DAILY GRIND - FDD UFOC ITEM 7 Detail

ITEM 7

ESTIMATED INITIAL INVESTMENT YOUR ESTIMATED INITIAL INVESTMENT

None of the fees or costs estimated in this Item 7 are refundable except to the extent that you can negotiate with vendors. Payments to us are not refundable.

Please note that we do not offer direct or indirect financing to you for any items. The availability and terms of financing from other sources will likely depend on factors such as the availability of financing generally, your creditworthiness, and the policies of lending institutions.

This chart does not address those who will sign a Development ("Area Rep") Agreement, which is not a franchise nor does it confer on you any right to use our marks. The initial fees for signing a Development Agreement are noted in Item 5.

Notes:

(1)                 Initial Franchise Fee. The details of the initial franchise fee are described in Item 5, including the amount and the conditions under which the initial franchise fee is refundable. If you sign a 3-Pack Agreement, you will develop 3 Restaurants, and as a result you will incur 3 times the estimated cost of one Restaurant (less the reduction in initial franchise fee that is explained in Items 1 and 5).

(2)                 Leasehold Improvements. You will need to construct improvements, or "build out," the premises at which you will operate the Restaurant. Generally, you will take the premises from the landlord in "vanilla box" condition (such as primed drywall ready to be painted, but without improvements). Among other things, you will likely need to arrange for proper electric service, wiring and plumbing, flooring, wall finishes, additional drywalling, HVAC, lighting, storefront modifications, painting, cabinetry, bathroom facilities, and the like. You will need to hire an architect and licensed contractor (both of whom we must find acceptable). Costs are likely to vary due to many factors (e.g., the size of the Restaurant, the existing condition of the premises, etc.), and may be much higher, if you wish to establish your Restaurant in an area where special requirements of any kind (such as historical, architectural, or preservation requirements) will apply.

(3)                 Design/Permitting. You must construct and furnish the Restaurant according to the requirements set out in the Franchise Agreement and Manual. You must obtain all zoning classifications, clearances and/or permits which may be required by state or local laws, ordinances, or regulations, or which may be necessary or advisable due to any restrictive covenants relating to your Restaurant''s location.

(4)                 Real Estate Leasing. If you do not own a location for your Restaurant, you must purchase or lease a space. You will probably need to lease a space at least four months in advance; however, you may attempt to negotiate an abatement from the landlord.

Restaurant locations and sizes vary. Locations for a Restaurant are those that are typically described as "prime retail."

Restaurant sizes vary, but are typically 1,500 square feet in size.

The estimates provided assume that you will pay a security deposit equal to one month''s rent, the last month''s rent, rent for three months before you open, and rent for another three months after opening (for a total of eight months'' rent).

The estimate in the chart for Restaurants reflects estimated rental rates that range from $12 to $41 per square foot per year, for units that are 1,500 square feet, for a total of eight months. In some premium locations, rent costs can be even higher, and as a result, your costs will be higher (while we have experienced this ourselves, it is not the norm for most locations).

Rent varies considerably from market to market, and from location to location within each market. Rents may vary beyond the range that we have provided, based on factors such as market conditions in the relevant area, the type and nature of improvements needed to the premises, the size of the Restaurant, the terms of the lease, and the desirability of the location. (For example, we are aware that some franchisees have recently seen higher rental rates in certain locations chosen for particular reasons. While we believe that these locations are atypical, your costs will also be higher if you also select more expensive real estate.) If you decide to purchase the property for the location of your Restaurant, you will incur additional costs that we cannot estimate.

(5)                 Eauipment/Fixturing. The estimate is for the equipment you will need to operate the Restaurant, such as refrigeration, freezers, coffee equipment, tables and chairs, shelving, signs, menu boards, kitchen smallwares and display cases. You will need to obtain these items of equipment, fixtures, and other fixed assets that meet our specifications and are purchased from approved or designated vendors (where there are approved or designated vendors). The amount you will have to spend for equipment, fixtures, trade fixtures, and other fixed assets will vary depending upon the Restaurant''s size, style, and the volume of products to be offered in the Restaurant. You will pay suppliers for equipment, fixtures, trade fixtures, and other fixed assets.

The estimate also includes things such as office supplies, first aid kits, fire extinguishers, and similar items.

(6)                 Signage. The cost of signs will vary from location to location depending on lease requirements, ordinances and restrictions, traffic patterns, competition, and related factors. In addition, other considerations - such as zoning ordinances, as well as historical and architectural design standards - may affect your costs (both in terms of materials as well as professional fees that you will incur to get approval of your proposed signs). We will provide assistance to you in designing your signs; the final design must be submitted to us for our review and approval. You will pay your sign fabricator directly.

(7)                 Registers & Electronics. This amount covers the cost of your point of sale (POS) system and the required software for that system. The estimate also includes wireless internet access and satellite music systems.

(8)                 Inventory. Fees for inventory and supplies are paid to either us or approved vendors and distributors. Terms vary from vendor to vendor, but are more typically paid for on the first delivery before you establish credit, although either we or other vendors may require that payment be made on a C.O.D. basis.

(9)                 Utility Deposits.'' The figure is for the estimated cost of telephone and utility deposits.

(10)             Travel and Accommodations for Training. Training expenses include your costs for travel, food and lodging incurred while in the training program and are paid to the providers of those services. For the initial training period, the "low" estimate assumes that you are located within commuting distance of our training facilities and that you do not incur per diem expenses. The "high" estimate assumes travel, meals, auto and lodging for two individuals, for three weeks. The cost you incur will vary depending upon factors such as the distance traveled, mode of transportation, travel preferences (such as air travel or ground transportation), nature of accommodations, per diem expenses actually incurred, and the number of persons who will attend training. If you send more than two persons to attend training, we estimate that the additional cost, on a per-person basis, will range from $250 to $2,500.

(11)             Insurance. The estimate is for the annual premium for the policies required under the Franchise Agreement and as may be required under the terms of your lease or sublease. Insurance costs will vary depending upon factors such as the size and location of the Restaurant. You must obtain general liability insurance and product liability insurance as described in Item 8 of this disclosure document.

(12)             Uniforms. You must pay for approved uniforms before the grand opening of your Restaurant. Your costs will vary depending, for example, on the number of employees hired.

(13)             Grand Opening Marketing. We will assist you in tailoring an advertising plan appropriate to your market. The amount in the table is for the initial promotion and advertising efforts you must make under the Franchise Agreement. You must spend at least $3,500, although a larger amount (such as $5,000 or even more) may yield even better results. Additional details regarding advertising and promotion can be found in Item 11, under the subheading "Advertising." (As noted in Item 6, we may require you to deposit the funds with us to distribute as necessary to conduct the grand opening marketing program.)

(14)             Legal & Accounting. The estimate is for legal, accounting, administrative, traffic studies, demographic studies, and other professional fees that you may incur before you open for business, including (among other things) to assist you in reviewing the Franchise Agreement as well as your lease or sublease for the premises. Your actual costs may vary depending upon the rates charged by the professionals that you engage and the tasks that you assign to them.

(15)             Additional Funds. You will need additional capital to support on-going expenses, such as payroll and utilities, to the extent that these costs are not covered by sales revenue. New businesses often generate a negative cash flow. We estimate that the amount given will be sufficient to cover on-going expenses for the start-up phase of the business, which we calculate to be three months. This is only an estimate, however, and there is no assurance that additional working capital will not be necessary during this start-up phase or after. Our estimate is based on our experience with company-owned Restaurants.

Your credit history could impact the amount (and cost) of funds needed during the start�up phase. If you have no credit history or a weak credit history suppliers may give you less favorable lending and payment terms, which might increase the amount of funds you will need during this period. You will need to have staff on-hand before opening to prepare the Restaurant for opening, for training, orientation, and related purposes. We estimate that you will need approximately 80 hours of staff time, at $8.00 per hour (or more, if the minimum wage is higher in your state), to get ready for your opening.

The figures in the chart and the explanatory notes are only estimates. Your actual costs may vary considerably, depending, for example, on factors such as: local economic conditions; the local market for the Restaurant; the prevailing wage rate; competition; the sales level achieved during the initial period of operation; and your management and training experience, skill, and business acumen.

You should review these figures carefully on your own, with a business advisor of your choosing, before making any decision to purchase the franchise. You should take into account the cash outlays and probable losses that you may incur while you are trying to get established. Extensive start-up costs may be involved, depending upon your circumstances.

We relied on our own experience when preparing these figures.