Exhibit 10.8 Agreement with McGrow Consulting
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FRANCHISE DEVELOPMENT PROPOSAL
This proposal outlines the services, documents, and support to be provided by
McGROW® CONSULTING for the initial development of your franchise system. We
will accomplish the following work, together with your people.
I. PLANNING
A. Review of the Business/Determination of Franchise Services, Policies, and
Strategies
Our engagement will begin with a review and analysis of your business. This
review provides us with a better understanding of your business and, more
importantly, it provides us with the information needed to determine the best
way to structure the relationship between you and the franchisees.
We will:
o Determine the changes that your existing concept may require for adaptation
to a franchise operation based on current standards in franchising, legal
constraints, efficiency, and profitability.
o Determine the assistance and support services that you should provide in
order to get an individual franchise up and running.
o Determine the assistance and support services that you should provide to a
franchise on an ongoing basis. (Conversely, determine the services that you
will not provide.)
o Determine how your assistance and support services will grow and evolve as
the number of franchises grows so that we may structure your documents to
allow for these changes and protect your future options.
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o Determine the policies/terms under which these services will be provided.
o Determine any development work needed on your part in order to provide the
franchisees with the above-mentioned services.
o Determine your costs in providing these services.
o Determine the financial terms of your franchise offering (initial franchise
fees, royalties, advertising fees, etc.).
o Structure your franchise program so that you can effectively compete for
franchise buyers against other franchise companies.
One of the major areas of dispute and litigation in franchising concerns the
assistance and support services provided by the franchisor. Using our background
and knowledge in franchising, we'll determine the assistance and support that
you should promise to the first few franchisees, and how this assistance and
support will grow and evolve as the number of franchises grows. Since this
information will be repeated in the disclosure documents, marketing materials
and manuals, it's critical that this be spelled out precisely in order to avoid
future litigation.
In summary, we will analyze your business, determine the modifications necessary
for a franchise operation, and layout the overall guidelines for the
franchisor/franchisee relationship.
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B. Business Planning - Franchisee
A key factor to the successful growth of your franchise system is the likelihood
of success of a typical franchise. We will objectively analyze your concept and
determine the best ways to structure your controls, policies, and disclosure
documents.
We will:
o Review and recommend changes, as needed, regarding your typical
franchisee's operating strategies and methods.
o Determine if you should offer a protected territory, the type to be used,
and the criteria for establishing the territory.
Historically, this is one of the main litigation areas in franchising. With
our background, experience and information base we will determine how to
structure territories for your concept both with early franchisees and as
your franchise system grows.
o Determine the ideal background of a franchisee, including personality
traits, business experience, and financial strength; and, based on our
knowledge of the franchise marketplace, determine how to find and attract
these individuals. Revise the franchise model, if needed, in order to
broaden/narrow the ideal franchisee criteria.
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One of the common failure areas for new franchisors is selling a franchise to
the wrong person. Based on our experience, we can develop the qualifications for
your best candidates, keeping in mind that the first few franchises in
particular must be successful. We can also provide evaluation and negotiation
services with franchise candidates as described under VI.
Future Consulting Services.
o Determine the length of time to train and start up your typical franchisee.
o Prepare a detailed breakdown of the franchisee's initial investment
requirements.
o Determine the amount of working capital needed by the franchisee.
o Assemble profit/loss projections for various size typical franchises.
o Determine the franchisee's potential return on investment.
o Determine the tangible benefits of buying one of your franchises versus
being an independent or belonging to a competing franchise system (if
applicable).
It is extremely important that business planning for a typical franchise be
realistic and conservative.
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C. Business Planning - Franchisor
Business planning for your franchise division will provide you with key
information for an operating budget and growth plan.
We will:
o Determine a realistic pace of expansion and the number of markets and
franchises to be opened during the next few years.
o Determine the organizational structure that you will need in place to
support this growth including job descriptions and salary requirements.
o Determine other expense items that will be required to support your growth
plans.
o Determine your investment in dollars, time, and projects to develop and
implement the franchise system.
o Develop a franchise program implementation schedule.
In summary, we will develop plans for your franchise division to grow in a
smooth, controlled, manageable way.
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The information, decisions, and strategies developed during the Planning phase
are critical to the proper development of the disclosure documents, operations
control manuals, and franchise marketing materials and strategy. Development of
these documents without proper planning is bound to lead to misunderstandings
and litigation.
II. DISCLOSURE DOCUMENIS
We will prepare the documents that you will need in order to franchise.
In franchising, the Uniform Franchise Offering Circular and Franchise Agreement
are more than just legal documents - they cover financial aspects of a business,
quality control, operating systems and procedures, marketing, future
options/alternatives, and the many decisions and strategies determined in the
Planning phase. An attorney alone doesn't possess sufficient knowledge or
experience to develop these documents. All of the work that we do is
interrelated; our entire staff works together to develop these documents for
your company.
We will:
o Develop a Franchise Agreement that defines the relationship between you
(the franchisor) and each franchisee. This document protects your image and
reputation. It helps ensure a uniform and consistent operation from one
franchisee to the next.
By necessity, the tone of the Franchise Agreement is heavily one-sided - in your
favor. Among other things, it will describe the services that you will provide
to the franchisees and the method of operation, controls, and reporting systems
to which the franchisees must adhere.
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It defines the length of the relationship, training and assistance, the use of
and adherence to the Operations Control Manual, termination provisions, and
recourse you have should the franchisee fail to meet its obligations. This
document is very extensive.
Since the Franchise Agreement is usually in effect for a minimum of five to ten
years, it must reflect the latest state-of-the-art developments in franchise
law; it must be flexible and capable of accommodating future business changes;
it must be marketable.
Many new franchisers fail because their franchise agreement is not properly
structured from business, marketing, quality control, and economic points of
view.
o Develop a Uniform Franchise Offering Circular that provides the potential
franchisee with detailed background information on the franchise company,
such as: specific details about the officers - who they are, and their
business history; the organization structure of the franchise company; the
business concept; funds required by the franchisee; training provided; and
termination provisions. The Uniform Franchise Offering Circular is required
by law before you can offer a franchise for sale.
We will advise you about the best way of structuring your franchise corporate
entity(s) with respect to regulatory acceptance, limitation of liability,
financial disclosure requirements, auditing requirements, trademark usage,
future spin-off possibilities, other disclosure concerns, and Federal Trade
Commission and state regulatory requirements. Obviously, specialized research,
knowledge, and planning are needed to determine how to best structure the
franchisor corporate setup.
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We will deal with the regulatory authorities in those states that require
submission and approval of your franchise documents before you are allowed to
offer franchises for sale. Our relationship with these regulators, built over
the years, should help smooth the way and overcome obstacles. (Many new
franchisors who attempt to do it themselves with a local attorney have
difficulty getting approved by the regulators and usually lose many months in
the process.)
Also, it's got to be done correctly; substantial civil and criminal penalties
can be imposed if the state and federal laws are violated.
We have included in our fee the cost of submitting the Uniform Franchise
Offering Circular for approval in your home state, if required. Once approved,
you are allowed to sell franchises in 27 to 30 states depending on exemptions.
If necessary, we can register and obtain approval of your Uniform Franchise
Offering Circular in any or all of the remaining states as described in VI.
Future Consulting Services of this proposal.
III. OPERATIONS CONTROL MANUAL
The Operations Control Manual that we develop is unique in the industry. It is
structured and written in a manner that allows you to enforce your systems,
procedures, and methods of operation.
The Operations Control Manual is an extension of the Franchise Agreement. Its
primary purpose is to control the franchisees; it may also be used for training.
It must be written with the proper language, tone, and style so that you can
enforce your rules, regulations, policies and procedures. A common mistake of
many new franchisors is not having their business systems, procedures, and
controls sufficiently documented so that they can audit and control the
franchisees.
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We will:
o Review your current systems and methods.
o Recommend modifications and additions needed to tightly monitor and control
the franchisee.
o Develop standards of operation and quality for the franchisee and determine
the methods for monitoring these standards.
o Determine the franchisee's reporting requirements and the necessary forms
and procedures to implement this reporting.
o Prepare an in-depth outline for your Operations Control Manual.
o Develop an Operations Control Manual which contains your rules and
regulations. It will contain knowledge and controls that we have
accumulated over many years with many different types of successful
businesses. It will be written in the proper language, tone and style so
that you can ensure the franchise is operated your way.
IV. MARKETING PROGRAM
In this segment we will prepare a program to market and sell your franchises.
Many new franchisors fail because they don't have the proper marketing approach
and don't know the secrets to selling their particular franchise concept.
We will:
o Develop the marketing strategy for selling your franchises.
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o Determine the appropriate sources and methods for generating inquiries from
your ideal franchise candidates.
o Determine the overall formats of franchise sales brochures and ads meeting
state and federal franchising guidelines.
o Develop an advertising and promotion plan for selling your franchises.
Franchise advertising and promotion requires specialized knowledge that
most advertising agencies do not possess. Our knowledge of the
effectiveness of different media can prevent your wasting valuable dollars
on the wrong ads in the wrong publications.
o Train your staff in franchise selling, covering such topics as:
o franchise selling concepts;
o the psychology of the franchise buyer;
o planning, organizing, and controlling the sales effort;
o handling and controlling leads;
o the sales process and steps to be followed with prospective buyers;
o typical questions and answers;
o scheduling and organizing meetings;
o selecting the right people - the first few franchisees are critical to your
future success;
o closing/selling ratios for your concept;
o complying with the franchise laws - avoiding problems.
Our selling techniques, methods; and secrets have enabled our clients over the
years to collectively sell many franchises.
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V. TIME AND FEE SCHEDULE
A. Consulting Fee Schedule
1. Standard Payment Program - $72,000
o Retainer of $12,000 prior to commencement.
o Balance of $60,000 to be paid in 6 monthly payments of $10,000.
o Monthly payments are due every 30 days from the date of the retainer.
o This fee quotation is valid for 60 days.
Time Schedule - approximately 6 months to complete Sections I., II., III., and
IV.
2. Discount Payment Program - $64,800
o The consulting fee of $72,000 may be paid up front, less a discount of 10%
for a savings of $7,200.
B. Other Costs - Artwork, printing, copying, filing fees, mailing, and
out-or-pocket costs are not included in the Consulting Fee.
C. You and your company agree that all information provided for the preparation
of promotional materials, franchise agreements, disclosure documents, business
plans, and manuals will not contain any false or deceptive statements. You agree
to indemnify and hold us harmless for any losses or liabilities of any kind or
nature regarding the use of these documents and materials.
D. Upon commencement of any or all of our services and for five years from that
date, you agree that if you directly or indirectly hire (except through us) the
services of any of our current or former employees/consultants you will pay us
Twenty Thousand Dollars for each employee/consultant hired.
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VI. FUTURE CONSULTING SERVICES
We are available to provide future services, such as the following.
o Planning
o Strategy Sessions - We can establish a strategic game plan or budget for
your franchise division followed up by monthly, quarterly, semi-annual, or
annual progress meetings.
o Growing the Company - We can consult on a number of issues concerned with
growing the franchise division: building an organization, developing
support services, setting priorities, delegating, and time management.
o Business Plan Updates - We can update your business plan on an annual
basis. This can be used for internal planning purposes and for presentation
to prospective lenders and investors.
o Disclosure Documents
o Registrations - We can modify and obtain approval of your Uniform Franchise
Offering Circular in those states where you intend to sell franchises. We
can amend or update your documents as needed.
o Other Documents - We can develop other documents if needed such as:
o software license agreement
o promissory note.
o International Franchising - We can assist in the development of
international franchise programs.
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o Compliance Review - We can periodically review your compliance with state
and federal franchise laws and develop and implement procedures and forms
to ensure compliance.
o Manuals
o Operations Control Manual Updates - We can update your Operations Control
Manual as your procedures and systems evolve and change.
o Marketing
o Public Relations Press Kit - We can develop a complete public relations
press kit including press releases and media contact lists for your use in
generating publicity.
o Media Placement - We can place ads and manage your franchise advertising
program.
o Selling
o Sales Training - We can review your current sales efforts as well as train
new personnel in your company.
o Screening of Potential Franchisees - We can interview potential
franchisees, evaluate their backgrounds, and perform psychological
profiling.
o Negotiating - We can assist in the negotiations during the sale of a
franchise.
These additional services will be billed on a monthly basis, at the current
hourly rate or contract rate.
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VII. TERMS
Responsibility - Client agrees that it is responsible for all decisions
regarding the structuring, development, and implementation of its franchise
system and the results obtained from the franchise system.
Claims - Both parties agree that any and all claims for any matter, except for
our right to collect the Consulting Fee, will be barred unless commenced within
two years from the date below.
Assignability - This proposal is not assignable without the prior written
consent of both parties.
Entire Proposal - This document is the entire proposal and understanding between
both parties.
Modification - This proposal can only be modified in writing, signed by both
parties.
Severability - If any provisions of the proposal are held to be invalid,
illegal, or unenforceable by a court having competent jurisdiction, the
validity, legality, and enforceability of the remaining provisions wi11 not in
any way be affected or impaired.
Choice of Law/Venue - This proposal will be governed by the laws of, and
enforced in, the Commonwealth of Massachusetts.
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Signed this 17th day of December 2002.
AGREED TO AND ACCEPTED BY: AGREED TO AND ACCEPTED BY:
CLIENT: McGROW® CONSULTING
By: ________________________ By: ________________________
Its: ________________________ Its: ________________________
Witness: ___________________ Witness: ____________________
