UFOC
The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample UFOC
FRANCHISE OFFERING CIRCULAR
A*---------------------------
SMARTBOX
3
SMARTBOX PORTABLE SELF-STORAGE, LLC
a Virginia limited liability company 2100 Dabney Road Richmond, VA 23230 Phone: 804-282-9944 www.smartboxusa.com
B"
You will operate a business specializing in the operation of a self-storage facility featuring the use of portable, modular storage units.
You will be required to pay us an initial franchise fee of $40,000 for a Territory of approximately 200,000 people. The initial franchise fee will be increased by $10,000 for each additional 100,000 people in the Territory. (For example, a person purchasing a 1,000,000 population territory would have an initial franchise fee of $120,000.) The estimated initial investment ranges from $374,900 to $975,800 for one Territory if you follow the plan outlined in the Franchise Agreement. See Items 5 through 7 for more details.
Risk Factors:
1. THE FRANCHISE AGREEMENT PERMITS YOU TO ARBITRATE DISPUTES WITH US (AND IN SOME CASES SUE OR BE SUED) ONLY IN THE STATE IN WHICH WE HAVE OUR THEN-CURRENT PRINCIPAL OFFICE, WHICH IS CURRENTLY VIRGINIA. OUT OF STATE ARBITRATION OR LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT. IT MAY ALSO COST YOU MORE TO LITIGATE WITH US IN VIRGINIA THAN IN YOUR HOME STATE.
2. THE FRANCHISE AGREEMENT STATES THAT VIRGINIA LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
Information comparing franchisors is available. Call the state administrators listed in Exhibit C or your public library for sources of information.
The states listed in Exhibit C may require registration or filing of this franchise offering. If this franchise offering is registered in any of these states, the effective date of the registration is disclosed in Exhibit A. Some of these states may require different or additional disclosures (see Exhibit G) or revisions to the franchise agreement (see Exhibit H).
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, contact the Federal Trade Commission or your state authority.
Date of Issuance: March-30, 2007. If this Offering Circular has been registered in any of the states listed in Exhibit A, the Effective Date of that authorization is listed in Exhibit A.
Smartbox UFOC (FTC 2007) 4103696.25 / March 30,2007
TABLE OF CONTENTS
ITEM 1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES.........................................2
ITEM 2 BUSINESS EXPERIENCE.......................................................................................................7
ITEM 3 LITIGATION..........................................................................................................................10
TTEM4 BANKRUPTCY......................................................................................................................11
ITEM 5 INITIAL FRANCHISE FEE...................................................................................................12
ITEM 6 OTHER FEES..........................................................................................................................13
ITEM 7 YOUR ESTIMATED INITIAL INVESTMENT....................................................................19
ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES..................................24
ITEM 9 FRANCHISEE'S OBLIGATIONS.........................................................................................29
ITEM 10 FINANCING...........................................................................................................................31
ITEM 11 FRANCHISOR'S OBLIGATIONS.........................................................................................32
ITEM 12 TERRITORY...........................................................................................................................43
ITEM 13 TRADEMARKS......................................................................................................................46
ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION.................................48
ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION
OF THE FRANCHISED BUSINESS......................................................................................50
ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL..........................................51
ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION.....................52
ITEM 18 ARRANGEMENTS WITH PUBLIC FIGURES....................................................................57
ITEM 19 EARNINGS CLAIM...............................................................................................................58
ITEM 20 LIST OF OUTLETS................................................................................................................59
ITEM 21 FINANCIAL STATEMENTS.................................................................................................62
ITEM 22 CONTRACTS..........................................................................................................................63
ITEM 23 RECEIPT.................................................................................................................................64
EXHIBITS:
A STATE EFFECTIVE DATES
B FRANCHISE AGREEMENT
C LIST OF STATE ADMINISTRATORS
D AGENTS FOR SERVICE OF PROCESS
E OPERATING MANUAL TABLE OF CONTENTS
F FINANCIAL STATEMENTS
G STATE -SPECIFIC ADDENDA TO THE OFFERING CIRCULAR
H STATE-SPECIFIC AMENDMENTS TO THE FRANCHISE AGREEMENT
I LIST OF CURRENT AND FORMER FRANCHISEES
J UCC-1 FINANCING STATEMENT
K FRANCHISEE COMPLIANCE CERTIFICATION
L LIST OF BROKERS
M RECEIPTS
Smartbox UFOC (FTC 2007) 4103696.25 / March 30,2007
ITEM 1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES
The Franchisor
The franchisor is SMARTBOX Portable Self-Storage, LLC. To simplify the language in this offering circular (the "Offering Circular"), the franchisor will be referred to as "we," "our" or "us." We are a Virginia limited liability company formed on September 24, 2003. We conduct business under the name "SMARTBOX," "SMARTBOX Portable Self Storage," and "SMARTBOX Moving & Storage." Our principal business address is 2100 Dabney Road, Richmond, Virginia 23230 (804-282-9944).
We offer franchises for self-storage businesses that feature portable, modular storage units which will be operated under the name SMARTBOX. We first offered franchises for these "Smartbox Businesses" (described below) in February 2004. We have not operated businesses of the type described in this Offering Circular, although one of our affiliates operates a Smartbox Business. We do not offer franchises in any other line of business. Our agents for service of process are listed in Exhibit D.
Our Predecessors and Affiliates
We do not have any predecessors.
We have several affiliates. One affiliate is SMARTBOX Moving and Storage, LLC ("SBMS"). SBMS was formed on March 5, 2003, and is a Virginia limited liability company. SBMS is the owner of all rights, title and interests in and to the Marks (defined below). Its principal business address is 2100 Dabney Road, Richmond, Virginia 23230. As described in Item 13 below, SBMS has licensed to us the right to use and license others to use the Marks. SBMS has never offered franchises in this or any other lines of business.
We have one affiliate, Portable Storage of Richmond, LLC ("PSR"), that operates a Smartbox business. From May 2003, until July 1, 2004, a former affiliate of ours, West End Self Storage LLC ("WESS"), operated a Smartbox Business similar to the business described in this Offering Circular in Richmond, Virginia under the name "SMARTBOX." On July 1, 2004, PSR, which is owned by our affiliate, Spanish Moss Holdings, Inc., purchased the Smartbox operating assets from WESS, signed a franchise agreement with us, and became our franchisee in Richmond, Virginia. PSR's principal business addresses are 2100 Dabney Road, Richmond, Virginia 23230 and 2600 Durham St., Richmond, Virginia 23230.
The Franchise Offered
We have developed and own a comprehensive system relating to the franchising and operation of portable self-storage businesses that operate under the Marks (defined below). The system includes the use of specially designed portable, modular storage units ("Containers"), specialized equipment specifically designed for lifting and transporting the Containers ("Forklifts"), accounting methods, computer software, advertising, sales and promotional techniques, personnel training, the Marks and signage, equipment, and specifications for authorized equipment, methods of inventory and operations control and certain business practices and policies, all of which we may improve, further develop or otherwise modify from time to time (the "System"). Our portable self-storage businesses feature the use of our specialized Containers, truck transport system, Forklifts, and a centralized customer order center (the "Customer Order Center"). The business operates under the proprietary marks "SMARTBOX," SMARTBOX Design," "SMARTBOX MOVING AND STORAGE & Design" and "SMARTBOX
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PORTABLE STORAGE & Design." We may adopt, use and license additional or substitute trade names, trademarks and service marks and trade dress in connection with the operation of these businesses. The existing proprietary marks "SMARTBOX" and "SMARTBOX & DESIGN" and all additional or substituted names and marks are collectively referred to as the "Marks." The portable self-storage businesses that operate using our System and our Marks are referred to as "Smartbox Businesses," or individually, a "Smartbox Business."
We may offer a franchise agreement (the "Franchise Agreement") to qualified entities and persons that wish to establish and operate a Smartbox Business. We grant franchises to operate a Smartbox Business within a designated geographical area (the "Territory"). The Territory, which is described further in Item 12, is defined in the Franchise Agreement. The Smartbox Business will be operated from physical facilities that you own or lease and operate (the "Smartbox Facilities" or "Facilities"). The Facilities include a storage facility or warehouse(s), office(s), and the equipment you need to operate the Smartbox Business. The Franchise Agreement will govern the operation of the Smartbox Business. We have prepared, and we will provide to franchisees, on loan, our confidential manual, which consists of mandatory and suggested standards, specifications, and operating procedures relating to the development and operation of Smartbox Businesses, and other information relating to your obligations under the Franchise Agreement (the "Manual"). See Item 11, Item 14, and Exhibit E for more information regarding the Manual.
The person (or persons) who signs a Franchise Agreement with us will be referred to in this Offering Circular as "you," and "your." Certain provisions of the Franchise Agreement will also apply to your partners (if you are a partnership), to your shareholders (if you are a corporation), to your members (if you are a limited liability company), and to certain other parties involved in, or related to, the Smartbox Business, like guarantors, managers and operators. You will be required to operate your Smartbox Business in accordance with the Franchise Agreement and our standards and specifications. Our current form of Franchise Agreement is attached to this Offering Circular as Exhibit B.
The Smartbox Business
The Smartbox Business is a portable self-storage concept in which an individually rented Container that is used for storage space is delivered to the customer. Unlike traditional self-storage businesses, Smartbox Businesses deliver weather-resistant storage Containers directly to the customer's door. Customers are able to keep the Containers at their home or business as long as necessary (subject to any local regulations), allowing them to pack the Containers at their leisure. Containers can also be moved to any location in any state where we or our franchisees or approved companies have operations. If storage is desired, Smartbox Businesses will pick up the Container and deliver it to a central storage facility for storage until directed by the customer to re-deliver it to the same or a new location.
We have designed, built and tested prototype Containers and Forklifts that are utilized to move the Containers onto and off of trucks. The Forklift enables the Containers to be placed on a truck while keeping the contents level. In May 2003, our affiliate, SBMS, began full-scale operation of a Smartbox Business serving the Richmond, Virginia area. This business was later transferred to WESS, and then to PRS, who became our franchisee on July 1, 2004.
Smartbox Businesses may provide services to both individual consumers and businesses in need of storage facilities. The services provided attract customers who are seeking traditional self-storage, full-service moving and storage, self-movers, and rental truck users. A Smartbox Business provides a method to accomplish moving, storing, or any combination of moving and storage without the need to rent a truck, and with more flexibility of time, cost, and safety. The business is not a completely new concept, but rather an evolution of the traditional self-storage and moving and storage industries, driven by
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customer convenience, service, and economics. As the network of Smartbox Businesses expands, we expect to be able to offer additional "moving" services to permit Smartbox Containers to be picked up a customer's home or office in your Territory, and delivered to another location, or a Smartbox Business, located in another Territory. In 2005, we developed a service that we call SMARTCARE which is a coordinated storage and moving service that permits customers to use Smartbox services for moving goods in our Smartbox Containers to areas outside of a Smartbox Business's territory. Customers may store Containers with their goods in our storage centers or utilize monthly on-site storage rental for storage of special-event materials, contractor material storage at construction sites, and for a variety of other reasons. In some cases, Smartbox Businesses offer customers the ability to contract for point-to-point moving services, both within a metropolitan area and between metropolitan areas.
The Market and Competition
As noted above, a Smartbox customer is one who needs storage, is moving, or is looking for a combination of both moving and storage. Previously, potential customers would have utilized traditional self-storage facilities, moving and storage companies, rental trucks, or performed self-moves. We service both residential and commercial customers. In our limited experience, residential customers typically represent 75% of the business.
The self-storage industry has been built to a level of significant market penetration in many areas throughout the country. Based on the 2002 Self-Storage Almanac published by Minico, Inc., there are more than 35,000 self-storage facilities in the United States, containing more than a billion square feet of space. The top 10 companies within this industry control a combined market-share of approximately 19% of the total square footage in the industry, and the top 50 companies control less than 27%. Numerous small local operators characterize the remainder of the industry. The market for climate-controlled storage facilities has also grown over the years. The self-storage industry is a very fragmented market, however, characterized by a trend toward consolidation, continuing increase in demand, relatively slow growth in supply, and a targeted market of primarily residential customers. The market territory for a self-storage facility is generally small, with an approximate radius of 2 to 5 miles.
The self-storage industry has experienced relatively slow growth in supply in recent years for the same reasons that the industry is consolidating. Also contributing to slow growth are restrictive zoning and other regulations required through local governmental agencies, and substantial start-up costs associated with the construction and lease of new facilities. However, demand for self-storage services has increased significantly as indicated by an average increase in industry-wide rents and in industry-average occupancy.
The moving and storage industry is generally divided into three tiers: long distance moves handled by approximately a dozen large companies, shorter intrastate movers, and local movers. There are approximately 13,000 moving and storage companies, most being small, family run businesses. They generally offer numerous other services. The typical local mover has approximately 10 to 15 employees and two to three trucks. We expect a certain degree of seasonability in the moving and storage business, with increased levels of moving, and therefore increased use of moving and storage businesses and facilities, during the warmer weather months, particularly from May through August. Demand for moving and storage services continues to grow. The United States is a very mobile society, and industry figures suggest that approximately 20% of people who move will use moving and storage companies, while 80% will transport their own belongings.
There is a market of approximately 13 million self-movers every year. This group typically rents-or borrows trucks or vans, solicits help from friends and family, obtains temporary self storage space and transports their own goods. According to the U.S. Census Bureau, 2001, 32.5% of renters and 9.1% of
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homeowners moved to a different residence in the previous year. According to a Mayflower Transit report in 2002, the typical moving customer is a married couple between the ages of 25 and 44 with one or two children.
Smartbox Businesses compete with other self-storage facilities and moving and storage companies on the basis of the service, price, convenience, availability, and brand recognition. There are a handful of companies currently offering similar portable self-storage facilities to the consumer. It is possible that some of the large self-storage facilities will also enter the portable storage business. Other than the capital requirements, there are relatively low entry barriers to the local portable self-storage industry. Obtaining appropriate licensing and proof of financial responsibility are also barriers to entry. Competitors to your Smartbox Business will include transportation companies, moving and trucking companies, fixed-based self-storage facilities and other portable storage facilities, all of which include independent operators and large chains. The market for the storage and moving business is highly developed and competitive.
Smartbox Businesses are not seasonal in nature and are made available to a broad customer base. However, the moving portion of the customer base can be seasonal depending on the climate and geography. The storage of containers is not seasonal in nature, and cold climates can extend the length of stay similar to traditional self-storage.
Regulation
Smartbox Businesses may be subject to state laws that regulate the self-storage and self-contained storage unit industries. For example, Virginia regulates this industry through the Virginia Statute 55-416. These laws typically: (a) govern the relative rights between a Smartbox Business and its customers when the customer has not timely paid rent; (b) enable the placement of liens and set forth procedures to provide notice to customers that the property within the storage unit may be sold in order to collect the unpaid storage fees; and (c) specify notice procedures, timing requirements and specify the means by which goods in a storage unit may be sold to satisfy obligations for unpaid storage fees.
Moving companies which transport goods intrastate may be under the jurisdiction of the state public utility commissions or other state agencies. If goods are transported interstate, they are regulated by the Interstate Commerce Commission. Smartbox Businesses may also be subject to state laws that regulate "public movers," "movers" or storage units industries. For example, New Jersey regulates "movers" or "public movers" and storage services providers under the New Jersey Public Movers and Warehousement Licensing Act, N.J. Stat. §45:D-1, etseq. (2000). These laws typically regulate the rights and business activities of Smartbox Businesses and their customers by requiring licensure of "public movers" and "storage" businesses, mandating that certain types and amounts of insurance be carried by Smartbox Businesses, granting rights and remedies to customers of Smartbox Businesses, and may also require that Smartbox Businesses be bonded.
You should consider that certain aspects of a Smartbox Business are also regulated by federal, state and local laws, rules, environmental laws, building codes, land use and zoning ordinances, in addition to the laws and regulations applicable to businesses generally, such as the Americans With Disabilities Act, Federal Wage and Hour Laws, the Occupational, Health and Safety Act, and various laws, rules and regulations regulating intrastate and interstate transportation.
It will be your responsibility to investigate any applicable laws as they relate to operating a Smartbox Business. It will also be your responsibility to investigate the requirements of any transportation authority as they relate to both interstate and intrastate transportation. For example certain states are deregulated; however, other states may require an application be processed with the proper state
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authorities in order to move household goods within that particular state. The application process varies from state to state. Additionally the federal government requires that an application be processed if you intend to move household goods from one state to another. These laws typically regulate movement of these types of goods, and certain Smartbox Businesses must seek the appropriate approval in order to operate. You are also required to comply with all requisition levels of these requirements, pay the applicable fees, and acquire the appropriate insurance. We may review your records to ensure that you are in complete compliance with any transportation authority requirements.
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ITEM 2 BUSINESS EXPERIENCE
The following is a list of directors, principal officers, and other executives who have management responsibility for the operation of our business concerning the franchises described in this Offering Circular. The principal occupation and business experience of each during the last five years, including the names and locations of prior employers, are indicated in the table below. Unless otherwise indicated, the location of the employer is Richmond, Virginia.
Chairman of the Board:_____________________________________________________Bryan Bostic
Bryan Bostic has been our Chairman of the Board since July 1, 2004. Since April 2004, Mr. Bostic has also been Managing Director of Spanish Moss Holdings, LLC, an investment company that invests in privately held companies and real estate. It is the owner of PSR. Mr. Bostic also is, and has been since December 1999, the Managing Director of Live Oak Holdings, LLC. From October 1985 until December 2000, Mr. Bostic was Chief Executive Officer of the museum ticketing company, 2b Technology, Inc., in Glen Allen, Virginia, until it was sold to Ticketmaster in 2000.
President & CEO: ____________________________________________________Michael L. Lowe
Michael Lowe has been our President since September 2003, and President of SBMS since April 2003. He became our CEO effective July 1, 2004. From March 2000 to November 14, 2003, Mr. Lowe was Senior Vice President of Proudfoot Consulting, an international consulting firm specializing in operational improvement and financial return on investment, located in Richmond, Virginia. Prior to that, Mr. Lowe co-founded Imtek Office Solutions, Inc. in Richmond, Virginia and served as President and Chief Operating Officer from August 1995 to February 2000. From March 1991 to July 1995 Mr. Lowe spent over four years in executive management as a Vice President with Danka Business Systems, in St. Petersburg, FL, during which he had direct P&L and operational management responsibilities, including acquisition negotiation and integration. Mr. Lowe previously was an owner of Modern Office Systems, which he sold to Danka in March 1991. Previously, Mr. Lowe held a number of senior management positions with national insurance carriers responsible for various marketing and field operations.
Director, Business Development:_____________________________________James "Dusty" Rhodes
James ("Dusty") Rhodes has been our Director of Business Development since July 2005. From March 2003 to July 2005, Mr. Rhodes was Senior Product Manager of Capital One Financial, a Fortune 200 financial services company located in Richmond, Virginia. In this role, Mr. Rhodes managed the growth of the Capital One insurance business by developing partnerships with Fortune 500 insurance companies and evaluating potential acquisitions. From July 2002 until March 2003, Mr. Rhodes was a student at the Kenan-Flagler Business School at the University of North Carolina-Chapel Hill, where he received his MBA. From February 1995 until July 2002, Mr. Rhodes was Director of Ticketing Services for the museum ticketing company, 2b Technology, a wholly-owned subsidiary of Ticketmaster Corporation.
Director, Operations:______________________________________________________James H. Flore
James Flore has been our Director of Operations since February 2006. From November 2004 to February 2006, Mr. Flore served as the General Manager of our Richmond Franchise affiliate PSR. From June 2005 to February, Mr. Flore served in several different SPSS operational roles. Previously, Mr. Flore owned Oftek Supply Line, Inc. in Chester, Virginia, which he sold to the Supply Room Company for whom he served as the Director, Retail Stores. Prior to that, Mr. Flore held various middle and senior management positions in the office equipment industry including Regional Service Manager with Danka in Richmond, Virginia, National Service Manager with Sharp Electronics in Mahwah, New Jersey and Vice President of Operations for Imtek Office Solutions in Richmond, Virginia.
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Director. Accounting & Finance:______________________________________Robin L. Dance, CPA
Ms. Dance, CPA joined us in January 2007 as Director of Accounting & Finance. Previously, she held the positions of Assistant Controller, Accounting Manager and Controller for ColorTree, Inc. in Richmond, Virginia, ClearPoint Financial Solutions, Inc. in Richmond, Virginia and Realty Management Services, Inc. in Bethesda, Maryland from July 2003 through January 2007. From December 1995 to July 2003 she was Assistant V.P. and Controller of CAPREIT in Rockville, Maryland. She has also held various positions of Internal Auditor, Auditor In-Charge and Property Accountant.
Director, Franchise Development & Support:_____________________________Charles N. Lovelace
Mr. Lovelace has served as our Director of Franchise Development & Support since July 2006. Prior to joining us he was Vice President of Marketing of Apex Technologies in Chesapeake, Virginia from September 2005 to July 2006. From March 2005 to August 2005, Mr. Lovelace was President and owner of Creative Management Systems in Virginia Beach, Virginia. Mr. Lovelace was President and COO of Instant Tax Service in Dayton, Ohio from January 2004 to February 2005 and Vice President of Franchise Development at Liberty Tax Service in Virginia Beach, Virginia from April 1999 to December 2005. He also served as President of several non-profit entities for over 14 years.
Franchise Brokers
We utilize the services of two groups of franchise referral brokers: Sunbelt Referral Program Development Co., LLC d/b/a Sunbelt Business Brokers ("Sunbelt") and TES Franchising, LLC, which operates under the trade name The Entrepreneur's Source® ("TES"). Each broker group solicits prospective franchisees for franchise companies, and will assist us in identifying prospective Smartbox franchisees. Once a prospect is referred to us, we conduct all further sales activities. No Sunbelt or TES broker or independent contractor has the authority to negotiate the sale of, or sell, Smartbox franchises. We will pay a fee to a franchise broker in the event that a prospect referred by it to us signs a Franchise Agreement. Information regarding Sunbelt, TES, and their brokers, is described below and in Exhibit L.
Sunbelt
Sunbelt is a limited liability company formed in Delaware in April 2006 and located at 3210 Rice St., St. Paul, Minnesota 55126. Sunbelt has a relationship with independently owned business broker offices that operate as either Sunbelt Business Brokers or Sunbelt Business Advisors (collectively, "Sunbelt Brokers"). Sunbelt offices and the individual Sunbelt brokers are identified on Exhibit L. The principal officers and directors of Sunbelt are identified below.
President and Chairman: Edward T. Pendarvis
Mr. Pendarvis has been President and Chairman of Sunbelt since its formation in October, 2002. He also was President and Chairman of Sunbelt Business Brokers Network, Inc. from 1982 to 2002.
1st Vice Chairman: CarlE. Grimes
Mr. Grimes has been 1st Vice Chairman of Sunbelt since our formation. He has been President of Sunbelt Business Advisors of the Ozarks located in Fayetteville, Arkansas since 1995.
2nd Vice Chair: R. Stephen Thompson
Mr. Thompson has been 2nd Vice Chairman since July, 2005. He has been President of Sunbelt Business Advisors, Santa Ana, California since 2000.
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Member at Large: Daniel Elliott
TES
Mr. Elliott has been 2nd Vice Chairman of Sunbelt since our formation. He has bee'n Member at Large since July, 2005. He has been President of The Elliott Group, Inc., in Houston, Texas since 1997, and Managing Director of Sunbelt Corporate Advisors in Houston, Texas since 1993.
Member at Large: Scott Evert
Mr. Evert has been a Member at Large of Sunbelt since our formation. He also has been Region Manager and President of Sunbelt of Minnesota with offices in Minnesota, Chicago, Illinois since 2000. He was Senior Vice President of Major Video Concepts in Indianapolis, Indiana from 1991 to 2000.
Secretary: Dave Ball
Mr. Ball has been Secretary since July, 2005. He has been President of Sunbelt Business Brokers Network of Pittsburgh Inc. since 1998.
Treasurer: Satish Patel
Mr. Patel has been Treasurer since July, 2005. He has been President of Sunbelt Financial Group LLC. Located in New England since February, 2003. He was previously CFO. Of a privately held company named Smart Storage Inc. from 1994 through 2002.
Assistant Treasurer: Dan Pedersen
Mr. Pedersen has been Assistant Treasurer of Sunbelt since our formation. He has been President of Sunbelt Kansas City in Kansas City, Missouri since 1998
TES is a limited liability company, organized in September 1997 under the laws of Connecticut, and is located at 900 Main Street South, Building #2, Southbury, Connecticut 06488. TES offers franchises for businesses that provide consulting and referral services relating to franchise and business opportunities. TES's franchisees are independent consultants ("TES Consultants") that operate under the The Entrepreneur's Source® trade name. TES provides its consulting and brokerage services through the TES Consultants. TES's CEO and Managing Member is identified below. TES's officers and directors, and the TES Consultants, are identified in Exhibit L of this Offering Circular.
Terry Powell: CEO and Managing Member
Mr. Powell has been a Managing Member and CEO of TES since September 1997. From January 1984 to the present, he is also CEO and President of The Entrepreneur's Source, Inc., Southbury, Connecticut. The Entrepreneur's Source, Inc. provides consultation to persons desiring to purchase franchises and places them with various franchise companies, who pay it a placement fee for this service.
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ITEM 3 LITIGATION
Other than the 8 actions involving TES disclosed in Exhibit L, no litigation is required to be disclosed in this Offering Circular.
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ITEM 4 BANKRUPTCY
On February 11, 2004, Mr. Flore, our Director of Operations, filed a petition under Chapter 13 of the U.S. Bankruptcy Code (In re James H. Flore, U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division, Case No 04-31217-DOT). On April 15, 2004, the bankruptcy court entered a judgment to accept the repayment plan as filed, and on February 5, 2007, the court issued a directive that the matter is completed.
Other than the action described above, no person previously identified in Items 1 or 2 of this Offering Circular has been involved as a debtor in proceeding under the U.S. Bankruptcy Code required to be disclosed in this Item.
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ITEM 5 INITIAL FRANCHISE FEE
You must pay us an initial franchise fee (the "Initial Franchise Fee") of $40,000 for a Territory containing up to 200,000 people. The Territory is further described in Item 12 below. The Initial Franchise Fee will be increased by $10,000 for each additional 100,000 people in the Territory at the time the Franchise Agreement is signed. For example, for a 1,000,000 person Territory, the Initial Franchise Fee would be $120,000. The Initial Franchise Fee is due on signing the Franchise Agreement and is not refundable, in whole or in part, after the Franchise Agreement has been signed.
The Initial Franchise Fee is uniformly assessed according to the formula above. However, in 2005, to facilitate the opening of our New Orleans franchised business in the aftermath of Hurricane Katrina, we agreed to defer $75,000 of the $150,000 Initial Franchise Fee. All deferred payments are expected to be paid back plus interest within 18 months of opening. We do not anticipate agreeing to payment terms of this kind in the future.
If we grant you an additional franchise with a territory that adjoins or abuts your existing Territory, the Initial Franchisee Fee for the new franchise will be offered at a discount of 10% from the then-current Initial Franchise Fee.
The Initial Franchise Fee will go into our general operating funds, and will, in part, compensate us for the lost or deferred opportunity to franchise others and, in part, to defray some of the costs we may incur as a result of: (1) screening and approving prospective franchisees; (2) providing advice and assistance to franchisees; (3) incurring legal fees, accounting fees, and other costs to comply with the federal and state laws governing this offering; (4) developing, registering, and protecting the Marks; (5) prior research and development for the System; (6) prior development of our training programs; (7) new Smartbox Business training, or on-going training; and (8) marketing and general administrative expenses.
You are not required to purchase any products or services from us prior to opening your Smartbox Business.
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ITEM 6 OTHER FEES
|
d ' DATE,DUE .. |
. REMARKS |
||
|
Royalty Fees |
7% of "Net Sales" per "Accounting Period;" subject to a monthly "Minimum Royalty" after the first 6 months of operation, as adjusted annually by the "Index." |
The 3rd business day following each Accounting Period. |
See Notes 2, 3 and 4. |
|
Customer Order Center Fee |
2% of Net Sales for each Accounting Period; subject to a minimum monthly minimum of $ 1,000, as adjusted annually by the "Index." |
The 3rd business day following each Accounting Period. |
See Notes 2, 3 and 4. |
|
Marketing and Advertising Program Contribution |
2% of Net Sales for each Accounting Period. |
The 3rd business day following each Accounting Period. |
See Notes 2, 3 and 5. |
|
Local Advertising and Promotion |
The greater of (a) 3% of Net Sales per year, or (b) $50,000 per year. However, if the territory exceeds 1,000,000 population, then the $50,000 minimum is increased, pro rata, on the basis of an additional $30,000 for every additional 1,000,000 people. |
As incurred. |
This amount includes money you spend on Local Advertising and Promotion, not including your Grand Opening Program. See Notes 3 and 5. |
|
Cooperative Advertising Contribution |
If a cooperative is established, up to 3% of Net Sales; or more, as determined by your local or regional cooperative. |
The 3rd business day following each Accounting Period, or as directed by the Cooperative. |
Payments to local or regional advertising cooperatives are credited against your minimum Local Advertising and Promotion expenditure requirement. See Notes 2, 3 and 5. |
Smartbox UFOC (FTC 2007) 4103696.25 / March 30,2007
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Grand Opening Program (advertising and marketing) |
Varies under circumstances. |
As incurred, but generally before opening or during the 360 days after opening. |
See Note 6 below, and Item 7 and Item 11. |
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Training or Assistance |
Will vary under circumstances. Current fee is $250 per day, per person. |
As incurred. |
See Note 8. |
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Indemnification |
Will vary under circumstances. |
As incurred. |
You will indemnify us against any costs (including attorneys' fees) arising out of your use of the System. |
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Interest and Late Fee; Insufficient Funds |
$100, and the lesser of 1.5% per month or the highest legal rate. |
As incurred. |
If money is not paid or reports are not submitted when due, then you must pay us $100 for each late payment or late report, plus interest from the date that the money was last due for payment until the date that the money is received. Interest will not be imposed unless your payment is 30 business days late or you have been late 2 or more times during the preceding 12 calendar months. In addition, if your check is returned, or if there are insufficient funds to make an EFT payment, we may charge you a $100 fee for each returned check and/or instance of insufficient funds. See also Notes 2 and 7. |
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Audit |
Cost of audit plus interest on underpayment. |
Within 30 days of your receipt of our audit report (or 10 days, for subsequent audits). |
Cost of audit is payable only if an audit shows an understatement of more than 2% of Net Sales. |
Smartbox UFOC (FTC 2007) 4103696.25 / March 30,2007
14
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Insurance |
Will vary under circumstances. - |
As incurred. |
If you fail to obtain the required insurance coverage, we may obtain such coverage at your expense. We may designate certain insurers as mandatory. If we do so, you must procure such insurance from the designated insurers on the terms and conditions we have established with them. In these cases, we may pay the associated premiums. If we do so, you must reimburse us for the premiums attributable to your Smartbox Business within 30 days of our invoice. |
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Fees to Evaluate and Approve Suppliers |
Will vary under circumstances. |
Upon receipt of our bill. |
We may impose reasonable inspections and supervision fees (including travel costs) to cover our costs in evaluating alternative approved brands or suppliers you suggest. |
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Transfer Fee |
The greater of 25% of our then-current standard Initial Franchise Fee or our costs incurred in connection with the transfer. |
The greater of 50% of the transfer fee or $10,000 is due when submitting to us the request for review and approval of a proposed transfer; the balance at closing. |
The initial portion of the fee is non-refundable. The balance is payable only if you make a transfer (as defined in the Franchise Agreement), which includes the sale of your Smartbox Business, your company, or a controlling interest in your company. |
Smartbox UFOC (FTC 2007) 4103696.25 / March 30,2007
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Costs of Enforcement of Franchise Agreement |
Will vary under circumstances. |
As incurred. |
Only if you are in default under the Franchise Agreement, in which case you must reimburse us for the expenses we incur (including reasonable attorneys' fees) as a result of your default and to enforce and terminate the agreement. |
Notes:
1. Except as otherwise noted, all fees noted in this Item 6 are imposed by and payable to us. All fees referred to in this Item 6 are non-refundable.
2. When we request, you must establish an arrangement for an electronic funds transfer ("EFT") or deposit payments directly to our bank. If we make that request, you must sign an agreement that authorizes this EFT or direct debt. This arrangement will apply to royalty fees, COC fees, MAP contributions (described below), and similar payments. See Franchise Agreement Sections 6 and 12.
3. As used in this Offering Circular, "Net Sales" means the aggregate amount of sales, revenues, fees, charges and other consideration received for services and products sold in connection with operations conducted by the Smartbox Business including income derived from sales at or away from the Smartbox Business, whether for cash, check or credit, and regardless of collection in the case of check or credit, but excluding: (a) all federal, state or municipal sales or service taxes collected from customers and paid to the appropriate authority; (b) all insurance premiums (excluding administrative fees and expenses) that are billed to and collected from customers and paid to the appropriate insurance company; (c) the amount of all customer refunds and adjustments and pre-approved, in writing, promotional discounts; (d) any amounts written off as bad debt expense; (e) revenue from the sale of Containers as a part of a long distance move program, if and when we might establish, organize, and manage such a program; and (f) any other sale of Containers, Forklifts or other assets that we have approved in advance between you and other franchisees or us. Net Sales will not include any revenues earned or other consideration received by you in connection with: (i) your sale to third parties, not in the ordinary course of business, of the equipment or assets of the Smartbox Business (such as trucks, forklifts, and other assets of the Smartbox Business), which do not bear the Marks; or (ii) any transfer that is subject to Section 15 of the Franchise Agreement. (See also Item 17 of this Offering Circular.) Generally, and subject to more detailed policies in the Manual, the sale of Containers on a regular or occasional basis will be considered a sale in the ordinary course of business, and will be included in Net Sales, but the sale must be approved in advance by us. However, the sale of Containers for the purpose of disposing of or replacing depreciated or old equipment is not considered a sale in the ordinary course of business and would therefore not be included in Net Sales, but these sales must also be approved in advance by us.
The royalties ("Royalty Fees"), customer order center fee ("Customer Order Center Fee"), Marketing and Advertising Program ("MAP") contributions, contribution to any local or regional cooperative ("Cooperative Advertising Contribution"), and local advertising ("Local Advertising and Promotion") expenditures will be calculated on Net Sales. Net Sales must be accurately and truthfully recorded on our designated sales reporting forms, excluding sales tax and insurance as explained above, less discounts, credit memos or adjustments and bad debt expense, plus monies received as part of any
Smartbox UFOC (FTC 2007) 4103696.25 / March 30,2007
16
cross-country move program, which are distributed separately on a monthly basis. Our Manual contains detailed reporting requirements.
As used in this Offering Circular and as defined in the Franchise Agreement, "Minimum Royalty" means the minimum monthly payment that you must pay to us. There is no Minimum Royalty during the first 6 partial or full calendar months of operation. The Minimum Royalty will be $1,000 per month for months 7 through 24, and $2,000 per month for months 25 through 36. The Minimum Royalty for months 37 through the end of the term of the Franchise Agreement will be $3,500 per month, as adjusted by the Index.
As used in this Offering Circular and as defined in the Franchise Agreement, "Accounting Period" means the semi-monthly periods for reporting and for paying Royalty Fees and other payments. We may specify, in the Manual or otherwise in writing, that an Accounting Period will be a period of one week, two weeks, four weeks, or one calendar month, and you must comply with our rules and policies including, among other things, the payments and reports that must be paid or submitted during or following the end of such Accounting Period. As of the date of this Offering Circular, the semi-monthly Accounting Periods will be days 1 through 15 of a month, and days 16 through the last day of the month.
4. As used in this Offering Circular and as defined in the Franchise Agreement, "Index" means The Consumer Price Index (U.S. Average, all items) maintained by the U.S. Department of Labor (or such equivalent index as may be adopted in the future) between January 1, 1995 and January of the then-current year. Except as described above, all fixed dollar amounts used in the Franchise Agreement (e.g., the Minimum Royalty, the minimum Customer Order Center Fee, the minimum required expenditure for Local Advertising and Promotion, etc.) will be adjusted on January 1 of each year in proportion to the changes in the Index. Each adjustment will be made effective on January 1 based on the January Index, but the first adjustment will not be made until the second January following the Agreement Date (i.e., for an Agreement Date of July 1,2006, the first adjustment would be effective as of January 1, 2008).
5. You must contribute 2% of Net Sales to the MAP. You must also spend money each year on Local Advertising and Promotion. The expenditure requirement is the greater of (a) 3% of Net Sales, or (b) $50,000, although this amount may be higher if your territory has more than 1,000,000 in population. In that event, you must increase your expenditure by an amount equal to $30,000 for every additional 1,000,000 people (over the initial 1,000,000) adjusted pro rata. For example, if your territory has 1,500,000 people, your local advertising expenditure requirement would be the greater of 3% of Net Sales or $65,000. The $65,000 is based on $50,000, plus 500,000/1,000,000 in population, times $30,000. If a local or regional cooperative is formed in your area, you may be required to join, and your Cooperative Contribution may be up to 3% of Net Sales (or higher, if a majority of the members of your Cooperative vote to increase the Cooperative Contribution above 3%). However, your Cooperative Contribution will be credited against your obligation to conduct Local Advertising and Promotion, so that you will not be expending the maximum contribution for both local and cooperative advertising. See Item 11 for more information on required advertising expenditures.
6. While you may pay the required amounts to third-party providers of advertising and marketing services, we may require that you deposit the funds with us, and we will distribute the monies as necessary in accordance with the Grand Opening Program.
7. Interest begins from the date of the underpayment.
8. We will pay for the costs of instruction and required materials for the initial training of three highly trained personnel. You must pay the cost of initial training for any additional personnel and highly trained personnel, as well as all expenses incurred in connection with the additional initial replacement or
Smartbox UFOC (FTC 2007) 4103696.25 /March 30,2007
17
continuing training, which will include our costs and any fees. In addition, you will bear the expense for transportation, lodging, meals, wages and workers' compensation insurance for you and your personnel at all training. Currently, our per diem training fees are $250 per person.
9. We do not currently have any advertising cooperatives.
[Remainder of Page Intentionally Left Blank]
Smartbox UFOC (FTC 2007) 4103696.25 / March 30,2007
18
ITEM 7 YOUR ESTIMATED INITIAL INVESTMENT
The following is our estimate for the initial investment to develop a Smartbox Business in a Territory of approximately 200,000 to 1,000,000 people, with one storage facility, one truck, two Forklifts, and an initial supply of Containers as described in this chart and the notes that follow.
We also estimate that the initial start-up period will include a 3-month pre-opening phase, followed by an 18-month start-up phase. The chart reflects the initial investment during the pre-opening phase and the beginning of the start-up phase. Please see the notes that follow for our estimate of additional investments (primarily in additional storage facility space, Containers, trucks, and Forklifts) that may be required during the 18-month start-up phase or subsequent to that time period.
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All IMODOI i'\»MI VI
TO WHOM I'\ID
Initial Franchise Fee'
$40,000 to $120,000
Upon signing
Franchise
Agreement
Lump Sum
Us
Storage Facility Lease Deposit2
$4,000 to $20,000
As specified in Lease
As arranged
Landlord
Real Estate Lease Payments2
$40,000 to $100,000
Utilities, Licenses, and Prepaid Expenses3
$4,000 to $25,000
As arranged
As arranged
Utility companies and suppliers
Leasehold Improvements4
$5,000 to $10,000
As arranged
As arranged
Contractor or landlord
Smartbox Containers5
$150,000 to $250,000
As arranged
As arranged
Approved suppliers
Trucks, Forklifts and Equipment5
$3,000 to $169,000
As arranged
As arranged
Approved suppliers
Initial Inventory of Packaging Supplies
$2,500 to $4,000
As arranged
As arranged
Approved suppliers
Insurance
$12,000 to $40,000
As arranged
As arranged
Suppliers
Signage7
$0 to $5,000
As arranged
As arranged
Approved suppliers
(including us) and lessors
Uniforms &
Miscellaneous
Supplies
$1,400 to $2,800
As incurred
As incurred
Approved suppliers
Smartbox UFOC (FTC 2007) 19
4103696.25 / March 30,2007
The original documents were scanned as an image. The original file can be downloaded at the link above.