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You're
paying a bundle:
2.1 Franchise fee: $52,500
This is just the franchise fee. You may
spend as much as another $100,000 or more for
business expenses.
5% of all GROSS goes to CertaPro:
Even if you make little or no money, CertaPro
always gets 5% of the gross.
2.2 Royalty: 5% of gross sales.
Minimum
Royalty:
2.3 Minimum royalty fee (first two years):
$22,500 for first full year in business (=$450,000
gross) if contract signed January through May.
E.g., contract signed during first six months
of 2012, minimum franchise fee due Dec. 31, 2013.
If signed June through December, $22,500 minimum
due at the end of second full year in business.
E.g., contract signed during last six months of
2012, minimum franchise fee due Dec. 31, 2014.
Next year ("2nd calendar year"): $22,500 (=$450,000
gross).
6.1:
3rd-5th calendar year: $500,000 gross minimum.
(5% = $25,000)
6th-10th calendar year: $650,000 gross minimum.
(5% = $32,500)
If not attained, franchisee WILL BE IN BREACH
OF THIS AGREEMENT.
2.4
Late payment of royalty: 1-1/2 percent monthly
interest
2.8
Software Upgrade Fee:
0.25% of gross sales
($450,000 gross = $1,125 per year, $650,000 gross
= $1,625 per year)
2.9 Software support fee:
No charge BUT Certapro can charge a fee, if it
decides to, after giving you 60 days notice.
2.10
Answering service:
No charge BUT Certapro can charge a fee, if it
decides to, after giving you 60 days notice.
11.2.2
Minimum Advertising:
First year: Must spend 12% of gross on local advertising.
(Example: $350,000 gross = $42,000 on local advertising.)
If you don't, Certpro can demand you pay difference
between that 12% and what was actually spent to
Certapro's General Advertising Fund.
4.3 Operating Assistance (Summarized/paraphrased):
Will CertaPro help you?
You can ask Certapro for assistance with the operation
of the business but it's up to Certapro to decide
whether or not to provide it. Certapro may provide
advice and guidance about operation of business.
Certapro can decide if it's "reasonably required"
for the operation of the business.
5.2
Types of Vehicles:
Must be the make, model, and year decided by Certapro.
Vehicle logos, signs: Must use only Certapro-approved
logos and signs. (Note: Certapro may still require
vehicle be "wrapped". This is expensive. I don't
know current cost, but I believe it was about
$1,600 or more per vehicle.)
4.1
Initial training:
You pay for all transportation, meals, lodging.
4.2
(Additional training -- maybe -- and you pay):
"Mandatory In-Term Training" Additional training
may be provided. If so, you must attend. A "reaonable
fee" will be charged. You pay for all transporation,
meals, lodging, and any wages for people you may
bring along.
6.2.5 Certapro can tell you to attend training
or retraining at location of its choice. You
pay for all costs, transportation, meals, lodging,
and wages to Certapro's staff.
6.2.3 Certapro decides what services and products
you can sell/provide.
6.2.7
Comply with "quality and performance standards"
determined by Certapro. Franchise advisory
committee might have some input, but Certapro
can ignore recommendations of the franchise advisory
committee.
6.3
Must use approved Certapro suppliers:
(Note: Certapro gets a kickback from "approved
suppliers"--perhaps as much as nearly $2
million per year.)
If you can't obtain materials from approved suppliers
in a timely manner, you can't hold Certapro responsible
for damages to your business.
6.4
If Certapro changes name(s), products or techniques,
you must implement them at your own cost. If you
refuse to do so, Certapro can "rectify such failure"
and make you pay for the cost.
6.5
The phone number you use for the business belongs
to Certapro.
6.6
Certapro must approve all materials bearing Certapro
identification (if they're not from "approved
suppliers").
6.7
Certapro decides what the warranty is, and
you're responsible for taking care of all warranty
work. You might find yourself competing
with other painters who offer a longer warranty
-- but you can't change yours to meet theirs.
6.8
You must allow Certapro access to your bank accounts
so they can transfer money you owe Certapro directly
transferred to Certapro. You pay for any transfer
fees.
6.9
Certapro can "inspect" your business, including
access to your computer(s) "and all programs
and databases contained thereon".
6.10
Certapro owns your customer list if it's on
Certapro's computer system (used for keeping track
of jobs) or e-mail system. Certapro can use the
data for any purpose. You'll spend a lot of money
and time to get those customers -- and CertaPro
will own the customer list.
8.1
You can't give other people customer information
or the names of other franchisees or "know-how"
made available by Certapro, including drawings,
materials and oter data "which Certa Pro desginates
as confidential".
9.5
If Certapro changes logo or "proprietary marks",
the franchisee must make changes and bear the
cost of making changes to vehicle logo(s),
stationary, etc.
10.2
Three-year non-compete:
If you leave CertaPro, you can't operate a painting
business within a 20 -mile radius of a Certapro
franchise (or territory that somebody's considering
buying). You can't solicit your former Certapro
customers. You can't work for another painting
franchise business. The non- compete clause
applies to your business partner(s), family members
and employees.
10.3
You must obtain a non-compete agreement from partners,
officers, directors, members of your immediate
family and employees.
11.1.2
You pay 3% of gross sales to Certapro's General
Advertising Fund:
Certapro decides how to spend this money and where.
11.2.1
You must have a yellow pages ad (size determined
by Certapro). [Personal note: When I ran a business-card
size ad in the yellow pages, it cost me $300 per
month. The yellow pages are becoming obsolete--people
use the web now.]
11.2.1
You must spend 6% of your gross sales (12% first
year) on local advertising:
[Example: $350,000 gross = spend $42,000 in first
year.]
11.3
Marketing and advertising material must be approved
by Certapro.
12.1
Bookkeeping and accounting must be according to
Certapro terms and using systems approved by Certapro.
You must pay any associated costs.
12.2
You must maintain business records (such as all
work performed) and Certapro can inspect your
business records.
12.3
You must submit monthly reports, annual records,
and Certapro can demand a copy of your federal
and state tax returns.
12.4
Certapro can conduct an inspection and audit of
your books and payroll records. If an underpayment
is discovered, you must pay it (1-1/2% per month
interest). Certpro may be able to revoke your
franchise for under-reported gross sales.
12.6
You agree to allow Certapro to contact your bankers,
suppliers, and other trade creditors to make
inquiries of them. You agree to allow Certapro
to obtain copies of some documents from them.
13.1.1
You must obtain workers comp. insurance and include
"waiver of subrogation" clause in favor of Certapro.
13.1.2
You must have minimum auto insurance in the
amount specified by Certapro.
13.1.3
You must have $2 million liability insurance.
Certapro must be named as an additional insured.
13.2
If you don't have required insurance, Certapro
can obtain it and bill you for it.
13.3
Subcontractors must have insurance (the same
types of insurance required of franchisee).
[Note: In my opinion and experience t's highly
unlikely you'll find a subcontractor with that
kind of insurance -- especially workers' comp.
and a $2 million liability policy.]
14
If you sell your franchise, Certapro must agree,
and any outstanding debt to Certapro must be paid.
14.2
If someone makes an offer to buy your franchise,
Certapro has the right to buy it instead at the
same price (right of first refusal).
16.4
Certapro can terminate your franchise for many
reasons (see subsections of 16.4).
Your
Legal Rights (ha)
CertaPro
SEVERELY restricts your legal rights
(sections 18, 19, 20) |
18.1.1
Mediation required for disputes, at Certapro's
office in Oaks, Pennsylvania. However, Certapro
may have the right to NOT participate in mediation
if related to some violations by franchisee.
18.2
If mediation doesn't resolve a dispute, you
must use abribration (no court lawsuits),
according to Commercial Arbitration Rules of the
American Arbitration Association. Each party pays
its own costs, including cost of arbitrator you
choose, if it's a 3-arbitrator panel (and you
share the cost of another arbitrator). If you
lose, you're on the hook for Certapro's legal
fees and other costs.
18.2.1
Certapro does NOT have to arbitrate for some things
(money you owe them if it's $15,000 or less, certain
injunctive claims, etc.)
18.4
& 18.5 Certapro can sue you in court, in a Pennsylvania
court.
18.6
You can't demand a jury trial.
18.7
You can't sue Certapro for punitive damages.
18.8 You can't participate in class action lawsuits.
18.9
The loser pays attorney fees and costs for lawsuits
or arbitration.
19.3
Certapro can't be held responsible for liabilities,
losses, lawsuits, etc.
19.4
Certapro not responsible for injury, loss or damage
resulting from services or products sold by franchisees.
19.7
You can't withhold payments to Certapro.
19.10
Governing law & jurisdiction: the Commonwealth
of Pennsylvania.
20.1.1
You know what you're getting into, so don't cry
about it later. [Nevermind that Certapro has
silenced some (many?) of its failed franchisees
-- it's your responsibility to do due diligence
(if you can).]
20.1.2
"Nationwide painting company"?
Nah, you're an independent contractor who has
permission to use the CertaPro name.
"Don't
hold us responsible for whatever lies we may have
made"
20.1.1 Franchisee and any guarantor hereunder
acknowledge that they
have conducted an independent investigation of
the Certa Pro Business and recognize that the
business venture contemplated by this Agreement
involves business risks and that its success will
be largely dependent upon the ability of the Franchisee
as a independent business person. Certa Pro expressly
disclaims the making of and the Franchisee and
any guarantor hereunder acknowledge that they
have
not received any warranty or guarantee, expressed
or implied,
as to the potential volume, profit, cash flow
or success of the Certa Pro Business. The
provisions of this Subsection 20.1.1 do not apply
and are not effective in the State of Illinois.
20.2.1
...Franchisee is an independent contractor and
is in no way authorized to make any contract,
agreement, warranty, or representation, or to
create any obligation, express or implied, on
behalf of Certa Pro. Franchisee agrees to
prominently display in its place of business a
certificate from Certa Pro stating that the business
is operated by a Franchisee as a franchisee of
Certa Pro and not as an agent thereof.
20.2.2
Hold harmless:
Under no circumstances shall Certa Pro be liable
for any act, omission, debt or any other obligation
of Franchisee. Franchisee agrees to indemnify
and hold Certa Pro harmless against any such claim
and the cost of defending against such claims
arising directly or indirectly from, or as a result
of, or in connection with, Franchisee's operation
of the Certa Pro Business.
| If
they dismiss any of your concerns about
this contract: |
|
If
you talk to CertaPro about this contract
and ask about certain clauses, and
if they dismiss them, by saying something
like, "Oh, don't worry about
that, it's never enforced", tell
them to take it out of the contract.
Draw a line through it (strike it)
and initial it.
See
what their response is.
Talk
is cheap.
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