ITEM 11: FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING
Except as listed below, Belmont is not required to provide you with any assistance.
Before you open your business, Belmont will:
- Designate your exclusive territory (Franchise Agreement, Paragraph 2).
- Assist you in selecting a business site (Franchise Agreement, Paragraph 3). You select your business site within your exclusive area subject to our approval. Your site must be at least 8000 square feet, must have parking spaces, and must have an average of 250 cars per hour driving by. Although not required by the Franchise Agreement to do so, Belmont assists in site selection by telling you the number of new car registrations, population density, traffic patterns, and the proximity of the proposed site to other Belmont Muffler Shops. W e must approve or disapprove your site within 20 days after we receive notice of the proposed location. (Franchise Agreement, Paragraph 6.)Franchisees typically open their shops within four to seven months after they sign a franchise agreement. The factors that affect opening time are the ability to obtain a lease, financing, or building permits, zoning, and local ordinances. Other factors include weather conditions, shortages, and delays in installation of equipment, fixtures, and signs.
- Within 30 days of your signing the Franchise Agreement, assist you in finding and negotiating the lease or purchase of a location for your muffler shop. (Franchise Agreement, Paragraph 4.) You will purchase or lease your store location from independent third parties.
- Within 60 days of your signing the Franchise Agreement, provide written specifications for store construction or remodeling and for all required and replacement equipment, inventory, and supplies. (Franchise Agreement, Paragraph 4.) See Item 8 of this disclosure document.
- Within 60 days of your signing the Franchise Agreement, provide blueprints for your store construction or remodeling and obtain health, sanitation, building, utility, and sign permits for your premises. You pay for the construction and remodeling. (Franchise Agreement, Paragraph 5.)
During the operation of the franchised business, Belmont will:
- Develop new products and methods and provide you with information about developments.(Franchise Agreement, Paragraph 8.)
- Telephone you each week for the first 90 days after you open your shop to discuss your operational problems. (Franchise Agreement, Paragraph 9.)
- Hold annual conferences to discuss sales techniques, personnel training, bookkeeping, accounting, inventory control, performance standards, advertising programs, and merchandising procedures. There is no conference fee, but you must pay all your travel and living expenses. These elective conferences are held at our Jackson, Minnesota, headquarters or at a location chosen by a majority vote of all franchisees. (Franchise Agreement, Paragraph 9.)
Belmont provides advertising materials and services to you through a national advertising fund (the “National Fund”). Materials provided by the National Fund to all franchisees include video and audio tapes, mats, posters, banners, and miscellaneous point-of-sale items. You will receive one sample of each at no charge. If you want additional copies, you must pay duplication costs. (Franchise Agreement, Paragraph 10.)
You may develop advertising materials for your own use, at your own cost. Belmont must approve the advertising materials in advance and in writing. However, all Internet advertisements must be prepared and posted by Belmont only. (Franchise Agreement, Paragraph 10.)
Belmont occasionally provides for placement of advertising on behalf of the entire Belmont system, including franchisees. However, most placement is done on a local basis, typically by local advertising agencies hired by individual franchisees or advertising cooperatives. Belmont reserves the right to use advertising fees from the Belmont system to place advertising in national media (including broadcast, print, Internet, and other media) in the future. In the past, Belmont has used an outside advertising agency to create and place advertising. Neither Belmont nor its affiliate receives payment from the National Fund. Advertising funds are used to promote the products sold by the franchisee and are not used to sell additional franchises. (Franchise Agreement, Paragraph 11.)
The National Fund is a nonprofit corporation which collects advertising fees from all franchisees. Each franchisor-owned store of Belmont contributes to the National Fund on the same basis as franchisees. All payments to the National Fund must be spent on advertising, promotion, and marketing of goods and service provided by Belmont Muffler. You must contribute the amounts described in Item 6, under the heading “Advertising fees and expenses.”
The National Fund is administered by Belmont’s accounting and marketing personnel under the direction of the Advertising Council. The Advertising Council acts as the board of directors of the National Fund. The Advertising Council has eight members: the President, Treasurer, Vice President-Marketing, and Vice-President-Operations of Belmont; and four franchisee representatives who are elected by the governing board of the Belmont Franchisee Advisory Council. Belmont may change the number of Advertising Council members, but not the portion of mangers/franchisees. We cannot dissolve the advertising council without the approval of the Belmont Franchisee Advisory Council. (Franchise Agreement, Paragraph 11.)
An annual audited financial statement of the National Fund is available to any franchisee upon request. During the last fiscal year of the National Fund (ending on December 31, 2006), the National Fund spent 39% of its income on the production of advertisements and other promotional materials, 36% for media placement, 18% for general and administrative expenses, and 7% for other expenses (the purchase of glassware given to Belmont customers as part of a promotional campaign).
Once your shop opens, you must participate in the local advertising cooperative established in your Designated Marketing Area where your store is located. The amount of your contribution to the local advertising cooperative is described in Item 6 under the heading “Advertising Fees and Expenses.”
Each local advertising cooperative must adopt written governing documents. A copy of the governing documents of the cooperative (if one has been established) for your Designated Marketing Area is available upon request. Each cooperative may determine its own voting procedures; however, each company-owned Belmont Shop will be entitled to one vote in any local advertising cooperative. The members and their elected officers are responsible for administration and operation of the cooperative. Advertising cooperatives must prepare quarterly and annual financial statements. The annual financial statement must be prepared by an independent CPA and be made available to all franchisees in that advertising cooperative.
Belmont requires you to have a computer system and Internet access. Belmont does not specify specific computer hardware or an Internet supplier. However, you must have Microsoft Word, Access, and Excel programs. Your computer must be in good repair, with sufficient memory to carry out ordinary business functions, as provided in the Operating Manual. You also must buy an electronic cash register from an approved supplier. See Items 7 and 8 of this Disclosure Document. Belmont will not have independent access to the electronic cash register or computer system, but reserves the right to conduct periodic audits of any accounting records contained in such hardware.
Belmont will loan you a copy of our operating manual that contains mandatory and suggested specifications, standards, and procedures. This manual is confidential and remains our property. Belmont will modify this manual, but the modification will not alter your status and rights under the Franchise Agreement (Franchise Agreement, Paragraph 9.) The table of contents is attached as Exhibit F.
(Column 1) Subject (Column 2) Hours of Classroom Training (Column 3) Hours of Training On-The-Job (Column 4) Location Real Estate and Development 8 20-30 Franchise Market Area Administration 24 24 Jackson, Minnesota Operations Training 40 160 Jackson, Minnesota Store Opening Assistance 0 80 Franchised Location Follow-up Training 0 24-40 Franchised Location
Belmont conducts training programs for both you and some of your employees. The training program will include four segments, which are conducted as needed. Belmont does not charge for this training or service, but you must pay the travel and living expenses for you and your employees. All training occurs at Belmont’s Jackson, Minnesota, headquarters, the first weekend of each month. Training is conducted by Mark Smith, who has 20 years of experience in operating a muffler shop, 12 years of that with Belmont.
Belmont’s Real Estate & Development Training introduces you to the site selection, real estate, and construction and acquisition strategy portions of the business. It will begin promptly after you sign the Licensee Agreement and will include 1 day of orientation and 2-3 days of site visits once a site is identified. You (or if your business is a corporation or partnership, a principal of the business) must attend and complete, to Belmont’s satisfaction, Belmont’s Real Estate & Development Training.
Belmont’s Administration Training provides you with business training and store management training. The program introduces you to the human resources, compensation, fleets, marketing, legal, EH&S, credit, security, training, point of sale, and pricing aspects of the business. The Administration Training will begin approximately 45-60 days before the opening of your initial store, and will include approximately 3 days of classroom instruction and approximately 3 days of on-the-job training at stores operated by Belmont affiliates or licensees. You (or if your business is a corporation or partnership, a principal of the business) must attend and complete, to Belmont’s satisfaction, Belmont’s Administration Training.
Belmont’s Operations Training for your initial manager focuses entirely on store management and is intended to train qualified individuals to manage stores. The Operations Training will begin approximately 45-60 days before the opening of your initial store and will include approximately 5 days of classroom instruction and approximately 20 days of on-the-job training at a store operated by a Belmont affiliate or licensee. Your initial manager must complete, to Belmont’s satisfaction, Belmont’s store management training program portion of Operations Training before your store opens.
Belmont’s Store Opening Training is designed to assist you in the opening of a new store. Store Opening Training will be held at your store, approximately 1 week before the opening of your store, and will include operational training and assistance. The exact duration and timing of Store Opening Training, however, will depend on your preparation,
Approximately 3-6 months after your first store opens, an operations representative will return to your store and provide Belmont’s Follow-Up Training.
It is your responsibility to insure that all subsequent managers and employees are trained in Belmont’s systems and procedures and that Belmont’s systems and procedures are utilized at your store. Belmont may audit your store at any time to ensure compliance with Belmont systems and procedures.