Mister Sparky Franchise

Financing Details

Mister Sparky Franchising may, at its discretion, allow franchisees to finance up to 75% of the initial Franchise Fee and any applicable Additional Population Fee. These financed amounts can be paid in up to 36 monthly installments of principal and interest, with an annual interest rate of 12%. Payments begin on the first of the month following the first full month after the Franchise Agreement is signed, and prepayments can be made without penalty. For franchisees under the Conversion Incentive Program, Mister Sparky Franchising permits financing of 100% of the Franchise Fee and any Additional Population Fee, minus a $5,000 down payment. Payments on this promissory note are deferred for five years, after which the balance is payable in 48 monthly installments at a 12% annual interest rate. Up to 100% of the note balance may be forgiven, depending on the Franchised Business's performance in its fifth year of operation compared to its pre-conversion gross revenue. To qualify for financing, franchisees must sign a Promissory Note and Guaranty, and if the franchisee is a business entity, its owners must also sign as guarantors. Mister Sparky Franchising requires a security interest in the assets of the Franchised Business for the Promissory Note. The franchisor does not offer other direct or indirect financing, nor does it guarantee any third-party loans, leases, or other obligations.

Litigation Summary

Mister Sparky Franchising SPE LLC, along with its affiliates Benjamin Franklin Franchising SPE LLC and One Hour Air Conditioning Franchising SPE, LLC, is currently involved in a lawsuit filed on February 2, 2024. This case, ongoing in a U.S. District Court in Michigan, alleges breach of contract, enforcement of a non-compete clause, trademark infringement, unfair competition, and collections against David Michael Plumbing, Inc. and its owners. Mister Sparky Franchising has also been involved in three concluded legal actions. In 2014, Mister Sparky's predecessor was sued by a former franchisee for trademark infringement and unfair competition; this case was resolved by a settlement in May 2015. In a separate action in January 2015, Mister Sparky's predecessor sued one of its Nevada franchisees for alleged non-competition violations, which was also resolved by a settlement in May 2015, leading to the termination of the franchisee's agreement. Lastly, in February 2018, Mister Sparky's predecessor and affiliates filed a lawsuit against a former New Hampshire franchisee to collect unpaid fees following the franchisee's bankruptcy; this action was automatically stayed by the owner's personal bankruptcy filing and was non-suited without prejudice in August 2018.

Renewal Conditions

To renew their Mister Sparky franchise for one additional term of 10 years, franchisees must meet several conditions. They need to provide written notice of their desire to renew 6 to 12 months before the current agreement's expiration. Franchisees must be in good standing, meaning no defaults on their agreement or any other agreements with Mister Sparky or its affiliates, and maintain a good record of customer service and compliance with brand standards, without any litigation or adversarial legal proceedings with the franchisor. At Mister Sparky's option, franchisees will sign the then-current standard Franchise Agreement, which may have substantially different terms, including different fees and higher minimum performance requirements. Franchisees must pay a renewal fee, sign a general release of claims against Mister Sparky, and meet current training requirements. They also need to demonstrate their right to occupy the approved location for the renewal term and must remodel, refurbish, renovate their vehicles and premises, and update computer systems and vehicles to meet current brand standards. If a franchisee fails to sign the new agreement by the expiration date, Mister Sparky may treat the franchise as expired or allow it to continue month-to-month, potentially charging the new royalty rate.

Staffing Notes

Mister Sparky Franchising requires franchisees to maintain adequate staffing to meet Brand Standards, though specific numbers are not explicitly mandated beyond 'approximately two employees' for initial operations. Franchisees are solely responsible for all employment decisions, including recruiting, hiring, training (beyond initial franchisor-provided training), compensation, and discipline. The franchisor may recommend certain policies, but these are for guidance and do not constitute control over employment. Mister Sparky may require initial and periodic drug testing and background checks for employees, and franchisees are responsible for ensuring their employees comply with social media policies. Franchisees must clearly inform all workers that they are employees of the franchisee, not Mister Sparky Franchising, and must indemnify the franchisor against any claims of co-employment.