BAJA SOL - FDD UFOC ITEM 7 Detail

ITEM 7.

ESTIMATED INITIAL INVESTMENT

The following chart summarizes your estimated costs to open and operate a franchised Baja Sol, Baja Sol Express, Baja Joe''s, or Baja Sol Cantina restaurant during the first three months of operation. There is no assurance that your experience will correspond with these cost estimates.

YOUR ESTIMATED INITIAL INVESTMENT

The Company is unable to calculate the exact investment required of each franchisee for a Baja Sol restaurant due to the many factors that influence the total project costs, such as location, amount of space leased, amount of remodeling needed, the extent of the landlord''s contribution and other factors. Your initial investment will also vary considerably depending upon the method and amount of financing that you use. Also, the table above does not reflect an amount for investment in real estate, since it is assumed that you will lease your premises. The Initial Franchise Fee, equipment, and other items are shown in full, although they may be financed or leased.

(1) Refundable less $5,000 and our administrative and direct out-of-pocket expense if you are terminated before opening. If you sign a Territory Development Agreement, you must also pay the Company a Development Fee equal to $5,000 multiplied by the number of Baja Sol Businesses you must develop in the Designated Territory. You must pay the Development Fee in full when you sign the Territory Development Agreement. The Development Fee is payable for the reservation of future development rights and is not refundable under any circumstances. You must sign a separate Franchise Agreement for each Baja Sol Business you develop under the Territory Development Agreement, and in addition to the Development Fee, you must also pay an Initial Franchise Fee for each Business you develop in the Designated Territory according to the following schedule:

Portion of Development
Number of Businesses��������������������������� Fee Applied to����������������������� Remaining Balance of

in Designated Territory����������������������� initial Franchise Fee�������������������� Initial Franchise Fee

1st���������������������������������������������������� $5,000 $25,000

2nd���������������������������������������������������� $5,000 $20,000

3rd or more��������������������������������������������� $5,000������������������������������������������� $15,000

You will pay the remaining balance of the applicable Initial Franchise Fee each time you sign a Franchise Agreement for a Baja Sol Business you develop according to the Development Schedule in the Territory Development Agreement. You must sign your first Franchise Agreement when you sign the Territory Development Agreement.

(2)                You must pay for the salaries, benefits, travel expenses and other expenses while you and your Manager attend the Initial Training.

(3)                The lease deposit payment has been estimated in terms of one month''s rent. If property is leased, the landlord may require the payment of advance monthly rent. This will vary depending upon the location and size of the premises and other related factors. The amount that you will pay per square foot per year for this retail space will vary depending upon the location of the retail space and local market conditions (see Notes 9 and 10). Any refund of the prepaid rent will be governed by the terms of the lease.

(4)                This represents the estimated architectural costs you will pay for architectural services needed for the design of your Location. The Company will provide you with design plans and specifications for a specific allotment of square footage. Because each space may be configured differently, you may require additional architectural services in order to conform the space to the design requirements.

(5)                Costs may vary considerably depending on the amount of the contribution made by the landlord for the construction of the leased premises for the Business.

(6)                If you open a Baja Sol Cantina, you will need to obtain a liquor license for your Business. Liquor license costs generally are less than $10,000. However, in isolated instances, you may have to pay up to $300,000 for a liquor license. You should check with the local licensing board to determine the cost of your liquor license.

(7)                You will spend at least $1,000 on grand opening expenses including public relations, promotions, marketing, advertisements, direct mail, coupons, and other initial marketing expenses for the opening of your Business.

(8)                This figure represents the amounts related to the fixtures and equipment for your Business, including merchandise displays, cash registers, backroom shelving, and related items. It also includes the computerized point-of-sale registers and computer system.

(9)                You should provide for funds with which to pay the Business overhead and your living expenses for at least the first three months of operation. In addition, before opening the Business, you will need to provide from 18 to 25 hours of training to each of your employees (15 to 20 individuals) plus food and lodging if training is held at a distant location.

(10)            We relied on our years of experience in the restaurant industry (see Item 1). You should review these figures carefully with a business advisor before making a final decision. These figures do not include real estate costs if purchased. The site is usually in an in-line storefront with square footage ranging from approximately 1,700 to 2,700, but we have opened three stores in regional shopping malls with approximately 800 to 900 square feet. We would also consider a free-standing building if the size and economics were advantageous. You should consult with a knowledgeable real estate advisor.

(11)            The chart estimates your initial start-up expenses as an owner-operator for the first three months, and includes estimated lease payments for three months, incorporation and other start-up costs, licenses, wages, other initial expenses, but not your salary. Real estate lease costs may vary and you should investigate your real estate market carefully. We can''t guarantee that your costs won''t be higher. You may need to put more cash into the Business until, or if you do not, achieve positive cash flow. Your costs will vary depending upon factors such as how well you follow our procedures; your financial situation and credit worthiness; your management, negotiating and sales skills; competition; economic conditions; the local market for the Business; and other factors.

(12) The range of estimated costs in the chart includes the estimated initial investment for a Baja Sol restaurant, a Baja Sol Express restaurant, a Baja Joe''s restaurant, or a Baja Sol Cantina restaurant.