BRUEGGERS BAGELS - FDD UFOC ITEM 7 Detail

ESTIMATED INITIAL INVESTMENT

The estimate below is for a single Bruegger''s Bakerv-caf�. You should review the chart in conjunction with the notes that follow it.

YOUR ESTIMATED INITIAL INVESTMENT

The estimate below is for a single Bruegger''s Kiosk. You should review the chart in conjunction with the notes that follow it.

NOTES TO BAKERY-CAFE AND KIOSK CHARTS

(1) You must obtain your dough for the Bakery either from one of BEI''s commissaries, from a dough production facility that you construct, from another franchisee''s commissary, or from an approved supplier. The estimated costs for site improvements and equipment do not include the costs of a commissary or dough production facility. Exhibit D to this disclosure document lists all commissaries in our System.

(2)                 You must sign a Development Agreement and pay a development fee, as described in Item 5. If the number of Bakeries that you commit to open is three or fewer, the development fee is $10,000 times the number of Bakeries that you commit to open in the Development Area in accordance with your Development schedule. If the number of Bakeries that you commit to open is greater than three, the development fee is $30,000 for the first three Bakeries plus $5,000 times the number of Bakeries in excess of three that you commit to open.

(3)                 This estimate reflects the first installment of the franchise fee for your first Bakery. We will credit $10,000 of the development fee toward the initial franchise fee for each of the first three Bakeries that you open under the terms of the Development Agreement. We will credit $5,000 of the development fee toward the initial franchisee fee of each Bakery in excess of three that you open under the terms of the Development Agreement. The initial franchise fee for a Bakery-cafe is payable in two installments: 50% at the time you execute the Franchise Agreement, and the balance, less the development fee credit noted above, one week prior to the bakery opening. The initial franchise fee for a Kiosk is payable in two installments: 50% at the time execute your Franchise Agreement, and the balance, less the development fee credit noted above, one week prior to the time the Kiosk opens for business. (See Item 5.)

(4)                 A typical Bakery-cafe is a 1,200-2,500 square foot facility located in a mall, strip center or free-standing location. A typical Kiosk is less than 1,200 square feet. The cost of purchasing or leasing and developing a suitable site varies widely depending on the size, type, and location of the Bakery and the local real estate market. As discussed elsewhere in this disclosure document, if your Bakery is not within a 4-hour drive of an existing commissary, and an approved supplier is not otherwise available, you must provide additional space at your premises for BEI to establish a dough production facility. See below under "Dough Production Facility.''

(5)                 Typically, we require improvements including floor covering, wall covering, electrical modifications, partitions, installation of heating and cooling systems, painting, and lighting. You must engage a qualified architect or engineer to prepare preliminary and final architectural and engineering drawings and specifications for the Bakery consistent with our representative plans for a Bakery. For your first Bakery, we also require that you retain the services of a professional construction manager. The estimate includes the typical fees for the architect or engineer and for the construction manager. Your lessor may offer, or you may be able to negotiate, a tenant improvement allowance to reduce your cost of Site improvements, but the estimate does not include any such allowance.

(6)                 The estimate includes the equipment typically situated at a Bakery and installation costs. It does not include equipment for a dough production facility. (See below, "Dough Production Facility.") The estimate is lower for a Kiosk because Kiosks do not include baking equipment and typically do not have seating (though they may share seating in a food court).

(7)                 This estimate includes both exterior and interior signage. The cost varies depending on the size and location of the signs.

(8)                 You must use the BagelNet System in your Bakery. See Items 5, 6 and 11 for additional information on the BagelNet System.

(9)                 This estimate is for inventory and supplies in quantities typically sufficient for your first week of operations. You will obtain your dough, cream cheese and other products from a dough production facility and/or commissary (which may be owned by BEI, by you, or by another Bruegger''s franchisee) or from an approved supplier.

(10)             You must conduct a Grand Opening of your Bakery within 30 days of opening in accordance with a grand opening marketing plan that you develop and we approve. We reserve the right to require you to deposit with us the funds required for the Grand Opening, to distribute as necessary to conduct the grand opening marketing plan. You may have additional expenses for promotional materials.

(11)             This estimate is for the first year''s premiums for insurance meeting our current requirements. Insurance costs will vary depending upon the size and location of the Bakery, your claims history, and other factors. You must obtain general liability insurance with minimum limits of $2 million per claim and an umbrella policy with minimum limits of $5 million. See Item 8 for further information about your obligations with respect to insurance.

(12)             Some utility companies may require you to provide deposits or pay installation charges for utility services, including electrical, gas, water, sanitation, and telephone service. Local, municipal, county and state regulation may require that you obtain licenses and permits to operate your Bakery.

(13)             You must designate a manager and at least one baker for the Bakery. Within 120 days before your first Bakery opens for business, you (or your approved Operator), your manager, your baker, and your dough production facility manager, if applicable, must complete our training program to our satisfaction. We charge no fee for certification exams, instructors, or the training facilities for this training. We currently do not charge for training materials, although we may in the future. This is an estimate of the cost of your and your trainees'' lodging, meals, travel expenses, wages and uniforms (white oxford shirt, dark or khaki pants). See Item 11 for more details on training.

(14)             This is an estimate of the additional funds you will need during the initial period of operation, which we define as three months from the opening of the Bakery. The estimate does not include royalties, NAC Fund contributions, or any compensation that you may choose to pay yourself. These figures are estimates; we cannot guarantee that you will not have additional expenses starting the business. Your actual costs will depend on many factors, including how closely you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions; the local market for our product; the prevailing wage rate; competition; and the sales level reached during the initial period.

We relied on the experience of the Company-owned Bakeries in making the estimates in this Item 7. The amounts noted in Item 7 as payable to us are not refundable.

Dough Production Facility

If there is no commissary within a 4-hour drive of your Bakery, and an approved supplier is not otherwise available, we will notify you before you sign a Development Agreement whether you will be required to construct a dough production facility in or near your first Bakery. (See Items 8 and 11.) You will incur additional costs for leasehold improvements to meet our specifications for a dough production facility. You may incur the cost of leasing the equipment for the dough production facility from BEI. A typical start-up, dough-only facility located in the rear of a Bakery, with a maximum capacity to supply one to six Bakeries, will require an additional 500 to 800 square feet beyond that required for a typical Bakery. You will need 3,000 to 3,500 square feet of space for a commissary to supply seven to 15 Bakeries. Your estimated costs for such facilities appear below.

(1)                
As noted above, we may require that you construct a dough production facility (see Item 8, Dough.) Before commencing leasehold improvements, you must employ a qualified architect or engineer to prepare preliminary and final architectural and engineering drawings and specifications consistent with our representative plans. Typically, we require improvements including floor covering, wall covering, electrical modifications, partitions, and installation of heating and cooling systems, painting, and lighting.

(2)                 The cost for purchasing or leasing and developing a suitable site varies widely depending on the size, type of location of the site, and the local real estate market. Typical size of a dough production facility is 500 to 800 square feet and of a commissary is 3,000 to 3,500 square feet.

(3)                 This estimate is for the first year''s premium for the insurance meeting our current requirements (see Item 8).

(4)                 Some utility companies may require you to provide deposits or pay installation charges for utility services, including electrical, gas, water, sanitation, and telephone service. Local, municipal, county and state regulation may require that you obtain licenses and permits to construct the dough production facility.

(5)                 This estimate is of the yearly lease payments to BEI if you are required to construct and operate a dough production facility and lease the equipment from BEI. The lease rate is 10% annually of BEI''s total capital cost to acquire the equipment. It is payable to BEI in equal monthly installments on the first day of each month via electronic funds transfer. (See Equipment Lease Agreement, Exhibit I.)