The UPS Store Centers (“Centers”) are retail service businesses which offer mail and parcel receiving, packaging, and shipping services through various carriers and provide a wide range of other authorized products and services, including notary, printing, copying, office supplies, and communications (such as fax) services. Centers are targeted to the needs of businesses of all size, small office/Headquarters workers, and busy consumers who are looking for timesaving services. We have developed a service distribution network enabling national and international companies to utilize your Center for their shipping, packaging, postal, print services, and other business and communication needs. We previously offered franchises for Centers under the “Mail Boxes Etc.® ” trademark but, in order to take advantage of long term business opportunities, starting in 2003 we began to re-brand the entire domestic system under the The UPS Store® name. United Parcel Service, Inc. (“UPS”) is our parent entity (see below). However, the core underlying business that we are franchising remains the same as the business we and our predecessors have franchised for approximately 39 years (see below). You will sign a Franchise Agreement (Exhibit 1) to operate a single Center at a location, which you choose, subject to our acceptance. Centers traditionally are located in highly visible locations in strip shopping centers or in high foot-traffic downtown areas. However, Centers increasingly are being located at or within Non-Traditional locations like self-storage facilities, store in store locations, hotels, military bases, universities, convention centers, and airports. These Non-Traditional locations are described as follows with respect to Centers:
We maintain our principal place of business at 6060 Cornerstone Court West, San Diego, California 92121. This was also our predecessor’s principal business address. We conduct business under the name The UPS Store. We and our predecessor have, in aggregate, offered franchises for businesses similar to the type offered in both this disclosure document and our Traditional FDD since June 11, 1980. The franchised businesses offered in this disclosure document and in the Traditional FDD will operate under the The UPS Store name. We have been offering franchises for Centers located in the U.S. (excluding Guam and the U.S. Virgin Islands) exclusively under the The UPS Store name since approximately April 2003. Before that time, franchises for Centers were offered exclusively under the Mail Boxes Etc. name. In February 2003, we began a re-branding process for our system in the United States by which existing Centers meeting certain eligibility requirements changed their trade name from Mail Boxes Etc. to The UPS Store and changed certain operating procedures, although the underlying business remained the same. We colloquially have referred to this process in internal communications with franchisees and vendors as “Gold Shield.” We currently do not own or operate any The UPS Store Centers (see Item 20), although we periodically may do so. We have not offered franchises in any other line of business. As of this disclosure document’s issuance date, we do not conduct any other business activities. Our predecessor did not offer franchises in any other line of business.
Our “Access Model” franchise opportunity is for smaller versions of some of the Non-Traditional locations identified above, such as smaller hotels, universities (or another location at a university), smaller military bases and convention centers, resorts, condominium complexes, timeshares, and the like. We expect to offer the Access Model franchise opportunity only to existing The UPS Store® Center franchisees who already operate a standard The UPS Store® Center at a Traditional location or fullservice Non-Traditional location approximately a 30 minute drive from the proposed location (though we can change these criteria at any time). An Access Model Center is expected to differ from a The UPS Store® Center developed and operated in a larger, standard-size location in size, hours of operation, and scope of products and services offered. Self-Storage – Centers operating within a self-storage facility offer standard retail goods and services to tenants and the public. The self-storage owner may, but is not obligated to, serve as the Center franchisee. A self-storage Center is expected to differ from a Center located at a “Traditional” site in size, hours of operation, and scope of products and services offered. Store in Store – Centers operating within a store (or other locations, such as retail stores, service select hotels, shared workspace or co-working space, professional service offices, and other locations at our discretion) offer standard retail goods and services within a location with customer share and real estate benefits. A store in store Center is expected to differ from a Center located at a “Traditional” site in size, hours of operation, and scope of products and services offered. Hotels – Centers operating within a hotel offer, at a minimum, standard retail goods and services to the hotel guests, hotel staff and non-hotel patrons (if applicable). Additional services offered but not required include guest parcel management, 24-hour computer and print stations, rentals, crating and freighting of convention materials, and drayage. The Lease agreement is signed with the specific hotel. The franchisee operating a Center at a hotel typically will pay the hotel a fixed monthly rent plus a percentage share of its revenue from operations that exceeds a specified revenue threshold (to be negotiated with the hotel, but may range from 5% to 24%). Military Bases – Centers operating on a military installation offer standard retail goods and services to active military, retirees, military spouses and siblings, and government contractors assigned to the base (if applicable). The contract for the Center is unilaterally signed with the Army & Air Force Exchange Services (AAFES), Navy Exchange Service Command (NEXCOM) or Marine Corp Community Services (MCCS). A military base Center tends to be similar to a Center located at a “Traditional” site in terms of size, hours of operation, and scope of products and services offered. Universities – Centers operating on or within a public or private university or college campus offer, at a minimum, standard retail goods and services to the students, faculty, staff and the public (if applicable). Additional services offered but not required include Student Mail Room Management, Campus Mail, Parcel Receiving, Move-in/Move-out assistance, Summer Storage Programs, Dolly/Hand-Cart Rental and Campus Print. The Lease agreement for the Center typically is signed with the specific university. Convention Centers – Centers operating within a convention center offer, at a minimum, standard retail goods and services to convention staff, convention attendees and the public (if applicable). Additional services offered are print, rentals, and convention drayage. The Lease agreement or contract for the Center is typically signed with the convention center. Shopping Mall – Centers operating within a regional, super-regional or outlet shopping mall (typically enclosed with climate-controlled walkway between two facing rows of stores) offer standard retail goods and services to the mall patrons, shop owners and mall employees. Airport – Centers operating within an airport either before or after the security check-point offer standard goods and services to airport customers and employees. Corporate Office Building – Centers located within an office building or suite offer, at a minimum, standard retail goods and services. Corporate office building Centers may operate within a shared workspace or co-working office building, which often support the business service needs of that location. Additional services offered but not required may include parcel handling and mailroom management for members. Other – Any Center that is not classified as being located within a traditional model retail center and does not conform to the Non-Traditional definitions listed above, for example, gas stations and convenience stores.
Initial Franchise Fee (Not applicable to renewing franchisees or purchasers of existing franchised Centers.) You must pay us an initial franchise fee of $29,950 if this is your first Center and $19,950 if this is your 2nd or subsequent Center. These fee discounts apply to concurrent ownership and are not granted based upon former ownership. To qualify for a $19,950 Initial Franchise Fee, you must own at least a 50% interest in: (1) at least one existing The UPS Store franchise; and (2) this new franchise. However, the initial franchise fee is $9,950 if the Center is a “store in store” without an exterior entrance. (The initial franchise fee is the standard $29,950 or $19,950 if the Center is a “store in store” with an exterior entrance.) The initial franchise fee for a Self-Storage franchise also is $9,950. You must sign an LOI (LOI - FDD Exhibit 4), pay an Initial Application Fee ($7,500 if you do not currently own any interest in one of our franchises, and $3,750 if you do own an interest, as described in the previous paragraph), which would be fully credited against your Initial Franchise Fee, and pay the balance of your Initial Franchise Fee when you sign your Franchise Agreement. (In the event the Initial Franchise Fee is $9,950 or less, the provisions in Exhibit 4(b) to this disclosure document will apply.) As stated in the LOI, the Initial Application Fee is one-half refundable (i.e., $3,750 of $7,500 if you do not currently own any interest in one of our franchises) or one-third refundable (i.e., $1,250 of $3,750) if you do own such an interest if at the end of the LOI term you do not for any reason timely satisfy any of our written conditions for final approval or otherwise refuse to accept a franchise that we may offer you. The Initial Franchise Fee is fully earned when paid and non-refundable. Initial Franchise Fee for “VetFran” Veterans Program We are a member of the International Franchise Association and participate in the IFA’s VetFran Program, which provides an approximate 30% discount on initial franchise fees to veterans of U.S. Armed Forces (or spouses of active duty service members) who otherwise meet the Program’s requirements. First-time purchasers of franchises that are veterans of the U.S. Armed Forces are eligible to pay a reduced Initial Franchise Fee as follows. The Initial Franchise Fee for your first Center will be reduced from $29,950 to $19,950 ($10,000 reduction). The Initial Application Fee for a Center under the VetFran Program is $3,750. As stated in the LOI (Exhibit 4(b) to this disclosure document), the Initial Application Fee is one-third refundable (i.e., $1,250 of $3,750). To qualify for this discount, the Veteran(s) must own at least a 50% interest in the franchise. “Veteran” means a recipient of an honorable discharge as evidenced by the U.S. Department of Defense. It is the Veteran’s responsibility to give us the required documents to obtain the VetFran incentive. There is no VetFran discount if you are receiving this franchise disclosure document in connection with either a purchase of an existing franchised business, renewal of your Center’s franchise rights, or purchase of a Non-Traditional site with an already reduced Initial Franchise Fee. Initial Franchise Fee for Access Model Centers The Initial Franchise Fee for an Access Model Center payable to TUPSS is $9,950. The Initial Franchise Fee is not refundable. Initial Franchise Fee for Conversion and Traditional Site Programs Despite the fees described above, we may from time to time reduce the Initial Franchise Fee, offer financing, defer the Initial Franchise Fee and/or provide other terms at our discretion for Centers to be located at Traditional and conversion locations. Any Initial Franchise Fee paid is not refundable. Please refer to our Traditional FDD for more information about those opportunities. Center Development Fee We, an Area Franchisee, or a third party we designate (the “Center Development Coordinator”) must provide and manage a general contractor to construct your new Center and provide site selection and lease negotiation assistance. You must pay the Center Development Coordinator our Center Development Fee. We may collect this Center Development Fee directly from you or direct you to pay the Center Development Coordinator. You must pay this before commencement of Center build-out when the franchise fee or transfer fee is paid or at such other time we designate. The fee is $5,000 for all newly-constructed Centers, franchise renewals, franchise transfers, franchise relocations, conversions, franchise “Re-Openings” (the sale of a new franchise located at a previously closed Center), TUPSS 2000 remodels, and facelift remodels, except as follows. This fee will be 20% of the local labor and local material costs you incur – not including items supplied by us or our approved vendor (the “20% Fee”) – if the upgrades (transfer, renewal, or Re-Opening) are for improvements that are less than a “TUPSS 2000 Remodel,” which means upgrades not requiring a new Center design. However, if the 20% would exceed $5,000, you would have to pay only the $5,000 fee. This fee is not refundable. A franchisee acquiring a store in store Center, Access Model Center franchise, or a SelfStorage facility Center must pay us a Center Development Fee ranging from $0 to $5,000. Design Fee You must pay our then current Design Fee to prepare a general Center design. Payment is due when you sign your Franchise Agreement. The current Design Fee is $1,075 in connection with your purchase of a new The UPS Store franchise. A franchisee acquiring an Access Model Center franchise must pay us a Design Fee ranging from $0 to $1,075. Please see Item 6, footnote #16 for a description of the Design Fee in other situations. This fee is not refundable. Initial Marketing Plan (IMP) Fee You must pay the then current IMP Fee when you sign your Franchise Agreement (applicable for newlyconstructed Centers and conversions; not applicable to renewing Franchises; optional for purchasers of existing franchised Centers). You must pay the IMP Fee for re-opened Centers unless we waive the requirement. We will waive the IMP Fee for qualified Multiple Center Owners for new Center sales that are booked by the end of April 2020. We also will waive the IMP Fee for Non-Traditional Centers located in store in store locations and airports and for Access Model Centers. We or our designated vendor will manage disbursement of the IMP Fee to support your Center’s initial marketing plan. Details regarding the IMP are set forth in the Operations Manual and may be updated from time to time. The current IMP Fee paid to us for Non-Traditional Centers (other than those located at store in store locations and airports and Access Model Centers) ranges from $0 to $7,500. This fee is not refundable. Proprietary Software and Technology-Related Fees As more fully described in Items 7 and 11, you must license our proprietary software from us. Applicable fees are currently as follows: One-Time Per Franchise Proprietary Software License Fee (New Franchise Only) $4,750 ($3,750 if you are purchasing your second franchise and $2,750 if you are purchasing your third or greater franchise). If you are purchasing your second or greater franchise, you may seek financing for this fee as described in Item 10 of this disclosure document. However, the fee discounts do not apply to Site Development Program (“SDP”) franchises, which are described below. Annual Technology Development and Support Fee (New Franchise and Transfers) $1,548 The Annual Technology Development and Support Fee must be paid each year, on a monthly basis, including when your Franchise Agreement begins. If you are purchasing your second or greater franchise, this fee is reduced from $1,548 to $1,440 per Center. In the future, this fee is subject to change. Potential fee discounts do not apply to Site Development Program franchises. (We anticipate that the Annual Technology Development and Support Fee will increase at least $250 per year over the next 3 years due to significantly increasing costs related to delivering technology.) One-Time Per Franchise POS Vendor Software License Fee $500* * In the event you purchase the Microsoft Modern POS (mPOS), this fee would not apply. If you are purchasing a new, re-opened, or existing (transfer) franchise, you must pay to vendor iShip a $100 iShip set-up fee. You must participate in and be connected to our Virtual Private Network (“VPN”), which is our proprietary online communications system. See Items 7 and 11 for more details. No fee above is refundable. Training Fees To understand your training fees, you must first understand the basic structure of our training requirements. See Item 11 of this disclosure document for a more detailed description of our New Franchisee Training Program. Our Franchise Agreement requires that your Center be operated full-time by a “Primary Operator” (who may be you or a Center employee) who must successfully complete all parts of our New Franchisee Training Program. Our New Franchisee Training Program consists of: (1) Web-Based Training (WBT); (2) the In Store Experience (ISE) (5 days for ISE I and 5 days for ISE II) – where you train in a The UPS Store; and (3) the 10-day University Business Course (UBC) (including 4 days of Print Services Training) held at our The UPS Store University located at our Headquarters in San Diego, CA. A Certified Trainer provides ISE, which you must complete at a local/regional Certified Training Center. A Multiple Center Owner (MCO) is someone who has an ownership interest (i.e., even 1%) in the franchise rights of at least 2 Centers and has a controlling ownership interest in the franchise rights of at least one of these multiple Centers. If you are an MCO, each of your Centers must be overseen and supervised by a “Certified Operator” (a person trained as a Primary Operator may serve in this role). A Certified Operator is an individual who (1) works full-time on premises in the Center overseeing the Center’s day-to-day operations and (2) has successfully completed all assessments, Web-based training, and Certified Operator Training (COT). COT is held at a local/regional Certified Training Center and provided by a Certified Trainer and must be completed before your newly-franchised Center opens or you acquire ownership of an existing (i.e., “transfer”) Center. With one exception, there must be at least 1 Primary Operator for every 5 Centers owned by an MCO. (For example, if you are an MCO with 5 Centers or less, you must have at least 1 Primary Operator in addition to a Certified Operator for each Center; if you are an MCO with 6 through 10 Centers, you must have at least 2 Primary Operators in addition to a Certified Operator for each Center; if you are an MCO with 11 through 15 Centers, you must have at least 3 Primary Operators in addition to a Certified Operator for each Center; and so on.) The only exception to this requirement is for 2-Center owners. If you own 2 Centers, you may have one Center operated by a Primary Operator and the second Center operated by a Certified Operator or Primary Operator. If you purchase a third Center, each of your 3 Centers must be operated full-time by a Certified Operator, and the 3 Centers must be overseen by a Primary Operator. If you are an MCO, you may designate a person trained as a Primary Operator to satisfy your obligation to have a Certified Operator for one of your Centers if that person is overseen by a Primary Operator as described above. All first-time MCOs must attend and successfully complete our “Multiple Center Owner Workshop” (MCOW) no later than 6 months after your newly franchised or re-opened Center opens or you acquire ownership of an existing (i.e., “transfer”) Center. This currently is a 4-day program held at our Headquarters in San Diego, CA. You must complete MCOW even if you (or your Primary Operator) previously successfully completed the New Franchisee Training Program. You are required to attend, or have at least one supervisory employee who works full-time at the Center attend, and successfully complete all parts of the Print Services Training program. Alternatively, you may successfully complete, or have a supervisory employee successfully complete, the Print Services evaluation/training administered by a Certified Trainer for a designated fee. Each Center must have at least 1 supervisory employee who works full-time at the Center attend and complete all parts of the Print Services Training program. If the supervisory employee who attended and successfully completed all parts of the Print Services Training program is no longer employed at the Center, you must have a replacement as soon as possible, in no event more than 60 days. For new or re-opened franchises, all training fees are paid when you sign the franchise agreement. They are not refundable. For purchases of existing (transfer) Centers, all applicable training fees are collected at the close of escrow. If for any reason the training fees are not collected at these times, they must be collected before attendance at any of the training programs. You will also be responsible for all travel and living expenses you or your Center’s employees incur in attending any of our training programs. Site Development Program (“SDP”) From time to time, we or an Area Franchisee signs (as tenant) a Center lease at a location we have accepted with the intention of later assigning or sub-letting such lease to a qualified third party franchisee. When TUPSS is the SDP Lease’s Tenant/Assignor When we are the tenant of the location, we may (but need not) offer you the opportunity to assume the lease. You need not assume the lease unless you want that location. We usually assign (and, in some cases, sublet) such leases to franchisees before the build-out of the leased Centers. In these cases, the Center’s build-out must be done by the franchisee that assumes the lease from us. We do not sign Franchise Agreements “with ourselves” in connection with SDP leases. Instead, you would simply purchase a new franchise, and we would assign the SDP Center lease to you. There would be no franchise “transfer process” in the SDP lease assignment from us to you. When an Area Franchisee is the SDP Lease’s Tenant/Franchisee If and when an Area Franchisee is the tenant of an SDP location that we have accepted, such Area Franchisee may (but need not) offer you the opportunity to assume the lease. Again, you need not assume the lease unless you want that location. If an Area Franchisee transfers (with our consent and waiver of our right of first refusal) the SDP Center’s lease and franchise rights more than 6 months after the Center has opened for business to the public, then such transfer is subject to the normal (non-SDP) transfer process described in our Franchise Agreement. This would include the payment of all transfer-related fees (see Item 6), i.e., Transfer Fee, Processing Fee, and Pro-Rated Renewal Fee for Transfers (all nonrefundable). However, if an Area Franchisee transfers to you (with our consent and waiver of our right of first refusal) the SDP Center’s lease and franchise rights either before, or up to 6 months after, the Center has opened for business to the public, then such SDP transaction is a “hybrid” combination of certain requirements that apply to “Traditional” franchisee-to-franchisee transfers and certain requirements that apply to newly-constructed franchises that we sell. The following is a description of this unique hybrid transaction. 1. Even though the assignment of an SDP lease and franchise rights to you is a type of franchise “transfer,” neither the Area Franchisee seller nor you, as SDP buyer, must pay us the following types of transfer-related fees so long as your purchase is completed either before, or up to 6 months after, the SDP Center has opened for business to the public: Transfer Fee, Processing Fee, or Pro-Rated Renewal Fee for Transfers. 2. If you are purchasing an SDP franchise (and assuming an SDP lease) from an Area Franchisee, then your purchase price will consist of: (a) most or all of the Area Franchisee’s out-of-pocket expenses associated with the SDP lease (e.g., security deposit and rent paid) and its SDP franchise rights (Initial Franchise Fee, a portion of which Area Franchisee receives for services rendered); and (b) in most (but not all) cases, a reasonable amount that compensates the Area Franchisee for the value provided, and the risks incurred, in holding such SDP Center lease available for assignment to you (all non-refundable). 3. If you purchase an SDP franchise (and assume an SDP lease) from an Area Franchisee, you also must pay directly to us (and not to your Area Franchisee) the following fees which apply to all newly-constructed franchises: the Design Fee, the Initial Marketing Plan Fee, and the Training Fees (including MCOW, if applicable). These 3 fees must be paid to us when you sign your Franchise Agreement. Additionally, you must pay the following fees directly to us after you sign your Franchise Agreement: One-Time Per Franchise Proprietary Software License Fee, Annual Software Development and Upgrade Fee, and POS Software License Fee. (If you purchase an SDP franchise (and assume an SDP lease) from an Area Franchisee, you need not pay us an Initial Franchise Fee.) None of these fees are refundable. 4. Even if the SDP Center may have been opened for up to 6 months before you purchased it from an Area Franchisee, you need not pay a “Pro-Rated Renewal Fee for Transfers,” and your Franchise Agreement term will be a full 10 years. 5. At times, this disclosure document distinguishes between costs of a “newly-constructed Center” or a ‘‘new franchise,” on the one hand, and an “existing Center” or “existing franchise rights,” on the other hand. If you assume an Area Franchisee’s SDP lease and franchise rights before (or up to 6 months after) the SDP Center’s opening to the public for business, you would incur all or (depending upon the amount of build-out completed by the Area Franchisee before the assignment) some of the build-out costs associated with ‘‘newly-constructed” Centers disclosed in Item 7 of this disclosure document, even though you would be purchasing “existing franchise rights.” Referral Fees If, after you become and remain one of our franchisees, you complete and send us a “referral brochure” or other approved paper or electronic form that clearly identifies you and your Center number as the party making the referral and responsible for referring to us a prospective franchisee for a new domestic The UPS Store Center (not as part of a transfer), and your referral actually purchases a franchise for a new Center, you will receive a referral fee from us. If submitting a paper form, you must send us the original referral brochure; faxes are not acceptable. Our current policy is to “thank you” for the referral by having you receive $5,000 if a new Traditional Center is involved, $2,000 if a new Rural Center is involved, and $1,000 if a Non-Traditional “store in store” location is involved. (We do not pay referral fees for referrals involving all other types of Non-Traditional Centers or Access Model Centers.) We reserve the right, in our sole and absolute discretion, to change the amount of this referral fee. We may end or change this policy, and impose rules and conditions, whenever we choose. We do not expect or want you to be involved in the sales process at all. As one of our existing franchisees, you simply are passing along to us the name of someone you know who might be interested in acquiring a new franchise.
Except as provided below, we do not offer direct or indirect financing and do not guarantee your note, lease, or obligation. We cannot determine whether you will be able to obtain third-party financing for all or any part of your investment nor predict the financing terms if you in fact are able to obtain financing. Currently, we do not receive direct or indirect payment from any person or entity in exchange for his, her, or its obtaining or placing financing for you. TUPSS occasionally provides financing for qualifying prospective franchisees or prospective Multiple Center Owners under our guidelines, including our Premier Ownership Program. We reserve the right to add, change or delete any financing programs at any time. (Our Premier Ownership Program is an incentive program designed to reward franchisees who operate role-model Centers and will, in our judgment, enhance the overall value of the The UPS Store network. The Premier Ownership Program is open to individuals who own, directly or indirectly, a majority equity interest or an equally shared majority equity interest in the franchise rights of 2 or more Centers, each of which meets and maintains the Premier Ownership Program’s operational standards and excellence requirements. These requirements cover, among other things, vendor compliance, hours of operation, uniform and financial compliance, financial planner submission, image compliance, and participation in all required profit center categories.) We may offer you financing for your initial equipment for up to $50,000 of the initial costs of equipment and fixtures financed through an equipment lease with us. A copy of our present standard form of equipment lease is attached to our Franchise Agreement as Exhibit G. Our standard form lease provides for a term of up to 5 years with payments due monthly, plus a nominal lease-processing fee. Our lease financing provides the following parameters. If the Prime Rate (as that term is defined below) quoted on the business day before the lease’s effective date is lower than 5%, then our lease financing rate will be 9% (a “floor rate” of 5% plus 4% over such “floor rate”). If the Prime Rate is 5% or greater, then our lease financing rate will be such Prime Rate plus 4%. If you default, we may repossess the leased items and terminate the equipment lease agreement. We require a security interest in your Center’s assets and any leased equipment. From time to time, in our sole discretion, we may require additional collateral in order to facilitate approval and mitigate the risk in a transaction. If you are an MCO, you benefit from a reduced lease rate (Prime Rate or 5% floor rate, whichever is higher, plus 2%, plus waiver of the lease fee). In our discretion, we may offer Multiple Center Owners loans in amounts up to 100% of the purchase price of additional existing Centers (up to $150,000), or up to 100% of the cost to build out additional Centers (up to $150,000) (franchise fee and working capital cannot be financed), bearing interest as follows. If the Prime Rate is lower than 5%, then our Multiple Center Owner financing rate will be 7% (a “floor rate” of 5% plus 2% over such “floor rate”). If the Prime Rate is 5% or greater, then our Multiple Center Owner financing rate will be such “Prime Rate” plus 2%. Rate adjusts annually January 10th each calendar year based on the Prime Rate quoted on the first business day of each calendar year. Maximum annual change of interest rate is plus or minus 1%, with a maximum life of loan change in interest rate of plus or minus 5%. The floor or lowest Prime Rate allowed is 5%. All Centers owned by the franchisee would be collateral for the loan. The loan is fully amortized over 8 years. Franchisees satisfying our Premier Ownership Program eligibility requirements benefit from a reduced interest rate (Prime Rate, subject to a 5% minimum) plus 0% or 1% depending on how many Centers the franchisee then owns. Also, the franchisee has 2 repayment options: Interest-only for the first 12 months and then an 84-month amortization period or a 96-month amortization period. We would waive the 1% loan fee, though the franchisee is responsible for the cost of all UCC related fees and all applicable taxes. All Centers owned by the franchisee would be collateral for the loan. In our discretion, we may offer TUPSS 2000 remodel loans, under which we will loan up to $75,000 to qualifying franchisees to remodel their Centers, bearing interest as follows. If the Prime Rate is lower than 5%, then our TUPSS 2000 remodel financing rate will be 6% (a “floor rate” of 5% plus 1% over such “floor rate”). If the Prime Rate is 5% or greater, then our TUPSS 2000 remodel financing rate will be the Prime Rate plus 1%. You have 2 payment options: (1) interest only for the first 6 months and then a 60-month amortization period; or (2) a 60-month amortization period. Rate adjusts annually January 10th each calendar year based on the Prime Rate quoted on the first business day of each calendar year. Maximum annual change of interest rate is plus or minus 1%, with a maximum life of loan change in interest rate of plus or minus 5%. The floor or lowest Prime Rate allowed is 5%. All Centers owned by the franchisee would be collateral for the loan. In our discretion, we may finance the Renewal Fee ($7,487.50) you must pay us if you renew your franchise rights. If you finance the full amount, you will pay us monthly installments over a 12-month period at 6.5% interest per annum ($650 per month, including principal and interest). If you request the loan from us less than 12 months before your renewal date, the loan term will be the number of months between the date of your request and the renewal date, and we will adjust your monthly installments accordingly. All Centers you own would be collateral for the loan. For all of these financing programs, if you qualify, you must sign our then-current forms of Secured Promissory Note, Security Agreement, and General Release. Our current forms of Secured Promissory Note and General Release in Connection with Financing are attached to this disclosure document in Exhibit 11. Our current form of Security Agreement is attached to the Franchise Agreement as Exhibit F. The franchisee (and all Owners if the franchisee is an entity) must personally guarantee the debt. The debt will also be secured by the assets of all Centers currently owned, as well as the assets of any Centers subsequently acquired, by the franchisee borrower. The debt can be prepaid at any time with no prepayment penalty. As specified in the Secured Promissory Note, you have potential liability upon default, including the acceleration of all sums due, and responsibility for our attorneys’ fees, late fees, court costs, and other reasonable collection costs. Events of default under the Security Agreement include failure to pay any monies due under the Franchise Agreement, any promissory note, or the equipment lease; breach of any other contractual obligation; false or misleading representations under the Security Agreement; loss or destruction of the collateral; liens on the collateral; bankruptcy or insolvency; and declines in the collateral’s value. If you default under the Security Agreement, we have all rights available under the Uniform Commercial Code and also may accelerate the maturity of any notes payable to us, take possession of the collateral, sell the collateral, and take over the franchised business. We do not have any past or present practice or intent to transfer, assign, discount, or sell to a third party, in whole or in part, any note, contract, or other instrument signed by any franchisee, but we reserve the right to do so in the future. There are no waivers of defenses by you in the Franchise Agreement, Equipment Lease, or Security Agreement. However, under the Promissory Note you waive demand, presentment for payment, notice of nonpayment, notice of protest, and the right to assert any setoffs or counterclaims. The term “Prime Rate” means the prime rate as published from time to time in the Money Rates section of The Wall Street Journal or, if such rate is no longer published in The Wall Street Journal, a comparable index or reference rate selected by us in our sole discretion. The Prime Rate may not necessarily be our lowest or best rate.
We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting Legal Department, The UPS Store, Inc., 6060 Cornerstone Court West, San Diego, CA 92121; Phone: 858-455-8800; the Federal Trade Commission, and the appropriate state regulatory agencies.