$103

Business Description

To simplify the language in this Disclosure Document, “Cornwell” means Cornwell Quality Tools Company, an Ohio corporation that was incorporated in 1919. “You” means the franchised dealership and the person or persons who own the franchised dealership, which includes the franchise owners/partners/principals if the franchise is a corporation, partnership or other entity. The franchised dealership’s owners are sometimes referred to as “the Owners” in this Disclosure. Cornwell's principal place of business is 667 Seville Road, Wadsworth, Ohio 44281. Cornwell intends to do business related to this Disclosure under the names: Cornwell Quality Tools and Cornwell. Cornwell’s agent for service of process in your state is listed on Exhibit D.

Prior Experience

In 1919, the original predecessor to Cornwell was formed in Cuyahoga Falls (a suburb of Akron), Ohio. In 1927, the operations were moved to the facility located in Mogadore, Ohio (also a suburb of Akron). In 1957, a group of investors, headed by R.H.C. Moeller, purchased Cornwell. In 1965, the Moeller family purchased the outstanding stock. Currently, the Raymond M. Moeller family has an 80.49% ownership interest in Cornwell, 19.51% is owned by the Cornwell Employee Stock Ownership Plan. As of December 31, 2018, there were 692 Franchised Dealerships reselling Cornwell products throughout the United States. Cornwell also has a limited number of industrial distributors, mobile distribution through distributors in Great Britain and West Germany, along with various international accounts that sell to various foreign countries.

Business Offered

Cornwell has been selling products to independent dealerships under its present ownership for approximately 54 years, and has modified its program to be a franchise for those who became dealers after December 31, 1996. Previously, its relationship with its dealers consisted simply of agreements with them, which provided essentially only that Cornwell would sell to them and would authorize the use of Cornwell's trademarks and trade dress, with certain buyback provisions. As of December 31, 2003, Cornwell has only franchised dealerships and eliminated the program for non-franchised dealers. You will have to comply with various state and local laws as those related to driver’s licensing, vehicle licensing and automobile insurance. In some states, a physical examination may be required to obtain a license to drive a commercial vehicle. Insurability and insurance rates will generally be dependent upon your past driving record.

Initial Fees

Cornwell requires a new Dealership to purchase an initial inventory of at least $40,000 at regular dealer net prices when entering into the Dealer Franchise Agreement. Cornwell must approve the initial inventory. If you meet normal credit requirements, Cornwell will finance the initial inventory of $40,000, and will finance subsequent inventory purchases, as further described in this Disclosure Document. New Dealerships who have been in the tool business previously (“Convertees”) and already have a suitable inventory and an approved vehicle will only be required to purchase an initial inventory of at least $25,000 from Cornwell, at regular dealer net prices. Unless Cornwell waives the requirement, you must also establish a Reserve with Cornwell in the amount of $20,000, to be applied against the further purchase of inventory during the first 13 weeks of the dealership. If you meet normal credit requirements, Cornwell will finance up to $20,000 of the Reserve. Any unused Reserve cash balance will be refunded to you or applied against your obligations to Cornwell, at your option. Unless waived, you must also verify at the outset of the dealership that there is $10,000 on deposit in a business account and that you will only use those funds for business purposes on and after the first day of training on your route. For more information on the initial investment, see Item 7 of this Disclosure. Cornwell does not require that you pay any other franchise fee or other initial payment in order to become a dealer. Upon termination, Cornwell will purchase certain merchandise from you or your estate at the then prevailing dealer prices, less a 15% restocking charge. These tools must be shipped freight prepaid to Cornwell's distribution center in Wadsworth, Ohio. Only new tools and other merchandise will be approved for return. They must be in new and saleable condition, listed in the current price sheet and not to be discontinued by Cornwell. All returned product must be of current design and finish. All products returned must be in the original carton or container. Broken packs of Cornwell or Cornwell-Allied tools will not be accepted for return, if the tools are normally sold by Cornwell in factory pack quantities. The following items are not subject to return: tool boxes, socket trays, clips and rails, vinyl kit bags, air compressors, parts washers, sales administration or truck display aids, welders, battery chargers and serial numbered test equipment.

Financing

New Franchised Dealers are not eligible for the Franchised Dealer Volume Incentive until after their 13th week in business. The Franchised Dealer Volume Incentive earned will be applied weekly to the D1-B Statement balance or you may elect to utilize the Dealer Credit Account Program Authorization (DCA). (See Exhibit G for more details). Such incentives are subject to change at any time with no obligation by Cornwell.

Franchisee Revenue and Profit

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 Cornwell’s Franchising Department at 667 Seville Road, Wadsworth, OH 44281, the Federal Trade Commission, and the appropriate state regulatory agencies.