DAIRY QUEEN - FDD UFOC ITEM 7 Detail

Item 7

ESTIMATED INITIAL INVESTMENT

YOUR ESTIMATED INITIAL INVESTMENT

Note 1: Except where otherwise noted, all fees that you pay to us and/or ADQ or our or ADQ''s affiliates are nonrefundable. 3^rd party lessors, contractors, and suppliers will decide if payments to them are refundable.

The initial investment amounts in several categories will vary, depending on your building size and whether you lease or own the space or building.

Note 2: If you are new to the DQ system, your initial franchise fee will be $25,000. See Item 5 for conditions when the initial franchise fee is refundable. You pay the initial franchise fee on signing the operating agreement. If you are a qualified existing sublicensee and are opening an additional unit under our ASD program, the initial franchise fee may be reduced to $0, but you will be required to pay $9,500 for our Opening Team fee. We may refuse to approve your opening of an additional unit, or may refuse to offer or grant you an additional sublicense for no initial franchise fee or for a reduced initial franchise fee. See Item 5 for conditions when the initial franchise fee is refundable.

Note 3: ADQ charges a $2,850 initial training fee for each training attendee (including Phases 1, 2 and 3) who attends ADQ''s initial training program. ). If any of your training attendees has at least 3 months'' previous management experience at a DQ Grill & Chill or Dairy Queen restaurant or store, that person may be given the opportunity to test out of some or all of Phase 1 of ADQ''s training program. For any person who successfully tests out of Phase 1 of the training program, the training fee will be reduced to $1,850, covering only Phases 2 and 3 of the training program.

The total amount of training fees will vary depending on how many persons from your restaurant attend ADQ''s training programs, and whether or not those persons have already completed the SERVSAFE course or the cake decorating certification course. Before attending ADQ''s training programs, your training attendees must take and pass the MTRA test, which ADQ estimates will cost $100 per person.

Training attendees also must successfully complete a "SERVSAFE" course and have current SERVSAFE" certification before attending ADQ''s training program. ADQ estimates that the cost for your training attendees to attend a "SERVSAFE" course will range from $100 to $300 per person.

ADQ also estimates that the cost for 1 of your restaurant employees to attend a cake decorating certification course, including tuition and supplies, will range from $100 to $250. ADQ''s training, programs, the pre-screening test, the "SERVSAFE" course and the cake decorating certification course are further described in Item 11.

ADQ conducts its training program at a certified restaurant location. The actual training location will depend on a number of factors, including availability of certified restaurant locations near your restaurant and ADQ''s training calendar. Further, your actual travel and living expenses will depend on a number of factors, such as the length and location of training (See Item 11), and costs associated with taking the MTRA test and attending the "SERVSAFE" and cake decorating certification courses. In addition, your travel and living expenses may be higher than the estimate listed above if more than 2 training attendees attend ADQ''s training programs.

Note 4: You must purchase the pre-opening inventory you and your employees will use at your restaurant while we provide on-site pre-opening assistance.

Note 5: Neither we nor ADQ typically provide the land or building necessary for your restaurant. You must allow for the initial cash outlays and long term investment obligations necessary to acquire land and construct a building for your restaurant. If you purchase land, your investment for land will range from $250,000 to $800,000 or more, depending on many variables including the size of the property and land prices in your geographic market. The cost of your site work and building construction will depend in large part on many factors, including the size of the building you select, and whether you remodel an existing building, or choose new construction. For example, currently there are two prototypical freestanding DQ Grill & Chill building models, the GC2000 and the GC2530. The GC2000 is 2,048 square feet, seats approximately 44, and requires a minimum lot size of 26,250 square feet. The cost of the site work and building construction for the GC2000 generally ranges from $575,000 to $750,000 or more. The GC2530 is 2,800 square feet, seats approximately 74, and requires a minimum lot size of 36,900 square feet. The cost of the site work and building construction for the GC2530 generally ranges from $760,000 to $1,000,000 or more. Other building models would have different costs. The actual costs for site work and building construction depend on many variables, including restaurant location and lot size; site improvement costs; soil and environmental conditions; federal, state and local building codes and fees; health department requirements; local labor costs; union labor requirements; materials; interest costs; inflation and other factors. You also may choose to add approved options to your restaurant that are not required, such as adding rear storage. Acquisition costs may be beyond the ranges identified above in certain cases or localities. Down payment requirements and initial financing or commitment expenses are negotiated individually and vary too widely to be realistically predicted.

If you lease the land and/or building for your restaurant, the initial cost of leasehold improvements to a leased building may be more than the estimate, depending on many independent variables, including restaurant size, condition of existing space, demolition and landscaping, building code requirements and fees, as well as those factors listed in the paragraph above. The rental payments you make over the term of the lease, however, will likely total an amount equal to or greater than the total investment you would have made if you had purchased the land and building for your restaurant.

Payments for real property, leaseholds and construction ordinarily are not refundable, except possibly security deposits made with lessors. Investment obligations beyond the initial cash outlay requirements may be necessary, and you may finance these and other obligations at your discretion. Market forces will determine loan repayment totals, interest rates and periodic payment amounts.

Note 6: Nonrefundable building plan fees vary according to the type of facility that you build. See Item 5 for an explanation of building plans. If you have your building plans prepared locally, your costs may exceed $3,000. Your building plans must have an architectural seal as a condition to our and ADQ''s approval. If you use ADQ''s prototypical design intent building plans for a freestanding restaurant, you must obtain an architectural seal at your cost. In addition to ADQ''s building plan approval, you must obtain any local building plan approval, which may require you to pay local architect fees and other charges. ADQ estimates that these fees and other charges (including the architectural seal) will range from $15,000 to $45,000 or more if you encounter unusual circumstances. You must pay for any deviations or escalations in any leasehold improvements or construction costs, including any additional costs to comply with all federal, state or local requirements. If your local architect makes additional revisions to ADQ''s prototypical design intent building plans and/or any design criteria information, those revisions will become the property of ADQ. ADQ and its affiliates may use those plans in any manner in the future. (See Item 5)

Note 7: Your investment in equipment and fixtures is highly variable for your DQ Grill & Chill restaurant or Dairy Queen/Limited Brazier store. The investment depends to a great extent on the size of the building and whether you lease or own. The investment also depends on the location of your restaurant, the anticipated traffic through the restaurant, local labor costs, current prices charged by equipment suppliers, discretionary expenditures, inflation, financing costs and similar factors beyond ADQ''s or your control. You also may choose to add some approved options to your restaurant that are not required. For instance, additional seating packages are available but not required.

For equipment and fixture purchases, you and the seller will determine the amount of any initial or periodic equipment payments. The payments ordinarily are not refundable. You will have investment obligations beyond the initial cash outlay requirements that you may finance. Market forces will determine loan repayment totals, interest rates and periodic payment amounts.

The payments ordinarily are not refundable. Investment obligations beyond the initial cash outlay requirements will be necessary and you may finance at your discretion. Market forces will determine loan repayment totals and interest on borrowings at the time of any financing transaction.

You must purchase a TV and a DVD player, or a TV/DVD player combination, from a supplier of your choice.

Note 8: This amount includes utility and security deposits and business licenses. Deposits generally are refundable, but license fees generally are not refundable. You may be required to submit an impact study to a local government agency to receive necessary local permits and approvals for your restaurant. These estimates may be significantly higher in some unique jurisdictions, where local authorities may require fees in excess of $100,000 for electrical, sewer/water and/or other miscellaneous connections.

Note 9: This estimate covers attorneys'' fees for your purchase of the sublicense and your purchase or lease of the restaurant premises.

Note 10: You may need these additional funds to operate your DQ Grill & Chill restaurant or Dairy Queen/Limited Brazier store during its 12-month initial period to cover pre-opening and operating expenses in excess of typical start-up revenues. These expenses may include rent, management salaries, debt service, local advertising, taxes, freight, office supplies and security and/or music systems. The additional funds do not cover hourly labor or food costs beyond the opening inventory costs mentioned in the table.

We make no representation that your expenses will come within the range estimated and cannot guarantee that you will not incur additional expenses starting your restaurant. Your actual costs will depend on: region of the country; the time of year; the number of customers being serviced; sales promotions; how carefully you follow our procedures; your management skills, experience and acumen; local economic conditions; the local market for Dairy Queen products and services; the prevailing wage rate; competition; and the sales level that you reach during the initial period of your restaurant.

Note 11: We have relied on our 31 years'' experience in the business (since the date of our inception) to compile these estimates. You should review these figures carefully with a business advisor before purchasing the sublicense. In determining your initial cash position, you should anticipate that

local lending institutions ordinarily will require you to have a 20% equity position on all leasehold improvements and possibly 25% on all equipment. You are cautioned to allow for inflation, discretionary expenditures, fluctuating interest rates and other costs of financing, as well as local market conditions, which can be highly variable and can result in substantial, rapid and unpredictable increases in costs. You must bear any deviation or escalation in costs from the estimates in this Item 7 or estimates that we or ADQ give during any period of the development process.

DO Grill & Chill Restaurant or Dairy Queen/Limited Brazier Store at Fuel Center

If you establish a DQ Grill & Chill Restaurant or Dairy Queen/Limited Brazier Store at a fuel center, you must have made, or must make, an additional initial investment for the fuel center. We cannot estimate that initial investment, since we do not operate or authorize others to operate fuel centers.