The Utility Company

The offering circular states that the franchisee will provide information technology services to small and medium businesses as a utility, delivering the required hardware, software and services for a monthly per user fee. It also states that the franchisee will use the franchisor’s Connected Office service suite, which addresses three areas of technology for business: IT operations, web communications and business management.
The offering circular states that the initial franchise fee is $30,000 for one territory unit, which is a geographic area containing approximately 2,500 small and medium businesses. If the franchise agreement covers more than
one territory unit, the initial fee will be discounted as follows:

Number of Territory Units Initial Fee per Territory Unit Discount
1: $30,000 No discount
2 to 5: $27,000 (10%)
6 to 10: $24,000 (20%)
More than 10 $20,000 (33%)

For example, if the franchise agreement covers five territory units,
the total initial fee will be $135,000, which is equal to five times
$27,000.

The franchisor also offers area development rights pursuant to the terms of a
separate area development agreement, under which the franchisee may enter into
two or more franchise agreements over a defined period of time in a defined geographic area. The initial fee for each territory unit covered by the franchisee’s area development agreement will be the discounted fee described above. The initial fee for the area development agreement is equal to 10% of the total initial fees for all of the territory units covered by the agreement. This payment will be applied to the initial fee the franchisee pays at the time of signing for each franchise agreement. Thus, according to the offering circular the franchisee will pay 90% of the discounted initial fee for each territory unit when signing each franchise agreement pursuant to the area development agreement. The franchisor estimates that the initial investment required ranges from $36,715 to $62,785 for a franchise agreement with a single territory unit. Also, the franchisor states that the franchisee may be able to amortize some costs over multiple territory units, possibly lowering the initial investment range for each additional territory unit.

The Utility Company's Franchise Resources

UFOC 5-14

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