ITEMI: THE
FRANCHISOR AND ANY PARENTS. PREDECESSORS AND AFFILIATES
A. Terminology.
In this Franchise Disclosure Document, "NH",
"we", "us" and/or "our" means or refers to New
Horizons Franchising Group, Inc., the franchisor. "You" means the
person who buys the franchise, and all principals of any corporation,
partnership or other entity that owns the franchise.
Throughout this Franchise
Disclosure Document, we capitalize terms and assign them special definitions.
The definitions either appear in the sentence in which we first use the term,
or below:
Acting as a Computer Learning Center - refers to all of the
following: (i) the sale and delivery of instructor-led computer and
professional skills classroom training ("ILT"); (ii) the sale and/or
delivery of CBT using CD-ROM training products and the sale of other methods of
asynchronous and synchronous online training; (iii) the operation of eBusiness
and the sale and delivery of eLeaming and other forms of electronic training
enabled by the Internet or comparable or enhanced forms of electronic
technology now existing or hereinafter developed; (iv) the delivery or
performance of other computer and professional skills training services that we
incorporate in the System; (v) the sale and delivery of computer and
professional skills classroom training through Mentored Learning; and (vi) the sale of Classroom
Learning Content and other training products that we approve in advance.
Affiliate-Owned Centers - Collectively, all Centers
now or in the future owned by subsidiaries of NHWW.
Business Management System or "BMS" - A center hosted, web-based
intranet portal that standardizes and optimizes the execution of the New
Horizons business model. BMS functionality, including web-based reporting,
document management and process automation, allows centers around the world to
share a framework for decision making, a process for implementing decisions and
a methodology to understand and maximize center profit.
Classroom Learning Content - All printed materials and
eContent provided to customers attending instructor-led training
("ILT") programs for use during and after the classroom instruction.
Computer Based Training or
"CBT" - CD Rom training products and other methods of
asynchronous training.
Confidential Operations Manual or "COM" - Confidential materials
that we provide to you at Initial Franchise Training, ("IFT")
providing information on how to operate a New Horizons franchise.
Center Management System or "CMS" - The Center Management
System, an optional service that we offer which provides contact management,
manages student enrollments, class inventories and accounts receivable. If you
use CMS either by signing the CMS-ASP agreement attached to the Franchise
Agreement as Exhibit F-l, which provides you with a hosted version of CMS accessible
through our terminal server connections. Alternatively, you may purchase a CMS
license and host the proprietary software on your own servers. Different fees
are payable depending on the option
1
you choose, as we explain in
Items 5 and 6. If you choose not to use our CMS service, you must use any other
client management system capable of generating the financial reports that we
require under the Franchise Agreement.
eBusiness - Collectively the use of CMS and all electronic
commerce transactions that occur on any Network website, the collection and use
of demographic information, scheduling and course delivery from any Network
website, and/or the use of any Network website or electronic system for
managing the existing Network business processes.
eContent - The electronic versions of printed, instructional
and support materials, including electronic materials known as or referred to
as
eBooks or
eCourseware.
eLeaming - Collectively all forms of computer training and
professional skills training available over or enabled by the Internet, or
delivered electronically behind a firewall, including synchronous and
asynchronous classes such as New Horizons Online Live and New Horizons Online
Anytime, and all other training delivered in whole or in part by any comparable
or enhanced form of electronic technology now existing or developed in the
future.
Electronic Information - Any information stored in
our learning management system ("LMS"), our CMS Database, or
exchanged between Franchisor''s Website and the LMS including, but not limited
to, financial transactions, products sold, contact information, customer
information and training schedule information.
Extranet - The electronic communications device implemented by
us solely for the benefit of us and the Network, or any successor electronic
communications device implemented by us serving an equivalent function.
Franchised Business - We adopt the definition of
Franchised Business stated in the Franchise Agreement attached hereto as
Exhibit "A".
Franchisor''s Website - Refers to the URL "www.newhorizons.com" and any other
url or domain names that we own, which are linked to or lead a customer to www.newborizons.com.
Gross Revenues - The term "Gross
Revenues" means all money, credit card payments or other things of value
recognized on an accrual accounting basis in accordance with generally accepted
accounting principles by Franchisee in payment of, for or on account of, the
Franchised Business, without deducting Franchisee''s costs or expenses,
commissions, salaries, overrides, bonuses or other compensation payable to its
salespersons or employees.
Integrated Learning Agreement or "ILA" - The ILA is the contract that sets
forth our agreements regarding the sale and delivery of eLearning to customers
who reside in your Territory. A copy of the ILA is attached as Exhibit G to
the Franchise Agreement.
Instructor Led Training or
"ILT" - means delivery of computer and professional skills
content by a trained instructor.
Inter-Franchise Fee - Subject to the TROC, when
one Network member contracts with a customer for the delivery of services in
locations both within and outside of the contracting Network
2
member''s territory, the fee that the contracting
Network member must pay to other Network members who deliver training services
to the customer. The Inter-Franchise Fee is set forth in the COM and subject to
adjustment according to the procedures in the COM.
Key Account Contract - means any oral or written
contract memorializing the agreement between NH and a Key Account Customer for
the coordinated delivery by Network members of services constituting Acting as
a Computer Learning Center. We retain absolute discretion to negotiate the
terms and conditions under which Network members will deliver goods and
services to the Key Account Customer and Key Account Persons. For example, and
without limitation, Key Account Contracts may address some or all of the
following subjects; (a) the specific services to be rendered by Network
members; (b) special invoicing and billing procedures; (c) the time frame for
delivering services to Key Account Persons; and (d) other accommodations and
arrangements, including special delivery instructions, as we and the Key
Account Customer may mutually determine.
Key Account Customer - means a customer,
including, without limitation, a vendor, that we identify that (i) requires the
coordinated delivery by Network members of services constituting Acting as a
Computer Learning Center to multiple Key Account Persons who are physically
located for purposes of receiving services within the territory of two or more
Centers, and (ii) as a condition to doing business with Network members,
desires to negotiate one set of pricing and billing terms for all services
delivered by any Center to any Key Account Person regardless of the Key Account
Person''s location. A Key Account Customer might include, by example and without
limitation, a business with employees in multiple offices around the world that
requires the coordinated and contemporaneous delivery of an Enterprise Learning
Solutions program by multiple Network members in different territories on the
same pricing and billing terms. A Key Account Customer might also include a
vendor that sells software to third parties who reside or do business in the
territory of two or more Centers and, in connection with the sale of software,
offers purchasers of the software specialized training in the use of the
software on identical pricing and billing terms and desires to outsource to us
the delivery of the specialized training services by local Network members. We
have absolute discretion to identify when a Person constitutes a Key Account
Customer.
Key Account Person - means an individual who is
employed by, the direct customer of, the agent of, or otherwise affiliated in
some capacity with, a Key Account Customer.
Learning Port - refers to the Web-based
platform that we operate to support, deliver and manage OLA.
Master Product List or "MPL" - Collectively, our entire
course and product offerings, as we may modify them from time to time,
including, but not limited to, eLearning courses and eContent products, the
details of which are available on the Franchisor''s Extranet.
Mentored Learning - A premier classroom
solution offering the student a multi-dimensional approach to learning which is
adaptive to individual learning styles through a mentor who guides and teaches
the student by using assessments, reinforcement techniques and content
consisting of written courseware and streaming video.
3
Mentored Learning Manager
or "MLM" - refers to the administrative tool designed for the
Mentored Learning classroom to process registrations and track student
activities..
NH-Branded - means that a product has
been branded for sale and marketing displaying our name, Service Marks, tag
lines and/or logos.
New Horizons
Online Live or "OLL" - refers to our synchronous eLearning program
New Horizons
Online Anytime or "OLA" - refers to our asynchronous eLearning program
Person - The Franchise Agreement defines a
"Person" to mean either a natural person (i.e., an individual) or any
kind of business entity, such as a corporation, partnership or limited
liability company. Certain definitions that we explain in this Item 1 also use
the word "Person" as a capitalized or defined term and incorporate
the Franchise Agreement''s definition.
Satellite Center - means an additional classroom location that we
require you to open within your Territory that receives administrative support
from your primary Center. See additional disclosures in Items 1 and 12 of this
Franchise Disclosure Document. We do not require a Satellite Center to have
either a dedicated General Manager or Account Executives. Instructors of
classes held at a Satellite Center must perform the same check-in, collections
and other services typically performed by non-instructor staff members who
perform these duties onsite at your primary Center.
Territorial Rules of Conduct or "TROC" - Rules governing
relationships between and among Network Members set forth in the COM.
B.����� The Company. Our
Parents. Predecessor and Affiliates.
We are a Delaware corporation that was incorporated as
New Horizons Franchising Group, Inc., on February 6, 2006 as part of a
restructuring of our predecessor, New Horizons Computer Learning Centers, Inc.,
a California corporation. In this Franchise Disclosure Document, we refer to
New Horizons Computer Learning Centers, Inc. as "our Predecessor."
We do business under the names "New
Horizons" and "New Horizons Computer Learning Centers" (the
"Service Marks"). Our principal business address is 1900 S. State
College Blvd., #650, Anaheim, CA 92806. Our agent for service of process is
Mr. Gregory E. Marsella, whose address is 1900 S. State College Blvd., #650, Anaheim, CA 92806. See Exhibit I for the names of our additional agents for service of
process in certain states.
We are a wholly-owned subsidiary of New Horizons
Worldwide, Inc. ("NHWW"), a Delaware corporation. Our parent company,
NHWW, which was formerly known as Handex Corporation, is a publicly traded
company headquartered at 1900 S. State College Blvd., #650, Anaheim, CA 92806.
Our Predecessor was a California corporation that was originally incorporated as New Horizons Franchising, Inc.,
on June 19, 1991. Our Predecessor began offering franchises on November 22,
1991. In 1994, our Predecessor and the assets of the corporation operating the Santa Ana New Horizons Center were acquired by NHEC. In 1996, our Predecessor changed its
name to New Horizons Computer Learning Centers, Inc.
4
As part of the
restructuring of our Predecessor, on February 6, 2006:
(i)
We
acquired all of our Predecessor''s rights, and assumed all of its liabilities,
under all Franchise Agreements then in effect between our Predecessor and our
franchisees, as well as all of the membership interests of the following
limited liability companies: New Horizons Computer Learning Center APAC, L.L.C.
("APAC") and New Horizons Computer Learning Center EMEA, L.L.C.
("EMEA"). As a result, APAC and EMEA are our affiliates. APAC and
EMEA each maintain their offices at 1900 S. State College Blvd, #650, Anaheim, CA 92806.
(ii)
We
acquired from our affiliate, New Horizons Education'' Corporation
("NHEC"), a Delaware corporation, all of the membership interests of
Nova Vista, LLC. ("Nova Vista"), which is a required supplier to our
franchisees, as we disclose in Item 8. Therefore, Nova Vista is our affiliate.
Nova Vista is also located at 1900 S. State College Blvd, #650, Anaheim, CA 92806.
(iii)
We
entered into a License Agreement with NHEC to use and sublicense all
intellectual property owned or licensed by NHEC, including the name "New
Horizons," as we disclose in Item 13. NEHC is our affiliate and is also
located at 1900 S. State College Blvd, #650, Anaheim, CA 92806.
C.����� Our Prior
Experience.
We derive our experience from
our management, many of whom are the same as our Predecessor''s management
immediately before the 2006 restructuring. See Item 2.
Other than delivering eLearning to customers via the
Franchisor''s Website, www.newhorizons.com
(see Item 12), we are strictly a franchisor and at this time do not
directly operate own or operate any Centers. However, our affiliate, New
Horizons Computer Learning Centers of Santa Ana, Inc. ("NHSA"), and
other subsidiaries of our parent, NHWW, operate Centers substantially identical
to the Centers that our franchisees own and operate ("Affiliate-Owned
Centers"). We and other affiliates of ours may in the future operate
businesses of the type that our franchisees operate,
We disclose information about franchisee-owned and
Affiliate-Owned Centers operating in the United States in Item 20 and identify
all operating Centers in the United States as of December 31, 2007 (the end of
our last fiscal year) in Exhibit C. In addition to operating Centers in the United States, as of December 31, 2007 there were 146 Centers operating throughout the
world. Operationally, the international Centers are substantially similar to
the domestic Centers.
Neither we, our Predecessor
nor our affiliates has offered franchises in any other lines of business.
Together, the Affiliate-Owned Centers and the Centers that our franchisees own are
referred to as the "Network".
As we disclose in Item 8, our subsidiary, Nova Vista,
sells products to our franchisees. See Item 8. Nova Vista''s principal offices
are located at 1900 S. State College Blvd., #650, Anaheim, CA 92806.
Our wholly-owned subsidiary, EMEA, provides services
to our franchisees in countries within a geographic region that we describe as
EMEA (Europe, Middle East and Africa). Our wholly-owned subsidiary, APAC,
provides services to our franchisees in countries within a geographic region
that
5
we describe as Asia Pacific.
In Item 2, we identify the officers and personnel of EMEA and APAC with
management responsibilities for our franchisees in these regions.
D.���� The Franchises That
We Offer.
We grant franchises to own and operate a Center. Our
franchisees sell and deliver training to businesses and individuals who use a
personal computer, minicomputer, mainframe work station or Internet appliance
on how to use, manage and program computer-related software applications and
how to use, build, manage and repair computer hardware and related equipment.
Training in the use of software applications may also involve professional
skills training in business and personal productivity topics, such as making
presentations, time and project management skills. You may also sell and
deliver English language skills training and training in medical and pharmacy
billing and coding skills, primarily (but not exclusively) to individuals.
NH franchisees sell training in various formats
including via (i) live instructor-led classroom training; (ii) Mentored
Learning instructor led training, (iii) CBT; (iv) eLearning; (v) the operation
of eBusiness which includes performing services that facilitate the sale and
delivery of eLearning;; and (vi) Classroom Learning Content, and other training
products. All sales are subject to the TROC, as we explain in Item 12. In
operating your Center, you must sell and deliver training and Classroom
Learning Content using the methodologies, curriculum and operating procedures
that we establish and may revise for ILT, CBT, eLearning and classroom rentals.
We may modify, delete and add new products, programs and services for you to
sell and/or deliver to your customers in the future at any time.
To benefit the Network, maintain uniformity and avoid
confusion in the marketplace, we retain the exclusive right to market and
deliver NH-Branded eLearning to customers via Franchisor''s Website.
Franchisor''s Website will be the sole Web portal from which customers, anywhere
in the world with access to the Internet, may purchase and receive NH-Branded
eLearning regardless of where the customer may physically be present or reside
at the time the customer receives eLearning. See Items 8,9, 11 and 12. The terms and conditions regarding our delivery
of eLearning are contained in the ILA (Exhibit G to the Franchise Agreement).
If a customer who resides in your territory purchases eLearning from
Franchisor''s Website, you must pay us the delivery fees ("Delivery
Fees") that we describe in Item 6, and we will pay you certain revenues
from the eLearning transaction under the conditions stated in the ILA.
While we agree not to open or franchise another Center
in your territory, we also reserve certain rights to engage in conduct in your
territory that constitutes "Acting as a Computer Learning Center." You will deliver most of the ILT in your territory. Under the TROC, some
customers residing in your territory may receive ILT, CBT and eLearning that
has been sold by other Centers, or eLearning that is delivered by NH, and you
will not receive revenues for training delivered in these circumstances. You
may agree to deliver training in your territory for another Network member, or
ask another Network member to deliver training in its territory for you,
guidelines for these arrangements, including Inter franchise Fees, are set out
in the COM.
As we explain in Item 12, we may require you to open
one or more Satellite Centers in your Territory by certain deadlines, which we
identify before you sign the Franchise Agreement. Once you open a Satellite Center, you must continuously operate it for the remainder of the term of the
6
Franchise Agreement unless you obtain our prior
written consent to cease operations. We will notify you before you sign the
Franchise Agreement if the award of franchise rights is subject to a duty to
open and operate one or more Satellite Centers.
NH franchisees employ a tele-sales, approach to the
sale of training services and products, using professional Account Executives
("AEs"). Through our Enterprise Learning Solutions ("ELS")
team, we work with Centers and vendors to secure the potential delivery of
training for larger enterprise accounts. The Franchise Agreement sets forth the
conditions for your participation in our enterprise program.
As we note above, we have developed a Center
Management System, or CMS software, which is an optional service that provides
contact management, manages student enrollments, class inventories and accounts
receivable support. If you choose to use CMS, you can select between (i) the
CMS ASP Agreement attached to the Franchise Agreement as Exhibit F-l, which
will give you access to a hosted version of CMS that resides on our servers, or
(ii) the CMS Local Agreement attached to the Franchise Agreement as Exhibit
F-2, under which we will license a copy of CMS to you, which you will host on
your own servers. Different fees are payable depending on the option you
choose, as we explain in Items 5 and 6. The monthly support fee that you pay
also covers the cost of software updates. If you choose not to use our CMS
service, you must use any other client management system capable of generating
the financial reports that we require under the Franchise Agreement.
You may only operate
eBusiness and provide eLearning to customers pursuant to the Franchise
Agreement while adhering to the rules and requirements of the Territorial Rules
of Conduct contained within the COM.
We have developed a Web-based platform to deliver and
manage OLA through a single point of access, which we refer to as the Learning Port.
E.
General
Market for Your Products and Services and General Description of Your
Competition
The Franchised Business'' primary markets are
individuals, businesses and government agencies that need training in any of a
variety of current computer software programs, information technology job
functions, professional skills, English language skills and medical billing and
coding skills. You will compete with other businesses offering live and
distance computer training classes, continuing education programs offered by
educational institutions, training programs available at retail computer stores
and dealers, independent computer consultants, internal corporate training
departments and other instructors and training offered via a variety of
electronic technologies, including Web-based training. The general market is
competitive.
F.
Law
and Regulations.
Some states may regulate a
Franchise Business operating in the state as a post-secondary private
educational facility and require you to obtain an appropriate license before
offering services. You are responsible for investigating any special licensing
requirements in your state applicable to institutions or businesses that offer
post-secondary educational services and, if special laws exist
7
