The original documents were scanned as an image. The original file can be downloaded at the link above.

Sample UFOC


RAPID REFILL INK INTERNATIONAL CORP. A\>^&-^ r%          l 17% f"«ll I 1                         a Minnesota corporation

(ra? Rapid Refill Ink l^whitew^rRo^suiteiso

X^\}/               I                                                               Minnetonka, Minnesota 55343

(541)431-4665 www. rapidrefillink. com

The franchisee will operate stores under the name "Rapid Refill Ink" specializing in reprocessing, refilling, and selling of ink jet and laser toner cartridges for printers, copiers, fax machines, and all-in-one machines. These cartridges, along with OEM and compatible cartridges, will be sold to consumers and businesses through an attractive and friendly retail environment.

The initial franchise fee for your first individual franchised location, which may be an "A-Store" or a "B-Store", will be $30,000, and for all additional locations, the initial franchise fee will be $20,000. Your initial investment to establish a Store will range from $129,520 to $225,550 for an A-Store and from $79,395 to $143,685 for a B-Store. If you sign a 3-Pack Agreement, you will not have to pay a development fee, but when you sign the 3-Pack Agreement, you will also sign all three franchise agreements, and pay the initial franchise fee for those agreements. Please refer to Items 5 and 7 for details on these fees and costs.

Risk Factors:





Information about comparisons of franchisors is available. Call the state administrators listed in Exhibit "B" or your public library for sources of information.

Registration of this franchise with any state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in this offering circular is untrue, contact the Federal Trade Commission and the appropriate State agency listed in Exhibit "B".

This offering circular was issued on March 29, 2006 to meet the requirements of the Federal Trade Commission. Certain states require franchisors to make additional disclosures related to the information contained in this offering circular (see Exhibits J and K of this offering circular), which will be effective in those states as of the dates shown in Exhibit A.

Rapid Refill Ink International Corp. UFOC (March 29, 2006) (4100789.20)


Item Description_______________________________________________________________Page

1  THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES.........................................................1

2 BUSINESS EXPERIENCE........................................................................................................................3

3 LITIGATION.............................................................................................................................................5

4 BANKRUPTCY.........................................................................................................................................5

5 INITIAL FRANCHISE FEE......................................................................................................................6

6 OTHER FEES............................................................................................................................................7

7 INITIAL INVESTMENT.........................................................................................................................10

8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES...................................................13

9 FRANCHISEE'S OBLIGATIONS..........................................................................................................17

10 FINANCING..........................................................................................................................................18

11 FRANCHISOR'S OBLIGATIONS.......................................................................................................18

12 TERRITORY.........................................................................................................................................27

13 TRADEMARKS....................................................................................................................................29

14 PATENTS, COPYRIGHTS, PROPRIETARY INFORMATION.........................................................30

15   OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS..................................................................................................................................................31

16 RESTRICTIONS ON WHAT FRANCHISEE MAY SELL..................................................................32

17 RENEWAL, TERMINATION, TRANSFER DISPUTE RESOLUTION.............................................33

18 PUBLIC FIGURES................................................................................................................................35

19 EARNINGS CLAIMS............................................................................................................................35

20 LIST OF OUTLETS...............................................................................................................................35

21 FINANCIAL STATEMENTS...............................................................................................................37

22 CONTRACTS........................................................................................................................................37

23 RECEIPT................................................................................................................................................37


A.         Effective Dates

B.          List of State Administrators

C.          List of Agents for Service of Process

D.         Franchise Agreement

E.          3-Pack Agreement

F.          Table of Contents to the Manual

G.         Confidentiality and Nondisclosure Agreement H.        List of Franchisees

I.          Financial Statements

J.         Area Representatives and Brokers

K.        State-Specific Disclosures

L.         Agreement Amendments

M.        Franchisee Compliance Certification

N.        Receipts

Rapid Refill Ink International Corp. UFOC (March 29, 2006) (4100789.20)                                            Page i


The Franchisor

To simplify the language in this offering circular, the words "we," "us," and "our" refer to Rapid Refill Ink International Corp., which is the franchisor. We conduct business under the name and mark "Rapid Refill Ink," and do not conduct business under any other name. "You" means the person or entity who buys the franchise.

We offer franchises to operate full-service stores that can process and refill ink or toner cartridges for ink-jet and laser printers, copy and fax machines and all-in-one machines ("Cartridges"), which serve as a retail storefront, which maintain full ink-jet and laser toner cartridge remanufacturing equipment and supplies; and that are physically located in malls, streetfronts, and other retail establishments (an "A-Store"). Other types of Store designs include retail-service only stores (without ink-jet and laser toner cartridge remanufacturing equipment and capabilities) that are located in malls, streetfronts, and other retail establishments ("B-Stores"). Additionally, an important part of our business is unattended branded drop-off boxes located within and outside retail establishments ("Drop Boxes"), and collection bins located in a school or for the benefit of youth groups and other organizations ("Collection Bins") used for the recovery of Cartridges from customers.

We are a Minnesota corporation, and we were formed on March 8, 2005. Our principal place of business is located at 12400 Whitewater Road, Suite 150, Minnetonka, Minnesota 55343, and we also maintain offices at 919 International Way, Springfield, Oregon 97477 (541.431.4465). Effective March 20, 2005, we acquired the Rapid Refill Ink franchise system, trademarks, other intellectual property, and related assets from our predecessor, Rapid Refill Ink International, LLC (the "Acquisition").

Our Predecessor

Our predecessor, Rapid Refill Ink International, LLC (the "Predecessor"), was organized in the State of Oregon on April 24, 2003 under the name "Cartridge Works LLC." It later changed its name to "Rapid Refill Ink, LLC" (on December 31, 2003) and then again to "Rapid Refill Ink International, LLC" (on April 23, 2004). Our Predecessor's principal place of business was 132 East Broadway, Suite 900, Eugene, Oregon 97401 (541.683.3770). It conducted business under the names "Cartridge Works" and "Rapid Refill Ink." The Predecessor first conducted a business of the type offered in this offering circular in 2002 and offered franchises from January 2004 until the Acquisition. The Predecessor also licensed two individuals to operate businesses in California, similar to Stores, one of which used the Proprietary Marks, and neither of which used the methods and information employed under the System. The Predecessor later offered each of these licensees the chance to convert their business to a Store. The Predecessor did not engage in other lines or business or offer franchises in any other lines of business.

Our agents for service of process are listed in Exhibit C to this Offering Circular.

The Franchise Offered

Your Store will operate under the mark "Rapid Refill Ink" and other trademarks, service marks, logos and commercial symbols (the "Proprietary Marks") that we designate. We will offer to qualified individuals a franchise agreement for the establishment and operation of a Store at a mutually-agreeable location, which will be specified in the franchise agreement that we will sign with you (a "Franchise

Rapid Refill Ink International Corp. UFOC (March 29, 2006) (4100789.20)

Page 1

Agreement"). The first Store under your first Franchise Agreement may be either an A-Store or a B-Store. As mentioned above, an A-Store is a full-service store selling Cartridges, that also can process Cartridge refills for ink jet and laser toner cartridges, and which is physically located in a mall, on a streetfront, or in another retail establishment. B-Stores, in contrast to A-Stores, are retail-service only facilities (that is, they have no capacity to refill or process Cartridge refills for ink jet or laser toner cartridges, and must obtain these services from us or another approved supplier). B-Stores can also be physically located in a mall, on a streetfront, or in another retail establishment.

We also offer to qualified individuals development arrangements for the purpose of committing to enter into three Franchise Agreements (a "3-Pack Agreement"). If you sign a 3-Pack Agreement, you will not have to pay a separate development fee, but you will sign all three Franchise Agreements at that time and be required to pay the initial franchise fees for those Franchise Agreements (see Item 5 for details on the amount of the initial franchise fees due under a 3-Pack Agreement). The 3-Pack Agreement also will provide for an extended period under which you may locate sites for the Stores to be operated under the three Franchise Agreements.

Stores operate under a system we have developed (the "System") that is identified by the Proprietary Marks, and which is characterized by procedures, techniques, and methods for merchandising activities; distinct inventory specifications and standards; our confidential operations manual (the "Manual"); as well as methods and techniques for inventory and cost controls, record keeping and reporting, personnel management, purchasing, sales promotion, marketing and advertising. We may change, improve and develop the System during the term of your franchise.

Other Business Experience

We first conducted a business of the type offered in this offering circular in March 2005. Affiliates of ours currently operate five stores in Eugene and Bend, Oregon (and have done so since November 2002). As of the date of this offering circular, there are 36 Rapid Refill Ink franchises in operation. We do not engage in other lines or business or offered franchises in any other lines of business.


We believe that the market for the sale and servicing of Cartridges and related products is developing and expanding. The Store will compete with retailers selling new "OEM" (original equipment manufacturer) Cartridges, such as office supply stores, office equipment repair stores, computer supply stores, OEM's, e-commerce printing suppliers, warehouse chains (super stores), and existing retailers of recycled and reconditioned inkjet and laser toner cartridges.

Industry-Specific Laws and Regulations

You must comply with all local, state, and federal laws that apply to your stores' operations, including for example health, sanitation, no-smoking, EEOC, OSHA, discrimination, employment, and sexual harassment laws. The Americans with Disability Act of 1990 requires readily accessible accommodation for disabled persons and therefore may affect your building construction, site elements, entrance ramps, doors, etc. You must obtain real estate permits {e.g., zoning), real estate licenses, and operational licenses. You should consult with your attorney concerning these and other local laws and ordinances that may affect your store's operation.

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Page 2


A list of our directors, principal officers, and other executives who have management responsibility for the franchise described in this offering circular follows. The location of employment for each person is Eugene, Oregon, unless we indicate otherwise. The information concerning their employment over the past five years is as follows:

President________________________________________________________________Dan P. White

Mr. White has served as our President since the Acquisition in March 2005. Before that, he served our Predecessor as its President, Chief Executive Officer, and Director from April 2003 until the Acquisition in March 2005. Before that, Mr. White served in various capacities and as a consultant to various technology and marketing-related businesses. From October 2001 to May 2003, he served as Vice President - Sales and Marketing for Webrizon, Inc. Mr. White served as Director of Sales and Marketing USA for Waterstreet Technology Group of Vancouver, British Columbia (July 2001-October 2001), Director of Sales and Marketing for IFX International Corp. (March 2001-July 2001), and New Business Development Manager/Franchise/Retail for Kinzan, Inc. (July 2000-February 2001). Before that, Mr. White served as Vice President of Franchise Products for NetCreate Systems, Inc. and as Vice President of Franchise Products and Vice President of Consumer Products for Nextron Communications, Inc. (May 1998-February 2000). While these companies are based around the country, Mr. White's duties were performed from Eugene, Oregon.

Chairman of the Board of Directors___________________________________________Roger E. Block

Mr. Block has served as the Chairman of our Board of Directors since March 2006. He also currently serves as Executive Vice President of Carlson Travel Network Associates, Inc. in Minneapolis, Minnesota since October 1997. Carlson Travel Network Associates, Inc. franchises four travel concepts: Carlson Wagonlit Travel, Cruise Holidays, Results Travel and SeaMaster Cruises located throughout the United States and Canada. Together, these systems have over 1,800 franchisees. Before joining Carlson, Mr. Block was the founder, Chairman, and President of Travel Agents International, Inc., a franchisor with over 325 franchised locations.

Chief Financial Officer_____________________________________________________Ross Johnson

Mr. Johnson has served as our Chief Financial Officer since the acquisition in March 2005. From March 2002 to May 2003, Mr. Johnson was Chief Financial Officer of Clarity Coverdale Fury in Minneapolis, Minnesota. From December 1999 to February 2002, he served as Director of Finance and Operations for the eCommerce Unit of Cincom Systems, Inc. in Cincinnati, Ohio.

Vice President____________________________________________________________Barak Gibson

Mr. Gibson has served as our Vice President since the Acquisition in March 2005. He joined the Predecessor in July 2003 and served as its Vice President, Store Operations from July 2003 until the March 2005 Acquisition.

Vice President______________________________________________________________Pete Olson

Mr. Olson has served as our Vice President since the Acquisition in March 2005. Mr. Olson joined the Predecessor in July 2003 and served as its Vice President, Production and Training from July 2003 until the Acquisition in March 2005. Before that he served Emerald Valley Weatherization of Springfield, Oregon as a Window Installation Tech Supervisor (January 2002-December 2002), as a Department Manager for Pro Contracting in Eugene, Oregon (March 2001-December 2002), and a Pro V, Inc. business owner in Cottage Grove, Oregon (from 1996 to September 2000).

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Vice President__________________________________________________________Peter Palmisano

Mr. Palmisano has served as our Vice President since the Acquisition in March 2005. He served as an independently employed small business consultant in Eden Prairie, Minnesota from April 2003 to March 2005. From May 2001 to April 2003, he was Chief Operating Officer for Kelle Company in New Hope, Minnesota. Mr. Palmisano held various management positions with Winmark Corporation (the franchisor of "Play It Again Sports" and other concepts) in Golden Valley, Minnesota from November 1992 to March 2001.

Vice President of Franchise Development_________________________________________Dave Shaw

Mr. Shaw has served as our Vice President of Franchise Development since August 2005. He served as President of Makoto USA, Inc. in Centennial, Colorado from July 2002 to December 2004. From September 1999 to December 2001, Mr. Shaw was President and Chief Executive Officer of EBIZ Enterprises, Inc. in Stafford, Texas.

Director of Marketing________________________________________________________Kelly Cahill

Ms. Cahill has served as our Director of Marketing since the Acquisition in March 2005. She was Director of Marketing for our Predecessor from August 2004 to March 2005. From June 2004 to September 2004, Ms. Cahill was Sales Team Manager for University Directories in Eugene, Oregon. From January 2004 to July 2004, she was an Account Representative for Alsin Capital Management in Eugene, Oregon. From October 2003 to June 2004, Ms. Cahill worked in Retail Sports Marketing for Copeland Sports in Eugene, Oregon; before that, she was a student.

International Franchise Representative___________________________________________Chris White

Mr. White has served as our International Franchise Representative since the Acquisition in March 2005. He served as an International Franchise Representative for the Predecessor from December 2003 to March 2005. From January 2003 to December 2003, Mr. White was a Commercial Diver for Triton Diving Services, Inc. in New Orleans, Louisiana; before that, he was a student.


Area Representatives

Our Predecessor offered an "area representative" program, under which the area representatives were involved in the process of soliciting and assisting the Predecessor in identifying prospective Rapid Refill franchisees and developers. We do not currently offer such a program, but we will work with the area representatives, listed in Exhibit J, with whom the Predecessor contracted. Attached to this offering circular as Exhibit J is a listing of our area representatives, and the individuals who work for those area representatives will act for us in the capacity of franchise "brokers."


FranChoice, Inc. ("FranChoice") is a Minnesota corporation incorporated on March 10, 2000. Its principal place of business is 7500 Flying Cloud Drive, Suite 600, Eden Prairie, Minnesota 55344, and its telephone number is (952) 345-8400. FranChoice provides its franchise brokerage services through independent contractors who are identified in Exhibit J of this offering circular. FranChoice's officers, directors and key employees are as follows:

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President of FranChoice: Stephen K. Hockett

Steve Hockett became the President of FranChoice in January 2003. From January 2002 through January 2003 he was an Independent Franchise Consultant working with FranChoice. From January 1993 to February 2002, he was a Vice President for Great Clips, Inc., of Minneapolis, Minnesota.

Vice President of FranChoice: Lori L. Kiser-Block

Lori Kiser joined FranChoice as a Consultant Development Manager in April 2003 and became Vice President of FranChoice in November 2003. Before joining FranChoice, from March 2002 until December 2002, Ms. Kiser-Block was Vice President of eFrame Technology, Omaha, Nebraska. Before that Ms. Kiser-Block worked for Carlson Leisure Group, Minnetonka, Minnesota in various positions starting as a Franchise Sales Manager in February 1993, becoming Director of Franchise Sales in 1996, and serving as Senior Director of Franchise Services until December 2001.

Chief Financial Officer of FranChoice: Tony Verbeten

Tony Verbeten joined FranChoice in December 2002 as Chief Financial Officer. He also is currently Chief Financial Officer of Capistar Franchise Holdings, parent company of FranChoice and also based in Eden Prairie. He was named Director of FranChoice in November 2005. Before joining FranChoice, Mr. Verbeten was Controller for Digital River of Eden Prairie, Minnesota, from August 2001 to November 2002. He was an independent financial planner from June through August 2001. From January 2000 to May 2001 he was Vice President of Finance and Controller for Dantis, Minnetonka, Minnesota.


No litigation is required to be disclosed in this offering circular.


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.

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Franchise Agreement

The initial franchise fee for your first Store will be $30,000. For your second Store and each additional Store, whether the Stores are A or B Stores, the initial franchise fee will be $20,000. These amounts are referred to below as the "Initial Franchise Fee."

During our Predecessor's last fiscal year (which ran from April 1, 2004 until the Acquisition), the Predecessor received Initial Franchise Fees ranging from $5,000 to $30,000. Those franchisees who paid less than $30,000 for an Initial Franchise Fee had previously been operating as licensees under the Proprietary Marks. Except as described above, the Initial Franchise Fee is uniform for all new franchisees.

If we determine that you are unable to satisfactorily complete the initial training program (See Item 11 below for a description of the initial training program), we may terminate the Franchise Agreement. If we terminate the Franchise Agreement, upon your execution of a general release, we will refund to you the greater of: (a) $10,000, or (b) one-third of the Initial Franchise Fee.

The Initial Franchise Fee is payable in lump sum when you sign the Franchise Agreement, and will be fully earned and non-refundable.

3-Pack Agreement

If you sign a 3-Pack Agreement, you will not have to pay a separate development fee, but you will sign all three Franchise Agreements at that time and be required to pay the initial franchise fees for those Franchise Agreements. At the time you sign the 3-Pack Agreement, you must pay the full initial franchise fee for the first Franchise Agreement ($30,000), and Vz of the $20,000 initial franchise ($10,000) for the second and third Franchise Agreements. You will then pay the remaining $10,000 balance on each of the initial franchise fees for the second and third Franchise Agreements at the time we approve the site(s) for the Stores to be located under those agreements.

(As an example, if you sign a 3-Pack Agreement - your must pay $50,000 at the time you sign the agreement ($30,000 for the first Franchise Agreement and $10,000 each for the second and third Franchise Agreements). You will then be required to pay the additional $10,000 each for the second and third Franchise Agreements at the time we approve the site(s) for the Stores to be operated under those agreements.)

The fees paid at the time you sign the 3-Pack Agreement are not refundable and will be fully earned when we receive them from you.

POS Set-Up

You will also need to have your point-of-sale system properly set-up and tested. You may do that yourself, hire a qualified outside vendor, or ask us to do that work for you.

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Page 6


Please review the table below with the notes that follow.

Name of fee

(Note 1)


Due Date


Royalty Fee

6% of Gross Revenues, except that as to revenues from sales of OEM Cartridges, the royalty rate is reduced to 3% (Note 2.)

Each week, before the close of business on Wednesday, based on the previous week's Gross Revenues.

Gross Revenues includes all revenue from the franchise location, less sales tax or use tax. (Payments are due on Wednesdays, but if Wednesday is a bank holiday that prevents payment on that day, you can pay us on the next business day.)

Advertising Fee

4% of Gross Revenues, of which one-half will be allocated to the Advertising Fund

Same as the royalty fee.

Note 3.

Advertising Preparation Fee

Currently $75/hour (also see remarks column)

As incurred.

We may charge this fee if, at your request, we prepare advertising materials for you. We also reserve the right to increase our hourly rate. You must also reimburse us for any out-of-pocket costs and vendor charges (for example, an outside graphic artist or ad agency) that we incur on your behalf.




At least $5,000 (in addition to the advertising fund, explained above)

You will incur this cost in the first two months that you are open

You must develop and submit to us, for our prior approval, a grand opening marketing plan. If you don't do so, we have the right (but not the obligation) to prepare a grand opening marketing plan.

Late Fees

$35 for each overdue payment, plus 1.5% interest per month (but not more than any applicable maximum interest rate)

On demand (Note 4)

Payable only if you don't pay us on time and in the proper amount. Interest will continue to accrue on the overdue amount until the interest and the overdue amount are both paid.


Note 4

On Demand

Note 4

Transfer Fees

$7,500 or 25% of the then-current Initial Franchise Fee charged for a first Store with us, whichever is more

Before transfer

Payable only if you make a transfer. You will also have to pay any third-party brokerage and referral fees relating to the transfer transaction, even if we originally engaged the broker.

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Name of fee (Note 1)


Due Date



Will vary under circumstances

As incurred

Note 5

Costs and




On demand

If you default under the Franchise Agreement, you must reimburse us for our expenses (including reasonable attorneys' fees) in enforcing or terminating the agreement.

Securities Offering Fee

$7,500 or our actual expenses, whichever is more

Upon demand

If you engage in a securities offering, you must reimburse us for our reasonable costs and expenses (including legal and accounting fees) to evaluate your proposed offering and you also must indemnify us (see above).

Renewal Fee

The greater of $3,500 or 10% of the then-current initial franchise fee

Before renewal

The renewal fee is payable instead of a new initial franchise fee.

Technology Fee

$18 per week (to be adjusted annually to reflect changes in the Consumer Price Index)

Weekly, at the same time as the royalty fee

The Technology Fee defrays the cost of the services we provide in connection with the Computer System and the Required Software.

Additional Assistance

A mutually agreed-upon fee.

On demand

We do not charge a separate fee for initial training (see Item 11). This fee is payable only if you ask for additional on-site assistance, and we agree that it is necessary.

Product Testing

Will vary.

On demand, if incurred

If you propose to offer for sale a new product or item which is not then approved by us, you must submit samples to us for testing, and we may charge you or the vendor for our costs in conducting those inspections or running those tests.


Reimburse our cost to procure insurance coverage for you, plus a reasonable fee for our expenses.

On demand

If you fail to obtain or maintain the required insurance coverage, we will have the right (but not the obligation) to do so, and charge you for such coverage.

Operating Fee

Reimburse our expenses incurred, plus a reasonable fee.

On demand

Payable only if we have to operate your franchise if you are unable to do so due to illness, incapacity, or death.

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Name of fee (Note 1)


Due Date





Reimburse our expenses incurred, plus a reasonable fee.

On demand

Payable only if we operate your franchise upon your failure to cure a default within 30 days after notice.

Notes to Item 6 Chart:

1.     All fees are imposed by and are payable to us. All fees are non-refundable.

2.     Royalty fees will be 6% for Gross Revenues received from the sale of all products and services at the Store - except that the royalty fee will be reduced to 3% for revenues received from the verifiable sale of OEM (original equipment manufacturer) Cartridges. Royalties are due and payable each "Week."

3.     The advertising fee of 4% of Gross Revenues per Week (the "Advertising Fee") will be allocated in the following manner: 2% will be allocated the Advertising Fund or to a Regional Ad Fund, and 2% must be spent, by you, on local advertising and promotion. We reserve the right at any time to reallocate the amounts of the Advertising Fee that are to be spent among the Advertising Fund, Regional Ad Fund or on local advertising and promotion. See Item 11 for further information regarding the Advertising Fund, Regional Ad Fund, and local advertising and promotion. You will not be required to contribute or expend on advertising, in total, more than the Advertising Fee (although we encourage you, and you are free, to spend more on advertising your own business).

4.     If we audit and find that you understated Gross Revenues by 2% or more (or if we audit because you did not provide us with sales reports), you will have to reimburse us for all of our inspection expenses, including our reasonable accounting and legal fees, plus: (a) a fee of $35 for each overdue payment; and (b) interest on the unreported receipts at 1.5% per month (up to the maximum rate permitted by law). Interest will accrue from the date of the underpayment.

5.     You must indemnify and reimburse us for our costs (including our attorneys' fees) if we are sued or held liable in any case having anything to do with: (a) your business operations; (b) any securities offering you propose or undertake; and (c) if we have to defend a claim alleging trademark infringement because you used our marks in a manner not allowed under franchise agreement.

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Page 9


Please review this table together with the notes that follow in this Item 7.


"A Store" Estimated Range

"B Store" Estimated Range

Method of Payment and When Due

To Whom Payment Is To Be Made

Initial Franchise Fee (Note 1)

$20,000 to $30,000

$20,000 to $30,000

As Described in Item 5


Rent (Note 2)

$12,300 to $27,900

$7,720 to $17,460

Monthly, As Arranged


Utility Security Deposits (Note 3)

$0 to $500

$0 to $400

Before Opening, As Arranged

Landlord and Utility Company

Leasehold Improvements (Note 4)

$12,000 to $25,000

$5,000 to $15,000

Before Opening, As Arranged


Fixtures (Note 5)

$9,395 to $18,000

$6,400 to $9,000

Before Opening, As Arranged

Approved Vendor or Lender

Equipment (Note 5)

$30,000 to $40,000

$3,500 to $5,250

Before Opening, As Arranged

Approved Vendor or Lender

Initial Inventory (Note 6)

$12,500 to $17,000

$12,500 to $17,000

Before Opening, As Arranged

Us, or other



Insurance (Note 7)

$225 to $1,650

$225 to $1,325

As Arranged

Insurance Company

Training Travel Expenses (Note 8)

$3,300 to $6,000

See Note 8

As Arranged

Travel and hospitality vendors

Training Tuition





Freight Costs

$2,000 to $5,000

$1,250 to $2,750

As Incurred

Freight carriers

Exterior Signage (Note 9)

$300 to $12,000

$300 to $9,000

As Arranged

Approved Vendor

Grand Opening Adv'g (Note 10)



As Arranged


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Page 10


"A Store" Estimated Range

"B Store" Estimated Range

Method of Payment and When Due

To Whom Payment Is To Be Made

Salesperson expenses (Note 11)



As Incurred


Additional Funds (3 mos.) (Note 12)

$15,000 to $30,000

$10,000 to $24,000

As Incurred





$129,520 to $225,550

$79,395 to $143,685

Notes to Item 7 Chart

1       Initial Franchise Fee. The high amount in the chart is the Initial Franchise Fee for your first Store with us, and the low amount in the chart is the Initial Franchise Fee for your second and each additional Store with us, which may be an A-Store or B-Store. See Item 5 for details.

Please also refer to Item 5 for more information on the 3-Pack Agreement. If you sign a 3-Pack Agreement, you will pay us at the time of signing the full initial franchise fee for the first Franchise Agreement, and lA of the initial franchise fees due for the second and third Franchise Agreements. The remaining initial franchise fees for the second and third Franchise Agreements will be paid at the time we approve a site(s) for the Stores to be established under those agreements.

2      Rent. These estimates are for eight months' rent, covering your security deposit (first and last month's rent), three months pre-opening, and three months after you open. You may be able to negotiate more favorable terms (e.g., rent abatement for one or more months before you open your business) with your landlord; if so, your costs will vary.

The typical A-Store facility requires 1,200 square feet or more of retail space, and a B-Store typically requires 750 square feet or more of retail space. The above estimate contemplates rent for a 1,200 square foot A Store (and a 750 square foot B Store) at the rate of $13.50 to $30 per square foot and common area maintenance charges for six months at a rate of $2.50 to $6.50 per square foot (but the estimate assumes that no CAM charges will be included in any deposit for the first and last months' rent). Your rent expenses may vary widely based on factors such as geographic location, the size of your Store, local rental rates, your lease term, the current occupancy/vacancy rates for retail space in your market, and other factors, and may be considerably higher in large metropolitan areas and urban downtown areas.

3       Utility Security Deposits. Lessors and utility companies may require you to place a deposit before occupying the premises and before installing telephone, gas, water, electricity and related utility services. Your real estate deposit is included in the rent figure (see Note 2 above).

4      Leasehold Improvements. The cost of construction and leasehold improvements depends upon the size and condition of the premises, the nature and extent of leasehold improvements required, the local cost of contract work and the location of the Store. The range of figures above includes the cost of reasonable renovation or leasehold improvements, including flooring, and installation of fixtures, but may vary if the lessor provides you a construction allowance. The estimate in the chart

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above assumes that the leasehold improvements will be made to "vanilla shell" premises whose flooring, walls, ceilings, mechanical, and electrical systems are prepared for Store construction.

5       Fixtures and Equipment. The Manual describes the fixtures and equipment necessary for a Store, which include shelving, fixtures, counters, POS systems, and other items. You may do that yourself or hire a qualified outside vendor. The estimate assumes that you will incur set-up and testing costs for your POS system in the range of $0 (for example if you do the work yourself) to $1,000 (for example if you hire an outside vendor). The estimate provided includes a required purchase of 25 Drop Boxes for each Store at a current cost of $105 per Drop Box and 10 Collection Bins for each Store at a current cost of $55 per Collection Bin.

6      Initial Inventory. Before beginning business operations, you must purchase an initial inventory of Cartridges and related merchandise and products of the type and quantity that we require, as provided in the Manual and as described in Item 8 of this Offering Circular. Shipping costs will be extra.

7       Insurance. You must procure and maintain throughout the term of the Franchise Agreement insurance of the types and amounts that we require (as described in Item 8 of this Offering Circular). The cost of insurance will vary based on policy limits, type of policies procured, geographic location, and other related factors. The estimate in the chart above is for your initial premium payment for approximately three months of coverage. The method of payment of premiums varies, and often is paid either annually or quarterly in advance.

8       Training Expenses. You will not pay us a fee for initial training. You will however be responsible for your own costs and expenses (and those of your employees). You must arrange and pay for transportation, meals, lodging, and wages for any persons attending training. Your costs will likely vary depending on a number of factors, such as distance to travel, choice of accommodations, and the type of transportation you use. The low estimate contemplates that you reside in the general vicinity of a training facility, and the high estimate includes costs for an out-of-state franchisee attending the training program. We highly recommend (and have made our estimates based on) attendance of two people at training, however you may send up to four. The figures represent anticipated costs for an initial (Part I) three-day course as soon as you are accepted as a franchisee, followed later by a second (Part II) ten-day course just before you open your Store, a $150 per-diem allowance (meals & hotels) and a $750 travel allowance. If you send additional persons to training, or if you incur higher per-diem expenses, your costs will be higher. Additional store training is optional but highly encouraged. Training requirements are described in Items 6 and 11 of this Offering Circular.

9       Signage. You must acquire and install interior and exterior signs bearing the Proprietary Marks as we require. The cost of this signage will vary based upon the supplier, location of your business, local laws and ordinances, the landlord's signage requirements, and other similar factors. You cannot install or use any signage unless we have approved it in writing.

10     Grand Opening Advertising. You must spend the minimum amount shown on Grand Opening advertising and promotion within two months after the Store first opens for business.

11     Salesperson Expense. You are required to hire, engage, or utilize the services of a salesperson to help promote the products and services provided at the Store. The figures in the chart above assume a monthly salary of $2,500 for this salesperson during the three months after the Store first opens for business.

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12 Additional Funds. The disclosure laws require us to estimate all costs and expenses to operate your franchise during the "initial phase" of your business, which is defined as at least three months or a reasonable period for the industry. We are not aware of any established "initial phase" for this industry, so our disclosures for "Additional Funds" cover a three month period.

These figures assume that you will receive no operating revenue during this period, and cover only the following costs: three months payroll (and related taxes and payroll expenses) for a minimal staff; real property rental for the second and third month following opening (the first month is covered under the heading "Rent"); advertising, promotion, travel and entertainment; business insurance; utilities; telephone and general office expenses. The estimates do not cover Royalty Fees, Advertising Fees, or cost of goods sold, which you will not incur absent sales, nor do they cover any interest or other financing costs you may incur, which will vary depending on how much you borrow. These estimates also do not provide for your cash needs to cover any financing costs that you incur or your personal living expenses. You should not plan to draw income from the operation during the start-up and development stage of your business, the actual duration of which will vary materially from store to store and cannot be predicted by us for your business (and which may extend for longer than the three month "initial phase" described above). You must have additional sums available, whether in cash or through a bank line of credit, or have other assets that you can liquidate or against which you may borrow, to cover personal living expenses and any operating losses you may sustain, whether during your start-up and development stage, or beyond.

Fees paid to us are not refundable. Amounts you pay to third parties may or may not be refundable depending upon the arrangements you make with them.

We do not offer any financing for your initial investment. The availability and terms of your financing will depend upon various factors such as the availability of financing generally, your credit-worthiness, the collateral or other security that you may have, and lending institutions' policies.

We prepared these estimates based on our experience and that of existing Store locations. These estimates cover your initial cash investment up to the opening of your business. The "Additional Funds" line covers our estimate of certain costs you will incur during the first three months of operation.

Your investment and expenditures may vary considerably from the figures above, depending on many factors such as location, the amount of space you lease, the business capabilities of your management and service team, your requirements for living expenses, and the rate of growth and success of your business. Because the exact amount of reserves will vary from operation to operation and we cannot meaningfully estimate those figures, we recommend that you retain the services of an experienced accountant or financial advisor to develop a business plan and financial projections for your particular operation. We also recommend that you contact existing Store operators to discuss their experiences and start-up and development expenses and costs.


General Inventory Requirements

You must at all times maintain an inventory of Cartridges and related merchandise and products, and other products, materials and supplies in quantities and quality established by us. (Franchise Agreement, § 13.5.3)

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We require all advertising and promotional materials, signs, decorations, and other items which may be designated by us to bear the Proprietary Marks in the form, color, location and manner that we may prescribe. (Franchise Agreement, § 13.5.10)

Inventory. Drop Box and Collection Bin Purchases

Before opening the Store, you must buy certain products from third-party suppliers, such as inventory, build-out materials, and fixtures. We estimate that the purchase of such products will total $40,000 for your first Store (an A-Store) and $20,000 for your second and each additional Store (whether an A-Store or a B-Store). You also must maintain a minimum inventory (currently $15,000) of finished product for sale in your Store. Although neither we nor affiliates will sell you these items, nor receive any profits from your purchase(s) of these items, we may in certain circumstances facilitate your purchases of these materials by receiving your payments for them, and delivering the materials to you. In these cases, we are simply a conduit, or pass-through, for payments to the supplier, as all revenues are passed along to the third party designee(s) who ultimately produce and/or supply these products.

You must buy at least 25 Drop Boxes for the Store before your Store opens. These Drop Boxes currently cost $105 each (although depending upon the number of boxes that you purchase, the vendor may afford you a discount), plus shipping costs. We do not sell Drop Boxes to you, but we currently have designated a single supplier for such items.

You must buy at least 10 Collection Bins for the Store before your Store opens. These Collection Bins currently cost $55 each (although depending upon the number of bins that you purchase, the vendor may afford you a discount), plus shipping costs. We do not sell Collection Bins to you, but we currently have designated a single supplier for such items.

Trademarked Products

We have the right to develop and own a proprietary line of Cartridges and other proprietary products ("Trademarked Products"). If you choose to purchase Trademarked Products, you must purchase them from us or a limited number of vendors authorized by us, at prices in effect at the time of purchase. If we develop and sell Trademarked Products, we will derive revenue and make a profit on your purchases of Trademarked Products. You are not obligated to purchase Trademarked Products in any particular volume. (Franchise Agreement, § 14.3)

Approved Supplies and Vendors

We will provide you with a list of approved manufacturers, vendors and distributors ("Approved Vendors List") for products that will be included as inventory in your Store. Approved vendors may include us or our affiliates. We may revise the Approved Vendors List in our sole discretion. If you wish to purchase any product from a vendor that is not on the Approved Vendors List, you must first notify us and, if requested, submit samples and information for examination and testing so we may determine whether the item or proposed vendor meets our specifications and quality standards. The vendor may be required to pay a charge, not to exceed the reasonable cost of the inspection and evaluation and the actual cost of the test. Although there is no time limit on the time we may take in order to evaluate a new vendor, our decision to approve or disapprove a new vendor typically will be made within ninety days after we receive all the relevant materials. We may re-inspect the facilities and products of any vendor and we reserve the right to revoke our approval of any item or any vendor that fails to continue to meet any of our criteria. We are not contractually obligated to make our specifications and standards available to you and do not plan to do so. (Franchise Agreement, § 14.1)

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We apply the following general criteria in approving vendors: (1) Ability to make the product to our high quality and safety specifications; (2) Production and delivery capability; (3) Integrity of the vendor; (4) Financial condition of the vendor; and (5) Evidence of a valid franchise granting the right to use any proprietary material. We do not currently use any purchasing arrangements or distribution cooperatives.

We will negotiate purchase arrangements for our franchisees when we can do so. We already have arranged for certain discounts in the range of 5% to 15% from certain vendors. These percentages may vary; in some cases the discounts from standard pricing may be higher.

Cash For Carts, LLC ("CFC") is a company owned by some of our officers, including Dan White. CFC is an approved vendor of Cartridges, and franchisees may purchase Cartridges from CFC, but will not be required to do so. CFC is an Oregon limited liability company, organized on January 12, 2005. CFC has not and does not offer franchises in any line of business. During the fiscal year ended December 31, 2005, CFC received $10,380.56 from franchisee purchases of Cartridges.

Computer Hardware Components and Software Programs

The computer hardware and software used in our system is not proprietary to us. We require you to purchase specific computer hardware, software and POS equipment for the operation of your Store, however, and such hardware, software and equipment is described in Item 11. Please see Item 11 for details.

Mandatory Specifications and Standards

All inventory and other items used in operating your Store which are not specifically required to be purchased in accordance with our Approved Vendors List must conform to our specifications and quality standards established. Any items bearing trademarks, likenesses, copyrighted material or other proprietary material must be licensed from the proper owner or agent, and you must provide us with evidence of a valid license. (Franchise Agreement, § 14.2)

You must comply with all requirements in the Franchise Agreement (including § 13), the Manual and other written policies we supply to you. You must also have and maintain all required licenses, permits and certificates required to operate the Store, must comply with all applicable laws (Franchise Agreement, § 13.6), and must notify us in writing within 5 days of any legal action or matter which may adversely affect the operation or financial condition of the Store (Franchise Agreement, § 13.9). You must train and maintain at all times during the term of the Franchise Agreement an outside salesperson for the purpose of promoting the products and services of the Store (Franchise Agreement, § 13.8).

Bookkeeping and Records

You must maintain a bookkeeping, accounting and record keeping system, and submit periodic reports, as we specify in the Manual or otherwise in writing. You must retain your books and records throughout the term of the Franchise Agreement and for three years after (Franchise Agreement, § 12.1) and make them available for inspection, copying, and audit by us (Franchise Agreement, § 12.4). You must use the templates and other charts of accounts that we will provide to you wherever possible.

You must provide us on a form we approve with a profit and loss statement and activity report for each calendar month. Within 90 days after each fiscal year, you must provide us with a profit and loss statement and a balance sheet as of the last day of that fiscal year, prepared on an accrual basis in accordance with U.S. generally accepted accounting principles ("GAAP"), including all adjustments

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necessary for fair presentation of financial statements; and you must certify that your financial statements are true and correct. We may also require you to submit financial statements each year prepared in accordance with GAAP by an independent certified public accountant. (Franchise Agreement, § 12.2.2)

Marketing and Promotional Materials

Regardless of whether the logo or brand is utilized, you may not implement any advertising plan or use any promotional material until it has been submitted to and approved by us in writing. If you have not received written approval within fifteen days after our receipt of the proposed advertising plans promotional materials, the materials will be deemed disapproved (Franchise Agreement, § 10.7). We may develop and make available to you from time to time, at your expense, advertising and promotional materials for use in local advertising and promotion (Franchise Agreement, § 10.6).

Insurance Policies

You must maintain insurance policies protecting you and (as additional insureds) us and our officers, directors, partners and employees against all loss, liability, personal injury, death or property damage or expense relating to your Store. Policies must meet be written by an insurance company satisfactory to us and must meet our specifications, including the types and amounts of coverage, and the dollar limits and deductible levels, among other things. The premiums for this insurance will vary depending on nature and value of the physical assets, your gross revenues, number of employees, square footage, location, drivers' driving records, and other factors bearing on risk exposure (Franchise Agreement, § 16.2). Within 120 days after you sign the Franchise Agreement (or the date you purchase or lease the location for your Store, if that is sooner than the 120 day mark), you must provide us with Certificates of Insurance showing that you have obtained (paid the premiums for) the required policies. Policies must not be subject to cancellation or alteration without at least twenty days' prior written notice to us. We may modify minimum insurance limits in our sole discretion by written notice to you (Franchise Agreement, § 16.3).

You must obtain your insurance from an insurance company that we find satisfactory and must include at least the following coverage (this is only a summary; more details may be found in § 16 of the Franchise Agreement):

     "All risks coverage" on the Stores and all fixtures, equipment, supplies and other property used in the operation of the Stores, for full repair and replacement value;

     Worker's compensation and employer's liability insurance, and other insurance that may be required by statute or law (if you are permitted not to have worker's compensation insurance for your owners and officers, and choose not to do so, then you must instead maintain adequate alternative coverages at all times for work-related injuries);

     Comprehensive general liability insurance and product liability insurance with limits of at least $1.0 million combined single limit including various coverages;

     Automobile liability insurance and property damage liability insurance with a combined single limit of at least $1.0 million;

     Business interruption insurance for actual losses sustained; and

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Other insurance and coverage that may be required under your lease or that we may otherwise required.

We may specify that you must obtain insurance with higher minimum levels of coverages if we deem it is appropriate to do so.

Your insurance will not be limited because of the fact that we may also maintain insurance.

If you do not obtain and maintain the required insurance we will have the right and authority (but we won't have any obligation) to obtain insurance coverage for you and charge the insurance to you, along with a reasonable fee for the expenses we incur. These fees will be payable to us upon notice to you.

Payments from Franchisees for Approved Goods and Services

We estimate that your purchases of goods and services which are required to be purchased from approved or designated sources, or which must meet our standards or specifications, account for 95% of all purchases of goods and services required in the opening of your business and 95% of all purchases of goods and services required in the on-going operation of your business. Except as described above with regard to purchases of Cartridges from CFC, neither we nor our affiliates currently receive revenue on the products that you purchase from approved or designated sources but we reserve the right to do so in the future.

During the fiscal year ended December 31, 2005, we did not receive any revenues from franchisee purchases of any products or services. However, we now have a central facility from which franchisees will have the option to buy refilled inventory and we will receive revenues from those sales.

We do not provide or withhold material benefits to franchisees based on their use of designated or approved sources.




Section(s) in Franchise Agreement

Item(s) in Offering Circular

a Site selection and acquisition/lease


6, 7 and 11

b Pre-opening purchases/leases

4.4 and 13.5

7 and 8

c Site development and other pre-opening requirements


6, 7, and 11

d Initial and ongoing training



e Opening



f Fees

2 and 10

5 and 6

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Section(s) in Franchise Agreement

Item(s) in Offering Circular

g Compliance with standards and policies/Manual

7, 10.5, 13.1,13.2 and 14.2


h Trademarks and proprietary information

6 and 14.3

13 and 14

i Restrictions on products/services offered

1.4,13.5,14.1 and 15.2


j Warranty and customer service requirements


k Territorial development and sales quotas



1 Ongoing product/service purchases

13.5 and 14


m Maintenance, appearance and remodeling requirements



n Insurance


6 and 8

o Advertising


6 and 11

p Indemnification



q Owner's participation/ management/staffing

13.8 and 17.2

11 and 15

r Records/reports



s Inspections/audits


6 and 11

t Transfer



u Renewal



v Post-termination obligations

17.4 and 19


w Non-competition covenants



x Dispute resolution




We do not offer direct or indirect financing to you or guarantee your lease or other obligations.


Except as listed below, we need not provide any assistance to you.

Before you open your business, we will:

1.         Provide an initial training program as more fully described below in this Item 11. (Franchise

Agreement, § 5.1)

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The original documents were scanned as an image. The original file can be downloaded at the link above.