CARTRIDGE WORLD UNIT - FDD UFOC ITEM 7 Detail

Item 7. ESTIMATED INITIAL INVESTMENT.

The following table estimates pre-opening costs and additional funds for reguired expenses a-franchisee is expected to incur in the initial period of operations, which is a 3 month period.

- Deleted: pursuant to the Master Franchise Agreement

( Deleted: may

Deleted: If the fund is insufficient to pay the expenses of the Master Franchise and Stores in a reasonable business-like manner, we''ll notify you and you must within 5 business days deposit in the fund the amount we require to attain a reasonable balance in the fund.

Deleted: The security interest granted by you is prior to all other security interests in the collateral except for (a) bona fide purchase money security interests and (b) the security interest granted to a third party in connection with your original financing for your Cartridge World Master Franchise or Store(s), if any. In connection with any request for our approval of a security interest, we will make commercially reasonable efforts to accommodate reasonable lender''s requirements, including the subordination of our interests to the lender''s and/or lessor''s, as applicable, in our judgment, bearing In mind the interests of the borrower, lender, ourselves and the System. If an event occurs that allows us to terminate your rights under the Master Franchise Agreement, or any other agreement between you and us, or if we are not assured that all of your (and any Affiliates'') obligations will be met, we will have all the rights and remedies of a secured party under the Uniform Commercial Code of the State in which your Master Franchise is located, including the right to possession of the collateral.il

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(1)            
Expenditures. The initial investment table shows certain estimated expenditures required to develop a Cartridge World Master Franchise Territory. This chart does not reflect any costs associated with the establishment of a Traditional Cartridge World Store under a Unit Franchise Agreement. Note that these amounts may vary widely. Amounts payable to us are nonrefundable unless otherwise noted. Amounts payable to suppliers/vendors are refunded according to arrangements you make with the vendor, if any. These figures are estimates of the range of your initial costs in the first 3 months of operation only. Amounts may vary significantly from market to market.

(2)             Initial Franchise Fee. We do not offer any direct or indirect financing for the initial franchise fee. This fee includes the price of training for you or your Designated Individual. _MThe_

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California

Deleted: Some jurisdictions (I.e., New Mexico) impose a tax upon Franchise and Royalty Fees, which is subject to change without notice to you. You are responsible for paying any such tax and should consult a tax expert in your ama for guidance.

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amount of the Initial Franchise Fee varies depending upon the population, demographics, geographic size of the Territory, and other factors.� No Territory will have an Initial Master Franchise Fee of less than $50,000. We awarded 2_Master Franchise in the _U_njted_S_tates_,---{Formatted: Font: n pt during the last fiscal year. The Initial Franchise Fees have ranged �om_%l75_L0ppJo_$3_⁵P�PPP. from 2004 through 2007.

(3) Real Estate. It is extremely difficult to accurately estimate real estate related costs. Currently, we have a policy of allowing Master Franchisees to establish an office in their own home. We can change this policy. If you elect to find separate office space, real estate costs will vary significantly, depending upon a multitude of factors, including whether the property is purchased or leased, the landlord, the size, type, condition, and location of the property, the local real estate market, general and local economic conditions, and the availability of financing on commercially reasonable terms. The approximate size of a Cartridge World Master Franchise office may be 500 to 1,000 square feet. Although they vary widely, typical minimum rental costs range from $500 to $2,000 per month. The estimated range provided is based upon these square footage and cost/foot assumptions. In addition to rent, there are often a variety of additional charges that you may be obligated to pay, including a proportionate share of real estate taxes, utility, heat, air conditioning, security, common area maintenance, and other expenses of the building or structure in which the office is located. None of these costs are reflected in the estimates provided. A security deposit is also generally reguired by the landlord.

The security deposit is usually refundable, �ny or all of these_co_sts_ may be different [n_ your_. , - -f Formatted: no underline

area, and you should research these costs and other lease terms before making any

commitments.

(4) Improvements and Fixtures: Currently, our policy permits the operation of the Master Franchised Business from their home-based office. Although we can change this policy, Jhere currently are no office improvements required by us. If you choose to lease an office, it is extremely difficult to accurately estimate real estate related improvement expenses. These improvement expenses will vary significantly, depending upon a multitude of factors, including the landlord, the size, type, condition, and location of the property, the local real estate market, general and local economic conditions.

Deleted: this policy is subject to change by us,

(5) Insurance. You must maintain in force policies of insurance issued by carriers
approved by us covering various risks, as specified by us, including the following: (i)
comprehensive general liability insurance against claims for bodily and personal injury, death
and property damage caused by, or occurring in conjunction with, your Master Franchised
Business and any Master-Owned Stores; (ii) all risk property and casualty insurance for the
replacement value of your Master Franchised Business and any Master-Owned Stores and all
associated items; and (iii) business interruption insurance providing for continued payment of all
amounts due us and/or any Affiliate of ours under this Agreement. You must also secure and
pay premiums on a worker''s compensation (or similar) policy covering your employees as \
required by law. We may specify the types and amounts of coverage required under such
policies and require different and/or additional kinds of insurance at any time, including excess ,'' ₁
liability insurance. Each insurance policy must name us andour .Affiliates as additional named //
insureds. See Section 12.01 of the Franchise Agreement._______________________________________ /

J?^ur/eit/equired.insurance^levels are given below_________________________________________________

Type of Insurance����������������������������� Limits and Other Details

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California

Deleted:; b) contain a waiver of all subrogation rights against us, our Affiliates and any Successors and assigns; c) and provide thirty (30) days'' prior written notice to us of any material modifications, cancellation, or expiration of such policies

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Commercial General Liability

Business Interruption Insurance Fire Damage

All Risk Property and Casualty

$1,000,000 General Aggregate $1,000,000 Products Aggregate $1,000,000 Each Occurrence $1,000,000 Personal Injury/Advertising Injury $1,000 Medical Payments

$100,000. Must provide continued payment of amounts due (or to become due) us, any applicable Related Company and/or any affiliate under the Franchise Agreement.

$50,000

Must cover the replacement value of the business operations and all associated items (e.g., inventory, signs, equipment, etc.)

Worker''s Compensation

Statutory

$1,000,000 Employer''s Liability

(6) Training Expenses. The Initial Master Franchise Fee covers the training program tuition, travel and accommodations for 1 person attending training at our training center in Emeryville, California. If more than one person attends initial training, you are responsible for travel and accommodation costs for the second person,. In all cases, you are responsible foraji other costs associated with attendance at initial training, such as wages, meals, incidentals and living expenses. The amount you expend will depend on several factors, including your number of attendees, the distance you must travel, and the type of accommodations you choose, among others. See Items 6 and 11 for more information about training.

Deleted: Currently, the training fee for an additional attendee is Seven Hundred Dollars ($700)

(7)             Professional Expenses. The advertising, offering, and selling of unit franchises are subject to federal regulation by the FTC. Additionally, some states closely regulate franchising and require that offers be registered before franchise sales can begin, and on an ongoing basis.

You jnust comply wjth al[ state and ..federal franchise^ laws_ and .regulations, including those _, - \ Deleted: win be responsible for ) related to financial statements and independent audits. You should consult with your attorney�� " - -(Deleted: ing ) and accountant and local, state and federal government agencies before buying your Cartridge World Master Franchise to determine all legal requirements that you must comply with, their effects on you, and the ongoing costs of compliance.

(8)             Miscellaneous Opening Costs.��� Includes security deposits, utility costs, costs associated with obtaining business licenses and permits.

(9) Additional Funds. Additional Funds is an estimate of certain funds needed to cover your business (not personal) expenses during the first 3 months of operation of your business. You will need capital to support on-going costs of your business, such as payroll, utilities, taxes, loan payments and other expenses. _r New businesses (franch[sed or not) often have Larger expenses than revenues. This is only an estimate, and we do not guarantee that the amounts specified will be adequate. You may need additional funds during the first 3 months of initial operation and/or afterwards.� Additionally, modifications to the Cartridge Wodd System and

Cartridge World North America, LLC � MasterJ^DD �,4/1/08 California

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practices at times may require additional and as yet undetermined expenditures. We do not
furnish or authorize our salespersons or any other persons or entities to furnish estimates as to
the capital or other reserve funds necessary to reach "break-even" or any other financial
position, nor should you rely on any such estimates. The 3 month period from beginning
business covers the time by which most Master Franchisees are fully in operation, but does not
necessarily mean that you will have reached "break-even", "positive cash flow", or any other
financial position. In addition, the estimates presented relate only to costs associated with the
franchised business and do not cover any personal, "living," unrelated business or other
expenses you may have, such as fees due to us, referral fees to Unit Franchisees, Master
Marketing Fund contributions and other marketing/advertising expenses, debt service on any
loans, ,sajes, A^nd(^or_^u_^s6_taxes on goods and services, sa[esperson draws _and cpnr^missions, �
and a variety of other amounts not described above. _T_________________________________________ .

(10) Total Estimated Initial Investment. These figures are estimates of the range of certain
initial costs pre-opening and in the first 3 months of operation. _T jt is not all-inclusive as_n_ote_d_in
footnote 9, above, and we cannot guarantee you will not have additional expenses in starting \
your Cartridge World Master Franchised Business. Your costs will vary depending on such \
factors as: how much you follow Cartridge World Master Franchise Systems and procedures;
your management and marketing skill, experience and general business ability; local and
general economic conditions; the local market for Cartridge World Master Franchises; levels of
competition; and prevailing wage rates,_________________________

Posts to begin operations and other financial requirements may be more or less th_a_n_the figures
specified above, as a function of the size of business (number of staff, anticipated volume of \
business, etc.), the area in which you intend to operate and other factors, as mentioned above.
Many of these factors are primarily under your control in your independent operation of the
business. .You should not assume_that_reyenues_ from your franchisees^������������������������������������ poyer _

your initial (or other) expenses, particularly since once a franchise agreement is signed, it can
take a Cartridge World Store,6 months to ^�������������������������������������������������������������������������������� You .should^

review these figures carefully with a business advisor (such as an accountant and an attorney) \ before making any decision to purchase the franchise. In preparing the figures in this chart, we relied on our ^Lyears of industry experience_J These_figures^ aret estimates, and _we cannot guarantee that you will not have additional expenses.

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