BLENDZ - FDD UFOC ITEM 7 Detail

ITEM 7

ESTIMATED INITIAL INVESTMENT

YOUR ESTIMATED INITIAL INVESTMENT FOR A BLENDZ� STORE

Notes to ITEM 7:

(1) Expenditures, All estimates in this ITEM 7 are based upon new Blendz� Store locations with a building/premises size of approximately 1,250 to 1,500 square feet for a Blendz� Store which are constructed within a 2 to 3 month period. The time period to build-out your Blendz� Store may be shorter or longer depending upon the market conditions in your Authorized Territory. Your costs will be higher if you choose to open a larger Blendz� Store or if it takes longer to construct your Blendz� Store. The costs for fixtures, rent, and improvements will vary based on the square footage, location and other factors. All fees imposed by us or our Affiliates are non-refundable unless otherwise noted. Fees and expenses paid to vendors or other third parties may or may not be refundable depending on the arrangements you make with them.

(2)                 Initial Franchise Fee. The Initial Franchise Fee is $25,000. The Initial Franchise Fee is non-refundable once paid.

(3)                 Initial Training Fee. The Initial Training Fee is $5,000 and due 30 days prior to your scheduled initial training program. The Initial Training Fee includes the training for you, your Designated Store Manager or Operating Principal and 1 additional person for 3 weeks at our corporate headquarters located in Campbell, California and 1 week of home study training. The Initial Training Fee also includes our on-site assistance during your grand opening for up to 5 days.

(4)                 Space Layout and Design Fee. The Space Layout and Design Fee is $9,000 and due at the time you sign the Franchise Agreement. The Space Layout and Design Fee includes site selection assistance, assistance in negotiating with the landlord for your selected site to address our required lease provisions, a complete set of floor plan drawings for the Blendz� Store with any adjustments required by the applicable health department, and assistance in selecting a general contractor and obtaining comparative bids to construct the initial improvements to your Blendz� Store.

(5)                 Grand Opening and Promotional Kit Fee. The Grand Opening and Promotional Fee is $7,500 and is due as invoiced. The grand opening and promotional kit ("Grand Opening and Promotional Kit") includes 15 embroidered aprons, 30 black T-shirts, 25 name badges, 3 manager shirts, and an initial set of letterhead, business cards, paper menus, Blendz� cash cards, initial marketing collateral and direct mailers with postage for Grand Opening. We reserve the right to change the Grand Opening and Promotional Kit in our discretion. You should plan on spending a portion of this $7,500 at least 30 days prior to your grand opening of your Blendz� Store for direct mailers and marketing collateral. The Grand Opening and Promotional Kit will be delivered before your grand opening. The recommended grand opening celebration should last at least 1 day.

(6)                 Leasehold Improvements. In most cases you will need to alter the interior of your Blendz� Store location before you open your Blendz� Store. The costs will vary widely and may be significantly higher than projected in this table, depending on such factors as property location, labor and material costs, economic climate, prevailing interest rates and other financing costs, the conditions of the property and the extent of the alterations required. The estimates do not include the costs of any necessary site development or site engineering work, nor do they include capitalized costs of rent or other occupancy costs, over either the life of the lease or the life of your investment. In addition, these amounts do not reflect costs for the purchase of unimproved land and construction of a Blendz� Store building, which also would result in a significantly greater initial investment. These estimates assume that the landlord will provide a shell space which, at a minimum, includes concrete floors, demised walls, HVAC, roof, exhaust vent chaseway, and utilities sufficient for a Blendz� Store. You should investigate all of these costs in the area where you wish to establish your Blendz� Store.

(7)                 Furniture, Fixtures. Cabinetry and Interior Signage. These amounts include costs for chairs, tables, cabinetry, lighting fixtures, miscellaneous decor items and interior signs required for the Blendz� Store, office furniture, window treatments, artwork/artifacts, fans, flooring and plants. These estimates do not include any freight, tax or installation costs, and will vary depending on the location and size of the Blendz� Store.

(8)                 Computer Hardware. Software. POS and Security System and Music System. These amounts include costs for computer hardware and software, TV/Stereo system, cameras, wireless network equipment, safe, a complete point-of-sale ("POS") system (See ITEM 11), back of the house computer hardware, and all necessary guest check printers, credit card "swipe/read" terminals, printers, and modems. These estimates

do not include any freight, tax or installation costs, and will vary depending on the location and size of the Blendz� Store.

(9)                 Major Equipment. These amounts include costs for Panini grills, refrigerators, blenders, coffee and espresso makers, (if we approve your sale of coffee and espresso), other kitchen equipment, prep station, freezers, salad display, soup crocks, all necessary stainless steel fixtures and kitchen smallwares. Costs do not include freight, tax or installation costs that may vary substantially depending on the Blendz� Store''s location, configuration and local regulations.

(10)              Outside Sign. You must purchase our approved sign for your storefront. We will provide you with the specifications that must be followed.

(11)              Opening Inventory and Supplies. We estimate that the range given will provide sufficient inventory (food, beverages, and disposables and restaurant smallwares) for opening your Blendz� Store. These amounts may vary according to your sales volume and approved local suppliers'' terms. We reserve the right to change the selection of Opening Inventory and supplies at any time. Your initial supplies will vary depending upon the anticipated sales volume as well as current market prices. The required supplies will include, but not be limited to, non-branded paper products, silverware, etc., some of which will be purchased directly from us.

(12)              Security and Utilities Deposits/Licenses. These amounts include estimated security deposit (equal to 1 months'' rent) and utility deposits. The actual amount of these deposits will vary depending on local landlord practices and other factors. These amounts also include the estimated cost of obtaining a license or permit from a state agency to sell food. Other permit and license fees will also vary depending on location and on whether applicable laws require the payment of occupational or other taxes for the Blendz� Store. Franchise taxes are not included.

(13)              Legal and Accounting Fees. In most cases, the terms and conditions of all agreements relating to the purchase, lease or alteration of the property for your Blendz� Store will be negotiated by you and/or your legal counsel. However, we may require you to incorporate certain provisions into your lease. This estimate includes the legal expense for negotiating your lease. We may also require you to let us or our attorneys review your lease, in which case we may charge you a Lease Negotiation Fee.

(14)              Catering Equipment and Supplies. If we permit you to provide catering services after your second month of operating your Blendz� Store, you will be required to purchase a sign wrap approved by us and catering equipment and supplies, including but not limited to, warming equipment and catering menus.

(15)              Catering Vehicle. If we permit you to provide catering services after your second month of operating your Blendz� Store, we will require that you purchase or lease a new sports utility vehicle or van. We will provide you with the type and model of the, vehicle required, including color. The range provided in this Franchise Disclosure Document assumes that you will lease a vehicle. If you buy a vehicle the range will be more. You must obtain our approval for your catering vehicle. To receive our approval, the catering vehicle must, at a minimum, have a large surface area for marketing graphics, a large interior cargo space and receive above average gas mileage.

(16)              Catering Training Fee and Travel Expenses to Attend Catering Training. Prior to offering catering services, you must attend our catering training program. The catering training fee is $500 ("Catering Training Fee") and due 30 days prior to your scheduled catering training. The catering training is 1 day at our corporate headquarters located in Campbell, California. You are responsible for all expenses incurred by your attendees to participate in the catering training, including travel, lodging and meals.

(17)              Additional Funds. These amounts represent our estimate of the amount needed to cover your expenses for the initial 3-month start-up phase of your Blendz� Store. They include rent, common area maintenance, insurance, property taxes, and other typical lease expenses, payroll, administrative, janitorial, maintenance and utilities. These figures do not include standard pre-opening expenses, royalties or advertising fees payable under the Franchise Agreement or debt service and assume that none of your expenses are offset by any sales generated during the start-up phase. For purposes of this disclosure, we estimated the start-up phase to be 3 months from the date the Blendz� Store opens for business. These figures are estimates, and we cannot guarantee that you will not have additional expenses starting the business. You must bear any deviation or escalation in costs from the estimates that we have given. Your costs will depend on factors such as; how well you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions; the local market for your products and services; the prevailing wage rate; competition; the sales level reached during the start-up period; and the size of your Blendz� Store.

(18) Total. We relied on the experience of our Affiliate and their principals in opening and developing company-owned Blendz� Stores to compile these estimates. You should review these figures carefully with a business advisor before making any decision to purchase the franchise. We do not offer financing directly or indirectly for any part of the initial investment. The availability and terms of financing will depend on factors such as the availability of financing generally, your creditworthiness, collateral you may have and lending policies of financial institutions from which you may request a loan.

YOUR ESTIMATED INITIAL INVESTMENT EXPRESS UNIT

Notes to ITEM 7:

(1)                 Expenditures. All estimates in this ITEM 7 are based upon a new Express Unit location with a size of approximately 250 square feet for an Express Unit, which are constructed within a 1 to 2 month period. Your costs will be higher if you choose to open a larger Express Unit location or if it takes longer to construct your Express Unit location. The costs for fixtures, rent, and improvements will vary based on th� square footage, location and other factors. All fees imposed by us or our Affiliates are non-refundable unless otherwise noted. Fees and expenses paid to vendors or other third parties may or may not be refundable depending on the arrangements you make with them.

(2)                 Express Unit Fee. The Express Unit Fee is $10,000. The Express Unit Fee is non-refundable once paid.

(3)                 Initial Training Fee. The Initial Training Fee is $3,500 and due 30 days prior to your scheduled Express Unit initial training program. The Initial Training Fee includes the training for you, your Designated Store Manager or Operating Principal and 1 additional person for up to 5-7 days at our corporate headquarters located in Campbell, California. You will be required to pay for you, your Designated Store Manager or Operating Principal and 1 additional person to attend the initial training program, including airfare, lodging and meals incurred during the initial training program.

(4)                 Space Layout and Design Fee. The Space Layout and Design Fee is $5,500 and due at the time you sign the Franchise Agreement. The Space Layout and Design Fee includes site selection assistance, assistance in negotiating with the landlord for your selected site to address our required lease provisions, a complete set of floor plan drawings for the Express Unit with any adjustments required by the applicable health department, and assistance in selecting a general contractor and obtaining comparative bids to construct the initial improvements to your Express Unit.

(5)                 Leasehold Improvements. In most cases you will need to alter the interior of your Express Unit location before you open your Express Unit. The costs will vary widely and may be significantly higher than projected in this table, depending on such factors as property location, labor and material costs, economic climate, prevailing interest rates and other financing costs, the conditions of the property and the extent of the alterations required. The estimates do not include the costs of any necessary site development or site engineering work, nor do they include capitalized costs of rent or other occupancy costs, over either the life of the lease or the life of your investment. In addition, these amounts do not reflect costs for the purchase of unimproved land and construction of a building, which also would result in a significantly greater initial investment. These estimates assume that the landlord will provide a shell space which, at a minimum, includes concrete floors, demised walls, HVAC, roof, exhaust vent chaseway, and utilities sufficient for an

Express Unit location. You should investigate all of these costs in the area where you wish to establish your Express Unit.

(6)                 Furniture, Fixtures. Computer Hardware and Software and POS. These amounts include costs for chairs, tables, restaurant smallwares, TV/Stereo system, cameras, wireless network equipment, office furniture, safe, window treatments, artwork/artifacts, fans, flooring, plants, computer hardware and software, lighting fixtures, miscellaneous decor items and interior signs required for the Express Unit. These estimates also include costs for a complete point-of-sale ("POS") system (See ITEM 11), back of the house computer hardware, and all necessary guest check printers, credit card "swipe/read" terminals, printers, and modems. These estimates do not include any freight, tax or installation costs, and will vary depending on the location and size of the Express Unit.

(7)                 Equipment. These amounts include costs for Panini grills, refrigerators, blenders, coffee and espresso makers, (if we approve your sale of coffee and espresso) other kitchen equipment, prep station, freezers, salad display, soup crocks, all necessary stainless steel fixtures and kitchen smallwares. Costs do not include freight, tax or installation costs that may vary substantially depending on the Express Unit''s location, menu offerings, configuration and local regulations.

(8)                 Signs. You must purchase our approved sign for your storefront. We will provide you with the specifications that must be followed.

(9)                 Opening Inventory and Supplies. We estimate that the range given will provide sufficient inventory (food, beverages and disposables) for opening your Express Unit. These amounts may vary according to your sales volume and approved local suppliers'' terms. We reserve the right to change the selection of Opening Inventory and supplies at any time. Your initial supplies will vary depending upon the anticipated sales volume as well as current market prices. The required supplies will include, but not be limited to, non-branded paper products, silverware, etc., some of which will be purchased directly from us.

(10)              Deposits. These amounts include the estimated security deposit (equal to one months'' rent) and utility deposits. The actual amount of these deposits will vary depending on local landlord practices and other factors. These amounts also include the estimated cost of obtaining a license or permit from a state agency to sell food. Other permit and license fees will also vary depending on location and on whether applicable laws require the payment of occupational or other taxes for Express Units. Franchise taxes are not included.

(11)              Pre-Opening and Grand Opening. You should plan to spend a minimum of $1,000 on your pre-opening advertising and grand opening. Your pre-opening advertising should begin at least 30 days before your grand-opening of your Express Unit. The recommended grand opening celebration should last at least 2 days.

(12)              Legal and Accounting Fees. In most cases, the terms and conditions of all agreements relating to the purchase, lease or alteration of the property for your Express Unit will be negotiated by you and/or your legal counsel. However, we may require you to incorporate certain provisions into your lease. This estimate includes the legal expense for negotiating your lease. We may also require you to let us or our attorneys review your lease, in which case we may charge you a Lease Negotiation Fee.

(13)              Additional Funds. These amounts represent our estimate of the amount needed to cover your expenses for the initial 3-month start-up phase of your Express Unit. They include rent, common area maintenance, insurance, property taxes, and other typical lease expenses, payroll, administrative, janitorial, maintenance and utilities. These figures do not include standard pre-opening expenses, royalties or advertising fees payable under the Franchise Agreement or debt service and assume that none of your expenses are offset by any sales generated during the start-up phase. For purposes of this disclosure, we estimated the start-up phase to be 3 months from the date the Express Unit opens for business. These figures are estimates, and we cannot guarantee that you will not have additional expenses starting the business. You must bear any deviation or escalation in costs from the estimates that we have given. Your costs will depend on factors such as: how well you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions; the local market for your products and services; the prevailing wage rate; competition; the sales level reached during the start-up period; and the size of your Express Unit.

(14) Total. We relied on the experience of our Affiliate and their principals in opening and developing affiliate-owned Express Units to compile these estimates. You should review these figures carefully with a business advisor before making any decision to purchase the franchise. We do not offer financing directly or indirectly for any part of the initial investment. The availability and terms of financing will depend on factors such as the availability of financing generally, your creditworthiness, collateral you may have and lending policies of financial institutions from which you may request a loan.