BREADSMITH - FDD UFOC ITEM 7 Detail

Item 7

INITIAL INVESTMENT FULL SERVICE STORE

NOTES:

Note 1. None of these payments are refundable.

Note 2. BFI Equipment payable 60% upfront (with option to pay in full), 40% due net 30 from order, Install Fee due upon successful installation (testing complete), all other fees (custums, shipping, storage, etc.) as they occur. Some vendors may offer financing for a portion of equipment to qualified purchasers. Your investment in equipment, whether by purchase or lease, will depend on how you acquire and finance the equipment.

Note 3. We do not recommend that you acquire real estate for your BREADSMITH bakery. You should lease space in a we 11-maintained, high-traffic neighborhood shopping center. The typical BREADSMITH site is between 1,800 and 2,100 square feet. Rental rates vary for acceptable locations and may be between $15.00 and $30.00 a square foot, plus common area maintenance (CAM) charges. The cost of leasehold improvements will vary depending on location, local construction costs, zoning, deposits, and other factors. You must obtain our approval for the site before you sign a lease.

Note 4. You will need an initial supply of ingredients and supplies in your opening inventory. The estimated cost should cover approximately 2-3 weeks of operation. All supplies and inventory must meet our standards (See Item 8).

Note 5. Signage costs may vary by location, construction, size, color, material and individual contractor''s specifications.

Note 6. The estimate includes deposits that may be refundable to you at a later time. In most cases, your lease will require you to pay electric, gas, water and other utilities directly; however, some landlords cover some utility charges through CAM fees or operating fees they include in the lease.

Note 7. The promotion cost estimate will vary with the type of media you choose to use. Costs also vary by location. Public relations event costs will also vary by type of event and location.

Note 8. This estimate includes the cost for you to travel to our office for initial training. It does not include any salary for you while training. The estimate includes a salary for new employees who train on location for one week before you open your store.

Note 9. The estimate also includes the premium on insurance for your business during preopening. You must maintain in effect an insurance policy with an "all insurance" carrier, naming us as an additional insured. The insurance must include public liability insurance in no less than $2,000,000 combined single limits for bodily injury and property damage, comprehensive and collision auto liability insurance with $2,000,000 combined single limit for both bodily injury and property damage, business interruption insurance for a period of at least 180 days, and all risk replacement coverage.

Note 10. This amount is an estimate of your initial start-up expenses. The estimate is based on an owner-operated business and does not include any salaries or benefits for the owner. It also does not include payroll costs for other employees. You may need additional cash after the first 6 months, as we cannot estimate or promise when, or whether, you will achieve positive cash flow or profits. Since these figures are estimates, we also cannot guarantee you will not have additional expenses either in starting the business or during the first 6 months. Your costs will depend on factors like: how closely you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions, the local market for each store; the prevailing wage rate; competition; and the sales level reached during this initial period.

Note 11. In putting together these estimates, we relied on the experiences of our franchisees who opened stores in the last 24 months, and our current costs. Your actual investment could be different than our experience, particularly if you add features to your store that are above and beyond those normally contained in our stores. We do not offer financing for any part of the initial investment. The availability and terms of financing will depend on factors like the availability of financing generally, your credit worthiness, your relationship with local banks, and any additional collateral you may offer to a lender to secure the loan. Our estimates do not include any finance charges, interest or debt service obligations you incur to finance your store.