Download - 1800 Flooded Franchise Disclosure Document
FRANCHISE REVIEW by
PROFYLING.COM
I-800-Flooded
Department of Corporations Los Angeles
FRANCHISE OFFERING CIRCULAR
Franchisor: I-800-Flooded, Inc., a Nevada corporation, 2156 West Hillside Drive, Central Point, OR 97501
This franchise allows the franchisee the use of the I -800-Flooded tradename and telephone number within a designated territory.
The initial franchise fee is $59,995.00.
The franchisee's initial investment for the first three months is approximately $63,380. This assumes that the franchisee has an ongoing water damage restoration business. Information comparing franchisors is available. Call the administrator for your state or your public library for sources of information.
Registration of this franchise by a state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in this offering circular is untrue, you may contact the Federal Trade Commission and the franchise administrator for your state.
Effective date: Risk factors: INSUFFICIENT TELEPHONE CALLS MAY BE RECEIVED AT THE I-800-FLOODED TELEPHONE NUMBER AND DIRECTED TO YOU TO RECOVER THE COST OF YOUR
INITIAL INVESTMENT.
Table of Contents
ITEM I The Franchisor, its Predecessors and Affiliates 2. Business Experience 3. Litigation 4. Bankruptcy 5. Initial Franchise Fee 6. Other Fees 7. Initial Investment 8. Restrictions on Sources of Products and Services 9. Franchisee's Obligations 10. Financing 11. Franchisor's Obligations 12. Territory 13. Trademarks 14. Patents, Copyrights and Proprietary Information 15. Obligation to Participate in the Actual Operation of the Franchise Business 16. Restrictions on What the Franchise May Sell 17. Renewal, Termination, Transfer and Dispute Resolution 18. Public Figures 19. Earning Claims 20. List of Outlets 21. Financial Statements 22. Contracts 23. Receipt
Exhibits A. Franchise Agreement B. Financial Statements C. Receipt
I. The Franchisor, its Predecessors and Affiliates
Our name is I -800-Flooded, Inc. We are a Nevada corporation. We have no affiliates or predecessors. Our principal business is licensing and franchising the tradename and telephone number
" I -800-Flooded," to which we have exclusive rights. We have no other
business activities. We do not engage in the flood damage business ourselves.
The franchise consists of the following: (a) the non-exclusive right to use the tradename " I-800-Flooded" in your geographical area; and (b) the exclusive right to receive and respond
to telephone calls to the I-800-Flooded number from the telephone prefixes that you license from us. There are no requirements that you buy advertising or marketing materials from us
although they are available if you want them. We do not participate in the management of your business in any way, shape, or form. We only ask that you refrain from any activity that will bring our tradename into disrepute and that you indemnify us in case of any claim advanced against us on account of your activities.
Most franchisees will have an existing water damage restoration business and will be interested in expanding their market share through use of the 800-Flooded tradename and number. We do not operate the kinds of businesses being franchised.
The potential customers for the business being offered to the franchisees include
principally owners of real property damaged by water, such as might result from natural
flooding, faulty construction, or burst pipes. We are not aware of any regulations specific to the industry other than those which might be imposed by the state or local authorities in your area, such as the requirement for a contractor's license or a business license for the
municipality in which you are located.
There is no competition for the I-800-Flooded tradename or number. We have the exclusive rights to both the tradename and the 800 number. At this time we are not aware of any use of a confusingly similar tradename anywhere in the United States. Of course, there is significant competition for the water damage restoration business, and companies are engaged in this business throughout the United States and Canada.
Our principal place of business is 2156 West Hillside Drive, Central Point, OR 97501. We are a new company organized in Nevada on or about July 1, 2001. Our agent for service of process is the California Corporations Commissioner, 320 West 4th Street, Los Angeles, CA 90013-2344. We have not offered franchises in any other line of business.
2. Business Experience
Our principal director, having responsibility for the franchises offered by this offering circular, is Phillbert R. Thomas.
Mr. Thomas's principal occupation during the last five years has been the restoration of
property damaged by water through Aquatele, a company which he owned and managed in Fontana, CA. We are not using any franchise brokers.
3. Litigation
We do not have any administrative, criminal or material civil action pending against us of any nature, including any which alleges a violation of a franchise, antitrust, or securities law, fraud, unfair or deceptive practices, or comparable allegations.
During the ten year period immediately before the date of this offering circular, we have not been convicted of a felony or pleaded nolo contendere to a felony charge; or been held liable in a civil action by final judgment or been the subject of a material action involving violation of a franchise, antitrust or securities law, fraud, unfair or deceptive practices, or comparable allegations.
We are not subject to a currently effective injunctive or restrictive order or decree relating to the franchise or under a federal, state or Canadian franchise, securities, antitrust, trade regulation or trade practice law resulting from a concluded or pending action or proceeding brought by a public agency.
4. Franchisor The Franchisor and its president, secretary, and treasurer (it has no affiliates) have not,
during the ten-year period before the date of the offering circular, (a) filed as debtor or had filed against us a petition to start an action under the U.S. Bankruptcy Code; (b) obtained a discharge of our debts under the Bankruptcy Code; or (c) been a principal officer of a company or a general partner in a partnership that either filed as a debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code or that obtained a discharge of its debts under the Bankruptcy Code during or within one year after the officer or general partner of the franchisor held this position in the company or partnership.
5. Initial Franchise Fee. The initial franchise fee is $59,995.00 payable at the time the franchise agreement is
signed. It is nonrefundable. In addition, there is a deposit of $400.00 for telephone charges, which is refundable to the extent it has not been applied during the term of the agreement.
6. Other Fees. You are also required to pay a nonrefundable monthly licensing fee of $995.00, payable
on the first day of each month by automatic checking account withdrawal. This fee is collected by us and paid to us. No third party participates in the fees. This fee may increase over time. You will be given at least sixty days notice of any fee increase.
7. Initial Investment.
EXPENSE AMOUNT METHOD WHEN DUE TO WHOM
INITIAL $59,995 LUMPSUM AT SIGNING 1-800-
FRANCHISE OF FRANCHISE FLOODED, FEE AGREEMENT INC.
MONTHLY $995 PER LUMPSUM EVERY MONTH 1-800-
FRANCHISE MONTH OR FLOODED, PAYMENTS $2,985 FOR
THREE
MONTHS
INC.
DEPOSIT FOR $400 LUMPSUM AT SIGNING 1 -800- TELEPHONE OF FRANCHISE FLOODED, CHARGES AGREEMENT INC.
TOTAL (Ist 3 $63,380
MONTHS)
None of the foregoing payments is refundable. We do not finance the payments. We do not provide real estate, equipments, fixtures, other fixed assets, construction, remodeling, leasehold improvements, inventory, or any other assets. We do not require deposits except for the telephone charges. We do not assist you with establishing a water damage restoration business or with obtaining licenses required to operate one. This investment is not suitable for anyone not having or capable of establishing and operating a water damage restoration business.
8. Restrictions on Sources of Products and Services We have no required specifications, designated suppliers, or approved suppliers for
goods, services, or real estate relating to your franchise business. We will not derive revenue from your purchases or leases.
You are not required or expected to purchase marketing materials or any other items from us such as services, fixtures, equipment, inventory, computer hardware or software, or real estate. Marketing materials are available separately for purchase and it is probably to your
advantage to use them because we can probably make them available to you at a lower cost than comparable items which you would purchase independently, due to volume discounts. However, there are no purchases required either by written agreement or by our practice.
We do not issue or modify specifications. We have no standards which we impose on franchisees except that they comply with all applicable laws and regulations and that they
engage in no business practices that would bring the I -800-Flooded tradename into disrepute.
We grant approval to existing water damage restoration firms if the prefixes are available. We have no criteria for approval except availability of the prefixes, although we would strongly discourage anyone without an existing, viable, ongoing water damage restoration business from investing in this franchise. The franchisee will be informed
immediately whether his application to purchase a franchise is approved.
We do not revoke approval except upon the following contingencies:
A. The Franchisee is delinquent by more than thirty days in the payment of any of the required fees or in its payment for marketing materials purchased from Franchisor.
B. The Franchisee files a petition in bankruptcy (any chapter) or a bankruptcy
petition (any chapter) is filed against the Franchisee, or the Franchisee becomes insolvent, or the Franchisee makes a general assignment for the benefit of creditors, or a receiver or other custodian takes control of the Franchisee's business, or a judgment against the Franchisee exceeding $10,000 remains unsatisfied for more than sixty days.
C. The Franchisee breaches any of its obligations under this Agreement.
D. The Franchisee violates any law or regulation concerning its business, or the Franchisee commits an act of dishonesty or moral turpitude which might tend to bring the Tradename or the Franchisor into disrepute.
E. The Franchisee dies or is incapacitated or fails to maintain active operation of the business in which the Tradename and Number are used.
We are not approved suppliers of any categories of goods or services. We do not have suppliers. We have no criteria for evaluating, approving or disapproving suppliers. We do not provide any goods or services to franchisees through suppliers. We have no purchase arrangements with suppliers.
We do not derive revenue from required purchases or leases. There are no required purchases or leases. We do not provide material benefits to a franchisee based on a franchisee's use of designated or approved sources.
There are no purchasing or distribution cooperatives.
9. Franchisee's Obligations. This table lists your principal obligations under the franchise agreement. It will help you
find more detailed information about your obligations in these agreements and in other items of this offering circular.
OBLIGATION SECTION IN
AGREEMENT ITEM IN OFFERING
CIRCULAR
SITE SELECTION AND
ACQUISITION/LEASE
NONE NONE
OBLIGATION SECTION IN
AGREEMENT ITEM IN OFFERING
CIRCULAR
PRE-OPENING PURCHASES/LEASES
NONE NONE
SITE DEVELOPMENT AND
OTHER PRE-OPENING
REQUIREMENTS
NONE NONE
INITIAL AND ONGOING
TRAINING
NONE NONE
OPENING NONE NONE
FEES SCHEDULE C 5-6
COMPLIANCE WITH
STANDARDS AND
POLICIES/OPERATING
MANUAL
9 7
TRADEMARKS AND
PROPRIETARY INFORMATION
1,6 13
RESTRICTIONS ON
PRODUCTS/SERVICES
OFFERED
NONE NONE
WARRANTY AND
CUSTOMER SERVICE
REQUIREMENTS
NONE NONE
TERRITORIAL
DEVELOPMENT AND
SALES QUOTAS
NO SALES QUOTAS NO SALES QUOTAS
ONGOING
PRODUCT/SERVICE PURCHASES
NONE NONE
10. Financing. We do not offer financing arrangements.
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OBLIGATION SECTION IN
AGREEMENT ITEM IN OFFERING
CIRCULAR
MAINTENANCE, APPEARANCE AND REMODELING
REQUIREMENTS
NONE NONE
INSURANCE NONE NONE
ADVERTISING NONE NONE
INDEMNIFICATION II NONE
OWNER'S
PARTICIPATION/MANAGE
MENT/STAFFING
NONE NONE
RECORDS AND REPORTS NONE NONE
INSPECTIONS AND
AUDITS
NONE NONE
TRANSFER 8 17
RENEWAL 3,9 17
POST-TERMINATION
OBLIGATIONS
10 17
NON-COMPETITION
COVENANTS
NONE NONE
DISPUTE RESOLUTION 15,16 COVER PAGE
OTHER (DESCRIBE) N/A N/A
11. Franchisor's Obligations.
Except as listed below, we need not provide any assistance to you.
A. The obligations that the franchisor will perform before the franchise business opens.
We maintain the registered trademark with the U.S. Patent and Trademark Office in
good standing. We maintain the exclusive right to receive calls to the I -800-Flooded telephone number in good standing. We reserve one or more prefixes for you and provide instructions to the telephone company that all telephone calls originating from any of the prefixes you have reserved will be routed to the telephone number you designate. (See Franchise Agreement,
paragraph 2.)
B. The obligations to be met by the franchisor during the operation of the business.
We do not provide any assistance in products or services, hiring or training employees,
improvements or developments in the franchised business, pricing, administrative, bookkeeping, accounting and inventory control procedures, or operating problems which you may encounter. We do not have an advertising program. You are not required to participate in a local or regional advertising cooperative. There is no advertising fund to which you are required to contribute. You are not required to spend any amount of money on advertising in
your territory. You are not required to buy or use electronic cash register or computer
systems. We are not obligated to provide or assist you to obtain any of the above items or services. We have no operating manual. (See Franchise Agreement, paragraph 7.)
C. We do not select the location of your business.
D. There is no typical length of time between the signing of the franchise agreement or the first payment of consideration for the franchise and the opening of the franchisee's business, because we expect that you already have an existing water damage restoration business. If you do not, you should not invest in this franchise.
E. We have no training program or instructional material.
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We do not provide any assistance to you in the operation of your business. We have no requirements regarding site selection, site appearance, equipment, signs, fixtures, inventory, employees, bookkeeping, pricing, customer service, or any other aspect of the management of your business except only that we require that you take no action that would bring our name into disrepute and that you indemnify us from claims by any of your customers.
We will provide you with a non-exclusive right to use our tradename and the exclusive right to receive calls from selected telephone prefixes to the I -800-Flooded number. We expect to make marketing materials available to you, but your use of these materials is optional.
12. Territory.
You have no exclusive geographical area, but you do have the exclusive right to receive telephone calls to I -800-Flooded for the telephone number prefixes that you license from us. The word "territory" whenever it appears in this offering circular or in the franchise agreement refers to the telephone number prefixes that we have licensed to each franchisee, not to a geographical territory. We charge the initial franchise fee for each prefix.
We will not allow anyone else to receive calls from the telephone number prefixes which we have licensed to you. We will not establish a company-owned outlet or other channel of distribution using the your number prefixes. Continuation of your license does not depend on achievement of any particular sales volume. Your license will not be altered or terminated as long as you comply with your obligations under the franchise and licensing agreement.
We do not guarantee that there are any particular number of people living within the geographical area served by your telephone number prefixes. You may acquire other telephone number prefixes from us if they are available in your geographical area.
Other franchisees may advertise and do work within your geographical area and vice versa. There is no restriction on where you may work, nor any restriction on where other franchisees may work. The only restriction is that no other franchisee will get calls from the telephone number prefixes which have been reserved for you.
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13. Trademarks.
The principal trademark licensed to the franchisee is I-800-Flooded. We have common law rights to this trademark resulting from our assignor's use of this trademark in connection with water damage restoration since 1976. In addition, we have the federally registered trademark for I -800-Flooded, as assignees from Phillbert and Betty Thomas. It is registered with the U.S. Patent and Trademark Office on the principal register. Its registration date is
April 23, 2002. Its registration number is 2563655. We have filed all required affidavits. No
registration has been renewed yet. There are no currently effective material determinations of the Patent and Trademark Office, Trademark Trial and Appeal Board, the Trademark Administrator of this state or any court. There are no known pending infringements, opposition or cancellations. There is no pending litigation involving the principal trademark. There are no agreements in effect that significantly limit the rights of the franchisor to use or license the use of the trademark listed above in a manner material to the franchisee.
We do not undertake to protect your right to use the tradename. If it comes to your attention that someone else is using the tradename within your territory, you may have the option to pursue a claim of infringement or unfair competition against that party at your own expense, and we reserve the right to do so as well. As a practical matter, it is extremely unlikely that any third party would attempt to use the tradename apart from the number, which no third party can access without our knowledge or consent.
You are not required to notify us of the use or claims or fights to a trademark identical to or confusingly similar to the trademark licensed to you. We are not required to take affirmative action if you do notify us of such uses or claims. In case of administrative proceedings or litigation involving us, we have the right to control it.
We will protect you against claims of infringement or unfair competition arising out of
your use of the trademark. We will assume your defense and indemnify you for expenses and
damages if you become a party to an administrative or judicial proceeding against your will
involving a trademark licensed by us to you, or if the proceeding is resolved unfavorably to you. If you are required to modify or discontinue the use of the trademark as a result of a
proceeding or settlement, the difference between your franchise fee and the net revenue you derived from the franchise will be refunded.
We do not know of either superior prior rights or infringing uses that could materially affect the franchisee's use of the principal trademark in this state or the state in which the
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franchised business is located.
14. Patents, Copyrights, and Proprietary Information.
No patents or copyrights are material to the franchise at this time. We reserve the
right to apply for copyrights for our marketing materials.
15. Obligation to Participate in the Actual Operation of the Franchise Business.
We do not require that you personally supervise your business.
16. Restrictions on What Franchisee May Sell.
We have no restrictions as to what you may sell. 17. Renewal, Termination, Transfer and Dispute Resolution. This table lists certain important provisions of the franchise agreement. You should
read these provisions in the agreement attached to this offering circular.
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PROVISION SECTION IN
FRANCHISE
AGREEMENT
SUMMARY
TERM OF THE FRANCHISE 3 INDEFINITE TERM
RENEWAL OR EXTENSION
OF THE TERM
3 CONTINUES
INDEFINITELY
REQUIREMENTS FOR YOU TO RENEW OR EXTEND
N/A N/A
TERMINATION BY YOU 3 2 MONTHS NOTICE
TERMINATION BY US
WITH "CAUSE" 10 TERMINATION ON
DEFAULT
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PROVISION SECTION IN
FRANCHISE
AGREEMENT
SUMMARY
"CAUSE" DEFINED - 10 SPECIFIED EVENTS SET DEFAULTS WHICH CAN FORTH IN PARAGRAPH 10 BE CURED
"CAUSE" DEFINED - 10 SPECIFIED EVENTS SET DEFAULTS WHICH FORTH IN PARAGRAPH 10 CANNOT BE CURED
YOUR OBLIGATIONS ON 10 TRADENAME AND
TERMINATION/NONRENE TELEPHONE PREFIXES
WAL REVERT TO FRANCHISOR
ASSIGNMENT OF 8 FREELY ASSIGNABLE
CONTRACT BY US
"TRANSFER" BY YOU - 8 MORE THAN 50%
DEFINITION CONTROL
FRANCHISOR APPROVAL 8 WILL NOT BE
OF TRANSFER BY UNREASONABLY FRANCHISEE WITHHELD
CONDITIONS FOR 8 WILL NOT BE
FRANCHISOR APPROVAL UNREASONABLY
OF TRANSFER WITHHELD
FRANCHISOR'S RIGHT OF NONE NONE
FIRST REFUSAL TO
ACQUIRE FRANCHISEE'S BUSINESS
FRANCHISOR'S OPTION NONE NONE
TO PURCHASE
FRANCHISEE'S BUSINESS
DEATH OR DISABILITY OF NONE NONE
FRANCHISEE
18. Public Figures. We do not use any public figures to promote our franchise. 19. Earnings Claims. We do not make earnings claims. None of our sales people is authorized to make any
representation as to how the use of the tradename or 800 number might increase your sales. We do not know.
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PROVISION SECTION IN
FRANCHISE
AGREEMENT
SUMMARY
NON-COMPETITION
COVENANTS DURING
THE TERM OF THE
FRANCHISE
NONE NONE
NON-COMPETITION COVENANTS AFTER THE FRANCHISE IS TERMINATED OR EXPIRES
NONE NONE
MODIFICATION OF THE
AGREEMENT NONE NONE
INTEGRATION/MERGER
CLAUSE
12 INTEGRATED
DISPUTE RESOLUTION BY
ARBITRATION OR
MEDIATION
NONE NONE
CHOICE OF FORUM 16 LOS ANGELES COUNTY, CA
CHOICE OF LAW 15 CALIFORNIA
20. List of Outlets. As of the time of the preparation of this offering circular (June 2003), the franchise
concept has not yet been marketed, and there are no franchises of a type substantially similar to those offered nor any franchisor owned or operated outlets as of the close of the franchisor's last three fiscal years. There are no franchise outlets in this state. We do not know the number of franchises to be sold during the I year period after the close of the franchisor's most recent fiscal year. There have been no franchisee outlets for the 3-year period immediately before the close of the franchisor's most recent fiscal year which have transferred controlling ownership, been canceled or terminated by the franchisor, not been renewed by the franchisor, been reacquired by the franchisor, or been reasonably known by the franchisor to have otherwise ceased to do business in the system. No franchisee has had an outlet terminated, canceled, not renewed, or otherwise voluntarily or involuntarily ceased to do business under the franchise agreement during the most recently completed fiscal year or who has not communicated with the franchisor within 10 weeks of the application date.
21. Financial Statements. As we are new, we do not have a history of earnings. The only available financial
statements for us are annexed to this circular as an exhibit.
22. Contracts.
A copy of the franchise agreement which you are asked to sign if you want to become a franchisee is attached.
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23. Receipt.
THIS OFFERING CIRCULAR SUMMARIZES CERTAIN PROVISIONS OF THE FRANCHISE AGREEMENT AND OTHER INFORMATION IN PLAIN LANGUAGE. IF WE OFFER YOU A FRANCHISE, WE MUST PROVIDE THIS OFFERING CIRCULAR TO YOU BY THE EARLIEST OF:
(I) THE FIRST PERSONAL MEETING TO DISCUSS OUR FRANCHISE; OR (2) TEN BUSINESS DAYS BEFORE THE SIGNING OF A BINDING AGREEMENT; OR
(3) TEN BUSINESS DAYS BEFORE A PAYMENT TO US.
YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT LEAST FIVE BUSINESS DAYS BEFORE YOU SIGN A FRANCHISE AGREEMENT.
IF WE DO NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IT IF CONTAINS A FALSE OR MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL TRADE COMMISSION, WASHINGTON D.C. 20580 AS WELL AS TO ANY AGENCY IN YOUR STATE HAVING JURISDICTION OVER FRANCHISE OPERATIONS OR BUSINESS OPPORTUNITIES, WHICH IS THE DEPARTMENT OF CORPORATIONS, 320 WEST 4th STREET, LOS ANGELES, CA 90013-2344. THE DEPARTMENT'S TOLL FREE NUMBER IS 1-866-275-2677.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF A UNIFORM FRANCHISE OFFERING CIRCULAR. THIS OFFERING CIRCULAR INCLUDES THE FOLLOWING EXHIBITS:
A. FRANCHISE AGREEMENT B. FINANCIAL STATEMENTS OF FRANCHISOR
C. THIS RECEIPT
FRANCHISEE DATE OF RECEIPT
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FRANCHISE AND LICENSING AGREEMENT
1. Parties and Recitals. The effective date and the identity of the parties to this Agreement are set forth in Schedule A.
Franchisor owns and has the right to license the tradename 1-800- Flooded ("Tradename"). Franchisor also has the exclusive right to the 1- 800-Flooded telephone number ("Number") throughout the United States. Franchisor has also developed marketing materials for businesses using the Tradename.
Franchisee wishes to obtain a license to use the Tradename and Number within the Territory defined in Schedule A.
2. Grant of Franchise. Subject to the terms of this Agreement, Franchisor grants to Franchisee the exclusive to receive telephone calls to the 1-800-Flooded telephone number from the telephone prefixes set forth in Schedule A to this agreement (hereafter referred to as "Territory"). Franchisee acknowledges that Franchisor cannot give Franchisee exclusive rights to any particular geographical territory, only the exclusive rights to receive calls made to 1-800-Flooded from certain telephone prefixes. Any Franchisee may accept work in any geographical location.
3. Term and Termination. This Agreement shall continue indefinitely unless one of the parties chooses to terminate it. Franchisee may terminate this Agreement at any time without cause upon two months written notice to the Franchisor. Franchisor may terminate only on the conditions set forth in paragraph 10.
4. Operating Assistance. Franchisor will make available to Franchisee for purchase marketing materials. Examples of such marketing materials are set forth in Schedule B. The list of available materials may change from time to time in Franchisor's discretion. Franchisee will be provided with periodic lists of inventory of available marketing materials and price lists. Franchisee is not required to purchase marketing materials from Franchisor. Franchisor conducts no advertising or marketing effort on its own. Any advertising or public use of the 1-800-Flooded tradename or number must be approved in advance by the Franchisor.
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5. Fees. The Franchisee will pay fees to the Franchisor for the Tradename and Number as set forth in Schedule C.
6. Tradename. Franchisor continues to own the Tradename and the goodwill associated with the Tradename throughout the term of this Agreement. Any use of the Tradename except as authorized by this Agreement violates Franchisor's rights. Any advertisement or other public use of the Tradename shall always be accompanied by the "TM" symbol or other symbol that Franchisor may designate in writing from time to time.
7. Independent Operation. Franchisor will exercise no control over the operation of Franchisee's business. Franchisee will refrain from representing or giving the appearance that there is any legal relationship between its business and that of Franchisor except as set forth in this Agreement, that is, licensor/licensee and franchisor/franchisee. Neither party is an agent or fiduciary of the other. Neither party is responsible for the obligations of the other. Neither party has any ownership interest in the other.
8. Assignment. Franchisor may freely assign its rights under this Agreement including the right to the Tradename and Number. Franchisee may assign its rights under this Agreement only with Franchisor's prior written consent, which shall not be unreasonably withheld. Sale of more than a 50 percent interest in Franchisee, whether by sale of assets or stock or any other transfer which effectively conveys more than 50% of the control of Franchisee to a third party, constitutes a transfer. Franchisor may require a transfer fee.
9. Acknowledgments. Franchisee acknowledges that the following facts are true:
A. Franchisee has conducted an independent investigation of the business contemplated by this Agreement and understands that it involves business risks. The success of the venture depends on the abilities and participation of the Franchisee. Franchisor has made no claims of success or guarantees to Franchisee. Franchisor is unable to evaluate Franchisee's suitability for this type of investment. Franchisee
has the sole responsibility for determining whether to enter into this
Agreement.
B. Franchisee acknowledges that Franchisor has provided an offering circular not later than the earlier of (a) the first personal meeting held to discuss the sale of a franchise; (b) ten business days before the execution of this Agreement; or (c) ten business days before payment of any consideration.
C. Franchisee has read the offering circular and understands it contents.
D. Franchisee has received a copy of this Agreement at least five business days before signing it.
E. Franchisee has had sufficient opportunity to consult with its attorneys, accountants and other advisors. Franchisor's attorneys have provided Franchisee with no legal advice or representation. Franchisee has sufficient knowledge and experience to make an informed investment decision with respect to this Agreement.
F. Franchisee understands that other Franchisees will be using the Tradename and Number in other Territories. Franchisor has no obligation to control other Franchisees. Franchisee has sole responsibility for addressing any infringement of any of its rights under this Agreement by any third party.
10. Default and Termination. Franchisor may terminate this Agreement immediately and revoke the license to use the Tradename and Number if any of the following events takes place:
A. The Franchisee is delinquent by more than thirty days in the payment of any of the fees set forth in Schedule C or in its payment for marketing materials purchased from Franchisor.
B. The Franchisee files a petition in bankruptcy (any chapter) or a bankruptcy petition (any chapter) is filed against the Franchisee, or the Franchisee becomes insolvent, or the Franchisee makes a general assignment for the benefit of creditors, or a receiver or other custodian
takes control of the Franchisee's business, or a judgment against the Franchisee exceeding $10,000 remains unsatisfied for more than sixty days.
C. The Franchisee breaches any of its obligations under this Agreement.
D. The Franchisee violates any law or regulation concerning its business, or the Franchisee commits an act of dishonesty or moral turpitude which might tend to bring the Tradename or the Franchisor into disrepute.
E. The Franchisee dies or is incapacitated or fails to maintain active operation of the business in which the Tradename and Number are used.
11. After Termination. After this Agreement terminates, Franchisee will cease to use in advertising or in any other manner the Tradename.
12. Indemnification. Franchisee will hold Franchisor, its officers, directors, employees, agents, attorneys and shareholders, harmless from
any claims for damages advanced against them arising out of the operation of Franchisee's business.
13. Entire Contract This contract sets forth the entire understanding between the parties. Any conversations that the parties might have had before this Agreement was signed were mere discussions and have no force or effect. Neither party has made any representations or promises to the other regarding the subject matter of this Agreement. Franchisor has made no statements or promises about what revenue, if any, the Tradename or Number might generate for the Franchisee.
14. Amendments. Any amendments to this Agreement must be in writing.
15. Notices. Any notices required by this Agreement may be sent to the addresses set forth in Schedule A or to such other addresses as the parties may designate in writing from time to time.
16. Choice of Law. This Agreement shall be construed according to the laws of the state of California.
17. Choice of Forum. Any litigation filed by either party against the other arising under or relating to this Agreement or any alleged breach of the obligations of either party under this Agreement shall be filed only in the Superior Court of Los Angeles County, CA, Central District, and not in any other forum.
18. Attorneys' Fees. The prevailing party in any dispute arising under this Agreement shall recover its reasonable attorneys' fees and costs, including fees and costs incurred on appeal or in enforcing any judgment entered in its favor under this Agreement.
19. Severability. If any provision of this Agreement is held invalid, such provision shall be deemed to be restricted in its application as necessary to render it valid, and the remainder of this Agreement shall remain valid and enforceable for all purposes.
1-800-Flooded, Inc. Franchisee By: Its:
Schedule A
The effective date of this Agreement is:
The name, address, and telephone number of the Franchisor are 1-800- Flooded, Inc., 2156 Hillside Drive, Central Point, OR 97501.
The name, address, and telephone number of the Franchisee are The numerical prefixes from which the Franchisee has the exclusive right to receive telephone calls to 1-800-Flooded ("Territory") is
Schedule B
The marketing materials that are available to the Franchisee may
change from time to time and so may the prices. A representative sample of marketing materials which may be available from the Franchisor is listed below. The Franchisor will supply the Franchisee with current inventory items and price lists on request. The Franchisee is not required to purchase marketing materials from Franchisor.
business cards magnetic refrigerator stickers flyers and handouts envelopes stationery newspaper advertisements signs postcards stickers
Schedule C
The Franchisee will pay fees to the Franchisor as follows:
1. An initial franchise fee, payable on execution of this Agreement, in the amount of $59,995.00.
2. A monthly franchise fee, payable on the first day of each and every month following execution of this agreement, in the amount of $995.00. Franchisee acknowledges that the monthly franchise fee may increase, but that Franchisor will provide at least sixty days notice of any price increase.
3. Actual charges made to Franchisor for incoming telephone calls. Franchisee will deposit $400.00 for these charges. Any balance remaining at the conclusion of this agreement is refundable to Franchisee.
1000 • Bank of America - Checking 719.87
1-800-Flooded, Inc. Balance Sheet
cash Basis As of December 31, 2001
Dec 31,01 ASSETS
Current Assets Checking/Savings
Pagel
Total Checking/Savings 719.87
Total Current Assets 719.87 Fixed Assets
1210 • Computer 1,359.92
Total Fixed Assets 1,359.92 Other Assets
1320 • 1-800 Flooded Number 30,000.00
Total Other Assets 30,000.00
TOTAL ASSETS 32,079.79 LIABILITIES & EQUITY
Liabilities Current Liabilities
Other Current Liabilities 2020 - Payable to Randy T
210.94
Total Other Current Liabilities 210.94
Total Current Liabilities 210.94
Total Liabilities 210.94 Equity
3020 ■ Add'l to Capital 3050 ■ Capital Stock Net Income
30,000.00 10,000.00 -8,131.15
Total Equity 31,868.85
TOTAL LIABILITIES & EQUITY 32,079.79
1-800-Flooded, Inc. Profit & Loss
cash Basis September through December 2001
Net Ordinary Income -6,104.07 Other Income/Expense
Other Expense 8010 • Other Expenses 2,027 08
Total Other Expense 2,027.08 Net Other Income -2,027.08
Net Income -8,131.15
Pagel
Sep - Dec 01 Ordinary Income/Expense
Expense 6110 ■ Automobile Expense
61 i1 ■ Gasoline 244.24 6112 • Auto Rental (Auto Rental) 287.68 6113 • Auto Repairs 159.26
Total 6110 • Automobile Expense 691.18 6120 - Bank Service Charges 38.00 6230 - Licenses and Permits 25.00 6250 - Postage and Delivery 221.47 6270 • Professional Fees
6273 ■ Web Design 4,000.00 Total 6270 • Professional Fees 4,000.00 6340 • Telephone 296 37 6350 • Travel & Ent
6360 ■ Entertainment 23.92 6370 • Meals 612.56
Total 6350 • Travel & Ent 636.48 6540 ■ Office Expenses 48.90 6550 ■ Office Supplies 146.67
Total Expense 6,104.07
1110- Petty Cash 560.52
Total Equity 12,570.04
Cash Basis
1-800-Flooded, Inc. Balance Sheet
As of December 31, 2002
ASSETS Current Assets
Checking/Savings 1000 • Bank of America - Checking
Total Checking/Savings Other Current Assets
Dec 31, 02
262.86 262.86
TOTAL LIABILITIES & EQUITY
32,183.30
Page 1
Total Other Current Assets 560.52
Total Current Assets 823.38 Fixed Assets
1210 • Computer 1,359.92 Total Fixed Assets 1,359.92 Other Assets
1320 • 1-800 Flooded Number 30,000.00 Total Other Assets 30,000.00
)TAL ASSETS 32,183.30 LIABILITIES & EQUITY
Liabilities Current Liabilities
Other Current Liabilities 2020 ■ Payable to Randy T 19,613.26
Total Other Current Liabilities 19,613.26
Total Current Liabilities 19,613.26
Total Liabilities 19,613.26 Equity
3020 ■ Add'l to Capital 30,000.00 3050 - Capital Stock 10,000.00 3500 ■ Retained Earnings -8,131.15 Net Income -19,298.81
2,000.00
920.27
Cash Basis
1-800-Flooded, Inc. Profit & Loss
January through December 2002
Ordinary Income/Expense Expense
6110 ■ Automobile Expense 6111 • Gasoline 6112 • Auto Rental (Auto Rental) 6113 - Auto Repairs 6110 • Automobile Expense - Other
Total 6110 • Automobile Expense 6120 ■ Bank Service Charges 6170 ■ Equipment Rental 6180 • Insurance
6184 ■ Auto Insurance Total 6180 • Insurance 6200 - Interest Expense
6220 ■ Loan Interest Total 6200 • Interest Expense 6250 - Postage and Delivery 6260 • Printing and Reproduction
6261 - Supplies 6260 • Printing and Reproduction - Other
Total 6260 • Printing and Reproduction 6270 • Professional Fees
6273 • Web Design 6270 • Professional Fees - Other
Total 6270 • Professional Fees 6300 ■ Repairs
6330 - Equipment Repairs Total 6300 ■ Repairs 6340 • Telephone 6350 • Travel & Ent
6360 ■ Entertainment 6370 ■ Meals 6380 • Travel
Total 6350 • Travel & Ent 6390 ■ Utilities
6400 - Gas and Electric Total 6390 • Utilities 6540 - Office Expenses 6550 - Office Supplies
Total Expense
Net Ordinary Income Other Income/Expense
Other Expense 8010 ■ Other Expenses
Total Other Expense
Net Other Income
Net income
Jan - Dec 02
684.16 40.89
1,925.52 314.00
2,964.57 174.00 320.00
248.83 248.83
300.00 5,275.00
5,575.00 13.95
13.95 1,932.34
72.69 334.43
2,600.00 3,007.12
129.28 129.28 403.47 491.46
18,210.31 -18,210.31
1,088.50 1,088.50
-1,088.50 -19,298.81
Pagel
2,000.00 30.02
887.94 32.33