What is the significance of the 'Recitals' section in the Mrcool Franchise Agreement for Mrcool franchisees?
Mrcool Franchise · 2025 FDDAnswer from 2025 FDD Document
horization Form | | Exhibit 8 | General Release | | | |
MRCOOL FRANCHISE AGREEMENT
| I ACCOUNTS PAYABLE | |||||
|---|---|---|---|---|---|
| As of December | 31, 2024, | the majority of the Company's | accounts payable | balance | ($218,142) |
RECITALS
WHEREAS, Franchisor has developed a distinctive and proprietary system (the "System") for the establishment, development and operation of a MRCOOL Center, a warehouse distribution center that distributes "MRCOOL" branded HVAC products, provides HVAC installation services, HVAC equipment servicing, and other products and services that Franchisor authorizes (the "Approved Services and Products") under the Licensed Marks (defined below) (each, a "Center");
WHEREAS, the System and, therefore, each Center, is identified by the Licensed Marks and distinctive trade dress, service offerings, business formats, equipment, products, supplies, operating procedures, programs, methods, procedures, and marketing and advertising standards, all of which are part of the System and all of which Franchisor may modify from time to time; and
WHEREAS, Franchisee desires to obtain the non-exclusive license and right to use the System in the development and operation of one Center from a single fixed location within a designated territory and pursuant to the terms of this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged, the parties do hereby agree, as follows:
ARTICLE 1 DEFINITIONS
Supplementing the terms and definitions contained in the foregoing "Recitals":
"Accounting Period" refers to and means the period of time selected and determined by Franchisor for the required measurement and reporting of financial information and payment of financial obligations by Franchisee. The applicable measurement period will be determined by Franchisor from time to time with respect to Franchisee's obligations to report financial information and data to Franchisor and Franchisee's payment of all fees, including, and other obligations under this Agreement. The respective "Accounting Period" shall be those Franchisor designated times, whether, weekly, monthly, or otherwise, as designated by Franchisor, with all such Accounting Periods automatically commencing on the earlier of the (a) Scheduled Business Commencement Date, or (b) the Actual Business Commencement Date of the Franchised Business and, continuing, throughout the Term of this Agreement. Unless otherwise designated by Franchisor at any time, unless otherwise specified in this Agreement, the Accounting Period shall be a quarterly period for each and every quarter throughout the Term of this Agreement.
"Actual Business Commencement Date" refers to and means the date of the grand opening of the Franchised Business and/or the date upon which the Franchised Business is open to the public.
- "Advertising Contributions" refers to and means any and all obligations of Franchisee to contribute to or pay fees to Franchisor, Franchisor's affiliate and/or designees as set forth in this Agreement including, but not limited to, the Brand Development Fund Fee (Article 9.A.).
- "Advertising Cooperative" shall have the meaning defined and set forth in Article 9.F. of this Agreement.
- "Alternative Channels of Distribution" refers to and means outlets that do not include Centers but do include stores, and/or internet/web based sales and similar outlets that sell HVAC-related products and equipment, and/or related branded products or services to the public.
- "Ancillary Agreements" refers to and means, individually and collectively, each and every agreement between: (a) Franchisor and Franchisee but, not including this Agreement; (b) Franchisor and each of Franchisee's Owners, whether individually and/or collectively; and (c) Franchisor and each Spouse of Franchisee's Owners, whether individually and/or collectively. Without limitation to the foregoing, the term Ancillary Agreements includes the Franchise Owner and Spouse Agreement and Guaranty, Lease Agreement Rider, Collateral Assignment of Lease and the Assignment of Telephone Numbers and Digital Media Accounts, as said agreements, individually and/or collectively, may have been entered into between the foregoing parties.
Source: Item 23 — RECEIPTS (FDD pages 55–263)
What This Means (2025 FDD)
According to Mrcool's 2025 Franchise Disclosure Document, the 'Recitals' section of the Franchise Agreement is significant because it lays the foundation for the agreement by describing Mrcool's established system and the franchisee's intentions. The recitals outline that Mrcool has developed a distinctive system for operating centers that distribute Mrcool-branded HVAC products and provide related services. It also states that the system is identified by Mrcool's marks, trade dress, service offerings, and operating procedures, which Mrcool may modify over time. For franchisees pursuing a multi-unit development, the recitals acknowledge the franchisee's request to develop multiple centers within a defined area, adhering to a development schedule and Mrcool's standards.
For a prospective Mrcool franchisee, the recitals confirm that they are entering into an agreement to operate under Mrcool's established system and brand. It highlights the importance of adhering to Mrcool's operational standards and specifications, as outlined in the Franchise Agreement, Operations Manual, and the system as a whole. The franchisee acknowledges that following these standards is essential for the success of all Mrcool Centers. The recitals also state that the franchisee and Mrcool have or will enter into a Center Franchise Agreement for the franchisee's first development center.
Furthermore, the agreement explicitly states that the recitals are considered true, accurate, and a material part of the agreement, thereby incorporating them into the main body of the agreement. This means that the statements made in the recitals are legally binding and can be relied upon by both Mrcool and the franchisee. The 'Recitals' section also introduces and defines key terms such as "Center", "MRCOOL Center(s)", and Approved Services and Products" which are referenced throughout the agreement. The definition of "MRCOOL Center(s)" includes businesses owned/operated by Mrcool, its affiliates, and authorized franchisees that utilize the System and/or Licensed Marks, including the Franchised Business.