Personal Responsibility for Your Financial Safety As documented by research in The Millionaire Next Door, most millionaires are business owners.

Brooke franchisees want to become successful business owners so they can build personal wealth. The support of a franchisor improves their odds for business success, however business success, especially the success of a sales professional franchise, is never easy or assured. Brooke sometimes assists franchisees by providing budgeting assistance and making commission advances, but the success of a sales professional franchise ultimately depends on their personal ambition, perseverance and financial discipline.

Safeguards Concept Brooke has implemented a set of safeguards to protect franchisees and their business partners. These include safeguards to: 1) protect consumers and insurance companies from inappropriate use of their premiums by individual franchisees, 2) protect franchisees from inaccurate and untimely commissions payments by the processing center, 3) protect insurance company relationships for benefit of the collective franchise network,4) protect and build the brand name for benefit of the collective franchise network, and 5) adequately communicate these safeguards through training for franchisees and employees.

Premium Safeguards Insurance premiums are billed and collected by either insurance companies or franchisees. Brooke requires premiums to be collected by insurance companies, not franchisees, when direct insurance company billing is available. In those circumstances where insurance premiums are billed and collected by franchisees, the franchisee is required to process these premiums in a responsible manner. Brooke has safeguards in place to help ensure insurance premiums are handled responsibly by franchisees because of the obvious importance to consumers, regulators and insurance companies. These premium safeguards include: 1) immediate collection and deposit of all franchise billed premiums in an independent trust account, 2) immediate allocation of all franchisee, or agency, billed insurance premiums directly from insurance company statements to the franchisee’s monthly statement, 3) matching of premium deposits to the independent trust account with the agency billed premiums allocated to the franchisee’s monthly statement, 4) identification of uncollected accounts, or the agency bill premiums allocated to the franchisee’s monthly statement that have not been matched with a deposit to the independent trust account and must be collected, and 5) identification of escrowed premiums, or the deposits to the independent trust account that have not been matched with the agency bill premiums allocated to the franchisee’s monthly statement and must be held in the trust account until paid.

Commissions Safeguards The proper allocation of commissions is of utmost importance to Brooke and its franchisees because revenues determine the amount of a franchisee’s compensation and the value of their business. Brooke has safeguards in place to help ensure that commission allocations are timely and accurate. These commission safeguards include: 1) segregation of duties among an experienced processing center staff that certifies each month the completion of their assigned tasks in
accordance with established procedures, 2) periodic monitoring of the processing center by an independent consulting firm to help ensure the employees’ monthly certifications are accurate, 3) holding all commissions received from insurance companies in an independent trust account until allocated to the individual franchisees, 4) holding all franchise billed premiums received from customers in an independent trust account until paid to insurance companies, 5) holding all insurance company agreements in a separate bankruptcy remote entity so franchisees’ commissions are insulated from Brooke creditors and the payment of franchisees’ commissions is not interrupted, 6)
holding commissions in an orphan account when customer account ownership is not readily identifiable so commissions are not allocated to the wrong franchisee, 7) coordinating franchisees’ inspection of the actual insurance company commission statements used to allocate commissions, and 8) paying rewards to franchisees who identify commission payments on their franchise statements
that belong to another franchisee.

Insurance Company Safeguards An important element of franchisee success is access to quality, competitive products provided by reputable property and casualty insurance companies. Brooke consolidates the purchasing power of all franchisees to expand and improve insurance company access. However, to enjoy the benefits of consolidated purchasing power, individual Brooke franchisees
and employees must each act responsibly to safeguard the relationship our collective organization has with insurance companies. To protect insurance company relationships, franchisees: 1) must know the underwriting and binding authority guidelines of each insurance company they represent, which limits the number of insurance companies for which they can write policies, 2) may not “adversely select” against insurance companies by writing policies for insurance companies with which Brooke does
not have an agreement, and 3) can not individually negotiate with insurance companies because it negates the benefits to insurance companies of dealing with one franchisor instead of many franchisees. Brooke employees negotiate commission rates directly with senior insurance company management and certify their negotiations have not been to Brooke’s advantage at the expense of a lower than “street level” commission rate to franchisees.

Brand Safeguards The image of an individual Brooke franchisee impacts the image of all Brooke franchisees. The following brand safeguards that are implemented by the advertising center to protect and build the collective Brooke image include: 1) branding and legal compliance standards that are developed and monitored for compliance by the advertising center, 2) use of advertising agencies, certified marketing representatives, demographic consultants and other independent advisors to help protect the Brooke brand, 3) advertising expertise gained by the advertising department from specialized duties and interaction with independent consultants help protect the Brooke brand, 4) administration of a significant advertising budget to build the Brooke brand for the good of the collective franchise organization, 5) allocation of a portion of the advertising budget to the sharing of expenses in local advertising campaigns initiated by franchisees provided the advertising center thinks the campaign will be effective and benefit the collective organization by promoting the centralized phone
number and Web site, 6) approving campaigns that make effective use of the advertising budget; campaign effectiveness is estimated by independent consultants, internal expertise and campaign surveys, and 7) public relations campaigns by individual franchisees that contribute to building a positive image of all Brooke franchisees. To help franchisees cultivate relationships with the local press, the advertising department retains a third party public relations service that builds local media
lists, contacts local news outlets and assists in local story development.

Training Safeguards Training represents the safeguard of the safeguards because implementation of
premium, commissions, insurance company and brand safeguards requires training and communication. Training also safeguards the collective franchise system by reducing E&O exposures and protecting professional reputations. A significant investment was recently made in new training academy facilities and an updated training curriculum.