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Sample Franchise Agreement
Exhibit B PRONTOWASH USA, LLC a Florida Limited Liability Company
FRANCHISE AGREEMENT - TIER_____
This Franchise Agreement (this "Agreement') is made and entered into this____day of
__________, 200__, between Pronto Wash USA, LLC, a Florida limited liability company whose
principal office is at 5481 NW 159th Street, Miami, Florida 33014 ("Franchisor") and
__________________________whose principal address is at___________________________
("Franchisee"), with reference to the following facts:
Franchisor is the licensee of a unique and proprietary system for providing car wash services at parking lots and other locations, using equipped mobile MDUs (the "ProntoWash System"). Franchisor continues to expend time, skill and money to improve this system. Franchisor is the owner or licensee of trademarks, such as "ProntoWash," used to identify Pronto Wash services and facilities (the "Pronto Wash Marks") and technology that Franchisor considers to be proprietary (the "Technology"). Franchisee wants to obtain a franchise to operate one Pronto Wash Service Point of Service providing service at a specific location or in a defined geographic area using the Pronto Wash System. Franchisor is willing to grant to Franchisee a franchise on the terms in this Agreement. Accordingly, the parties now agree as follows:
1. GRANT OF FRANCHISE
1.1. Grant of Franchise. Franchisor grants Franchisee the right to operate one Pronto Wash Point of Service (the "Point of Service") using the Pronto Wash System as it may be developed over time, to provide service at a location or in a geographic area defined in Exhibit A (the "Service Zone"). The franchise also includes a non-exclusive license for Franchisee to use and display the Pronto Wash Marks and to use the Technology in operating
the Point of Service in the Service Zone. Franchisee shall operate a minimum of____detail
center hubs ("Detail Center- Hubs") at the Point of Service.
1.2. Best Efforts. Franchisee shall continuously use Franchisee's best efforts to operate, maintain and increase the volume of business at the Point of Service.
1.3. Limited Exclusivity. While Franchisee is in full compliance with this and all other agreements with Franchisor, Franchisor shall not establish or grant a franchise to anyone else to operate a Pronto Wash Service Point of Service in the location or defined geographic area comprising the Service Zone. However, Franchisor shall have the right to lease MDUs to corporate clients, even within Franchisee's exclusive territory, so long as such clients do not offer car washing services to the public and only use the MDUs for internal client purposes. The rights granted in this Agreement do not include marketing exclusivity; or exclusivity to portions of the parking lot or other area not within the Service Zone. Franchisor can operate or grant franchises or licenses to others to operate Pronto Wash service Point of
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Services adjoining or anywhere else at the edge or outside of the Service Zone; and other Pronto Wash service Point of Services may solicit and service customers and advertise regardless of geographic location. Franchisor can also arrange for manufacture of products whether or not identified by the Pronto Wash Marks, and cause them to be sold through any distribution channels, all without geographic restriction.
2. TERM AND RENEWAL
2.1. Term. This Agreement's term is five (5) years, starting on the date both parties have signed. However, this Agreement shall terminate earlier on the soonest to occur of (a) expiration, termination or other loss of the right or loss of consent from the landlord of the Service Zone, to operate there; or (b) the date this Agreement is terminated as provided in Sections 18.1 -18.3. Franchisee acknowledges that the current term of the lease for the Service Zone is _____
2.2. Notice of Expiration. If the law requires longer notice of expiration than Franchisor has given, then the term of this Agreement shall automatically be extended week-to-week until Franchisor has given the notice required and the required time has passed before the expiration becomes effective.
2.3. Renewal. If Franchisee has complied fully with all the conditions precedent to renewal in Sections 15.1(A) -15.1(E), then Franchisee shall have the right, but no obligation, on expiration of this Agreement to enter into a renewal Franchise Agreement (the "Renewal Agreement") for one consecutive five (5) year term (the "Renewal Term").
3. INITIAL FRANCHISE FEE
On signing this Agreement, Franchisee shall pay Franchisor an initial franchise fee of $35,000 for a Tier A Property, $25,000 for a Tier B Property or $15,000 for a Tier C or D Property. This fee is deemed to be fully earned when paid, and is nonrefundable.
4. SELECTION OF LOCATION
4.1. Location. Franchisor may, but is not obligated to, secure for or propose to Franchisee a proposed Service Zone. If the Service Zone is not defined in Exhibit A when this Agreement is signed, then Franchisee shall find and propose for Franchisor's approval a Service Zone for the Point of Service. The proposed Service Zone must be in the geographic territory identified in Exhibit A. Franchisee must do this according to the requirements in Franchisor's Franchisee Book. Franchisee shall not sign a lease or other agreement ("Lease") with any landlord until after receiving Franchisor's written consent for both the proposed Service Zone and proposed Lease.
4.2. Approval Conditions. As a condition to approving a proposed Service Zone and proposed Lease, Franchisor may require Franchisee to submit information that Franchisor deems necessary to evaluate the proposed Service Zone and proposed Lease; and
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may specify terms, such as terms enabling Franchisor to control the location before termination due to breach, which Franchisor requires to appear in the Lease. Franchisor shall review Franchisee's proposed location and lease within 30 days of receipt of Franchisee's written request.
4.3. Timing. Franchisee shall obtain written approval of Franchisor for, and then sign the Lease all within 45 days after Franchisor signs this Agreement, or such longer period as consented to by Franchisor in writing.
4.4. Lease and Sublease by Franchisor. Franchisor may choose to lease and sublease to Franchisee a Service Zone whether selected by Franchisor or Franchisee.
4.5. No Assurance. Any assistance or lease/sublease involving Franchisor, and any approval or disapproval by Franchisor is not a warranty about viability, profitability or suitability for the Point of Service.
4.6. Lease Performance. Franchisee shall perform all obligations under the lease for the Service Zone. Franchisee shall not assign the lease or sublet any premises of the Service Zone or any portion of premises containing the Service Zone without Franchisor's prior written consent. If Franchisor makes any rent payments on Franchisee's behalf, Franchisee shall reimburse Franchisor for all such payments.
4.7. Government Approval. Franchisee shall be solely responsible to seek and obtain all licenses, consents and approvals of any government authority needed to lawfully operate the Pronto Wash Service Point of Service in the Service Zone at Franchisee's sole cost and expense.
4.8. Relocation. Franchisee shall not relocate the Point of Service without Franchisor's prior written consent. Franchisor shall have the right to require any relocation to comply with this Article 4 and all other provisions of this Agreement. Any relocation occurring in compliance with this Agreement shall be deemed to be the Service Zone. In the event of loss of the right or consent to operate at the Service Zone, or the location owner's objection to Franchisee, without fault of Franchisee, Franchisor shall try to identify a new location for Franchisee, and shall consent to relocation of the Point of Service to an alternate location acceptable to Franchisor. This relocation shall be at Franchisee's sole expense. Franchisee acknowledges that relocation may not be possible before expiration of the term of this Agreement, or at all; and any relocation, could involve interruption in operations until a new location is secured and operations resume.
5. EQUIPPING THE POINT OF SERVICE
5.1. Franchisee's Obligations. Franchisee shall, at Franchisee's expense, install
facilities and fixed equipment and obtain supplies at the Point of Service according to requirements in the Franchisee Book.
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5.2. Signs. Franchisee shall cause all signs using the Pronto Wash Marks to conform to all Franchisor's sign criteria and all laws and regulations regarding signage.
5.3. Security Agreement. To induce Franchisor to provide Franchisee the MDUs specified in Exhibit "B", and to assure Franchisee abides by the Repurchase Option of Section 18.6, and all other obligations to Franchisor, Franchisee shall (a) not remove or change the physical location of the MDUs from the Point of Service; (b) keep the MDUs in good repair, working order and condition, and make or cause to be made, all needed and proper replacements, repairs and improvements; (c) permit Franchisor at any time during or outside normal business hours, to visit and inspect in person the MDUs; (d) not modify the MDUs in any manner without Franchisor's prior written consent; (e) not create or permit any lien, encumbrance or security interest on any of the MDUs; (f) not sell the MDUs to any person or entity without Franchisor's prior written consent; and (g) continuously maintain insurance against risks of fire, theft and other loss of or damage to any of the MDUs in amounts and with insurers and on policy terms satisfactory to Franchisor, designating Franchisor as an additional insured; and furnish to Franchisor proof of this insurance satisfactory to Franchisor. Franchisee appoints Franchisor as attorney in fact to sign any statements necessary to effectuate the requirements in this Section 5.3.
6. CONFIDENTIAL OPERATING MANUAL
6.1. Loan. Franchisor shall lend to Franchisee one copy of each of Franchisor's Confidential Operating Manual (the "Franchisee Book").
6.2. Compliance. Franchisee shall operate the Point of Service in compliance with the standards, procedures, policies, methods, specifications and requirements as instructed during training and as provided for in the Franchisee Book.
6.3. Revisions. Franchisor can add to, delete from or otherwise modify the Franchisee Book from time to time. Revisions are part of the Franchisee Book and are binding on Franchisee on delivery. Franchisee must keep the loaned copy of the Franchisee Book up-to-date with all revisions being immediately inserted in the Franchisee Book. In any dispute as to contents, Franchisor's master copy controls.
6.4. Ownership. The copy of the Franchisee Book loaned to Franchisee is Franchisor's property. Franchisee shall implement procedures to maintain the confidentiality of the Franchisee Book and their information. Franchisee shall not copy any or all of the Franchisee Book and shall not make any of the Franchisee Book available to any unauthorized person. Franchisee shall assure that Franchisee's agents, independent contractors and employees do not copy any or all of the Franchisee Book.
6.5. Return. On expiration or termination, for any reason, of this Agreement, Franchisee shall return the Franchisee Book to Franchisor.
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Exhibit B 7. SERVICES FROM FRANCHISOR
7.1. Start-Up Kit. Franchisor shall provide Franchisee an operational start-up kit comprised of the items listed in Exhibit B to this Agreement. Franchisee shall pay Franchisor's published prices for these items and all shipping costs to transport these items to the POS destination.
7.2. Pre-Opening Planning. Prior to opening, Franchisor shall provide Franchisee a tour of an existing facility and consult with Franchisee on pre-opening matters including layout and set up of office facilities, placement of a detail center and hubs in the Service Zone, preparation for operations and grand opening planning. Before launching the POS, members of Franchisor's staff or other designees shall provide Franchisee on-site assistance with the launch of the POS, staffing and grand opening promotional efforts. These staff or designees shall remain on site for up to one week. Franchisor may also assist Franchisee with permit applications and/or permit processing. Such assistance may require Franchisor's staff or other designees to take several trips to Franchisee's location. Franchisee shall pay for all travel and living expenses incurred by Franchisor's staff or designees in providing the above services to Franchisee.
7.3. Initial Training. Franchisor shall provide and Franchisee's management and initial staff shall attend and successfully complete an initial training program ("Initial Training"). The Initial Training shall take place at Franchisor's headquarters or other location Franchisor designates. Franchisee shall not open the Point of Service before completing Initial Training. Franchisor may exempt Franchisee from some or all training if Franchisor determines that Franchisee is already experienced in these subjects. Franchisee shall pay for all travel and living expenses incurred while attending the training.
7.4. Scope of Training. At the time of signing this Agreement, Franchisor estimates the Initial Training will last about five (5) days, but it may be shorter or longer. Franchisor has the right to determine the duration, subjects, composition and mix and number of trainees who may participate in training programs.
7.5. Training Fee. Before starting initial training, Franchisee shall pay
Franchisor a training fee of $500 per person to be trained for a total of: $________. If
Franchisee asks and Franchisor agrees to provide additional training or assistance at the Point of Service, then Franchisee shall pay Franchisor's then standard rates for each day of additional training or assistance. At the time of signing this Agreement, Franchisor's standard rates are $50 per hour per Franchisor staff member or other designee sent. For training away from Franchisor's offices, Franchisee shall also pay for all travel and living expenses incurred by Franchisor's staff or other designee in providing such training.
7.6. On-Going Training. Franchisor may conduct conferences, conventions or additional training programs. Franchisor shall have the right to determine their duration, content and location. Franchisee and any personnel of Franchisee, as designated by
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Franchisor, shall attend and participate in any such conference, convention or training program.
7.7. Training Expenses. Franchisee shall pay all expenses for Franchisee and its personnel for training programs, conferences and conventions such as transportation, meals, lodging and other living expenses. Franchisor has no obligation to pay any compensation for services performed for or beneficial to Franchisor by any trainee or attendee at any training program, conference or convention.
7.8. Operating Methods and Reviews. Franchisor may furnish to Franchisee information, instructions, techniques, data, materials and forms pertaining to developments in services and goods offered under the Pronto Wash System and may provide Franchisee assistance with sales, marketing and other matters, all as Franchisor deems appropriate. Franchisor may also from time to time, as it deems appropriate, provide Franchisee business reviews, certify new personnel, inspect the Point of Service and review mystery shopper feedback.
7.9. Promotion and Advertising. Franchisor may offer and sell, or arrange for others to offer and sell, promotional materials and forms to Franchisee. All prices for such items shall be subject to change at any time.
7.10. Accounting. Franchisor may specify accounting procedures, systems and formats to be used by Franchisee.
7.11. Pricing. Franchisee has sole discretion to decide all prices Franchisee charges with the exception that if (and only if) maximum and/or minimum pricing is allowed or not prohibited by law, Franchisor may establish maximum and/or minimum pricing and Franchisee shall comply with such lawful maximum and/or minimum pricing limits. Additionally, if Franchisor establishes a national or regional accounts program, then Franchisee shall participate in and adhere to all lawful policies regarding pricing and other terms that are established as part of that program. There is no representation that Franchisor's suggested or recommended (or, when permitted, maximum and/or minimum) prices will increase or maximize Franchisee's revenues or profit.
8. OTHER DUTIES OF FRANCHISEE
8.1. Starting Operation. Franchisee shall start operating the Point of Service within 90 days of the date of this Agreement and having obtained all necessary government permits.
8.2. Manner of Operation. Franchisee shall operate the Point of Service in compliance with the Pronto Wash System, including all contents in the Franchisee Book. Franchisee shall offer and sell to the public all services and goods that are part of the Pronto Wash System. Franchisee shall not provide any services or goods except by means of
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sales from the Point of Service, without Franchisor's prior written consent. Franchisee's failure to operate the Point of Service in compliance with the Pronto Wash System shall entitle Franchisor to asses a fee of One Hundred Dollars ($100) against Franchisee per each violation regardless of whether the violation is the same as a prior violation for which the fee was paid, or similar or other act, conduct or omission. As a courtesy to Franchisee, Franchisor shall on one occasion only, waive the $100 fee for this first violation under this Agreement. The $100 fee is neither a penalty nor liquidated damages but a fee on account of Franchisor's efforts to secure compliance with this Agreement.. Franchisor's assessment of any such fee shall not constitute a waiver of the violation or of Franchisor's other rights and remedies in this Agreement, all of which shall be reserved.
8.3. Promotion Programs. Franchisee shall participate in and comply with the terms of all promotion programs that Franchisor designates as mandatory.
8.4. Inspection. Franchisor shall have the right at any time, with or without notice, to inspect and examine the Service Zone, Point of Service and Franchisee's operation to ensure Franchisee's compliance with all obligations. Franchisee shall implement changes or corrections that Franchisor requests.
8.5. Staffing. Franchisee shall, hire, train and staff the Point of Service according to Franchisor's specifications. Franchisee shall require all personnel to maintain standards of appearance and demeanor that Franchisor establishes. If Franchisee elects to deliver services through independent contractors or other form of day workers or other intermittent workers, Franchisee shall do so pursuant to written agreements, which Franchisee shall not use before providing a copy of the proposed agreement to Franchisor and obtaining Franchisor's written consent to use such form.
8.6. Computer/Software, Franchisee shall buy and install the Pronto Wash PDA based POS software, computer hardware and software, dedicated phone and internet lines, modems, printers, and other utility services, accessories and peripheral equipment Franchisor specifies. Franchisor shall have the right to require Franchisee to upgrade the software, hardware, accessories and equipment from time to time at Franchisee's sole cost and expense. Franchisee shall purchase a monthly subscription service for the software at Franchisor's then current rates.
8.7. Maintenance. Franchisee shall maintain the Point of Service and its facilities, including all MDUs, other equipment, fixtures, signs and uniforms in a high degree of repair and cleanliness. Franchisee shall replace all of these that become obsolete, inoperable or unsightly. Replacements shall be the type and quality then required of new Pronto Wash Points of Service and shall comply with Franchisor's then requirements and specifications. .
8.8. System Changes. Changes may occur in competitive circumstances, needs of customers and through technological innovations. Franchisor shall have the right from time to time to change components of the Pronto Wash System, such as, changing services, goods, methods, equipment, standards, forms, policies and procedures of the Pronto Wash System;
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adding to, deleting or modifying services and goods that the Point of Service is authorized or required to offer; and changing the Pronto Wash Marks. Franchisee shall, at Franchisee's expense, implement all changes when required by Franchisor.
8.9. Compliance with Law. Franchisee shall operate the Point of Service in compliance with all laws, rules and regulations of all government authorities.
8.10. Manager. Franchisee shall designate a manager (the "Point of Service Manager") to perform day-to-day on-premises management of the Point of Service. Franchisee shall, at Franchisee's expense, require the Point of Service Manager to attend and successfully complete Franchisor's next scheduled Initial Training, and other training that Franchisor specifies.
8.11. Hours. Franchisee shall operate the Point of Service on days and during at least the minimum hours Franchisor specifies and inline with the location operating hours of the POS
8.12. Recording Receipts. Franchisee shall record all receipts of revenue at or in connection with operating the Point of Service on individual machine serial-numbered receipts by using the Pronto Wash PDA based POS System.
8.13. Coupons. Franchisor may publish, issue and/or distribute any number of coupons and promotion offers, valid for discounts up to 25% on services to be provided by Franchisee. Franchisee shall accept and honor such coupons and offers. Franchisee shall not be entitled to reimbursement for the discounts granted.
8.14. Indemnity. Franchisee shall defend, indemnify and hold harmless Franchisor and its affiliates, and their respective members, managers, officers, employees, agents and representatives (collectively "Indemnitees") from all losses, costs and expenses incurred from any action, suit or other proceeding, based in any way on any aspect of the development or operation or act or omission of or relating to the Point of Service.
8.15. Notice of Claim. Franchisee shall give Franchisor written notice of any action, suit or other proceeding. Franchisor shall have the right, but no obligation, to assume the defense or settlement, or both, of any such action, suit or other proceeding provided that Franchisor shall seek advice and counsel of Franchisee, and keep Franchisee informed, regarding any contemplated settlement. Franchisee's obligations in this Section 8.15 shall not be diminished by any defense or settlement undertaken or conducted by Franchisor.
8.16. Records. If Franchisee or any assignee of Franchisee is a corporation, limited liability company, partnership or other form of entity, then Franchisee shall provide Franchisor a copy of its charter and governing documents (articles of incorporation, bylaws, shareholders, partnership or owners agreements and equivalents); list of owners and individuals in all director, manager and officer or equivalent positions, all amendments to these documents, and any other information about the organization and structure that
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Franchisor requests from time to time. Franchisee shall promptly notify Franchisor in writing of any change in any information provided under this Section 8.16. All securities issued shall include the following legend conspicuously on their face:
The transfer of securities represented by this certificate is subject to the terms and conditions of a Franchise Agreement with Pronto Wash USA
LLC. dated__________, 200 Reference is made to the terms of the
Franchise Agreement and to the [name of charter and governing documents] of this [type of entity].
8.17. Franchisee Purchases.
Franchisor shall have the right to require Franchisee to buy from Franchisor or from sources Franchisor designates, certain equipment, products and services comprising part of the Pronto Wash System developed by, proprietary to and/or kept secret by Franchisor. Franchisee's purchase of non-approved equipment, products or services or failure to purchase equipment, products or services from Franchisor's approved suppliers shall entitle Franchisor to asses a fee of One Hundred Dollars ($100) against Franchisee per each violation regardless of whether the violation is the same as a prior violation for which the fee was paid, or similar or other act, conduct or omission. As a courtesy to Franchisee, Franchisor shall on one occasion only, waive the $100 fee for this first violation under this Agreement. The $100 fee is neither a penalty nor liquidated damages but a fee on account of Franchisor's efforts to secure compliance with this Agreement.. Franchisor's assessment of any such fee shall not constitute a waiver of the violation or of Franchisor's other rights and remedies in this Agreement, all of which shall be reserved.
Franchisor shall have the right to offer and sell to Franchisee, or to arrange with Franchisor's affiliates to offer and sell to Franchisee, any goods and services at prices that Franchisor or the selling affiliate determines. Franchisee acknowledges that Franchisor or the selling affiliate may earn profits on such sales.
All non-proprietary equipment, goods and services required to operate the Point of Service shall be purchased by Franchisee only from suppliers designated or approved in writing by Franchisor or from sources that satisfy, and whose equipment, goods and services satisfy, all standards established from time to time by Franchisor. Franchisor shall use reasonable efforts to maintain a list of suggested sources of non-proprietary equipment, goods and services.
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D. Approval Procedure/ Disapproval Procedure.
Franchisor will exercise its right to approve suppliers proposed by Franchisee according to the following procedure. Franchisee must submit a written request to Franchisor for approval of the supplier. The request must state the supplier's name, address, phone number, and all other information that Franchisee requests Franchisor to consider, and must identify the goods or services proposed to be supplied to Franchisee. The proposed supplier shall be required to demonstrate to Franchisor's satisfaction that it will supply the goods or services to Franchisee according to Franchisor's standards; that it is in good standing in the business community, has a good reputation generally, is financially solvent, and that there is no risk of these arrangements benefiting a competitor. Franchisor shall notify Franchisee within 60 days of its approval or disapproval of the requested supplier. Franchisor may revoke the use of a supplier by providing Franchisee 30 days written notice of its decision to do so. Franchisee shall not use a supplier after approval of the supplier has been revoked.
Franchisor reserves the right from time to time to arrange for testing, analysis, inspection and/or sampling of goods or services of any supplier proposed or being used by Franchisee, regardless of whether the supplier is or has been approved as a supplier.
8.18. Quality. Franchisor shall have the right to require Franchisee to stop offering any service, using or selling any goods or engaging in any practice which, in Franchisor's opinion, conflicts with or causes the Point of Service not to conform to Franchisor's image, quality or other standards. Franchisee shall comply with all Franchisor's procedures and standards relating to the Pronto Wash System, including but not limited to, uniforms, image, materials as well as all other operating procedures and standards.
8.19. Accounting. Franchisee shall comply with recordkeeping and accounting requirements established by Franchisor from time to time. Franchisee shall submit bookkeeping and accounting reports and other reports that Franchisor requests from time to time.
8.20. Payments to Third Parties. Franchisee shall maintain all trade accounts with suppliers in current status. Franchisee shall use Franchisee's best efforts to promptly resolve any disputes with suppliers.
8.21. Complementary Services. If and when requested in writing by Franchisor, Franchisee shall provide all complementary services required by Franchisor.
9.1. Scope. Franchisee shall obtain and maintain the following insurance
coverage through carriers satisfactory to Franchisor: (a) comprehensive general liability coverage including contractual liability and advertising injury coverage of at least $2,000,000,
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naming Franchisor and the Indemnitees (identified in Section 8.14) as additional insureds; (b) garage keeper; (c) fire and casualty insurance on the Point of Service and Franchisee's property; (d) business interruption insurance; and (e) worker's compensation, employer's liability, unemployment and state disability insurance as required by law. These policies shall provide that Franchisor is entitled to receive at least 30 days prior written notice of any intent to reduce coverage or policy limits, cancel or otherwise amend the policy. Franchisor shall have the right from time to time to revise coverages and coverage amounts Franchisee must obtain and maintain.
9-2. Proof. Franchisee shall provide Franchisor with certificates of insurance
evidencing the coverages described in Section 9.1 before the Point of Service starts operating. Franchisee shall deliver to Franchisor a complete copy of each insurance policy within 21 days after delivery of the certificates of insurance, and of each new or renewal policy on receipt of the policy. Franchisor shall have the right at any time to require Franchisee to provide Franchisor full copies of any or all Franchisee's insurance policies and certificates of insurance. If Franchisee fails to purchase, maintain or provide proof of insurance and copies of policies, then Franchisor shall have the right, but no obligation, to obtain that insurance, or other insurance that Franchisor is able to obtain for this purpose. Franchisee shall, at Franchisor's election, pay all premiums for the insurance or reimburse premium payments made by Franchisor.
9.3. Disclaimer. Franchisor shall have no obligation to obtain or maintain any insurance for or on behalf of Franchisee. Nothing in this Agreement is an undertaking or representation that the insurance Franchisee is required to obtain and maintain will be a sufficient amount or scope of insurance for any purpose.
9.4. Claims. Franchisee shall notify Franchisor in writing of any and all claims or demands against Franchisee, the Point of Service, the Service Zone or Franchisor within three days after Franchisee receives actual notice of such claim or demand. Franchisee shall respond to all claims within the time required by law. Franchisee shall cooperate with Franchisor or Franchisor's designee in defending Franchisor and Franchisee against any and all claims.
10.1. Proposed Advertising/ Website Usage. Franchisee shall submit to
Franchisor, before use, all proposed advertising, promotion materials, print ads, broadcast ads, direct mail, press releases, signs, posters, leaflets and other advertising and promotion ("Advertising"). Franchisee shall not use any Advertising unless it has been furnished by or approved in writing by Franchisor. Franchisee shall not establish a website or promote or advertise Franchisee's Point of Service on the web or internet without first obtaining Franchisor's prior written consent. Franchisee shall submit all proposed website content to Franchisor for approval prior to use. Franchisee shall make all requested changes to the content Franchisor requests.
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10.2. Use of Marks. All Franchisee's Advertising using the Pronto Wash Marks or referring to the Point of Service shall conform to all standards that Franchisor specifies from time to time. Franchisee shall discontinue using any advertising that Franchisor objects to.
10.3. Materials. Franchisor or its affiliates may develop advertising and sales promotions, campaigns and other materials. Franchisor or the affiliate shall have the right to charge Franchisee for such materials that Franchisee obtains from Franchisor or its affiliates.
10.4. Local Advertising. Franchisee shall spend at least $250 per month for local advertising and promotion of the Point of Service. Not later than the 10th day of each month and such additional times as Franchisor requests, Franchisee shall provide Franchisor written accountings and copies of receipts and invoices for all Franchisee's expenditures for local advertising in the previous calendar month.
10.5. National Advertising.
A. Uses of Advertising Fund.
Franchisor shall establish a National Advertising Fund ("Advertising Fund") and use the Advertising Fund to pay for design, production, placement and administration of local, regional and national advertising, public relations or promotion programs intended to promote and enhance the quality image, identity and patronage of Pronto Wash businesses, all in Franchisor's sole discretion. These may include, but are not limited to, print, broadcast and electronic ads, promotion materials, newsletters, public relations, and payment to Franchisor, its affiliates or advertising agencies for administrative expenses.
B. Direction of Advertising Fund.
Franchisor shall have the right to direct all advertising programs with sole discretion over the creative concepts, materials and media, placement and allocation. Franchisor has no obligation to make expenditures which are equivalent or proportionate to Franchisee's contributions, or to expend all contributions in the same time frame as when they are received, or to ensure that any particular franchisee benefits directly or pro rata from use of the Advertising Fund. Franchisee acknowledges and agrees that Franchisor's obligations regarding the Advertising Fund shall be those of an independent contractor and Franchisor does not undertake, and shall not be held to any fiduciary obligation regarding the Advertising Fund.
C. Separation of Funds.
Franchisor shall separately account for contributions to the Advertising Fund and may elect whether or not to keep the funds in accounts separate from Franchisor's other funds. Franchisor shall not use the Advertising Fund to defray Franchisor's general operating expenses, except for reasonable administrative costs and overhead not to exceed 15% of overall Advertising Fund expenditures, that Franchisor incurs in activities reasonably related to
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administration or direction of the Advertising Fund or its programs. If Franchisor elects to hire personnel, establish a department, or establish a separate entity whose principal responsibilities are advertising and promotion, then Franchisor shall have the right to use any or all of the Advertising Fund to pay for that department, entity or personnel, and their activities.
Franchisor maintains the right to terminate the Advertising Fund. The Advertising Fund shall not be terminated, however, until all money in the Advertising Fund has been expended.
An accounting of the expenditures of the Advertising Fund shall be prepared at least annually and made available to Franchisee on written request. Franchisor may from time to time, conduct audits of Advertising Fund expenditures, by an independent accountant selected by Franchisor and performed at the expense of the Advertising Fund.
F. Franchisor Contributions.
Any Pronto Wash locations owned and operated by Franchisor shall make contributions to the Advertising Fund on a basis substantially equivalent to (but not necessarily exactly the same as) contributions required of franchisees.
10.6. Sponsorship Advertising. Franchisor shall have the right to sell advertising space to others at the POS. Franchisee shall comply with Franchisor's instructions to place advertising at the POS. Franchisor shall have the right to place any revenue derived from such advertising in the Advertising Fund or to retain and/or use such revenues for any other purposes as Franchisor deems appropriate.
10.7. Advertising Cooperatives.
Franchisor shall have the right but no obligation from time to time to designate one or more local, regional or national geographic areas encompassing the Point of Service and at least one other Pronto Wash franchise as a cooperative advertising region to conduct advertising and promotion. The cooperative will operate according to governing documents that Franchisor prepares or consents to. Franchisee shall participate in and, contribute to such cooperative advertising region according to participation and contributions required of the other members, as determined from time to time by majority vote of members. Each member shall have one vote per operating Pronto Wash Point of Service owned by such member and located in the region. Franchisor controlled or affiliated outlets shall not participate as such, contribute to, or have voting power in any cooperatives. However, Franchisor shall have the right, but no obligation, to cast a vote to break a tie, and/or to veto or modify any decision of the cooperative advertising region. Franchisor shall prepare annual financial statements at the cooperative's expense and
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shall make them available to Franchisee on request. Franchisor shall have the right to change, dissolve or merge cooperatives at Franchisor's discretion.
B. Contribution Limit.
Franchisee shall have no obligation to contribute to a cooperative advertising region more than $200 a month per Point of Service operated by Franchisee in any three consecutive calendar months.
11. CONFIDENTIAL INFORMATION
11.1. Restriction on Use. Franchisee shall not divulge or use for the benefit of any other person or entity any confidential information or know-how which may be communicated to Franchisee. Franchisee shall protect the confidentiality of all confidential information.
11.2. Scope. Franchisee acknowledges that the following is confidential information and constitutes trade secrets of Franchisor (without limitation): all systems of operation, policies, standards and techniques that at any time are part of the Pronto Wash System; the contents of the Franchisee Book; methods of advertising and promotion; training materials; unpublished promotion and public relations materials, and such other information as Franchisor designates as confidential.
11.3. Duplication. Franchisee shall not duplicate, record or otherwise reproduce any of the confidential information or material, in whole or part, or make any available to any person or entity except as authorized in this Agreement. On expiration or termination of this Agreement, Franchisee shall return to Franchisor all confidential information in Franchisee's possession or control.
11.4. Disclosure. Franchisee and the Point of Service Manager, shall divulge only that confidential information and only to those personnel who must have access to that information to do their jobs. Franchisee shall take all precautions necessary to assure that Franchisee's personnel retain such information in confidence.
12. PAYMENTS TO FRANCHISOR
12.1. Royalty. Franchisee shall pay to Franchisor a monthly Continuing
Royalty. The monthly Continuing Royalty is the greater of 8% of Gross Sales derived at the Point of Service in the prior calendar month or the following per Detail Center - Hub operating at the Service Zone at any time in that month:
Tier A & B: First Hub - $1,000, Second Hub - $500, Third + Hub - $250
Tier C & D: Each Hub - $500.
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12.2. Advertising Fund. Franchisee shall pay to Franchisor each month a contribution to the Advertising Fund. The monthly Advertising Fund contribution is the greater of 0.5% of Gross Sales derived at the Point of Service in the prior calendar month or
$150 per month.
12.3. Reporting and Payment. Franchisee shall deliver to Franchisor not later than the 5th day of each month, a statement signed by Franchisee, on a form prescribed by Franchisor, reporting the Gross Sales derived at the Point of service in the month just ended and number of Detail Center - Hubs existing at the Service Zone at any time in the month. With the submission of each report, Franchisee shall pay Franchisor the full amount of the Continuing Royalty and Advertising Fund contribution due for that calendar month.
12.4. Inflation Adjustment. On written notice to Franchisee, as often as once per year, Franchisor shall have the right to increase the royalty and advertising payments due to Franchisor to adjust for inflation.
12.5 Gross Sales. For purposes of this Agreement, "Gross Sales" is defined as
the total of all sales made from the Point of Service, of every kind and nature, whether for car washing, detailing or other services, occasional or nonrecurring sales or any other activity. (This definition does not expand the scope of authorized activity of a Point of Service). Gross Sales also includes the fair market value of any transactions in which Franchisee barters or exchanges goods or services for goods or services provided by a vendor, supplier or customer. Gross Sales does not include, and Franchisee may deduct from Gross Sales (only to the extent they have been included): (i) the amount of sales tax receipts which by law are chargeable to clients, if those taxes are separately stated when the client is charged and were actually paid to the taxing authority; and (ii) documented refunds, chargebacks, credits and allowances given in good faith to customers by Franchisee.
13.1. Financial Records. Franchisee shall prepare and maintain for at least 7 years, complete records of all sales and revenues received by Franchisee, payroll records, copies of all tax returns, and supporting documentation, including but not limited to cash receipts, credit and charge records, cancelled checks and bank statements. Franchisee shall maintain additional records that Franchisor specifies from time to time.
13.2. Reporting. Franchisee shall provide to Franchisor within twenty (20) days after each calendar quarter and each calendar or fiscal year, in a form approved by Franchisor, a balance sheet and income statement as of the end of the quarter and end of the year. The financial statements shall be prepared according to generally accepted accounting principles, and, if requested by Franchisor, reviewed or audited by an independent CPA, at Franchisee's expense. Franchisee shall provide Franchisor with a copy of all Franchisee's federal and state income tax returns, amendments and other tax return filings at the same times as these are filed with the government tax authorities.
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13.3. Additional Reports. Franchisee shall submit to Franchisor other reports, forms and records, in the manner, containing information and at times Franchisor specifies from time to time.
13.4. Inspection and Audit. Franchisee shall make available to Franchisor for inspection at times and in a manner that Franchisor requests from time to time, all original books and records that Franchisor designates. Franchisor or its designee shall have the right, at all reasonable times, to examine, copy, inspect and audit the books and records of Franchisee.
13.5. Results. If an inspection or audit reveals any underpayment or understatement to Franchisor, then Franchisee shall immediately pay the amount of the underpayment or understatement, plus interest from the date the amount was due until paid, at the rate stated in Section 20.17. If an inspection or audit discloses an underpayment or understatement of two percent (2%) or more in any period, then Franchisee shall also reimburse Franchisor's costs and expenses of the inspection or audit. The provisions in this Section do not excuse any breach reflected by the underpayment or understatement, and are additional to all Franchisor's other rights and remedies.
14.1. In-Term. While this Agreement is in effect, Franchisee shall not directly or indirectly engage, in any "Competitive Business" as defined below, either as an owner, investor, partner, shareholder, director, officer, employee, agent, advisor, consultant, or in any other capacity.
14.2. Post-Term. For a period of 2 years immediately following expiration or termination of this Agreement, Franchisee shall not directly or indirectly engage, within the territory identified in Exhibit A, or within the territory granted by Franchisor to any other franchisee under any agreement in effect as of the date of expiration or termination of this Agreement, in any "Competitive Business" as defined below, either as an owner, investor, partner, shareholder, director, officer, employee, agent, advisor, consultant, or in any other capacity.
14.3. Hiring. While this Agreement is in effect, and for 2 years after it expires or is terminated, Franchisee shall not hire or make any effort to hire for any purpose, any personnel of Franchisor or of any affiliate of Franchisor or of any other Pronto Wash franchisee without the prior written consent of the Franchisor, affiliate or franchisee for whom the person is employed.
14.4. Scope. The parties acknowledge that Sections 14.1 through 14.3 are intended to prevent (and shall be deemed to also restrict) not only direct competition but also all forms of indirect competition, such as a spouse, partner or family member residing in the same household as Franchisee or Franchisee's officers, engaging in the conduct prohibited by Sections 14.1 through 14.3. However, Sections 14.1 through 14.3 shall not prevent Franchisee
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from owning, only for passive investment purposes, up to an aggregate of 3% of the stock of a competitive business that is publicly held with that stock listed and traded on a national stock exchange, or through NASDAQ and provided Franchisee does not control the company, and shall not prevent Franchisee from owning any other Pronto Wash franchise pursuant to a Franchise Agreement with Franchisor.
14.5. Competitive Business. The phrase "Competitive Business" means any
business that offers or sells any form of washing service for cars or other mobile vehicles whether conducted from any one or more fixed or portable locations. This restriction shall not apply to an existing car wash business owned or operated by Franchisee at the following location(s):
14.6. Confidentiality Agreements. If Franchisee is a corporation, limited
liability company, partnership or other form of entity, then Franchisee shall take all actions needed to cause Franchisee's members, owners, directors, managers, officers and management employees individually to comply with the restrictions in Sections 14.1 through 14.3 as if each was individually a party to this Agreement. Franchisee shall also cause each such person to sign a confidentiality agreement in a form satisfactory to Franchisor and shall deliver to Franchisor a copy of each such agreement.
15.1. Conditions Precedent.
Franchisee's right to enter into a Renewal Agreement, in accordance Section 2.3 is subject to Franchisee's timely satisfaction of all the provisions in Sections 15.1(B) - 15.1(E), each of which is a condition precedent to renewal.
At the time Franchisee exercises the right to enter into a Renewal Agreement, and when the Renewal Term starts, Franchisee shall have fully performed all provisions in this Agreement; shall be in full compliance with the Franchisee Book and with all other agreements then existing between Franchisee and Franchisor, and between Franchisee and any affiliate of Franchisor; and shall be current on all amounts owed to Franchisor and to any affiliate of Franchisor.
Before signing the Renewal Agreement Franchisee shall have arranged to refurbish, remodel and upgrade and redecorate, the Point of Service and its equipment, signs, and
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furnishings, as Franchisor specifies, to conform to Franchisor's then-current requirements for a franchised Pronto Wash Service Point of Service.
Before signing the Renewal Agreement Franchisee shall demonstrate to Franchisor's satisfaction the ability to retain lawful possession of the Service Zone for the duration of the Renewal Term on terms acceptable to Franchisor.
Before the time of signing the Renewal Agreement Franchisee shall have satisfied or arranged to satisfy Franchisor's then-current qualification and training requirements for a renewing Pronto Wash franchisee. This may include, without limitation, attendance and successful completion by Franchisee and the Point of Service Manager of Franchisor's initial training program and other training programs specified by Franchisor, regardless of whether any such person previously completed these or other training programs.
15.2. Form of Renewal Agreement. The Renewal Agreement shall be Franchisor's then-current form of Franchise Agreement. Its terms may provide for different or additional fees, or both, and may otherwise materially differ from the provisions in this Agreement, except that the duration shall be the period of time provided in Section 2.3. Any provision in the Renewal Agreement for an initial franchise fee shall be modified to require Franchisee to pay Franchisor a sum equal to the average monthly Continuing Royalties that were payable to Franchisor (or should have been payable to Franchisor) in the 12 calendar months immediately preceding the renewal date with a minimum of $1,000. (the "Renewal Fee").
15.3. Procedure For Exercising Right to Renew. Franchisee shall enter into a Renewal Agreement in the following manner:
A. At least 120 days but not more than 150 days before the end of the term of this Agreement Franchisee shall in writing notify Franchisor of Franchisee's desire to renew and ask Franchisor for Franchisor's then current Uniform Franchise Offering Circular or equivalent disclosure document, the Renewal Agreement and applicable ancillary agreements and instruments.
B. After receiving Franchisee's written request Franchisor shall deliver the applicable documents to Franchisee. Franchisee shall promptly acknowledge receipt of these items in the manner Franchisor requests.
C. No sooner than 14 days and no later than 28 days after Franchisee receives the items in Section 15.3(B), Franchisee shall sign the Renewal Agreement and applicable ancillary agreements, and deliver these to Franchisor with payment of the Renewal Fee.
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D. Franchisee's failure to fully and timely perform any act required in Sections 15.3(A) - (C) shall be deemed an election by Franchisee not to exercise the right to enter into a Renewal Agreement,
15.4. Franchisor's Agreement. If Franchisee has exercised the right to enter into
a Renewal Agreement as provided in this Agreement, and through and including the date this Agreement expires Franchisee has satisfied all conditions precedent in Section 15.3 then on (or as of) the date this Agreement expires Franchisor shall sign the Renewal Agreement previously signed and returned by Franchisee and shall provide Franchisee a copy of the signed Renewal Agreement.
16.1. By Franchisor, Franchisor shall have the right to assign this Agreement, and any of its rights in this Agreement, to any person, firm, corporation, limited liability company or other entity. On such assignment, Franchisor shall be released from any further obligations hereunder except for accrued liabilities, if any.
16.2. By Franchisee.
A. No Transfer.
Franchisee acknowledges that Franchisor entered into this Agreement in reliance on the personal skill and qualifications of Franchisee. Therefore, except as expressly stated in this Agreement, Franchisee shall have no right or power to, and shall not, assign, sell, transfer or sublicense, voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise, any or all of this Agreement or any of Franchisee's rights or interest in this Agreement or in Franchisee, without Franchisor's prior written consent. Any purported assignment, sale, transfer or sublicense granted without such consent shall be void and of no effect.
B. Negative Pledge.
Franchisee shall have no right to and shall not pledge, encumber, hypothecate or otherwise grant any security interest in this Agreement, the Point of Service, or any aspect of the business being conducted pursuant to this Agreement without Franchisor's prior written consent. Any purported pledge, encumbrance, hypothecation or security interest made without such consent shall be void and of no effect.
For this Agreement, "assignment" includes but is not limited to, any transfer or redemption in the aggregate of more than 49% of the capital stock, voting power, units of ownership, partnership interest or equivalent of a corporate, limited liability company, partnership or other entity franchisee, as originally constituted on the date of signing this Agreement, to any person or entity who is not (i) already a shareholder, general partner, member
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or equivalent owner of the entity; (ii) the spouse of the person making the transfer, (iii) a trust controlled by the person or entity or whose only trustee is and remains such a person, or (iv) a corporation, limited liability company or partnership controlled and composed and continuing to be composed solely of the persons or entities making the transfer.
D. Additional Scope.
Nothing in Section 16.2(C) implies that a transaction involving less than 49% of the interest in Franchisee is not a transfer or assignment. Franchisee shall advise Franchisor in writing of all proposed transfers of ownership in Franchisee regardless of whether the amount transferred is less than 49%. Franchisor shall have the right, thereafter, to determine whether the proposed transaction constitutes a transaction subject to the provisions of this Section 16.2.
16.3. Assignment To Franchisee's Entity. Franchisor will not unreasonably withhold consent to a written request by Franchisee to assign Franchisee's interest in this Agreement to a corporation, limited liability company or equivalent entity, provided that Franchisee satisfies all the following conditions precedent: (a) the entity is newly organized and its activities will be limited to acting as a Pronto Wash franchisee; (ii) the entity's name shall not include the words "Pronto" or Pronto Wash," " or any variant, or words confusingly similar thereto without Franchisor's prior written consent; (c) Franchisee shall be the sole owner of at least 51% of the ownership of the entity and any remaining ownership is owned only by Franchisee's spouse or children; (d) if Franchisee is two or more individuals, then each owns the same percentage of the entity as his or her interest in the business prior to the assignment; (e) the entity's articles of incorporation, articles of organization and bylaws state that the issuance and transfer of any interest in the entity are restricted by this Agreement; and (f) all the entity's ownership certificates conspicuously state:
The transfer of the securities represented by this certificate is subject to the terms and conditions of a Franchise Agreement dated [date of this Agreement] between Pronto Wash USA LLC and [Name of Franchisee]. This certificate is not transferable and cannot be sold, assigned, pledged, mortgaged or encumbered by operation of law or otherwise, without prior written consent of Pronto Wash USA LLC.
16.4. No First Refusal. An assignment made pursuant to Section 16.3 shall not be subject to Franchisor's rights of first refusal in Section 16.8 of this Agreement, and shall not require payment of a transfer fee.
16.5. Franchisee's Sale To Third Party. Franchisor's consent to a proposed assignment by Franchisee shall not be unreasonably withheld. It shall be deemed reasonable for Franchisor to impose, among other requirements, any or all the following as conditions precedent to consenting to a proposed assignment to a third party:
A. Franchisee first complies with the right of first refusal provisions in Section 16.8.
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The original documents were scanned as an image. The original file can be downloaded at the link above.