RECITALS
I. FCC is engaged in the business of consulting with, representing and/or referring potential franchisees (“Prospects”) to franchisors, would-be franchisors, and other business opportunity companies (hereinafter referred to collectively as “Franchisors”) in connection with the sale of their franchises, business opportunities, or existing businesses or units (hereinafter referred to collectively as “Franchise or Franchises”). In the course of conducting its business, FCC meets with Prospects and provides them with information to help them determine what type of Franchise and which Franchisors might be most suitable for them. FCC does not charge any fee or receive any other compensation from Prospects for performing these consulting services.
II. FCC is paid fees, under certain conditions, by Franchisors or other outside vendors/business partners for conducting and providing these and other services. Any and all such payments to FCC, collectively, are hereinafter referred to as “Gross Consulting Income.” The form or purpose of these payments may include one or more of the following:
1. a payment to FCC for FCC’s services when an FCC Prospect enters into a franchise agreement with a particular Franchisor. This payment is typically in the form of a percentage of the initial franchise fee or payment paid by the Prospect to the Franchisor, and may also include one-time productivity or other bonus payments by the Franchisor. This type of transaction is hereinafter referred to as a “Standard Deal.”
2. after the Prospect signs the franchise agreement and independent of the specific action of a FCC Prospect entering into a franchise agreement with that particular Franchisor. These payments may be in the form of a percentage of the ongoing franchise fees (royalties) paid by the Prospect to the Franchisor, a liquidated equity interest that FCC has taken in the Franchisor, an additional bonus based on the cumulative companywide production of FCC for the Franchisor, or they may be based on some other comparable long term economic activity or agreement between FCC and Franchisor. This type of transaction is hereinafter referred to as a “Downstream Payment.”
3. If FCC is paid for Aggregate Transaction fees (hereinafter referred to as “ATF”) they are not considered commission. FCC will share the ATF fees in its discretion with consultants, after a number of units are placed across multiple prospects and multiple consultants. Typically, for franchisors that are part of this program, every 7 units of that brand triggers what is referred to herein and throughout this Agreement as an “Aggregate Transaction Fee” or “ATF”. These 7 units of a single brand that is part of this program are referred to as a tranche. This “ATF” is divided among the consultants who placed these units, on a pro-rata basis, based upon the percentage of the number of units they placed within that tranche. For example, if a consultant placed 1 of the 7 units, they would be entitled to 1/7th or 14.28% of the ATF, paid by a franchisor that is part of this program for that tranche of payment, after all fees paid to FCC. If the consultant placed 2 of the units it would be 2/7ths or 28.57% after FCC’s fee. If a consultant places a client with a number of units that goes over the 7 unit tranche then it will start a 2nd tranche and that consultant will be entitled to his/ her portion of that second tranche when the 7th unit is placed. The consultant must be active and in good standing with The FCC to be eligible for this payment as it is not considered a commission but a rather, a discretionary fee sharing arrangement. This type of transaction is referred to hereinafter as an “Aggregate Transaction Fee”.
III. FCC owns and exclusively holds all rights and title to its proprietary and confidential systems, operating methods, brand identification and contractual Franchisor relationships.
IV. FCC is also engaged in the business of supporting the efforts of independent individuals and entities that wish to participate in a business of the same general type and using the same operating system and brand name as FCC. These independent individuals and entities have requested that FCC provide them with training on its proprietary operating systems and methods of doing business as well as providing them with access to the Franchisors with whom FCC has or will establish contractual relationships. They have also requested that FCC allow them the limited right to use the brand, logo and tradenames (hereinafter collectively referred to as the “IP”) of FCC, exclusively in conjunction with the furtherance of this Agreement.
V. Consultant desires to become such an independent individual or entity and engage in the same type of business as FCC using the operating system, brand identification, IP, and proprietary and confidential methods of FCC. Consultant has also requested that FCC provide Consultant with training, information, access to FCC Franchisors, and the limited right to use the IP of FCC, exclusively in conjunction with the furtherance of this Agreement.
VI. FCC has agreed to provide Consultant with such training, information, access to Franchisors, and the non-exclusive, limited right to use the IP of FCC, solely in furtherance of this Agreement, under the following terms and conditions.
NOW, THEREFORE, intending to be legally bound hereby, and in consideration of the mutual covenants contained herein, the parties agree as follows:
1. FCC SERVICES
FCC will perform the following services for Consultant under the following terms and conditions:
1.1 System Documentation Materials. FCC will loan a copy of its proprietary FCC system training materials, including its systems and procedures for dealing with Prospects and Franchisors (hereinafter referred to as the “Materials”), to Consultant. Consultant agrees to hold all such Materials provided by FCC in strictest confidence during the term of this Agreement and thereafter. Consultant further agrees to immediately return all such Materials to FCC upon the termination of this Agreement, at any time and for any reason.
1.2 Initial Training. An FCC representative will provide initial training to Consultant covering all aspects of the systems and procedures for dealing with Prospects and Franchisors. This training will be held in a manner and at a location designated by FCC. Consultant will be responsible for all expenses incurred to travel and/or participate in said initial training, which will culminate with a multi-day summary training held at FCC’s home office.
1.3 Advanced Training. FCC will, from time to time, as it determines in its sole judgement that a need exists, conduct advanced training and system review sessions. This training will be held in a manner and at a location designated by FCC, and all such trainings will be made available to Consultant. Consultant will be responsible for all expenses incurred to travel and/or participate in such advanced training and system review sessions.
1.4 Ongoing System Support. After Consultant’s initial training, FCC will continue to provide system support to Consultant, as requested, and at the convenience of FCC. The amount and method of this ongoing system support will be whatever is deemed to be reasonable and necessary, in the sole opinion of FCC.
1.5 Franchisor Information. FCC will provide Consultant with the name, address and other contact information, as well as an introduction, for every Franchisor with which it has arranged for Consultant to have a relationship and the ability to refer Prospects, as amended, at FCC’s sole and absolute discretion. During the term of this Agreement and for the term of any non- solicitation period provided below, Consultant agrees that it will not, either directly or indirectly, enter into any contract or relationship involving the offering of any services that fall within the contemplated scope of this Agreement, with any Franchisor introduced to Consultant by FCC. Consultant agrees that any inquiry made by a Franchisor to Consultant, concerning any service that falls within the contemplated scope of this Agreement, will be immediately referred by Consultant to FCC.
1.6 Use of Brand and Trademarks. FCC will grant Consultant the non-exclusive, limited right to use the IP of FCC, exclusively in conjunction with the furtherance of this Agreement. Consultant is authorized, while this Agreement is in full force and effect, to use the name and logo of FCC in Consultant’s public identification to Prospects of Consultant’s business. This right is limited to use on business cards, stationary, envelopes, phone number listings or answering services and proprietary materials purchased from FCC (or reprinted with the permission of FCC) to be used with Prospects. Consultant agrees that it will use the title “FCC Consultant” on all communication related to the business. Consultant agrees that it will not use the FCC IP in any other manner without the express written authorization of FCC, specifically including, but not limited to, the use of the IP in Consultant’s own legal name or legal identification. Consultant hereby agrees that it has no right, title or ownership of any kind in relation to the IP belonging to FCC. Consultant also agrees to immediately cease and desist from any use of the IP belonging to FCC upon the termination or expiration of this Agreement for any reason.
2. FCC MARKETING
The following rules govern all Consultant actions related to marketing activities for producing leads for Prospects:
2.1 The Franchise Consulting Company Marketing Program. The Franchise Consulting Company currently operates a marketing program to produce Prospect leads for certain of its consultants. Consultant may use these leads. This program may be modified from time to time.
2.2 Reporting Requirements. Consultant agrees that it will use the FCC CRM system to record and regularly update all of Consultant’s activity with prospective franchisees.
2.3 Consultant Non-Solicitation. Consultant expressly agrees that it will not solicit or accept any marketing contributions or other payments of any kind from any Franchisor, vendor or business partner, including, but not limited to, an investment of time or any other non-monetary contribution or gift by the Franchisor, vendor or business partner to Consultant, without first receiving written authorization from FCC. Any offers or expressions of interest, made by a Franchisor, vendor or business partner to Consultant, for providing any such marketing contributions, payments or support will immediately be referred by Consultant to FCC.
2.4 Consultant Self-Marketing. Consultant expressly agrees that it will follow and observe all rules, regulations and conditions placed on Consultant’s ability to self-market themselves or their business to Prospects of Consultant. FCC will publish, and may change or modify at any time, these rules, regulations and conditions that it feels, in its sole and absolute judgment, to be essential to protecting the integrity of the FCC brand.
3. PAYMENT OF GROSS CONSULTING INCOME
3.1 Ownership of Gross Consulting Income. Consultant agrees that all payments of Gross Consulting Income generated through the efforts of Consultant under the terms of this Agreement are the property of and will be paid directly to FCC. If Consultant receives any Gross Consulting Income from any source, Consultant shall immediately remit said Gross Consulting Income, in full, to FCC.
3.2 Collection Responsibility. FCC shall assume the costs of any effort, including legal fees, to collect Gross Consulting Income that is, in FCC’s sole and absolute opinion, due and payable based on the activity of Consultant and worth the effort and expense of proceeding with collection efforts.
3.3 Non-Monetary Considerations. To avoid the potential creation of any legal liability from the establishment of an agency relationship between Consultant and any Franchisor, vendor or business partner, FCC and Consultant agree that Consultant shall not accept any substantial non-monetary consideration from any Franchisor, vendor or business partner. This restriction would include any free trips or other significant gifts, rewards or compensation, but would exclude any minor gifts or consideration if completely unrelated to the activities of the Consultant conducted with any specific Prospect.
4. CONSULTANT COMMISSIONS AND OTHER COMPENSATION
Consultant will be paid a commission by FCC, based on the Gross Consulting Income received by FCC due to the efforts of Consultant, on the following terms, conditions and schedule:
4.1 Deal Income. The percentage of deal income paid out is categorized based upon the lead source.
4.1a Standard Lead Deal Income. Any Standard Lead Gross Consulting Income produced for FCC by Consultant will qualify for a commission to Consultant of ninety percent (90%) of the Gross Consulting Income received. The definition of a “Standard Lead” is that the Consultant generated the lead him or her self.
4.1b Qualified Lead Deal Income. Any Qualified Lead Deal Gross Consulting Income produced for FCC by Consultant will qualify for a commission to Consultant of seventy-five (75%) of the Gross Consulting Income received. The definition of a “Qualified Lead” is that FCC generated the lead and transferred it to the Consultant.
4.2 Downstream Payment Income. Any Downstream Payment Gross Consulting Income produced for FCC by Consultant will qualify for a commission to Consultant of fifty percent (50%) of the Downstream Payment Gross Consulting Income received by FCC.
4.3 Aggregate Transaction Fee. Any Aggregate Transaction Fee produced for FCC by Consultant will qualify for a commission to Consultant of seventy-five percent (75%) of the Aggregate Transaction Fee income received by FCC related to Consultant’s portion of the ATF related to Consultant’s deals that constitute the transactions triggering the ATF.
4.4 Vendor/Business Partner Income. Any vendor/business partner Income produced for FCC by Consultant will qualify for a commission to Consultant of ninety percent (90%) of the vendor/business partner Income received by FCC.
4.5 Other Income. Any Gross Consulting Income produced for FCC by Consultant, that is based on any activities other than those listed above, will qualify for a commission to Consultant of ninety percent (90%).
4.6 Income Recognized as Received. The commissions that FCC pays to Consultant will be based on Gross Consulting Income as received by FCC. FCC will not use any form of accrual accounting to recognize Gross Consulting Income that may be due and payable at some future date in determining the commissions due Consultant. FCC typically waits for collected funds to be deposited in its account by the Franchisor before paying Consultant its commission and Consultant agrees to immediately return any commission received from FCC if there is any error.
4.7 Commission Vesting. Any commission due Consultant based on sections 4.1, 4.2, 4.3 and 4.4, above, shall be vested and payable to Consultant upon receipt of the Gross Consulting Income by FCC, unless the Gross Consulting Income is received by FCC after the termination of the Consultant’s contract with FCC for cause, as defined in Section 9.2 below, or unless the Consultant violates the post termination provisions of this Agreement as contained in Section 10 below. In either of those situations, only those commissions due under Section 4.1 shall be vested and payable to consultant. If, in any calendar year, the total of all such vested commissions actually paid to Consultant amount to less than $1000.00 total, FCC shall no longer have any obligation to continue future payments to Consultant under this commission vesting provision.
4.8 Refunds. In certain rare circumstances, FCC may be obligated to return part or all of the Gross Consulting Income paid to it by a Franchisor in association with a Standard Deal. If this happens, FCC will compute the percentage of refund as it applies to the Gross Consulting Income it received on the Standard Deal. Consultant agrees that it will immediately repay FCC this same percentage of the commission it received on the Standard Deal.
4.9 Commission Payment Schedule. FCC will pay all commissions due Consultant under Sections 4.1, 4.3 and 4.4 to Consultant by Electronic Funds Transfer (“EFT”), or other form of electronic payment determined to be acceptable to FCC, in its sole and absolute discretion, within twenty- four hours of the receipt of the Gross Consulting Income from a Franchisor. FCC will pay all Downstream Payment Gross Consulting Income commissions to Consultant by EFT, or other form of electronic payment determined to be acceptable to FCC, in its sole and absolute discretion, by the tenth day of the month following the month of receipt by FCC of the Downstream Payment Gross Consulting Income. FCC reserves the right to offset any commission payment due Consultant by the amount of any indebtedness owed by Consultant to FCC.
4.10 Upside Participation. If FCC is sold, 20% of the sales price will be held in reserve to be distributed to consultants who are in active and good standing with The FCC at the time of such sale, as such active and good standing status is determined by The FCC in its sole and absolute discretion. The amount shall be based upon the total amount of commission each such consultant shall have paid to The FCC since the day they signed their initial agreement with The FCC as a percentage of the total commission The FCC has earned from consultants since its inception. A consultant who resigns, is terminated, is not in good standing or in violation of their FCC Consultant agreement shall not be eligible for this participation. If a consultant leaves and subsequently returns to The FCC, the 2nd signing of their agreement shall constitute the start date for this benefit. As an example only, if a consultant who is active and in good standing with The FCC signed an agreement to join The FCC on June 1st, 2016 and has paid $500,000 in total commissions to The FCC since that date, and assuming that The FCC has generated $20,000,000 in total income from all consultants, then that consultant generated 2.5% of the total commission income to The FCC. If The FCC sells for $50,000,000 then 20% of that is $10,000,000. Therefore, that consultant would be due 2.5% of $10,000,000 or a $250,000 Upside Participation payment. This payment will be paid in 2 equal installments approximately one year after the closing date occurs and the second installment two years after the closing date occurs.
5. INDEPENDENT CONTRACTOR STATUS
5.1 Autonomy of the Parties. Consultant is an independent contractor and not an employee, franchisee, partner or agent of FCC. Consultant shall have no right to participate in any of FCC’s presently existing or future employee benefits or employee benefit plans. Neither FCC nor Consultant shall represent to any third party that there is any employment, agency or any other relationship between FCC and Consultant. Neither FCC nor Consultant shall have the authority to act for the other in any manner to create any obligations or liabilities or incur any debts or expenses binding on the other. Neither FCC nor Consultant shall be responsible for any obligations, liabilities, debts or expenses of the other. Neither has any control or right to control the activities of the other. FCC and Consultant are separate and distinct entities and are independent of one another.
5.2 Expenses and Supplies. Consultant is fully responsible for all of its expenses, including, but not limited to, all expenses associated with its office, phones, postage, supplies and travel.
5.3 Employees/Agents of Consultant. Consultant shall have the right to hire employees and/or agents to assist in operating Consultant’s business as long as Consultant makes certain that all services performed by Consultant’s employees and/or agents is done in accordance with the terms of this Agreement. Consultant specifically agrees that no such employee and/or agent shall represent themselves publicly in any manner as being a part of FCC without first receiving the specific written consent and/or training of FCC to any such representation, which consent may be withheld or denied in FCC’s sole and absolute discretion. FCC does not assume any responsibility for the terms of any arrangements between Consultant and any of its employees and/or agents. Consultant is solely liable for its own action or lack of action, and for the actions or lack of action of its agents, employees or representatives. Consultant is free to exercise its own judgment as to the manner, time, place and persons it conducts with whom it conducts business.
5.4 Taxes. To the extent required under applicable law, Consultant shall report as income all compensation received pursuant to this Agreement, and pay all taxes
due on such compensation. Consultant is solely responsible for all federal, state and local taxes which may be payable in connection with this Agreement.
6. MUTUAL INDEMNIFICATION
FCC agrees to defend, indemnify and hold Consultant harmless from and against any and all claims, demands, suits, obligations and liabilities arising out of or relating to any act, omission or breach of any obligation contained in this Agreement on the part of FCC to perform. Consultant agrees to defend, indemnify and hold FCC harmless with respect to any and all claims, demands, suits, obligations and liabilities arising out of or relating to any act, omission or breach of any obligation by Consultant.
7. CONFIDENTIALITY
Consultant acknowledges that it may have access to or receive from FCC information of a confidential or proprietary nature to FCC. Such information would include, without limitation, any non-public information about (a) scripts, procedures and other components of the FCC operating system; (b) FCC’s methods of doing business; (c) FCC’s financial affairs; (d) FCC’s business plans; (e) Franchisors; and (f) anything provided to Consultant by FCC (hereinafter collectively referred to as “Confidential Information”). Consultant agrees not to disclose any Confidential Information to any party without the prior written consent of FCC, which consent may be denied or withheld at FCC’s sole and absolute discretion. Consultant agrees not to use any Confidential Information except in furtherance of this Agreement. It shall not be a violation of this clause for Consultant to share this information with Consultant’s professional advisors if, and only if, such advisors have a need to know such information to represent Consultant. Consultant acknowledges that violation of this section would result in irreparable harm to FCC and that therefore, FCC is entitled to injunctive relief, along with appropriate damages, for any violation thereof.
8. TERM OF AGREEMENT
The term of this Agreement shall be from the date of execution first written below through the last day of the calendar year in which the Agreement is executed. On the first day of the next calendar year, and on the first day of each subsequent calendar year, this Agreement shall automatically renew for a period of one year, unless previously terminated as provided in this Agreement. Each of these renewals shall be on the then current form of the The Franchise Consulting Company, Inc.’s Independent Consultant Agreement. In any year where the Independent Consultant Agreement has been or will be modified from the previous year’s Agreement, a copy of the new Agreement will be sent to Consultant via email at least 30 days prior to the beginning of the new year.
9. TERMINATION OF AGREEMENT
9.1 Termination Without Cause. This Agreement may be terminated by either party, upon 90 days written notice, for any reason or no reason.
9.2 Termination For Cause. This Agreement may be terminated immediately by FCC for cause upon the occurrence of any of the following:
9.21 Consultant violates any federal, state, county or city regulation, statute, law or ordinance applicable to Consultant’s conduct of the FCC business, or
9.22 Consultant fails to comply with any of its obligations under this Agreement, after receiving a default notice and having a 10 day period to cure the default, or
9.23 Consultant receives three or more default notices in any two year period, even if said defaults are subsequently cured, under the terms of section 9.22 above, or
9.24 Consultant, or any shareholder, officer, director or employee of Consultant, becomes an owner or participates, either directly or indirectly, in the conduct or activities of any business or organization that competes with or engages in activities similar to FCC, or
9.25 Consultant files a petition in bankruptcy court under any chapter of the Bankruptcy Code, or
9.26 Consultant refers a Prospect to any Franchisor that is not currently under contract with FCC as demonstrated by the Franchisor’s listing in the FCC CRM system as being available for the referral of Prospects on the date of the referral by Consultant, or
9.27 Consultant engages in conduct that FCC considers to be unethical, immoral or a violation of moral turpitude, in FCC’s sole and absolute opinion and discretion.
10. POST-TERMINATION PROVISIONS
Upon the termination of this Agreement, Consultant agrees to be bound by the provisions listed below:
10.1 Return of Material. Consultant agrees that it will return to FCC, within 10 calendar days of the termination of this Agreement, at Consultant’s sole and absolute expense, all Confidential Information and any other FCC identified materials in its possession. Consultant will not retain copies of any such material in any form, including, but not limited to, electronic media.
10.2 Non-Solicitation. Consultant agrees that both during the term of this Agreement, and for a period of two years following the termination of this Agreement for any reason, neither Consultant, nor any shareholder, officer, director or employee of Consultant (the “Consultant Agents”), will, directly or indirectly, solicit or enter into any contract or relationship, involving the offering of any services that fall within the contemplated scope of this Agreement, with any Franchisor introduced to Consultant by FCC. During this same period, Consultant, and the Consultant Agents, will not divert or appropriate business from any Franchisors with whom FCC was doing business during the term of this Agreement, and Consultant and its employees and agents will not in any way interfere, or attempt to interfere, with FCC’s relationships with any Franchisors.
10.3 Forfeiture of Commissions. Consultant agrees that any violation of these post-termination provisions will result in the forfeiture of the Consultant’s right to future commission payments from FCC as outlined in Section 4 above. In addition, FCC shall have all other remedies available at law or equity, including, but not limited to, equitable relief and damages.
11. ASSIGNMENT
Consultant shall not assign its rights and obligations under this Agreement without the express written consent of FCC, which consent shall not be unreasonably withheld.
12. WAIVER OF PERFORMANCE
No failure or delay by FCC in exercising any right or remedy under this Agreement shall constitute a waiver of any such right or remedy.
13. AMENDMENT
Except as specifically stated in section 8 above, this Agreement may be modified or amended only by an instrument in writing, duly executed by both FCC and Consultant.
14. AGREEMENT NOT TO BE CONSTRUED AGAINST DRAFTER
FCC and Consultant agree that they have both had ample opportunity to share this Agreement with their professional advisors and that it shall be deemed, for all purposes, that both parties drafted this Agreement.
15. ACTS OF GOD
Neither Consultant nor FCC shall be liable for any failure on its part to perform its obligations under this Agreement as the result of any Act of God, war, strike, labor unrest, act of terror, or any other unforeseeable circumstance, that causes a delay or inability to perform under this Agreement.
16. BINDING EFFECT
This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto and their respective heirs, legal representatives, successors and assigns.
17. GOVERNING LAW
FCC and Consultant agree that the laws of the State of Florida shall apply in any action or proceeding arising from or in connection with this Agreement.
18. MEDIATION AND ARBITRATION
In the event of any dispute arising from or concerning this Agreement, the parties agree to attempt to resolve the dispute by mediation through the auspices of the American Arbitration Association, in Miami, Florida. Should mediation undertaken by the parties not result in a settlement of the dispute, the parties agree to submit the dispute for binding arbitration to the American Arbitration Association in Miami, Florida, and such arbitration shall be conducted by a single arbitrator under the rules of the American Arbitration Association then in effect. Any judgment so awarded may be enforced by the courts of Miami-Dade County, Florida.
19. NOTICES
All notices, requests, consents, demands, waivers or other communications required to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or sent by registered or certified mail, or by any recognized overnight carrier whereby a valid delivery receipt is obtained.
FCC
The Franchise Consulting Company, Inc.
935 Bella Vista Ave
Coral Gables, FL 33156
Attn: Nick Neonakis