apply to businesses generally, and we urge you to make further inquiries about these laws.
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Item 2
BUSINESS EXPERIENCE
The following list discloses the officers and managers of Pirtek and the principal occupation of each of them during the preceding 5 years.
Pirtek
President and Manager: E. Morgan Arundel
Mr. Arundel has been President and a Manager of Pirtek since June 1997. He also has been the President and Chief Executive Officer of MBI, Inc., a brokerage firm based in Satellite Beach, Florida, for more than the last 10 years.
Manager: Neil A. Robinson
Mr. Robinson has been a Manager of Pirtek since June 1997. From September 1996 through January 1999, he was the general manager for the PIRTEK hose service center in St. Paul, Minnesota. Mr. Robinson also has operated Neil A. Robinson Brokerage, Inc. in Minneapolis, Minnesota for more than the last 10 years.
Manager: David LaRue
Mr. LaRue has been a Manager of Pirtek since June 1997. In addition, Mr. LaRue is the President of Baldwin Supply Company, Inc., where he has been employed for more than the last 10 years. Baldwin Supply Company, Inc. is an industrial products distributor located in Minneapolis, Minnesota.
Vice President Franchise Development: Gwvn O'Kane
Mr. O'Kane became the Vice President of Franchise Development of Pirtek in March of 2004. Prior to that, he served as the Director of Development starting in January 2003. Prior to that, he served as the Director of Training starting in 1997. In addition, Mr. O'Kane has more than 44JJ years of experience in the Pirtek system and has previously managed established Pirtek centers.
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The following list discloses the principal officers and directors of PFS. As noted in Item 1. PFS does not offer or sell franchises in the United States or provide products and services to franchisees in the United States.
PFS
Chief Executive and Board Member: Ronald F. Clarke
Mr. Clarke has been Chief Executive International Diviaion and a Board Member of PFS for more than the last 5 years. He also has been a partner in the Chartered Accounting firm of Clark Smith located in Sydney, Australia, for more than the last 5 years.
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Chairman of the Directors: Peter B. Duncan
Mr. Duncan co-founded PFS and the PiRTEK system in 1980 and has been Chairman of the Directors or Managing Director of PFS for more than the last 5 years. He also is a Director of Pirtek Europe, LTD, which operates the Pirtek business in Europe.
Managing Director: Glenn Duncan
Mr. Duncan has been with PFS for more than the last 5 years, serving as Managing Director since January 2004 and General Manager from 1996 to January 2004.
Director and General Manager: Stephen Dutton
Mr. Dutton has been with PFS for more than the last 5 years, serving as General Manager since January 2004 and a Director since January 2005.
Director and Secretary: Christopher Bovle
Mr. Bovle has been with PFS in April 2002 and was appointed a Director in January 2005. Prior to April 2002. he had been Finance Director and Secretary for Pirtek U.K. in London. England from 1998 to 2002.
Item 3
LITIGATION
Richard Wilcox, et. al. v. Pirtek USA, LLC (American Arbitration Association Case No. 33 114 Y 00030 05) On January 25, 2005, thirteen franchisees filed an arbitration action against Pirtek, alleging breach of their respective Franchise Agreements, breach of the covenant of good faith and fair dealing, violation of Florida's Uniform Deceptive Trade Practices Act and, violation of Florida's Uniform Commercial Code. The number of franchisees involved in the arbitration action has since been reduced to eleven. The franchisees allege that the cost of products sold by Pirtek to franchisees are excessive in comparison with similar products sold by etaerthird-partv suppliers, manufacturers and distributors in the industry.Plaintiffs The franchisees seek monetary damages and injunctive relief.Pirtok hoo filed an answer and counterclaim.Ne arbitrators have been soloctod and there is no arbitration date set at this time. This matter is in the pro hearing/discovery phase.
Pirtek is defending the arbitration action vigorously. Its defenses include: (1) the franchise agreements and UFOC specifically state that the cost of the products sold bv Pirtek to its franchisees may be higher than the cost of similar products in the market; and (2) Pirtek's comparison of its product prices with similar products in the industry demonstrate that Pirtek's prices are not unreasonable or inflated. Pirtek has also asserted counterclaims against 5 of the franchisees. These claims include breach of the non-compete agreement trademark
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infringement, unfair competition, breach of the franchise agreement's post-termination obligations, failure to pay past due licensing fees and marketing fees, and failure to pav for product. Pirtek seeks both monetary damages and injunctive relief on its counterclaims.
The arbitration hearing is scheduled to begin February 28T 2006.
Other than the action listed above, no litigation is required to be disclosed in this offering circular.
Item 4
BANKRUPTCY
No person previously identified in Items 1 or 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item.
Item 5
INITIAL FRANCHISE FEE
You must pay to us an Initial Franchise Fee of $45,000. In addition, you must pay to us a $10,000 Shop Set-up Fee. You must pay at least one-half of the Initial Franchise Fee when you sign the Franchise Agreement and the balance of the Initial Franchise Fee and the Shop Set-up Fee prior to attending the initial training program described in Item 11. In connection with the Shop Set-up Fee, we will spend approximately 10 to 20 business days at your Center prior to opening to generally get you ready to open your Center for business.
We will return your Initial Franchise Fee and Opening Set-up Fee (without interest) to you only under the following circumstances: (i) if you notify us in writing and withdraw your franchise application prior to the commencement of the training program; or (ii) if any training program attendee fails to successfully complete the training program to our satisfaction. In either case the refunded amount will be the Initial Franchise Fee and Shop Set-up Fee minus the lesser of $3,500 or any actual costs that we incur through the training program.
In addition to the Initial Franchise Fee and Opening Set-up Fee, you must purchase from us the opening inventory, and certain items of the equipment (including the PiRTEK Data System), uniforms and other similar items with the PiRTEK trademark for your Business, for a total of approximately $89,000 to $210,000, as further described in Items 7 and 8. The amounts for these items are payable in lump sum and are not refundable. During our 20012005 fiscal year, the amounts that franchisees paid us for the items described in this Item 5 ranged from $9&000115.220 to $204.000.269.701. which included the Initial Franchise Fee, Set-up Fee, signs
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and equipment, opening inventory, the PiRTEK Data System (the computer network system) and other pre-opening items purchased from us.
Item 6
OTHER FEES
|
Name of Fee |
Amount (See Note 1) |
Due Date |
Remarks |
|
Continuing License Fee |
4%, with a reduction in the first year to VA%. |
On or before the 10th day of the month following the month for which the fee is due. |
See Notes 2 and 7. |
|
Marketing Fees |
1 Vi% - 3% of your Gross Sales. |
On or before the 10* day of the month following the month for which the fee is due. |
See Notes 3 and 7. |
|
Local Marketing |
%% - \Vi% of your Gross Sales. |
When due. |
See Note 4. You must advertise in the Yellow Pages of your local telephone directory. The cost of any yellow pages listing will be pro-rated if joint listing. |
|
Transfer Fee |
The lesser of $ 10,000 or our expenses. See Note 5. |
At time of transfer. |
See Item 17 for additional information on transfer requirements. |
|
PiRTEK Meetings |
Will vary under the circumstances. |
When incurred. |
You must pay all travel, living and other expenses while attending PiRTEK meetings, which may include an annual national conference and regional meetings. We may charge a conference fee payable to us to cover some of the meeting costs, although you also will pay some of those charges directly to third parties. |
|
Audits and inspections generally will be at our expense. If, however, an audit is made necessary by your failure to furnish reports, financial statements, |
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|
Name of Fee |
Amount (See Note 1) |
Due Date |
Remarks |
|
Audit and Recordkeeping Costs |
Will vary under the circumstances. |
After inspection or audit |
tax returns or schedules as required under the Franchise Agreement, or if any audit or inspection reveals that you have understated or underreported Gross Sales, Continuing License Fees, Marketing Fees or other amounts owed to us by an amount greater than 4%, in addition to the amounts owed to us, you must reimburse us for the cost and out-of-pocket expenses of the inspection or audit. |
|
Interest Expenses |
Will vary under the circumstances. |
When due. |
All amounts owed to us will bear interest at the rate of 2% over prime. |
|
Renewal Fee |
$5,000 |
Renewal of license. |
See Note 5. See Item 17 for additional information on renewal requirements. |
|
Computer/Data Transfer |
$500 - $2,675 per month. |
When due |
Amounts due to us and third party suppliers for software services and other communication lines and services. |
|
Insurance |
$2,000-$10,000 annual premium for liability insurance only; plus other annual premiums ranging from $4,000 - $30,000 or more, which will vary under the circumstances. |
When premiums are due. |
See Note 6. |
|
Remodeling Expenses |
A maximum of $5,000 per year for each year that you operate the Business under the Franchise Agreement. |
When incurred. |
The $5,000 amount will be adjusted annually in accordance with any annual change in the National Consumer Price Index. The $5,000 per year limitation does not apply to modernization requirements upon renewal. |
|
Costs and Attorneys' |
Will vary under |
You must pay us for our costs and attorneys' fees in obtaining injunctive or other |
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|
Name of Fee |
Amount (See Note 1) |
Due Date |
Remarks |
|
Fees |
circumstances. |
When incurred |
relief for the enforcement of the Franchise Agreement. |
|
BtaUaB^Mffl |
$5,000 |
W_henjac_urqfl |
See Note 8. |
Notes:
(1) Except where otherwise noted, all fees are payable to us and are not refundable.
(2) "Gross Sales" means the total revenues and receipts from the sale of all products or services, whether the orders for products or services originated from or were accepted at or from the Business or at any other place. "Gross Sales" are net of any applicable sales tax and any sales credits.
(3) We will determine annually the exact percentage of Gross Sales for the monthly Marketing Fee. We have established the Marketing Fee for our 20052006 fiscal year (December 20042005 through November 20052000 at 114%. See Item 11 for more information on marketing.
(4) The local marketing requirement will be Vi of the amount of the Marketing Fee for any given year. For instance, if your Marketing Fee is 2% of your Gross Sales, then your local marketing requirement is an additional 1% of your Gross Sales, for a total of 3%. Your local advertising expenses may be paid directly to third parties, although we may require you to provide us by January 31 each year with an accounting of the monies that you have spent for the preceding year on approved local marketing, as further described in Item 11.
(5) The maximum transfer fee of $10,000 and renewal fee of $5,000 are subject to increase each year based on the annual change in the Consumer Price Index as reported by the U.S. Department of Labor.
(6) You must maintain in force general comprehensive liability insurance in a minimum amount and with the type of coverage we designate from time to time (currently, this is at least $5.000.0003.000.000 combined single limit per occurrence). We estimate that the average annual premium for this insurance coverage will be approximately $2,000 -$10,000 or more. In addition, you must also maintain in force insurance covering operation or maintenance of any building, equipment, MSSU motor vehicles that you own or lease in connection with your Business and any other insurance required by local, state or federal law. Insurance premiums for building, equipment and motor vehicles and other insurance required by law can vary dramatically depending on the type of building, equipment or vehicle and the state in which your Business is located, but the premiums should range from $4,000 - $30,000 or more. We may reasonably increase the minimum
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liability protection requirement annually and require different or additional kinds of insurance to reflect inflation, changes in standards of liability, higher damage awards in public or product liability litigation or other relevant changes in circumstances. Premiums are payable in amounts and at times as required by your insurers. You must submit all insurance coverage for our approval at least 14 days before you obtain possession of the Business premises. All insurance policies must name us as an additional insured and must provide that we will receive 30 days' prior written notice of amendment, termination, expiration or cancellation of any policy. You must submit to us each year a copy of the certificate or other evidence of the issuance, renewal or extension of each insurance policy. If you fail to maintain the required insurance, we may obtain it on your behalf and you must reimburse us for costs incurred and premiums paid.
(7) You must sign a draft authorization for your business bank account. A current copy of the draft authorization is included as Appendix E to the Franchise Agreement. The draft authorization permits us to draw from your account all amounts due and payable to us.
(8) Before vou or we can initiate arbitration or litigation in connection with a dispute under the Franchise Agreement, vou will meet on an individual basis with our President within two weeks of a request for such meeting. You are responsible for vour own costs and expenses with respect to the meeting. If a party refuses to participate in the meeting^ the refusing party must pav the other $5.000.
Item 7
INITIAL INVESTMENT
|
Estimated Amount or Estimated Low-High Range (See Note 1) |
Method of Payment |
When Payable |
To Whom Payment is Made |
|
|
Initial Franchise Fee |
$45,000 See Note 2 |
Lump sum |
At least 1/2 when you sign the Franchise Agreement and balance prior to attending training |
Us |
|
Shop Set-up Fee |
$10,000 See Note 3 |
Lump sum |
Prior to attending training |
Us |
|
Training |
No separate fee for initial training because it is included in the Initial Franchise Fee; $5,000 to $15,000 for expenses (which is $1,000 to $3,000 |
As incurred |
Before opening |
Third parties for travel and living expenses |
Offering Circular
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|
Estimated Amount or Estimated Low-High Range (See Note 1) |
Method of Payment |
When Payable |
To Whom Payment is Made |
|
|
per person for travel and living expenses during training) See Note 4 |
||||
|
Leasehold Improvements |
$5,000 to $40,000 See Note 5 |
As incurred |
As incurred |
Third parties |
|
Signs and Equipment |
$20,000 to $80,000 See Note 6 |
Lump sum or installments if leased |
Before opening |
Us or third parties |
|
MSS Units |
$35,000 to $80,000 See Note 7 |
Lump sum or installments if leased |
Before opening |
Third parties, although equipment to outfit MSSU must be purchased from us |
|
Prepaid Rent and Security Deposit |
$2,000 to $10,000 See Note 8 |
Lump sum |
Before opening |
Landlord |
|
Opening Inventory |
$65,000 to $120,000 |
As incurred |
Before opening |
Us |
|
PiRTEK Data System (Computer Network System) |
$4,000 to $10,000 See Note 9 |
Lump sum or installments if leased |
Before opening |
Us and third parties |
|
Insurance Premiums |
$6,000 to $40,000 See Note 10 |
As incurred |
Before opening |
Insurance companies |
|
Utility Deposits and Business Licenses |
$1,000 to $3,000 See Note 11 |
As incurred |
Before opening |
Third parties |
|
Attorneys* Fees |
$2,000 to $5,000 See Note 12 |
Lumpsum |
As incurred |
Attorney |
|
Additional Funds - 3 Months |
$10,000 to $80,000 See Note 13 |
As incurred |
Before opening and as incurred |
Employees, third parties, etc. |
|
TOTAL See Note 14 |
$210,000 to $538,000 |
Notes:
(1) The following are the estimated minimum requirements for beginning operations for a PiRTEK Business. The estimated minimum requirements will vary depending on factors like your financial condition and the arrangements and business decisions you make.
Except where otherwise noted, all fees that you pay to us are nonrefundable. Third-party lessors and suppliers will decide if payments to them are refundable.
Offering Circular
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(2) See Item 5 for additional information on the Initial Franchise Fee and circumstances when the Initial Franchise Fee is refundable.
(3) See Item 5 for additional information on the Shop Set-up Fee and circumstances when the Shop Set-up Fee is refundable.
(4) See Item 11 for additional information on training.
(5) The PiRTEK Center premises will ordinarily be leased rather than owned. We estimate that the average center will have approximately 2,000 - 4,000 square feet or more. Your initial investment for leasehold improvements will vary depending upon local labor costs and whether the building is a completed structure immediately adaptable to installation of necessary fixtures and equipment or a location where construction is in progress. These variables affect how different obligations will be distributed between landlords and tenants under different lease agreements and the costs of acquisition and construction. We must approve all leasehold improvements prior to construction. Although the cost of leasehold improvements will vary depending upon the above-described factors, we estimate that the average cost of leasehold improvements will range between $5,000 and $40,000 or more.
(6) Your investment in signs and equipment is highly variable for your PiRTEK Center. The investment depends to a great extent on the size and location of your proposed center, local labor costs, current prices charged by equipment suppliers, discretionary expenditures, inflation, financing costs and similar factors beyond our or your control.
In order to insure uniform quality of products and services throughout the PIRTEK system, you must purchase or lease signs and equipment that we have approved. We estimate that under average conditions you may expect to incur costs for these items between $20,000 and $80,000 or more.
The parties will determine the precise amount of any initial or periodic equipment payments at the time of the transaction. The payments ordinarily are not refundable. Investment obligations beyond the initial cash outlay requirements will be necessary and you may finance at your discretion. Market forces will determine loan repayment totals and interest on borrowings will be determined by market forces at the time of any financing transaction.
(7) We require that you operate at least 2 MSSUs when you open your Business. You must purchase or lease the MSSUs from approved third-party suppliers and outfit them with approved MSSU equipment purchased from us.
(8) You usually will be required to pay one month base rent as a security deposit to the landlord. We estimate that for a PiRTEK center having 3,000 square feet the rental obligations will be approximately $3.50 - $7.50 or more per square foot base rent per
Offering Circular
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PIRTEK-2/06
Ml;|289IR8H2
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year. Leases also usually impose an obligation toward maintenance costs, insurance charges, real estate taxes and special assessments, utility charges, water and sewer charges, security charges, and other similar charges.
(9) This amount is for the PiRTEK Data System, as described in Item 11.
(10) See Item 6 for additional information on insurance.
(11) This amount includes utility deposits and business licenses. Deposits are generally refundable, but license fees are not.
(12) This amount is an estimate for attorneys' fees in connection only with your purchase of the franchise.
(13) This amount estimates your initial pre-opening and start-up expenses not otherwise mentioned in the Table, including advertising, employee wages, taxes, and telephone hook-up. The amounts are estimates based on our estimate of average costs and market conditions prevailing as of the date of this Offering Circular and our 8 years of experience in the Business. We cannot guarantee that you will not have additional expenses starting your Business. Your costs will depend on factors such as how much you follow our systems and procedures, your management skills and experience, your business skills, local economic conditions, the local market for the PiRTEK Business, the prevailing wage rate, competition and the sales level reached during the initial period.
(14) This total is an estimate of your initial investment and is based upon our estimate of average costs and market conditions prevailing as of the date of this Offering Circular and our 8 years of experience in the Business. You should review this amount carefully with a business advisor before making any decision to purchase the franchise. You are cautioned to allow for inflation, discretionary expenditures, fluctuating interest rates and other costs of financing, and local market conditions, which can be highly variable and can result in substantial, rapid and unpredictable increases in costs. You must bear any deviation or escalation in costs from the estimates in this Item 7 or estimates that we give during any phase of the development process.
Item 8
RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
To help assure a uniform image and uniform quality of products and services in all Pirtek businesses, you must maintain and comply with our quality standards. Although you are not required to purchase or lease real estate from us, you must improve and equip the building from which you operate your Business in accordance with our then current approved design specifications and standards. In addition to meeting our design specifications and standards, it is your responsibility to ensure that your building plans comply with the Americans with
Offering Circular
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PIRTEK - 2/06
MI-IJ«q78S0?
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The original documents were scanned as an image. The original file can be downloaded at the link above.