Key Items to Watch out for in the CRESTCOM INTERNATIONAL, LLC 2019 FDD
Please consider the following RISK FACTORS before you buy this franchise: 1. THE FRANCHISE AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US BY ARBITRATION OR LITIGATION ONLY IN COLORADO. OUT-OF-STATE ARBITRATION OR LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO ARBITRATE OR LITIGATE WITH US IN COLORADO THAN IN YOUR OWN STATE. 2. THE FRANCHISE AGREEMENT STATES THAT COLORADO 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.
Note: The Franchise Agreement provisions referred to in the risk factors may be void under some state franchise laws. See the State Addendum to the Disclosure Document, which is attached to this Disclosure Document as Attachment K.
We use the services of one or more FRANCHISE BROKERS or referral sources to assist us in selling our franchise. A franchise broker or referral source represents us, not you. We pay this person a fee for selling our franchise or referring you to us. You should be sure to do your own investigation of the franchise.
Item 5: Initial Fees
The initial franchise fee for one CRESTCOM Business franchise is $69,500. The initial franchise fee is customarily paid in two installments. In most cases a refundable deposit (“Deposit”) of $2,500 is paid with the signing of the Confidentiality/Application Agreement (“Application Agreement”), a copy of which is attached to this Disclosure Document as Attachment B. Once the Deposit has been paid, you may attend the initial classroom training program, which generally lasts two days. If after the initial classroom training program you and we agree to proceed with signing a Franchise Agreement, then the Deposit is converted to a down payment toward your initial franchise fee. The remaining amount due is typically paid in full with the signing of the Franchise Agreement. If either you or we elect not to proceed with the signing of the Franchise Agreement immediately after the completion of the initial classroom training program, then we will refund your Deposit.
We may, in our discretion, agree to finance a portion of your initial franchise fee. For information regarding financing, see Item 10 of this Disclosure Document. Except as described above related to the Deposit,no portion of any initial fees or other amounts paid to us as described in this Item 5 are refundable under any circumstances once paid. If applicable, a portion of your initial franchise fee may be paid by us to the Area Representative located in your Assigned Area or to another Franchisee or Area Representative who has referred you to us or provided us services related to your introduction to the Crestcom system. Except as is provided in this Item 5, all initial franchise fees for U.S. Franchisees are uniform as to all persons currently acquiring a CRESTCOM Business franchise.
Item 8: Restrictions on Sources of Products and Services
Franchisees must establish and operate their CRESTCOM Businesses in compliance with our Franchise Agreement and with the standards and specifications contained in the manuals, technical bulletins, and other supplemental written materials that we make available to Franchisees (collectively, the “Procedures Manual”). We will provide you with a copyof the Procedures Manual for use during training, and thereafter will make available to you the Procedures Manual through our proprietary, restricted, and confidential licensee’s support website, or via any other written, audio, video, or online source that we choose. You must read and learn the Procedures Manual and comply with it in the development and operation of your CRESTCOM Business as an essential aspect of your obligations under the Franchise Agreement. Our Procedures Manual may be modified by us. If any inconsistencies exist between the provisions in any Procedures Manual we make available to you and our master Procedures Manual we maintain at our office, regardless of whether it is in electronic or other form, our master Procedures Manual will control. The Procedures Manual is designed to protect our reputation and the goodwill of the Marks, it is not designed to control the day-to-dayoperations of your CRESTCOM Business.
We will provide Franchisees standards and specifications for Materials, Live Instruction and related materials and services that they may offer through their CRESTCOM Businesses. We also provide sales and management training techniques, forms and business methods to be used ina CRESTCOM Business. We may change our standards and specifications on 10 days prior written notice. One of our primary methods of communication with our Franchisees, distributors, and Area Representatives is through our proprietary, restricted, and confidential support website, Crestcom Operations and Communications Hub (“C.O.A.C.H.”). You are responsible for knowing all of the information contained in our C.O.A.C.H. website and newsletters, and complying with any standards and specifications provided in them. We may establish and change the standards and specifications for the operation of a CRESTCOM Business through ourC.O.A.C.H. website and newsletters.
Unless otherwise agreed to by us, Franchisees must comply with our proprietary prescribed marketing plan. See Note 9 in Item 7. Franchisees must purchase or otherwise acquire all items used in their CRESTCOM Businesses from suppliers designated or approved by us. If you want to utilize any materials or services in your CRESTCOM Business, or use any new suppliers that have not previously been approved by us, you must first obtain our approval. We may, in our discretion,withhold our approval. Wedo not have written criteria for supplier approval, and therefore such criteria are notprovided to any of our Franchisees. However, we may require that you submit specifications, information orsamples of the items for our review to determine if they meet our specifications and standards as to quality, content, composition and service. We will advise you within 30 days after we receive the required information whether the items or proposed suppliers meet our specifications. We do not require that a fee be paid to us to secure supplier approval; however, we may require you or the supplier to reimburse us for any expenses we incur in determining if the supplier meets our specifications and standards. We may revoke our approval of any supplier previously approved by written notice to you or the supplier. No person or company affiliated with us is currently an approved supplier for any of the items used in your CRESTCOM Business. Some of our officers have an indirect ownership interest in us. Otherwise, no officer of ours owns any interest in any of our approved suppliers.
You must purchase the Materials only from us and our approved suppliers. We are currently the sole approved supplier of all of the audio, video, and online media included in the Materials. We estimate that the purchase of Materials to be used in your CRESTCOM Business will be zero percent of the total cost to establish your CRESTCOM Business because, with the payment of your initial franchise fee, we provide you with our Fast-Start Kit (or, in our discretion, a credit to be used toward the acquisition of products and Materials from us) at no additional charge to you. Because we do not typically require Franchisees to provide us with their financial statements, we cannot accurately estimate what the percentage of your ongoing acquisition of Materials to the total of all recurring operating expenses of your CRESTCOM Business will be. However, we estimate that acquiring Materials and other items in accordance with our standards and specifications will comprise 90 to 95 percent of the product purchase requirements for both the initial investment and ongoing operations.
You are solely responsible for any claims or liability arising from or related to products used in your CRESTCOM Business, including any strict product liability claims. You cannot buy or sell Materials from or to any other current or former Franchisee or distributor without our written consent. We may withhold our consent in our discretion. Franchisees must comply with all agreements with third parties related to their CRESTCOM Businesses, including all provisions of any agreement related to the marketing of the Materials or the marketing or conduct of the Live Instruction, or any commitments to lease premises, including a facility to conduct the Live Instruction.
Franchisees are prohibited from contacting any of the individuals featured in the Materials for the purpose of directly or indirectly engaging or utilizing those individuals in their CRESTCOM Businesses or in any competing business, entering into any business dealings or arrangements with those individuals, or brokering any business dealings or arrangements involving the services or products, other than the Materials, of such individuals. Franchisees may not modify the Materials or any aspect of the Materials in any manner without our prior written consent, which we may withhold for any reason. A Franchisee must obtain our written consent before adding any additional logos, stickers, graphics, or other information to any of the Materials, cover or conceal any part of the Materials, or changethe appearance or content of the Materials.
You or your Principal Representative (defined in Item 11) may also choose to take an assessment provided by a third party supplier designated by us. If you elect to offer to your clients the optional assessment services we have approved, currently the NuVeda 360 Assessment, you must acquire the assessments and corresponding reports from our designated supplier. We and our designated representatives will be entitled to monitor or record the Live Instruction conducted by you to evaluate the Facilitator and to obtain other information, including the number, names and addresses of the attendees.
You will need a computer system as described in Item 11. You may already own one meeting our minimum requirements. You must acquire customer relationship management software for use with your computer system from a supplier we designate. We will pay the license fees for this software for the first 12 months, as described in Item 6. We may requireyou to obtain additional and new computer systems and software in the future, as described in Item 11. You must also acquire digital and e-mail marketing services from a supplier we designate. We will pay for this service for the first 12 months, as described in Item 6.
If you desire assistance in finding a potential purchaser to acquire your CRESTCOM Business or other assistance with the sale of your CRESTCOM Business, the Area Representative for your Assigned Area may agree to provide this assistance to you. You will be required to compensate the Area Representative $12,500 for these services, which will bereduced to $10,000 if the transferee is first identified by you rather than the Area Representative. Other than the requirements above, you are not obligated to purchase or lease any goods, services, supplies, fixtures, equipment, inventory or real estate from us or any other specifically designated source.
Currently, we do not negotiate purchase arrangements with suppliersfor the benefit of Franchisees and Area Representatives, nor do we derive revenue from your purchases through third party suppliers, although we andour affiliates reserve the right to doso in the future. We will derive revenues from acquisitions of Materials and other items through us. During the fiscal year ending on December 31, 2018, we had revenues of $7,684,264. Of this amount, $110,108 (approximately 1.43 percent of the total revenues) consisted of revenues derived from Materials and other items sold to Franchisees and Area Representatives in the United States. This information was compiled based on our financial statements, described in Item 21. Neither we nor our affiliates derive revenues from real estate leases. No other affiliated company of ours derived revenues from the sale of any products or services to our Franchisees or Area Representatives. We are not aware of any rebates received by Area Representatives of ours from any suppliers based on purchases made by our Franchisees or other Area Representatives Except as is described in this Item 8, you do not receive a material benefit from us based on your use of any particular designated or approved source.
Item 10: Financing
Except as described below, neither we nor any agent or affiliate of ours offer any direct or indirect financing to Franchisees. We do not guarantee any notes, leases or other obligations of our Franchisees. Furthermore, we cannot predict if you will be able toobtain financing for any part of your investment in your franchise and, if so, the terms of the financing.
We may agree to finance a portion of your initial franchise fee. The maximum amount we finance is generally 50 percent of your initial franchise fee. Wemay also agree to finance some or all of the New Materials surcharge and Crestcom Next Generation Sales Academy Program surcharge. Whether we will provide you any financing and the amount of financing we will provide are dependent on your location, your experience in marketing or conducting training programs, your creditworthiness, the funds available to us, the collateral available to secure the loan and various market considerations.
If we decide to finance a portion of these payments, you must execute a Promissory Note substantially in our then current form. Our current formof Promissory Note is attached to this Disclosure Document as Attachment D. The Promissory Notewill be payable within 60 days of executing the Franchise Agreement and will bear interest at a ratebetween 9 and 12 percent per annum, all as determined by us based on the factors discussed above. The Promissory Note will be secured with collateral acceptable to us, including your franchise, or guaranteed by persons acceptable to us, or both. The persons who are acceptable to us to execute this guaranty may include each of your officers, directors, partners, or shareholders, and any member of your or their immediate families, and any Authorized Representatives, as defined in Item 15. The Promissory Note may beprepaid in whole or in part without penalty.
If you execute a Promissory Note, it will provide that if you fail to make any payment when due, we may accelerate the entire unpaid balance, which will become due at once. If the default is not cured within 10 days after notice of default to you, the entire principal balance will accrue default interest at the lesser of 18 percent per annum or the highest rate permitted by applicable law. On default, we may pursue the following remedies: (i) sue you for the default amount; (ii) proceed against any collateral pledged to secure the Promissory Note, which may involve you losing your franchise; (iii) sue any guarantor of the Promissory Note; or (iv) pursue any combination of these remedies. If there is a default, in addition to the amount due on the Promissory Note, you may be liable for our costs and expenses of collection, including reasonable attorneys’ fees. We do not offer financing that requires you to confess judgment, but you will have to waive presentment, notice of protest, and protest. Legal actions by us related to the Promissory Note will be litigated in the courts of, or arbitratedin, the City and County of Denver, Colorado, at our option. Pursuant to the PromissoryNote, Franchisees agree to submit tothe personal jurisdiction of these courts and to binding arbitration, and agree to waive their rights to a jury trial.
Whether, and on what terms, you can obtain financing from third parties will depend on a variety of factors, including your own creditworthiness, the type of security you can offer, the policies of lending institutions, and the availability and cost of commercial credit generally. You may not be able to obtain a loan. Except for payments made to us for financing the initial franchise fee, we and our affiliates do not receive payments for the placement of financing or providing financing. We and our affiliates do not guarantee your obligations to third parties. In the past, we have not sold, assigned or discounted to a third party any note, contract or other instrument executed by a Franchisee, although we reserve the right to do so in the future.
Item 12: Territory
The Franchise Location.You will operate your CRESTCOM Business from a specific location that is designated as the “Franchise Location” in the Franchise Agreement. The Franchise Location can be relocated within the Assigned Area upon prior written notice to us.
The Assigned Area. You must concentrate your efforts on marketing the Materials within the geographic area described in the Addendum to the Franchise Agreement as it is currently constituted (“Assigned Area”). An Assigned Area is usually part of a state or the entire state where a CRESTCOM Business is located. You will not receive an exclusive Assigned Area. You may face competition from other Franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. You cannot conduct any marketing activities (including marketing through other channels of distribution such as the Internet, catalog sales, telemarketing, or other direct marketing) outside of your Assigned Area or market the Materials in your Assigned Area for use outside of your Assigned Area without our approval, which may be withheld for any reason. Without our prior written consent, you may not market the Materials or conduct, directly or indirectly, Live Instruction outside of your Assigned Area. We will typically give our consent unless the “Threshold Number” of “Qualifying Businesses,” as defined below, has already been reached in the assigned area where you seek to market the Materials or conduct Live Instruction. We may also withhold our consent if, in our determination, it would be detrimental to the interests of our other Franchisees, distributors, Area Representatives, or us.
The Threshold Number of Qualifying Businesses.Your rights to market the Materials and to market and conduct Live Instruction in the Assigned Area will not prevent us or another Franchisee or distributor of ours from marketing the Materials or marketing or conducting Live Instruction within the Assigned Area. However, when the number of Qualifying Businesses (defined below) in the Assigned Area reaches the Threshold Number(defined below), we will refrain from adding additional CRESTCOM Business franchises or our own CRESTCOM Businesses inthe Assigned Area. A “Qualifying Business” is a CRESTCOM Business that in each calendar quarter generates gross revenues equal to the dollar amount that would be realized from the enrollment of at least 18 attendees in The BULLET PROOF Manager training program at our then recommended U.S. minimum retail price. The recommended U.S. minimum retail price for attendees of The BULLET PROOF Manager training program is currently $4,320. This recommended retail price is stated in the Procedures Manual and is subject to change. The sales made by any Salespersons directly employed by a Franchisee will be included in that CRESTCOM Business’ sales results for purposes of determining if that CRESTCOM Business is a Qualifying Business. The “Threshold Number” is equal to one Qualifying Business for each1 million or fraction thereof in population in a Franchisee’s assigned area. If, after attaining the Threshold Number, the number of Qualifying Businesses in the Assigned Area falls below the Threshold Number, then without further notice to you we may resume adding franchised CRESTCOM Businesses or our own CRESTCOMBusinesses in the Assigned Area. We may continue to do so until the number of Qualifying Businesses in the Assigned Area again equals or exceeds the Threshold Number. We do not warrant that you or other Franchisees in your Assigned Area, or elsewhere, will achieve or maintain Qualifying Businesses status.
The Minimum Monthly Obligations.After the second full calendar quarter following the execution of your first Franchise Agreement, you will be required to meet and maintain minimum performance requirements. Beginning with the third full calendar quarter after the execution of your Franchise Agreement your CRESTCOM Business must average gross revenues on a monthly basis over each calendar quarter equal to the dollar amount that would be realized from at least two paying attendees of The BULLET PROOF Manager training program based on our then recommended U.S. minimum retail price. The applicable requirement will be referred to as the “Minimum Monthly Requirement” in this Disclosure Document. The recommended U.S. minimum retail price for attendees of The BULLET PROOF Manager training program is currently $4,320. You may charge a fee for attendance at The BULLET PROOF Manager training program that is higher or lower than our recommended U.S. minimum retail price. This recommended retail price is stated in the Procedures Manual and is subject to change. Any sales of Materials made by Salespersons retained by you shall be credited toward your sales of Materials for purposes of determining whether your CRESTCOM Business has satisfied its minimum sales requirements. If during any calendar quarter you fail to, on average, meet the Minimum Monthly Requirement, then (i) you must immediately after the end of the applicable calendar quarter pay us the difference between the Distribution Fees and Royalty Fees due based on gross revenues equal to the Minimum Monthly Requirement (the “Minimum Monthly Fees”) for the three months of that calendar quarter and the actual Distribution Fees and Royalty Fees paid to us by you during that calendar quarter (which difference shall be referred to as the “Initial Quarter MMR Fee”), and (ii) starting the next month and continuing each following month, you must pay us the greater of the Minimum Monthly Fees or the actual Distribution Fees and Royalty Fees due for that month. Once you commence paying Minimum Monthly Fees, if the total Distribution Fees and Royalty Fees that are actually paid by you during any month do not equal or exceed the Minimum Monthly Fees due for that month, on or before the last working day of that month you will pay us the difference between the Minimum Monthly Fees and the amount of Distribution Fees and Royalty Fees actually paid (the “Ongoing Monthly MMR Fee,” and together with the Initial Quarter MMR Fee, the “MMR Fees”). Once paid, we will credit the MMR Fees against any Distribution Fees and Royalty Fees owed by you in a subsequent month to the extent that the fees owed in that month exceed the Minimum Monthly Fees due for that month. Except for applying the MMR Fee as described above, no portion of the MMR Fees are refundable once paid. If you fail to pay us at least the Minimum Monthly Fees in any month during the remainder of the term of the Franchise Agreement you will be in default of the Franchise Agreement. In that case, we will have the right to terminate the Franchise Agreement. We may waive any default in our sole discretion. In lieu of declaring a default, if during any calendar quarter you fail to, on average, meet the Minimum Monthly Requirement, we may require you to attend and complete additional training at your expense. We have the right, in our sole discretion and on a case-by-case basis, to waive the obligation of you or any other Franchisee to meet the Minimum Monthly Requirement or pay the MMR Fees in any month. A waiver by us of this obligation for one or moreother Franchisees does not in any way affect your obligation to meet the Minimum Monthly Requirement or pay the MMR Fees.
Principal Marketing Areas.In regions where multiple Franchisees of ours share the same assigned area, or in areas where multiple Franchisees of ours otherwise market the Materials in close proximity to each other, we have created programs granting limited, semi-exclusive protected territories called “Principal Marketing Areas” within the assigned area. We call these marketing programs “PMA Programs.” The terms, conditions, policies, and procedures of any PMA Program established by us shall be stated in the Procedures Manual or in other written materials that we will provide. We may modify the PMA Program in our discretion. If we have already created a PMA Program with your Assigned Area, you must abide by the terms, conditions, policies, and procedures of that program. If following the execution of the Franchise Agreement we create a PMA Program inyour Assigned Area, or in an area with different assigned areas that include some or all of your Assigned Area, you must participate in the PMA Program, and cooperate and comply with all of the terms, conditions, policies, and procedures instituted by us related to that PMA Program. The terms, conditions, policies, and procedures of different PMA Programs may vary from one another. The Principal Marketing Areas and their geographical boundaries may be changed by us periodically.
Other Rights.Except as described above with respectto the performance requirements, the continuation of your rights described in this Item 12 during the term of the Franchise Agreement is not dependent on achieving any certain sales volume, market penetration or similar contingency or other circumstances. The Franchise Agreement gives you no options, rights of first refusal, or similar options to acquire any additional franchises from us, although we may in ourdiscretion offer you the right to acquire additional franchises in the future.
Our Reserved Rights.Your franchise rights are nonexclusive. We may do any or all of the following, without any compensation to you: (1) use and license the use of the Marks and Licensed Methods (a) for the operation of CRESTCOM Businesses anywhere, including in your Assigned Area, subject only to Threshold Number of Qualifying Business restrictions described above; (b) for the operation of Area Representative businesses anywhere, including in your Assigned Area; or (c) in connection with the production and sale of new or additional Materials, Live Instruction, or other promotional, marketing, or related items for use in a CRESTCOM Business, without regard to location; (2) establish alternative channels of distribution, which include marketing and distribution of the Materials via the Internet, the Electronic Transmission methods defined in Item 16 orother electronic transmissions, catalog sales, social media, telemarketing and other direct marketing sales channels, which may or may not use the Marks; (3) establish alternative channels of delivery, which include the Electronic Transmission methods, webinars, social media, and other electronic transmissions, other than electronic transmissions in conjunction with Live Instruction, for the Materials or any training programs of ours, which may or may not use the Marks, and in conjunction with any alternative channel of delivery, authorize the marketing and sale of such Materials or any training programs through other distribution systems at any location, including in your Assigned Area; (4) retire, cease to produce, cease to offer, or otherwise terminate the right to market, distribute, sell or otherwise offer to third parties any older versions of the Materials, while continuing to offer such older versions of the Materials through alternative channels of distribution or by alternative channels of delivery; (5) create, produce, market and sell products or services of any kind, which may be the same as, similar to, or different from those offered by a CRESTCOM Business, utilizing proprietary marks that are not the same as or confusingly similar tothe Marks, and not now or in the future designated as part of the Crestcom system licensed under the Franchise Agreement or otherwise used in a CRESTCOM Business, and authorize the marketing and sale of these other products and services through other distribution systems at any location, including in your Assigned Area, whether or not in alternative channels of distribution or using alternative channels of delivery; and (6) grant training personalities appearing on the Materials the right to market or use the Materials or similar materials in the conduct of their businesses, in their live presentations, or in connection with their personal appearances, at any location, including in your Assigned Area. All of these rights may be exercised on any terms and conditions as we deem advisable, without granting you any rights in them. We can acquire or be acquired by, or engage inany other transaction with, other companies, which may be competitive or not with us or a CRESTCOM Business. These arrangements may include converting other companies to the Crestcom system, or converting company-owned, franchised or other businesses (including your CRESTCOM Business) to another format (whether competitive or not), or both. The other companies and CRESTCOM Businesses may be maintained as the same concept, as a new concept, or as a separate concept. These concepts may be located anywhere, including in your Assigned Area. You must fully cooperate with any of these conversions, at your sole expense.
Item 15: Obligation to Participate in the Actual Operation of the Franchise Business
Franchisees or their Principal Representatives mustdevote their best, full time efforts toward the management and operation of their CRESTCOM Businesses. If you are an entity Franchisee, your principal owner must be approved by us in writing prior to serving as your Principal Representative. You, or if applicable, your Principal Representative, is required to successfully complete our mandatory initial training program and our Boot Camp training program. Franchisees are responsible for recruiting, hiring, appointing, firing, and supervising their employees, independent agents, Facilitators, telemarketers and other representatives (collectively referred to as the “Authorized Representatives”). Facilitators must be qualified toconduct Live Instruction and must successfully complete our PRO Facilitation Certification training program.
In addition to yourself or your Principal Representative, as applicable, you may, at your option and with our prior written consent, engage up to two individuals who are acceptable to us as Authorized Representatives who are authorized to market the Materials in your Assigned Area. These persons may be employees or independent contractors of your CRESTCOM Business acting as Salespersons. We recommend you consult your attorney or another person who can advise you of the proper relationship for any Salesperson you engage in your Assigned Area. If you elect to retain a Salesperson to market the Materials in the Assigned Area, you may pay him or her on such terms as the two of you shall agree. You may negotiate the terms of that relationship, except that all agreements between you, or your CRESTCOM Business, and the Salesperson must be approved by us and must provide that we are allowed to enforce the agreements directly against the Salesperson. The maximum number of Salespersons you may engage at any time is two without our prior consent, which may be granted or withheld in our sole discretion. Salespersons are retained directly by you and are not Franchisees of ours. You may also employ up to two additional telemarketing personnel. Other Franchisees in your Assigned Area will also have the right to engage Salespersons and telemarketing personnel to market the Materials.
All Authorized Representatives must be screened toensure that they will not reflect adversely on the reputation of our image and system. All of yourAuthorized Representatives must be approved in advance by us. We will approve an individual to serveas an Authorized Representative if that individual demonstrates to us that he or she has the skill set for the particular position, reflects the professionalism of the Crestcom system, is of good character, and, if applicable, has satisfactorily completed our training program. You are solely responsible for implementing training and other programs for your Authorized Representatives related to the legal, safe, and proper performance of their work, regardless of the fact that we may provide advice, suggestions, and certain training programs. The advice, suggestions, and training we provide are to protect our brand and the Marks and not to control the day-to-day operation of your CRESTCOM Business. You will have sole authority and control over the day-to-day operations of the CRESTCOM Business and its employees and other representatives. The Procedures Manual contains forms of agreements that you must execute with your Authorized Representatives. All of your agreements with your Authorized Representatives, including your Salespersons, must be in a form furnished by us or otherwise approved by us and must provide that we are allowed to enforce the agreements directly against the Authorized Representative. You must keep us informed of the names, addresses, e-mail contact information and telephone numbers of all Authorized Representatives. The number of people associated with any one CRESTCOM Business authorized to engage in the marketing and telemarketing of the Materials may be changed in our discretion, by change to the Procedures Manual. We may also, at our discretion, make other changes to the Procedures Manual.
We may require you to cause each of your officers,directors, partners or shareholders, and any member of your or their immediate families, and any Authorized Representatives, to execute our standard Nondisclosure and Noncompetition Agreement (a copy of which is attached to this Disclosure Document as Attachment C), and our standard Personal Guaranty (a copy of which is attached to the Franchise Agreement as Exhibit IV). You must provide usa copy of each Nondisclosure and Noncompetition Agreement at the time it is signed and upon our request. In addition, all of your customers, clients, purchasers or others acquiring rights to attend Live Instruction or use the Materials by or through you, will be required to execute a contract substantially in the form provided in our Procedures Manual (the “Training Agreement”). Any changes to the Training Agreement require our prior written consent. In no event will you permit any third party, including any client, to attend any Live Instruction or other training sessions, or acquire, observe, or use any of the Materials, without having first obtained a signed Training Agreement or other document approved by us from that third party.You must keep copies of all executed Training Agreements and make those copies available to us for review upon our request. Upon our request, you must cooperate with us in enforcing the obligations under the Training Agreement against any of your clients or other parties acquiring access to the Materials by or through you. We may require you to cause Authorized Representatives to execute contracts provided by us. Other than the requirements above, we makeno recommendations and have no requirements regarding written employment or other written agreements between you and your employees.
Item 16: RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
In order to maintain uniformity throughout the system, Franchisees must operate their CRESTCOM Businesses in conformity with our standards and specifications provided in the Procedures Manual or otherwise provided in writing. The Procedures Manual is described in Items 8 and 11 of this Disclosure Document. Franchisees may not deviate from our standards and specifications without our prior written consent. Unless we agree otherwise,Franchisees can only offer the Materials and Live Instruction that we approve and may not offer or engage in any other business activity, including conducting any competitive business in violation of the covenant against competition in the Franchise Agreement. In particular, Franchisees are restricted from offering, marketing or conducting other audio, video, or online media-based or other visually transmitted sales, motivational, or management training, personal development or consulting services, or conducting any other training sessions or participating in any other training that is transmitted by audio media, video media, online media, or other visual transmission methods. Involvement in such other activities can decrease the time and effort Franchisees have to devote to their CRESTCOM Businesses, and decrease the chances of success for those CRESTCOM Businesses. Because our relationships with our video faculty and other talent usedin the Materials are vitally important to us and the franchise system, Franchisees cannot solicit the services of or otherwise have contact with any of the talent used in the Materials without our prior written consent, which consent may be withheld for any reason.
If you engage in another type of business or profession or offer any other types of services or products in addition to your CRESTCOM Business, whether or not we have granted our prior written approval to such actions, you will be required to pay us Distribution Fees and Royalty Fees based on the Gross Revenues that you realize not only from your sale of the Materials and conduct of Live Instruction, but also, the Gross Revenues that you realize from the operation of the other business activities.
Franchisees are not allowed without our written approval (which approval may be withheld for any reason) to display any part of the Materials or conduct any instruction or other training via television broadcast, cable, network, closed circuit or satellite transmission, on the Internet, or by similar technological means and methods in use now or developed in the future (“Electronic Transmissions”), or to market or sell any Materials, instruction or training that are to be delivered or displayed to clients via Electronic Transmissions, including any on-demand training system we may establish. This does not restrict you from displaying the Materials using electronic technology in an in-person session of the Live Instruction. We may, in our sole discretion, grant you or third parties the rights to display the Materials or conduct instruction or other training via Electronic Transmission methods, or to market and sell the Materials, instruction or other training to be delivered or displayed via these Electronic Transmission methods, under terms and conditions we determine, including payment of an additional initial fee or other fees, which may be substantially different than the terms and conditions stated in your Franchise Agreement. You may not promote your CRESTCOM Business on the Internet, without prior written approval from us, which approval may be withheld for any reason.
Live Instruction may be conducted only in a manner specifically authorized by us, as described in the Procedures Manual. Without our written approval, you are not allowed to conduct Live Instruction or sell Materials outside of your Assigned Area. You must participate in and abide by the Multiple Area Sales Program described in the Procedures Manual, related to sales and servicing of clients with multi-area needs. In the event of a dispute between you and another Franchisee, distributor, or Area Representative, or any other party related to the Multiple Area Sales Program, you must submit the dispute to us for our final and binding decision.
Franchisees may not reship, transship, give, loan, sell or purchase any part of the Materials to or from any other current or former CRESTCOM Franchisee or any reseller of the Materials, whether within or outside of the Assigned Area. Franchisees may sell the Materials only through their CRESTCOM Business and only to clients who are the actual end users of the Materials. All of your clients or others acquiring the use of the Materials through you will be required to execute a form containing language thatis substantially similar to the language in the Training Agreement. See Item 15.
To view the full Franchise Disclosure Document, please click here