DISCLOSURE DOCUMENT STATUTORY NOTICES

Transcription

1 DISCLOSURE DOCUMENT STATUTORY NOTICES A COMMERCIAL CREDIT REPORT IS A REPORT WHICH MAY INCLUDE INFORMATION ON THE FRANCHISOR S BUSINESS BACKGROUND, BANKING INFORMATION, CREDIT HISTORY AND TRADE REFERENCES. SUCH REPORTS MAY BE OBTAINED FROM PRIVATE CREDIT REPORTING COMPANIES AND MAY PROVIDE INFORMATION USEFUL IN MAKING AN INVESTMENT DECISION. INDEPENDENT LEGAL AND FINANCIAL ADVICE IN RELATION TO THE FRANCHISE AGREEMENT SHOULD BE SOUGHT PRIOR TO ENTERING INTO THE FRANCHISE AGREEMENT. A PROSPECTIVE FRANCHISEE IS STRONGLY ENCOURAGED TO CONTACT ANY CURRENT OR PREVIOUS FRANCHISEES PRIOR TO ENTERING INTO THE FRANCHISE AGREEMENT. THE COST OF GOODS AND SERVICES ACQUIRED UNDER THE FRANCHISE AGREEMENT MAY NOT CORRESPOND TO THE LOWEST COST OF THE GOODS AND SERVICES AVAILABLE IN THE MARKETPLACE. THE FRANCHISOR 1. The Franchisor is Liaison Educational Systems Ltd., a corporation incorporated under the laws of the Province of Ontario. 2. The trade name of the private career colleges franchised by the Franchisor is Liaison College. 3. The principal address of the Franchisor is 1047 Main Street East, Hamilton, ON L8M 1N5. 4. The Franchisor has been engaged in the business of owning, operating and franchising private vocational schools under the Liaison College trade name since DIRECTORS AND OFFICERS OF THE FRANCHISOR 5. The directors and officers of the Franchisor are as follows: Rudy Florio & Susanne Mikler Mr. Florio is the President of the Franchisor and Ms. Mikler is the Vice President and they have owned, managed and operated private vocational schools since The school businesses that they have owned and operated include The Toronto School of Business (Toronto), The Toronto School of Business (St. Catharines) and The Toronto School of Business (Kitchener) During the past sixteen (16) years, Mr. Florio and Ms. Mikler have expended substantially all of their business time in the management and operation of Liaison College corporate 1

2 owned and franchised private career colleges. The Toronto School of Business (St. Catharines) school was operated until The interest of the Florio/Mikler family in The Toronto School of Business (Kitchener) school was sold to a co-owner in The interest of the Florio/Mikler family in The Toronto School of Business (Toronto) school was converted to a Liaison College culinary school in PREVIOUS CONVICTION(S) 6. In the preceding sixteen (16) years, neither the Franchisor nor any associate nor any director, general partner or officer of the Franchisor has ever been convicted or charged with fraud, unfair or deceptive business practices, or a violation of a law that regulates franchises or businesses. ADMINISTRATIVE ORDER(S) 7. Neither the Franchisor nor any associate nor any director, general partner or officer of the Franchisor has ever been subject to an administrative order or penalty imposed under a law or any jurisdiction regulating franchises or businesses. CIVIL ACTIONS 8. Neither the Franchisor nor any associate nor any director, general partner or officer of the Franchisor has ever been found liable in a civil action of misrepresentation, unfair or deceptive business practices, or a violation of a law that regulates franchises or business, including failure to provide proper disclosure to a franchisee nor is there any civil action involving such allegations pending. BANKRUPTCY AND INSOLVENCY PROCEEDINGS 9. In the preceding six (6) years, neither the Franchisor, nor any associate, director, general partner nor officer of the Franchisor has been involved in any bankruptcy or insolvency proceedings. FINANCIAL STATEMENTS 10. The following Financial Statements of the Franchisor are attached to this Disclosure Document as Schedule A : Notice To Reader Report for year ending July 31, 2011, prepared by Scott & Associate (John Bartlett CA). The Review Engagement Report consists of Balance Sheet, Statement of Income and Deficit, Statement of Changes in Financial Position and Notes. 2

3 MEDIATION OR ADR 11. The Franchise Agreement does not provide for a mediation or alternative dispute resolution process. MEDIATION IS A VOLUNTARY PROCESS TO RESOLVE DISPUTES WITH ASSISTANCE OF AN INDEPENDENT THIRD PARTY. ANY PARTY MAY PROPOSE MEDIATION OR OTHER DISPUTE RESOLUTION PROCESS IN REGARD TO A DISPUTE UNDER THE FRANCHISE AGREEMENT, AND THE PROCESS MAY BE USED TO RESOLVE THE DISPUTE IF AGREED TO BY ALL PARTIES. COSTS OF ESTABLISHING THE FRANCHISE 12. The costs of establishing a Liaison College private career college (PCC) culinary school are as follows: (a) Franchise Fee $ 50,000 (2) Inventory $ 2,000 (3) Leasehold Improvements $ 75,000 (4) Equipment $ 75,000 (5) Leases $ NIL (6) Rentals $ NIL (7) Signage/Graphics $ 5,000 (8) Ministry Fees (*) $ 5,000 (1) Professional Services $ 15,000 Total $ 254,000 *note: the Ministry of Colleges & Universities (MTCU) requires all new PCC s to post financial security in relation to revenues reported on the Pro-Forma Statement (see MTCU application form) ESTIMATE OF ANNUAL OPERATING COSTS 13. The Franchisor estimates the annual operating costs of operating the Liaison College private career college range from $30, per month to $45, per month, based upon one hundred (100) students per year. A more detailed breakdown is attached hereto as Schedule B. EARNINGS PROJECTIONS 14. The Franchisor does not provide an earnings projection for the Liaison College PCC culinary school. FINANCING ARRANGEMENTS 3

4 15. The Franchisor or its associates do not directly or indirectly provide any financing arrangements for the establishing or operation of the Liaison College private career college. The Franchisor does advise that certain franchisees may be eligible for a small business loan under the Small Business Loans Act. The Franchisor will, at the Franchisee s sole expense, provide information and advice with respect to the application for a small business loan, if desired by the Franchisee. The advice includes assistance with a formal Small Business Loan Proposal which includes information about Liaison College campuses specifically and industry information generally. TRAINING PROGRAMS 16. The Franchisee s principal shareholder/equity manager and one non-equity manager will be required to successfully complete an initial training program to be offered by the Franchisor at a location to be chosen by the Franchisor in the Greater Toronto Area or at the Licensed Location. While there is no fee or charge for this training, all travel and living expenses of the equity manager and one non-equity manager will be the sole responsibility of the Franchisee. The training will include the specific areas described on the Franchisee Training Schedule attached hereto as Schedule C. ROYALTIES AND ADVERTISING CONTRIBUTIONS 17. The Franchisee is required to pay to the Franchisor a royalty equal to 7% of the Franchisee s Gross Sales (as defined in the Franchise Agreement), calculated and payable on a monthly basis. The Franchisee is required to pay to the Franchisor, as an Advertising Contribution, an amount equal to 3% of the Franchisee s Gross Sales (as defined in the Franchise Agreement).The Advertising Contribution is to be calculated and paid on a monthly basis. The Franchisor has the right to increase the Advertising Contribution to 4% of Gross Sales if the owners of at least 75% of the Franchisor s franchised Liaison College private career colleges in Canada agree to such increase. Additionally, GTA schools are required to participate in the GTA Regional Ad Fund which is administered by the Franchisor. The fund contributions are based on 30% of the Franchisee local advertising budget and are remitted on a monthly basis. The Advertising Contributions received by the Franchisor from its Franchisees will be maintained in a separate fund administered by the Franchisor. All decisions concerning advertising and promotion shall be made by the Franchisor in its absolute discretion. For additional requirements relating to Advertising and Advertising Contributions please refer to Section 4.7 of the Franchise Agreement. 4

5 18. For the preceding calendar year, the Franchisor has collected the following Advertising Contributions from its existing franchisees $223, plus HST approximately The Franchisor will, upon request, provide to its franchisees reports on advertising activities financed by the fund. OPERATING RESTRICTIONS RE SALE OF GOODS, PURCHASES, ETC. 19. The Franchisee is permitted to offer for sale only such courses, programs and services of a type and quality from time to time specified or approved by the Franchisor. The Franchisee will be required to purchase goods, including food, beverages, promotional items, uniforms, smallwares, furnishing, fixtures and equipment, and other services, from suppliers designated by the Franchisor (provided the prices charged by such designated suppliers are competitive). In connection with the construction, fixturing, decorating and equipping of the Liaison College private career college, the Franchisee shall be required to use only suppliers, contractors and tradesmen designated from time to time by the Franchisor. The Franchisor may receive a rebate or commission with respect to any purchases made by the Franchisee. There is no obligation for the Franchisor to remit any portion of such rebates to the Franchisee. TRADE MARK REGISTRATION 20. The name Liaison College was registered as a trademark in Canada on June 14, 2000, as Number 529,130. REQUIRED LICENSES, PERMITS, ETC. 21. The Franchisor will be required to obtain the following licenses, registrations, authorizations or permissions in order to operate the Liaison College private career college: License to operate a private career college under the Private Career Colleges Act (Ontario) PCC Act Employer registration under the Income Tax Act (Canada). Building permits for all construction. Approvals of all work by the local Health Department, Building Department and Fire Department. Additional requirements are listed on the Franchisee Checklist attached hereto as 5

6 Schedule D. FULL TIME INVOLVEMENT BY FRANCHISEE 22. If the Franchisee is an individual, the individual must devote his full business time and attention to the management of the Liaison College private career college. If the Franchisee is a corporation, an individual holding at least a 50% equity interest in the Franchisee must devote his full business time and attention to the management of the Liaison College private career college. EXCLUSIVE TERRITORY 23. An exclusive territory is granted to the Franchisee and every other franchisee. The exclusive territory will be settled between the Franchisor and the Franchisee once the location of the Liaison College private career college is identified. It is anticipated that the exclusive territory will encompass a radius of four (4) kilometres from the Licensed Location. The Franchise Agreement does not provide for minimum sales, market penetration or other condition in order to maintain the exclusive territory. PROXIMITY OF OTHER FRANCHISES 24. The Franchisor expects that the proximity between Liaison College private career colleges owned or franchised by the Franchisor will not be less then four (4) kilometres. TERMINATED FRANCHISES, ETC. 25. Except for the Liaison College culinary school located in Kitchener, Ontario, the Franchisor has not terminated, cancelled, refused to renew or reacquired any Liaison College private career colleges within the last fiscal year. EXISTING FRANCHISEES 6

7 26. The current Liaison College private career college franchisees in Ontario are attached hereto as Schedule E. INITIAL TERM AND RENEWAL OF FRANCHISE 27. The initial term of the franchise to operate the Liaison College private career college is ten (10) years. The conditions of renewal of the franchise to operate the Liaison College private career college are as follows: (1) Franchisee to provide written notice of renewal not more than 240 days and not less than 180 days before the expiry of the initial term of the Franchise Agreement. (2) Franchisee shall have observed and performed all of its obligations under the Franchise Agreement, and (3) Franchisee shall have entered into the Franchisor s then current form of franchise agreement (which may differ substantially from the existing Franchise Agreement). The renewal term is equal to the lesser of (i) the unexpired portion of the premises lease for the licensed location plus future renewals and (ii) five (5) years. SALE OF FRANCHISED BUSINESS 29. The Franchisee is permitted to sell the Liaison College private career college subject to the restrictions and conditions set out in the Franchise Agreement which include, without limitation, the following: (1) the offer to purchase must be a Bona Fide Offer, as defined in the Franchise Agreement; (2) the Franchisee is not in default under the Franchise Agreement; (3) the Franchisor is afforded the right of first refusal with respect to the purchase of the Liaison College private career college; (4) the transferee obtains a license under the Private Vocational Schools Act (Ontario); (5) the transferee successfully completes the training program offered by the Franchisor; (6) the transferee executes and delivers the Franchisor s then current form of franchise agreement or, at the option of the Franchisor, executes and delivers a covenant of the Franchisee to observe, perform and be bound by the existing Franchise Agreement; 7

8 (7) the Franchisee pays to the Franchisor a transfer fee of $15, plus the Franchisor s legal expenses; (8) the transferee has total debt of not more than $150, immediately following the sale; (9) the Franchisee has obtained the prior written consent of the Franchisor to the sale; and (10) the Franchisee provides a final release in favour of the Franchisor, its affiliates, directors and officers. For additional terms and conditions and for particulars of the foregoing, please refer to Article 11 of the Franchise Agreement. In the event the Franchise dies or becomes permanently disabled, there are rights to transfer the Franchisee s interest or such persons interest, as applicable, to the spouse or issue of such person, subject to the terms and conditions set forth in Article 12 of the Franchise Agreement. TERMINATION OF FRANCHISE 30. The Franchisor is entitled to terminate the Franchise Agreement upon the occurrence specified events described in the Franchise Agreement including, the following: (1) failure to identify and agree upon an exclusive territory for the franchise; (2) failure to identify, mutually select and secure a licensed location for the franchise; (3) the occurrence of an event of default described in Section 8.1 of the Franchise Agreement; In the event the Franchise Agreement is terminated, the Franchise is require to, among other things: (1) cease use of the Trade Marks and remove all signs and materials which contain or display the Trade Marks; (2) notify the telephone company of the termination of the Franchisee s right to use the existing telephone numbers; (3) deliver to the Franchisor all materials bearing the Trade Marks; 8

9 (4) immediately return the Manual to the Franchisor; (5) sell and transfer certain assets (including the license under the Private Career Colleges Act (Ontario)) of the Liaison College private career college to the Franchisor, if the Franchisor elects to purchase any such assets, and assign the premises lease for the Licensed Location to the Franchisor, upon the terms set forth in the Franchise Agreement; (6) grant to the Franchisor the interim right to operate the Liaison College private career college; and (7) observe, perform and be bound by the restrictive covenants set forth in Article 14 of the Franchise Agreement. FRANCHISE DOCUMENTS 31. Copies of the following proposed Franchise Documents are attached: (1) Franchise Agreement. (2) Guarantee and Indemnity 9

10 (3) Landlord s Consent and Agreement (4) Security Agreement CERTIFICATE OF THE DIRECTOR OF THE FRANCHISOR The foregoing constitutes full, true and plan disclosure of all material facts relating to the Liaison College private career colleges franchised by the Franchisor as required by the Arthur Wishart Act (Franchise Disclosure), 2000 (Ontario), and the Regulations thereunder. Date: July Rudy Florio - President 10

11 SCHEDULE A FINANCIAL STATEMENTS 11

12 SCHEDULE B ESTIMATE OF ANNUAL OPERATING COSTS 12

13 SCHEDULE C TRAINING PROGRAM 13

14 SCHEDULE D FRANCHISEE CHECKLIST 14

15 SCHEDULE E CAMPUS LOCATIONS AND CONTACT INFORMATION 15