Key Items to Watch out for in the Martinizing International, LLC 2020 FDD
Please consider the following RISK FACTORS before you buy this franchise: 1. The franchise agreement requires you to resolve disputes with us by mediation, arbitration and litigation only in Oakland County, Michigan. Out of state arbitration and litigation may force you to accept a less favorable settlement for disputes. It may also cost you more arbitrate with us in Michigan than in your own state. Local law may supersede these requirements in your state. 2. The franchise agreement requires that Michigan 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. Even though the franchise agreement provides that Michigan law applies, local law may supersede it in your state. 3. You must make minimum royalty or advertising fund payments, regardless of your sales levels. Your inability to make the payments may result in termination of your franchise and loss of your investment. 4. There may be other risks concerning the franchise.
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
You must pay the initial fees described below to Franchisor or one of our affiliates ranging from approximately $77,000 to $89,425. Fees that are considered “initial” and described in this Item 5, include those fees due prior to your commencement of operations. The initial fees include a Franchise Fee, based on the number and type of franchise(s) you buying, an Initial Package Fee, and Shipping and Taxes, as such terms are defined and described below.
1. Franchise Fee. Based on whether you are buying an Initial Franchise or an Additional Franchise, you will have to pay a franchise fee (the “Franchise Fee”) as follows:
a. Initial Franchise. The term “Initial Franchise” means the initial or first Franchised Business established by Franchisee. The current Franchise Fee for an Initial Franchise is $69,500.
i. Veteran’s Discount. If Franchisee is a veteran of the U.S. Armed For ces meeting the requirements of the VetFran Program, there is a $5,000 discount (the “Veterans Discount”), so that the Franchise Fee for an Initial Franchise with the Veterans Discount is $64,500.
b. Additional Franchise. The term “Additional Franchise” means any Franchised Business established by Franchisee after the establishment of the Initial Franchise.
i. Additional Franchise Purchased with the Initial Franchise. The current Franchise Fee for any Additional Franchise purchased at the same time you purchase your Initial Franchise is $15,000.
ii. Additional Franchise Purchased Separately from the Initial Franchise. Purchased with the Initial Franchise. For any Additional Franchise purchased separately from the Initial Franchise, you will be required to pay the then-current Franchise Fee for an Additional Franchise. The current Franchise Fee for an Additional Franchise is $69,500.
iii. Veteran’s Fee Inapplicable. The Veteran’s Discount does not apply for any Additional Franchise.
c. Franchise Fee Applicable to all Franchise Types. A Plant Franchise or a Drop Store may each serve as an Initial Franchise or an Additional Franchise, if the criteria above are satisfied, and the applicable fee would apply. Typically, a Drop Store is only permitted to serve as an Additional Franchise and not an Initial Franchise, but it may serve as an Initial Franchise in the sole discretion of Martinizing.
d. Franchise Fee Subject to Change. Franchisor reserves the right at any time in its sole discretion, to modify the Franchise Fee payable for an Initial Franchise or an Additional Franchise.
e. Payment of Franchise Fee. Franchisee must pay to Franchisor the entire Franchise Fee for any Initial Franchise or Additional Franchise, as applicable, upon execution of the Franchise Agreement(s) with Franchisor. Your entire Franchise Fee for any Initial Franchise or Additional Franchise shall be fully earned by us and non-refundable, in whole or in part, when paid.
e. Payment of Franchise Fee. Franchisee must pay to Franchisor the entire Franchise Fee for any Initial Franchise or Additional Franchise, as applicable, upon execution of the Franchise Agreement(s) with Franchisor. Your entire Franchise Fee for any Initial Franchise or Additional Franchise shall be fully earned by us and non-refundable, in whole or in part, when paid.
2. Initial Package Fee. In connection with the purchase of the Franchised Business, Franchisee must purchase from Franchisor an “Initial Package” containing products, supplies and/or other material to assist Franchisee in the initial operation of the Franchised Business. The items include in your Initial Package will vary based on whether you purchase an Initial Franchise or an Additional Franchise. The items in your Initial Package will be itemized and included as either Exhibit B-1, for an Initial Franchise, or Exhibit B-2, for an Additional Franchise, of the Franchise Agreement. The fee for the Initial Package (the “Initial Package Fee”) will also vary depending on the Franchised Business format purchased, as described below
a. Initial Package – Plant Franchise as Initial Franchise. If you are purchasing an Initial Franchise, the Initial Package Fee is $18,400 and the term “Initial Package” refers to and consists of the following: an Initial Marketing Package (see Item 11 below); your Initial Locker Order consisting of six (6) locker sets; licenses for the use of the Franchise Management System, Locker System, and On-Demand System (through the specific license agreements described in Item 11 below); a convention allowance (“Convention Allowance”) to be allocated toward attendance of your first Martinizing franchise convention (“Martinizing Convention”) or regional meeting (“Martinizing Regional Meeting”), whichever is applicable for the given year the Franchisee purchases the Martinizing franchise; registration for two persons to participate in the Martinizing Training Program (see Item 6 below); operational forms; a copy of the Operations Manual; and certain other items (collectively, the “Initial Package Items”). For an Initial Franchise, the Initial Package Items will be listed in Exhibit B-1 of the Franchise Agreement.
b. Initial Package – Drop Store as Initial Franchise. If you are purchasing an Additional Franchise, the Initial Package Fee is $7,500 and the Initial Package will include the Initial Package Items referenced above with the following exceptions: you will not receive the Initial Locker Order or the Convention Allowance; and you will only receive registration for one store manager to participate in the Martinizing Training Program if he/she has not previously completed the Martinizing Training Program. For an Additional Franchise, the Initial Package Items will be listed in Exhibit B-2 of the Franchise Agreement.
c. Initial Package Modification. If agreed to in writing by Franchisor, the Initial Package Items may be modified to account for a variation of and/or reduction in the items needed and the Initial Package Fee will be modified accordingly. Any agreed upon modification(s) to the Initial Package Items and/or the Initial Package Fee will be reflected in Exhibit B-1 or Exhibit B-2, as applicable. Exhibit B-1 or Exhibit B-2, as applicable, will be executed simultaneously upon execution of the Franchised Location Addendum once your Franchised Location is secured and your Initial Package needs are determined (and not upon execution of this Agreement unless you already have a Franchise Location identified at the time of execution).
d. Initial Package Fee Payment. Franchisee must pay the entire Initial Package Fee prior to the completion of the Headquarters Training portion of the Martinizing Training Program attended by either the managing person or the store manager, as applicable. With respect to an Additional Franchise, in the event you do not employ a Store Manager, your entire Initial Package Fee will be due in full within seven calendar days from the date you close on the existing dry cleaning and laundry plant or drop store that will be converted into your Martinizing Store.
e. Non-Refundable Payment. Your entire Initial Package Fee shall be fully earned by us and non-refundable, in whole or in part, when paid.
f. Initial Package Fee Waived for Route Conversion Franchise, DCS Conversion Franchise and Legacy Franchise. When you sign a Route Conversion Amendment, DCS Conversion Amendment or a Legacy Amendment, the Initial Package Fee for the Franchised Business will be waived.
3. Shipping and Taxes. Upon our direction, you must pay us, our affiliates, or our respective suppliers or vendors, as the case may be, any and all shipping, freight, insurance, taxes, tariffs, customs, duties and other expenses incurred for the shipment of any of the Initial Package Items together with any and all applicable taxes, as well as any storage fees, including short-term or long-term storage fees, on such items (collectively, “Shipping and Taxes”). We also reserve the right to collect any applicable Shipping and Taxes from you and pay them to appropriate authorities as applicable. It is our best estimate that Shipping and Taxes will range from: $0 – $1,525, as further detailed below.
a. Shipping and Taxes Payment. To the extent Shipping and Taxes are calculated with the Initial Package Fee, such fees will be paid in accordance with the Initial Package Fee payment requirements above; provided, however, that it is your obligation to verify that the applicable tax is paid. To the extent Shipping and Taxes are calculated or assessed separately from the Initial Package Fee, such Shipping and Taxes will be due in full immediately upon Franchisee’s receipt of an invoice for such fees, or as otherwise incurred by Franchisee. Shipping and Taxes are fully earned by Franchisor and nonrefundable when paid. b. Shipping and Taxes Liability. We and our affiliates will not be liable for loss or damage due to delay in delivery resulting from any cause beyond its reasonable control. In no event will we or our affiliates, as the case may be, be liable for financial loss, including consequential or special damages on account of delay due to any cause.
Franchisor’s Surety Bond -Illinois and Maryland. We have procured a Franchisor’s Surety Bond as part of its franchise registration in Maryland and Illinois due to our financial condition. In Illinois, the bond is issued in favor of the Illinois Attorney General (500 South Second Street, Springfield, IL 62706 (217.782.4465)).
Item 8: Restrictions on Sources of Products and Services
Required Purchases: You must purchase all goods or services only from us or from sources, manufacturers or suppliers approved or designated in writing by us (which sources or suppliers may include or be limited to us or our affiliates). We may provide you with specifications and requirements for the purchase or lease of all interior and exterior signage, store furnishings, window graphics, or other items bearing the Martinizing logo; and specifications and requirements related to the purchase or lease, maintenance, and inspection of machinery, equipment, and other materials used in connection with the performance of dry cleaning and laundry and all Martinizing Services.
System Standards: You must operate your Franchised Business according to our “System Standards,” including mandatory and suggested specifications, standards, operating procedures, and rules which may require you to purchase various goods, services or other supplies, by way of example only, fixtures, equipment, inventory, and computer hardware and software. We will formulate and modify the System Standards based on our franchisees’ experiences in operating their respective Franchised Business. Our System Standards may impose requirements for performance (see Item 12), reputation, quality, and appearance. The System Standards do not include any personnel policies or procedures. We do not dictate or control labor or employment matters for franchisee and their employees. We also do not dictate the day to day operations of the franchisee and/or their employees. The Operations Manual identifies the System Standards and we may modify the System Standards from time to time in writing and you must comply with any such modification within sixty (60) days from the date of the written notice. Below is a list of some, but by no means all, of the purchases required as part of the System Standards.
Initial Package You are required to purchase from us, our affiliates, or our designated suppliers the Initial Package and all Initial Package Items. If buying an Initial Franchise, your Initial Locker Order will be included as part of the Initial Package and will be supplied by Martinizing. Aside from the licenses, credits, and the Initial Locker Order, neither we nor any affiliate of ours is currently a supplier of any Initial Package, or other items, but we reserve the right to become a supplier of such items in the future. Other than as provided as part of the Initial Package, you are not obligated to purchase any specific marketing material or supplies from us upon purchase of the Franchise. We do not maintain a list of approved suppliers and do not maintain criteria for approving suppliers. Any supplier who is able to provide marketing material or other items conforming to our specifications may become an approved supplier. You may contract with alternative suppliers for all items displaying the Martinizing logo and Marks for the operation of the Franchised Business. Provided, however, that you must obtain our prior approval. Approval can be requested from Mr. Starr, Mrs. Shinabarger or any subsequent persons serving in similar roles, by calling Martinizing’s corporate office at (800)827-0207. Before giving our approval, we may ask the supplier to provide sample materials that meet our specifications. Suppliers must show their ability to accurately meet our standards and specifications for representation of the Marks in order to be approved. The specs and specifications for the reproduction of our logo and any Marks are available to franchisees through the Operations Manual and on the Martinizing Franchisee website and can be shared with suppliers prior to acceptance. There is no fee to secure approval of any supplier. Upon our receipt of any request for approval, you can expect to be notified via email or telephone of the approval/denial within ten (10) business days, but that time period will depend on the cooperation we receive from you and the applicable supplier. Acceptance may be revoked upon receipt by us of information or proof that the supplier was never/is not/may not be able to meet our standards and specifications for representation of the logos and Marks. Notification of revocation of acceptance will be make via email or telephone from a member of our corporate staff. There are no marketing material suppliers in which an officer of Martinizing owns an interest. Martinizing does, however, have established relationships with certain approved fulfilment companies which are companies that inventory and distribute Martinizing trademarked items to franchisees. As part of the Operations Manual and the Martinizing Franchisee website, you will have access to the contact information for all approved fulfillment companies and all available products. Suppliers of items not bearing the Martinizing logo that are used in the daily operation of the Franchised Business need not be approved by Martinizing. Martinizing has no relationship with any such suppliers of items not bearing our logo and does not negotiate price or other terms on behalf of franchisees with such suppliers.
Locker Purchase: In connection with your Initial Franchise, in order to provide the Locker Services, you will be required to purchase multi-compartment locking sets (each set a “Locker” and collectively, “Lockers”) from Martinizing pursuant to the terms and conditions of the Locker System License Agreement. All Lockers must be purchased from Martinizing, by those suppliers Martinizing has approved. At this time, you are not permitted to purchase, install or operate any Lockers from any third party supplier. We are currently the only approved Locker supplier. You do not have any obligation to purchase Lockers in connection with any Additional Franchise, but you may do so in accordance with our requirements. The Initial Locker Order is included as part of the Initial Package for an Initial Franchise. You must then install, service, and maintain the Initial Locker Order on or before the second anniversary of the Effective Date of your Franchise Agreement (the “Locker Commitment”). The Locker Commitment represents your minimum Locker purchase and use requirement and you are permitted to purchase additional Lockers, at the then current Locker Purchase Price through procedures set forth in the Operations Manual or as otherwise provided by Franchisor.
Point of Sale System You must purchase a point of sale or “POS” system that meets our requirements, as may be modified from time to time in the Operations Manual, from such vendor as we require which may include us or one of our affiliates. Your POS must interface with the Software Systems and you may need to purchase certain other software or hardware in connection with such interface, as we require from time to time. You may also need to pay to install the POS and related software and hardware. The specific POS supplier(s) we approve of will be listed in the Operations Manual. The only current approved POS supplier is SPOT. In addition, Franchisor may require Franchisee to upgrade or update the software for the POS, but no more often than every three years during the Initial Term, or the Successor Term, of your Franchise Agreement. Martinizing will have independent access to all POS data (with the exception of credit card related data) including by way of example only transaction and customer contact related data recorded or otherwise stored in Franchisee’s POS. Franchisor will use the POS data, by way of example only, to generate invoices for Royalties, advertising and promotional fees and any other fees set forth in the Franchise Agreement, to facilitate advertising and communication to your customers, to gather sales and related data for use in our disclosure document, promotional or related material, to generate reports, and for any other purpose Franchisor, in its sole discretion, deems useful. See Section 10C of the Franchise Agreement.
Software Systems As described in detail in Item 11 below, you will be licensed and must use our Franchise Management System, Locker System, and On-Demand System for the performance of Martinizing Services. Otherwise, all software used in the operation of the Franchised Business must be licensed and/or purchased from suppliers Martinizing has approved. Neither we nor any affiliate of ours is currently a supplier of any software outside of the Franchise Management System, Locker System, and On-Demand System, but we reserve the right to become a supplier of such software in the future.Software Systems As described in detail in Item 11 below, you will be licensed and must use our Franchise Management System, Locker System, and On-Demand System for the performance of Martinizing Services. Otherwise, all software used in the operation of the Franchised Business must be licensed and/or purchased from suppliers Martinizing has approved. Neither we nor any affiliate of ours is currently a supplier of any software outside of the Franchise Management System, Locker System, and On-Demand System, but we reserve the right to become a supplier of such software in the future.
Insurance: As part of your Pre-Commencement Requirements (defined in Section 1G of the Franchise Agreement), before commencing operations of the Franchised Business you must obtain, and throughout the term of the Franchise Agreement you must maintain, at your sole expense, certain insurance coverages (as described in Section 22 of the Franchise Agreement). Coverage requirements are subject to modification by Martinizing from time to time in accordance with the Operations Manual and currently include the following: 1. Commercial General Liability Insurance, including Bodily Injury and Property Damage Liability, Products and Completed Operations, Personal and Advertising Injury Liability in amounts not less than $1,000,000 each occurrence, with $2,000,000 Annual Aggregate, and $2,000,000 Products and Completed Operations aggregate; The policy shall include Martinizing International, LLC as an additional insured on primary basis without right of contribution from any other insurance purchased by Franchisor and further shall include a waiver of subrogation; 2. Property and Boiler insurance covering franchisees business property in an amount equal to the actual replacement cost as determined solely by Franchisee and including coverage for equipment breakdown exposures. This policy shall include coverage for business interruption and extra expense in amount to be determined solely by the Franchisee. If Franchisee uses a steam pressure boiler as part of its operations, the policy shall include coverage for steam boiler explosion; 3. Bailees Legal Liability or Bailees Property Coverage Insurance must be maintained with limits of at least $250,000 per occurrence and must cover customer goods in your care, custody and control. This coverage must also apply to property at your premises and while in transit under your care; 4. Automobile Liability Insurance with policy limits of not less than $1,000,000 as a combined single limit for bodily injury and property damage arising out of all owned, non-owned and hired vehicles; 5. Workers’ Compensation and Employers’ Liability Insurance with limits of at least $500,000 each Accident, $500,000 disease each Employee, and $500,000 disease Policy Limit and shall include a waiver of subrogation in favor of Martinizing International, LLC; 6. Employee Dishonesty coverage with minimum limits of $50,000 per loss covering both Franchisee property and third party property; 7. Umbrella or Excess Liability Insurance with a limit of at least $2,000,000 per occurrence and in aggregate covering the commercial general liability, automobile liability and employers’ liability policies as scheduled underlying policies. The foregoing list reflects Martinizing’s minimum insurance requirements and is not meant to reflect your individual business needs. While all insurance must comply with our requirements, we do not approve any certain insurance suppliers (including any agents, brokers or carriers) and it is your obligation to locate an insurance company that can provide coverage meeting our requirements. It is your obligation to ensure that your business is properly insured, including maintenance of property and other business related insurance that is not referenced above. Additionally, you must maintain any applicable state, county, local, or other municipal insurance requirements. Neither we nor any affiliate of ours is currently a supplier of any insurance coverage, but we reserve the right to become a supplier of insurance in the future. In addition to the coverages listed above, you must comply with all insurance related requirements set forth in your Franchise Agreement and/or the Operations Manual including certain conditions related to insurance coverage required for your Franchised Business; our protection and rights under your insurance policies as a named additional insured; periodic verification of insurance coverage, including insurance certificates, that must be furnished to us; and our right to obtain insurance coverage at your expense if you fail to obtain required coverage.
Benefits: We may negotiate purchase arrangements with suppliers (including price terms) for the benefit of the Franchise System. These arrangements are subject to change and we have no obligation to insure that the arrangement with any supplier will continue to be made available to you. We do not provide material benefits to you (for example, renewal or granting additional franchises) based on your purchase of particular products or services or use of particular suppliers. For the year ending December 31, 2018, we had total revenue, as described in Exhibit A to this disclosure document, of $3,869,726. Of that total revenue, $51,595, which is 1.33%, was derived from items purchased according to our specifications from Martinizing franchisees, including Lockers, software fees and POS fees. We estimate that the required purchases described above are 85% to 90% of the cost to establish a Martinizing Franchise and approximately 10% of ongoing operating expenses. Moving forward, we and/or our affiliates, stand to gain additional revenue from any third party provider of software for the performance of Martinizing Services, based on either a percentage of the total fees received by such third party from Martinizing franchisees or to the extent the amount of your total payments made exceed the costs to us of purchasing the software. Also, we and/or our affiliates, stand to gain revenue on any machinery or equipment we secure for you to the extent the amount of your total payments made exceed the costs to us of purchasing the machinery or equipment during the course of the term of your Franchise Agreement. It is our best estimate that such revenue will be approximately 1% of our revenue. Aside from the foregoing, neither we, our officers or directors, nor any of our affiliates own any interest in, have a relationship with, or receive rebates, revenue or any other material consideration from any of the approved suppliers referenced in this Item 8. Provided, however, we retain the right to do so in the future. We may also sell or lease certain other supplies, products and services ourselves, and, if we do, we may derive revenue from those sales. In the event that any cash rebates, mark ups, volume discounts, concessions, advertising allowances, or discount bonuses (collectively “Discounts”), whether by way of cash, kind or credit, are available to or received by us or our affiliates from any manufacturer or supplier designated by us, whether or not on account of purchases made (i) by us for our own account or for the account of Franchisee or franchisees generally, or (ii) by Franchisee directly for its own account, we and/or our affiliates will be entitled to retain the whole of the amount or any part of such Discounts. We and/or our affiliates have the right to realize a profit on any items that we or our affiliates supply to Franchisee.
Cooperatives There currently are no purchasing or distribution cooperatives. However, as a result of quantity or other discounts available to Martinizing, we generally are able to purchase products from some suppliers at a lower price than you are able to purchase the equipment and products directly from those suppliers. The discounts made available to Martinizing by some suppliers generally range from 20% to 40% of the suggested retail or list price. Some promotional items are made available to Martinizing at discounts lower than 20%.
Item 10: Financing
We do not offer direct or indirect financing. We do not guarantee your note, lease or obligation.
Item 12: Territory
Pursuant to the Franchise Agreement, you will have the right and non-exclusive license to operate the Franchised Business at the Franchised Location identified in the Franchised Location Addendum attached as Exhibit A to the Franchise Agreement. If the specific Franchised Location has not been accepted by Franchisee and Franchisor prior to the execution of this, then once both Franchisor and Franchisee have accepted a location to serve as the Franchised Location in accordance with the terms of this Agreement, the Franchised Location Addendum shall be completed and executed.
The rights and privileges granted to you under the Franchise Agreement are applicable only to the Franchised Location, are personal in nature, and may not be used elsewhere or at any other location. You will not have the right to sub-franchise or sublicense any of your rights under the Franchise Agreement. You must not use the Franchised Location or the Franchise System for any purposes other than the provision of the Martinizing Services during the term of the Franchise Agreement. Subject to the below, the defined area around the Franchised Location within which no other Martinizing Store may be established or franchised by the Franchisor during the initial term of the Franchise Agreement without your consent will be referred to as the “Defined Area”.
We reserve the right to determine the exact size and shape of the Defined Area when the Franchised Location is selected and accepted by us and you. The Defined Area will be described in the Franchised Location Addendum. Upon renewal of the Franchise Agreement, if any, the Defined Area may be modified if the population within the Defined Area increases significantly (as shown in data published by Statistics Canada or an equivalent publication relied on by us). Except as otherwise provided in the Franchise Agreement, we will not establish or franchise another Martinizing Store with physical premises situated within the Defined Area during the initial term of the Franchise Agreement without your consent. If we acquire any existing third party dry cleaning and laundry businesses or franchises within the Defined Area, we will not, without your consent, convert or permit the conversion of the same to Martinizing Stores within the Defined Area during the initial term of the Franchise Agreement.
The foregoing notwithstanding, the performance by you of all Martinizing Services within the Defined Area will be on a non-exclusive basis, and subject to all marketing and other related obligations under the Franchise Agreement. We and any other Martinizing Franchisee may perform any and all Martinizing Services within the Defined Area, or elsewhere. You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. Please see Item 1 for more information on our affiliated brands and competition
You should note that there are franchisees operating under prior franchise agreement versions in which they were provided certain exclusive rights related to the performance of one or more Martinizing Services and such rights may be granted in or around the Franchised Location and/or the Defined Area (“Exclusivity Rights”). Such Exclusivity Rights may limit your rights to the performance of one or more Martinizing Services, and any Exclusivity Rights and corresponding performance limitation, if applicable, will be specifically provided for in the Franchised Location Addendum. With the sole exception of any Exclusivity Rights, if applicable, you may solicit, including without limitation all authorized forms of marketing (collectively, “Solicit”) and perform Martinizing Services freely, both inside and outside of the Defined Territory, in accordance with the terms of the Franchise Agreement.
You should also note that there are franchisees operating under prior franchise agreements with the Franchisor, and franchisees operating dry cleaning and laundry businesses under franchise agreements owned by or assigned to the Franchisor or affiliates of Franchisor using different service marks, which have no restrictions on their ability to Solicit and service customers for any dry cleaning and laundry related services, including Retail Services, Route Services, Locker Services and/or On-Demand Services or any other dry cleaning and laundry related services within any specified area. We have no duty or liability to any party whatsoever with respect to monitoring and/or regulating the activities related to solicitation and/or servicing of customers within the Defined Area allegedly performed by any such franchisees.
When you sign a Route Conversion Amendment, you will not receive a Franchised Location or a Defined Area. When you sign a DCS Conversion Amendment or a Legacy Amendment, the Franchised Location and/or Defined Area (if applicable) awarded in your Dry Cleaning Station franchise agreement or prior legacy Martinizing franchise agreement, as applicable, will be maintained, unless otherwise agreed in writing by both parties. There are no restrictions on the Franchisor, or affiliates of Franchisor, which limit the solicitation of their respective businesses to any area by advertising, marketing or other means, and the Franchisor will have no obligation to protect the Defined Area from those activities.
The rights granted in the Franchise Agreement are not exclusive to you. Except as otherwise specifically provided in the Franchise Agreement, we and our affiliates retain and reserve the unlimited right to open and operate, or license or franchise others to open and operate a business providing any Retail Services, Route Services, Locker Services and On-Demand Services or other businesses offering similar services under different service marks at any location, and to consent to Retail Services, Route Services, Locker Services and On-Demand Services in any area, even if it is in proximity to and competes for customers of Franchisee, including without limitation, customers of your Martinizing Store without regard to the impact upon your business.
With the exception of any Restricted Martinizing Service (defined below), you must offer and perform all Martinizing Services, and operate the Franchised Business, in compliance with the terms and conditions of the Franchise Agreement and in accordance with the Franchise System and the System Standards as outlined in the Operations Manual. If you are not authorized, pursuant to the terms of the Franchise Agreement or otherwise pursuant to a written notice delivered by the Franchisor, to perform any one or more Martinizing Service (each, a “Restricted Martinizing Service”), then we may establish or franchise another Martinizing franchise, or convert an acquired business or franchise to a Martinizing franchise, within the Defined Territory, including the presence of a Martinizing Store, solely for the performance of any Restricted Martinizing Service. Franchisee will not acquire any rights of first refusal or similar rights to acquire additional franchises. If you wish to obtain an Additional Franchise, you must make application under our then current procedures, as applicable to others wishing to obtain a Martinizing franchise.
Other Channels of Distribution Other than the sale of logo items by Martinizing for use by franchisees, Martinizing or its affiliates have not used, but reserve the right to use, other channels of distribution, such as the Internet, catalog sales, telemarketing or other direct marketing sales (“Other Channels of Distribution”), to solicit or make sales of products or services within your Defined Area using the Martinizing marks. Also, Martinizing reserves the sole right to solicit, market, and advertise to, and build regional and national account relationships using Other Channels of Distribution. Martinizing or its affiliates also reserve the right to use Other Channels of Distribution to solicit or make sales within your Defined Area of products or services under trademarks different from the Martinizing marks. If Martinizing decides in the future to use Other Channels of Distribution to solicit or make sales of products or services within your Defined Area using the Martinizing marks or under trademarks different from the Martinizing marks, you will receive no compensation from Martinizing for such sales inside your Defined Area, unless otherwise agreed in writing by Martinizing. Martinizing reserves the right to acquire and operate businesses inside and outside of the Defined Area providing services similar to the Martinizing Services and to be acquired by such a businesses. Martinizing also reserves the right to offer additional services to Martinizing franchisees to perform as part of the System; provided, however, you may be required to pay certain up-front and ongoing fees, meet and maintain certain qualifications, and enter into an amendment to your Franchise Agreement and/or execute a separate contract, prior to being approved and authorized to provide any such additional services. Unless otherwise agreed and approved by Martinizing, you are prohibited from soliciting or accepting orders by Other Channels of Distribution from customers inside or outside your Defined Area, and Martinizing does not protect your Defined Area from those activities. As described in Item 1 above, DCSA, an affiliate of our Predecessor, purchased selected existing franchise agreements and other assets of the dry cleaning business and laundry franchise system of Dry Cleaning Station, Inc., a Nebraska corporation, on June 30, 2009. We then purchased those franchise agreements from DCSA on November 7, 2014. Dry Cleaning Station franchisees operate retail dry cleaning, laundry and delivery businesses providing to the public dry cleaning and fabric maintenance services under the service mark Dry Cleaning Station which is registered with the United States Patent and Trademark Office (USPTO) under Registration No. 1,903,985, was assigned to DCSA on June 30, 2009, and then was assigned to us on November 7, 2014. There are no Dry Cleaning Station businesses owned or operated by Martinizing. As of December 31, 2018, there were 8 Dry Cleaning Station franchises operating in states under franchise agreements assigned to us. The name, business address, and business telephone numbers of each Dry Cleaning Station franchisee as of December 31, 2018 is included along with the list of Martinizing franchisees in Exhibit F of this disclosure document. Additionally, as described in Item 1, as of February 1, 2019, Martinizing is the successor franchisor of the 1-800-Dryclean franchise system, the Bizzie franchise system, and the Pressed4Time franchise system. From July 2, 2012 through February 1, 2019, 800DC served as the franchisor for the 1-800-DryClean franchise system in which franchisees performed pickup and delivery dry cleaning services under the service mark 1-800-DryClean(R), registered with the USPTO under Registration No. 3,748,305, and the Bizzie franchise system in which franchisees serviced laundry, dry cleanable goods and soft contents to and from a locker -based system under the service mark Bizzie(R), registered with the USPTO under Registration No. 4,387,329. From April 24, 2014 through February 1, 2019, P4T served as the franchisor for the Pressed 4 Time franchise system in which franchises performed pick-up and delivery of laundry and dry cleanable goods and soft contents under the service mark Pressed 4 Time(R), registered with the USPTO under Registration No. 1,604,057. As of December 31, 2018, there were 61 1-800-DryClean franchises, 2 Bizzie franchisees, and 53 Pressed 4 Time franchises. The name, business address, and business telephone numbers of each 1-800-DryClean, Bizzie, or Pressed 4 Time franchises franchisee as of December 31, 2018 is included along with the list of Martinizing franchisees in Exhibit F of this disclosure document. There are no 1-800-DryClean, Bizzie, or Pressed 4 Time franchises owned or operated by Martinizing. We are not and will not be offering new Dry Cleaning Station, 1-800-DryClean, Bizzie, or Pressed4Time franchises. e It is the goal of Martinizing to convert each 1-800-DryClean, Pressed 4 Time and Dry Cleaning Station franchise into a Martinizing Franchised Business as either a Route Conversion Franchise or a DCS Conversion Franchise, as applicable (collectively, the “Conversion Franchises”) and as described in Item 1, if the criteria for conversion to a Franchised Business is met and there is not an overlap of the defined area of an existing Martinizing Franchised Business. Conversion Franchises will be licensed to use trademarks including part or all of the Marks. Dry Cleaning Station, 1-800-DryClean and Pressed 4 Time franchises which do not or are unable to convert to Martinizing Franchised Businesses will remain Dry Cleaning Station, 1-800-DryClean, or Pressed 4 Time franchises, respectively and we may extend the term of the franchise agreements for such franchises. Additionally, Dry Cleaning Station, 1-800-DryClean, and Pressed 4 Time franchisees may sell their franchised businesses to other dry cleaning and laundry businesses or to existing Martinizing franchisees, to be converted to Martinizing Franchised Businesses, with the consent of Martinizing. Martinizing will attempt to avoid conflicts between Martinizing franchisees and Dry Cleaning Station, 1-800-DryClean, and Pressed 4 Time franchisees by not permitting the conversion of Dry Cleaning Station, 1-800-DryClean, Bizzie and Pressed 4 Time franchises to Martinizing Franchised Business at locations within the Defined Area of an existing Martinizing franchisee, without the consent of the applicable Martinizing franchisee; and by designating the defined area and any exclusive area, if applicable, granted to a new Martinizing franchisee in a manner not conflicting with existing Dry Cleaning Station, 1-800-DryClean, and/or Pressed 4 Time franchises and/or the services such franchises provide. If any conflicts remain between Dry Cleaning Station, 1-800-DryClean, Bizzie and Pressed 4 Time franchises and any Martinizing Franchised Business regarding territory, customers or Franchisor support, Martinizing will make efforts to resolve those conflicts. Martinizing shares the same corporate address for all brands it owns including Dry Cleaning Station, 1-800-DryClean, Bizzie and Pressed 4 Time does not plan to maintain physically separate offices or training facilities for Martinizing and Dry Cleaning Station, 1-800-DryClean, Bizzie and/or Pressed 4 Time, however, there will be no training provided for any brand other than Martinizing.
Item 15: Obligation to Participate in the Actual Operation of the Franchise Business
You are responsible for performance under the Franchise Agreement and must be willing and have the ability to devote sufficient time and effort to the operation of your Franchised Business. There is no explicit contractual requirement defining the parameters of “sufficient time and effort”, but we definitely encourage you to participate in the operation of your Franchised Business. That said, you do not have to personally manage your Franchised Business. You must maintain at all times a Managing Person for operation of your Franchised Business. The Managing Person must have full authority to make the financial and operational decisions associated with your Franchised Business. The Managing Person must successfully complete the Martinizing Training Program. The Managing Person must sign the Confidentiality and Nondisclosure Agreement and it must also include non-competition provisions (Exhibit D to this disclosure document). You will be considered the Managing Person, unless otherwise designated by you and approved by Martinizing in writing (see Sections 8 and 9 of the Franchise Agreement).
You must notify Martinizing in writing of any proposed change in the Managing Person. Any new Managing Person must attend the classroom portion of the Martinizing Training Program and sign a Confidentiality and Non-disclosure Agreement. You may also employ a manager of the Martinizing Store (the “Store Manager”). The Store Manager must attend the Martinizing Training Program and sign a Confidentiality and Nondisclosure Agreement as well (see Sections 8 and 9 of the Franchise Agreement). There is no equity or ownership requirement for any Managing Person or Store Manager, so long as the requirements noted above have been met.
Each owner of the legal entity holding the interest in the Franchised Business must personally guarantee your obligations under the Franchise Agreement and agree to be individually bound by all terms of the Franchise Agreement (see Section 18 of the Franchise Agreement). This personal guarantee is Exhibit G to the Franchise Agreement. You operate your Franchised Business as an independent contractor and are not an agent, representative or employee of Martinizing (see Section 21 of the Franchise Agreement). You may not make or attempt to make any contract, create any obligation or bind Martinizing in any manner.
Item 16: RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
During the Initial Term or any Successor Term of this Agreement, with the exception of any Restricted Martinizing Service, you must offer all Martinizing Services to customers in accordance with the terms of your Franchise Agreement, the Operations Manual and all System Standards. You may also engage in Optional Programs. When you sign You may not offer for sale any products or perform any services that we have not authorized. We have the right to change the types of authorized products and services and there are no limits upon our right to do so. We currently have no plans to change the types of authorized products and services.
You may not engage in any other business activity which is not directly related to this Agreement unless specifically acknowledged and agreed to in writing by us (see Section 1H of the Franchise Agreement). Your failure to adhere to the System Standards is a material breach of the Franchise Agreement as uniformity in identity, quality, appearance, delivery vehicles, Lockers, facilities and Martinizing Services among all Franchised Businesses is vitally important to the collective success of all Martinizing franchisees and Martinizing.
Unless otherwise agreed in writing by Martinizing, all dry cleaning and laundry services performed as part of and/or in connection with the provision of Martinizing Services, including any services performed in connection with a Drop Store must be processed on premise at a franchised Martinizing Stor and may not be processed at any unfranchised dry cleaning plant. You are not permitted to install vending machines or other equipment unrelated to dry cleaning and laundry services at your Martinizing Store unless approved in writing by Martinizing. Other than stated in Item 12 of this disclosure document, there are no restrictions as to the customers that may be solicited or serviced by you.
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