The Company was formed in March 2006 to design, manufacture and sell chiropractic tables and beds. The Company generated only changing revenue and essentially abandoned its business plan in March 2008.
On July 2, 2010 the Company acquired BFK Franchise Company, LLC, a Nevada limited liability company formed in May 2009, for 9,000,000 shares of the Company’s common stock.
On the July 7, 2010, shareholders holding a majority of the Company’s outstanding common stock approved an amendment to the Company’s Articles of Incorporation changing the name of the Company to Creative Learning Corporation.
Unless otherwise indicated, all references to the Company include the operations of BFK.
BFK, which conducts business under the trade name, BRICKS 4 KIDS®, offers programs designed to teach principles of engineering, architecture and physics to children ages 3-12+ using LEGO® bricks. BFK provides classes (both in school and after school), special events programs and day camps that are designed to enhance and enrich the traditional school curriculum, trigger young children’s lively imaginations and build self-confidence. BFK’s programs foster creativity and provide a unique atmosphere for students to develop problem solving and critical thinking skills by designing and building machines, catapults, pyramids, race cars, buildings and numerous other systems and devices using LEGO® bricks.
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LEGO® Bricks
LEGO® is a line of construction toys manufactured by the LEGO® Group, a privately held company based in Billund, Denmark. The flagship product, LEGO®, consists of colorful interlocking plastic bricks and an accompanying array of gears, minifigures and various other parts. LEGO® bricks can be assembled and connected in many ways to construct such objects as vehicles, buildings, and even working robots. Anything constructed can then be taken apart, and the pieces used to make other objects. The toys were originally designed in the 1940s in Europe and have achieved an international appeal, with an extensive subculture that supports LEGO® movies, games, video games, competitions, and four LEGO® themed amusement parks.
LEGO® pieces of all varieties are a part of a universal system. Despite variation in the design and purpose of individual pieces over the years, each remains compatible in some way with existing pieces. LEGO® bricks from 1958 still interlock with those made in 2010, and LEGO® sets for young children are compatible with those made for teenagers.
Bricks, beams, axles, gears, mini figures, and all other parts in the LEGO® system are manufactured to an exacting degree of precision. When snapped together, pieces must have just the right amount of strength and flexibility mixed together to stick together. They must stay together until pulled apart. They cannot be too easy to pull apart, or the resulting constructions would be unstable; they also cannot be too difficult to pull apart, since the disassembly of one creation in order to build another is part of the LEGO® appeal.
Since it began producing plastic bricks, the LEGO® Group has released thousands of sets themed around a variety of topics including town and city, space, robots, pirates, LEGO® Trains, Racers, Vikings, castles, Bionicle, dinosaurs, holiday locations, scuba diving and undersea exploration, the wild west, the Arctic, airports and miners.
The LEGO® range has expanded to encompass accessory motors, gears, lights, sensors, and cameras designed to be used with LEGO® components. Motors, battery packs, lights and switches are sold under the name Power Functions. The Technics line utilizes newer types of interlocking connections that are still compatible with the older brick type connections. The Technics line can often be motorized with Power Functions.
LEGO® initiated a robotics line of toys called “Mindstorms” in 1998, and has continued to expand and update this range ever since. The product originated from a programmable brick developed at the MIT Media Lab and the name is taken from a paper written by a computer scientist and educator who developed the educational theory of constructionism, and whose research was at times funded by the LEGO® Group.
The programmable LEGO® brick which is at the heart of these robotics sets has undergone several updates and redesigns, with the latest being called the 'NXT' brick, and sold under the brand name of LEGO® Mindstorms NXT 2.0 or 1.5. The set includes sensors that detect touch, light, sound and ultrasonic waves, with several others being sold separately, including an RFID reader. The intelligent brick can be programmed using software available for both Windows and Mac computers, and is downloaded onto the brick via Bluetooth.
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Current Programs Offered by BFK
In-school field trips. One-hour classes during school hours. Classes are correlated to the science for a particular grade level. Teacher guides, student worksheets, and step-by-step instruction are provided. Recommended fees: $5-$8 per student.
After-school classes. One hour, one day a week class held after school. Recommended fees: $10-$15 per class per child, minimum commitment is usually 4 classes.
Pre-school classes. Classes can be held in pre-schools for children of pre-school ages. Recommended fees; $5-$7 per child.
Classes for home-schooled children. Classes can be held in the home of one of the parents of a home-schooled child. Recommended fees: $8-$10 per child.
Camps. Normally 3 hours per day for 5 days. Camps can take place at schools or at other child-related venues. Children use LEGO® bricks to explore various science and math concepts while working in an open, friendly environment. The material covered each session varies depending on students’ ages, experience, and skill level. A new project is built each week. Architectural concepts are taught while assembling buildings, castles and other structures. Instructional content includes concepts of friction, gravity and torque, scale, gears, axles and beams. The curriculum can include the construction of a scaled model of the children’s school or the school mascot. The children work and play with programmable LEGO® bricks along with electric motors, sensors, system bricks, and LEGO® Technic pieces (i.e. gears, axles, and beams). Recommended fees: $125-$150/child. Children go home with a small LEGO® project (cost about $5/child)
Birthday Parties. In the home of the birthday child. Recommended fees: $150 per party up to 10 children. If over 10 children the fee is $10/child.
Special Events. Activities with LEGO® bricks can be held in various locations including church centers, lodges, child-related venues, private schools, pre-schools, etc. Program can include parents, grandparents and all children in the family. Recommended fees: $5 per family.
Operating Units
BFK operates through Corporate Creativity Centers and franchisees.
A Corporate Creativity Center is a store-front location, owned and operated by BFK, where BFK coordinates in school field trips, after school classes, parties, camps and other programs – as well as the retail sales of LEGO® merchandise.
As of December 15, 2011 BFK had:
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1 Corporate Creativity Center in Florida.
105 franchises in 26 states and 3 foreign countries.
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Franchise Program
A franchisee pays a one-time, non-refundable franchise fee of $24,000 upon the execution of the franchise agreement and is required to pay BFK a royalty of 7% of the amount received from the operation of the franchise.
The franchisee is granted an exclusive territory and a license to use the “Bricks 4 Kidz®” name and trademarks in the franchised territory. The franchisee is required to conform to certain standards of business practices. Each franchise is run as an independent business and, as such, is responsible its operation, including employment of adequate staff.
Franchisees are permitted to assign their franchise provided that BFK receives advance notice of the proposed assignment, the transferee assumes the obligations under the franchise agreement, the transferee meets certain conditions and qualifications, and BFK receives a $5,000 transfer fee.
The term of the franchise is for ten years. BFK has the right to terminate any franchisee in the event of the franchisee’s bankruptcy, a default under the franchise agreement, or other events. The franchisee has the right to renew the franchise for an additional ten years if, at the time of renewal, the franchisee is in good standing and pays a renewal fee in the amount of $5000.
In addition to the $24,000 franchise fee, a franchisee is advised that an additional investment of between $8,000 and $23,000 will be required for such things as equipment and supplies, insurance, marketing and working capital during the start-up phase of the business.
Competition
To the best of BFK’s knowledge, there are no companies franchising a model similar to that of Bricks 4 Kidz®. However, Play-Well Teknologies, with offices in San Anselmeo and Pleasanton, California, offers after-school classes, camps and birthday parties using LEGO® bricks. Vision Education and Media offers after school classes using LEGO® bricks in its office in New York City, NY. In addition, several other small businesses around the country offer after-school classes and vacation camps using LEGO® bricks. These classes and camps are typically held in elementary schools, middle schools and community colleges.
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Government Regulation
The offer and sale of franchises, and the operations of franchises in some respects, are regulated by the Federal Trade Commission and some state governments.
In 1979 the Federal Trade Commission promulgated what became known as the FTC Franchise Rule. The FTC Franchise Rule requires detailed disclosure of a wide variety of information as a condition to selling a franchise, but the rule does not regulate the franchise relationship or require any filing or registration on the part of a franchisor. The FTC Franchise Rule requires that the franchisor provide a disclosure statement or prospectus to each prospective buyer prior to execution of a contract or payment of money relating to the franchise relationship.
However, the FTC Franchise Rule is narrow and does not preempt state law, which often is stricter than the FTC Franchise Rule. As such, numerous states require franchise disclosure documents to be registered with the state authorities, and numerous states regulate the franchise relationship itself.
California, Florida, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Texas, Utah, Virginia, Washington and Wisconsin all have franchise statues and regulations which typically require a franchisor to file or register its offering with the state government and to provide all prospective franchisees with the disclosure document.
In these so called “registration states”, state regulatory agencies review the franchisor’s registration application, the franchise disclosure document, the proposed franchise agreement and any other agreements franchisees must sign. State regulators also review the financial condition of the franchisor, the background of the franchisor’s executives and sales agents and provisions regarding the rights and remedies of the franchisor and the franchise as provided in the franchise agreement. These state agencies can deny registration if they believe that the sale of the franchise would be deceptive in any way.
Numerous other states have laws regulating various facets of the relationship between the franchisee and franchisor. These “relationship laws” typically regulate franchisors’ ability to terminate or refuse renewal of a franchise, contain provisions requiring that a franchisor have “good cause” before terminating or refusing to renew a franchise and may also address other issues such as the right of a deceased franchisee’s heirs to continue the franchise after the original investor’s death. Some laws require a franchisor to buy back excess inventory from the franchisee in the even of termination. Some state laws make it illegal for a franchisor to demand a general release from a franchisee as a condition of renewing or entering into a new agreement.
Under the FTC Franchise Rule, the FTC has the authority to seek civil penalties against a franchisor for violations of the FTC Franchise Rule. Each of the “registration states” has similar authority to seek penalties for violations of their requirements. Violations may include the offer or sale of an unregistered franchise, failing to timely provide the disclosure document to a prospective franchisee or making misrepresentations in the franchise disclosure documents. Additionally, officers of the franchisor may have personal liability if they had knowledge of or participated in the violations.
Individuals cannot sue a franchisor for a violation of the FTC Franchise Rule. However, most of the pre-sale disclosure states grant a private right of action for violation of the state statue and have remedies that typically include damages, rescission of the franchise agreement and attorneys’ fees.
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General
The Company’s offices, consisting of approximately 1,100 square feet, are located in an office/condo complex at 701 Market, Suite 113, St. Augustine, FL 32095. The Company purchased this unit in July 2011 for $50,000,
As of December 15, 2011 the Company employed five persons on a full time basis.
The Company’s website is www.bricks4kidz.com.
LEGO® is a registered trademark of the LEGO® Group of companies which do not sponsor, authorize or endorse BFK’s programs or its website.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
See Item 1 of this report.
ITEM 3. LEGAL PROCEEDINGS
BFK Franchise Company vs. Robin Staples CA-11-1595. On September 29, 2011 BFK filed a suit against Robin Staples in the Circuit Court, St. Johns County, Florida. The suit alleges that Robin Staples violated the non-compete clause in an agreement that BFK entered into with Ms. Staples in 2010. BFK has petitioned the court for an injunction against Ms. Staples to enjoin her from operating her competing business.
Robin Staples vs. BFK Franchise Company, LLC, No. 11-2-37615-0 SEA. On October 31, 2011 Robin Staples filed a complaint in the SUPERIOR COURT OF WASHINGTON FOR KING COUNTY against BFK alleging that she did not violate any non-compete with respect to the Staples Agreement that BFK entered into with Ms. Staples in 2010. BFK filed an answer and petitioned the court for a stay until the case in St. Johns County is adjudicated.