EXTREME PITA - FDD UFOC ITEM 7 Detail

ITEM 7

ESTIMATED INITIAL INVESTMENT

You may incur the following initial expenditures in the establishment of an Extreme Pita Store. Additional factors regarding each expenditure category are described in the notes following the chart. The figures provided for the initial investment arc estimates and may vary.

NOTES:

(l) You will receive a credit against the Initial Franchise Fee for the amount of the Deposit paid by you. We currently charge a $15,000 for the second Franchise Agreement you sign and $10,000 for the third and subsequent Franchise Agreement for a traditional franchise, which is subject to change without notice. You must sign a separate Franchise Agreement for each Extreme Pita Store you operate and pay the applicable Initial Franchise Fee when the Franchise Agreement is signed (See ITEM 5). Except as set forth in ITEM 5, neither the Initial Franchise Fee nor the Deposit is refundable. The Multiple Unit Development Fee is fully earned and non-refundable once paid, even if you do not open any of the Extreme Pita Stores required by your Multiple Unit Purchase Agreement. We do not offer refunds of any other fees or expenses. We do not finance any fees or expenses.

(2)                You are responsible for all travel and accommodation costs incurred by you and your employees in attending the Initial Training Program at our head office or at another location designated by us. There is no fee charged to you for the training session itself.

(3)                A commercial lease normally requires payment of the first month''s rent, a security deposit and a rent deposit equal to one month''s rent. A lease deposit may or may not be refundable and lease deposits vary widely from location to location. The location of any commercial space must be approved in writing by us to ensure it meets our minimum criterion. You acknowledge and warrant that our approval of the location does not constitute a guarantee, recommendation, or endorsement of the Store and that the success of the Business to be operated at the Store depends on your abilities as an independent businessperson. You shall take all steps necessary to ascertain whether such location is acceptable to you.

(4)                At our sole discretion, we may require you to pay a separate Lease Negotiation Fee to compensate us for the cost of negotiating your lease or having your lease negotiated by our attorneys.

(5)                This estimate is based on the cost to build out a street front Extreme Pita Store (without any offices, apartments or other uses above the restaurant facility) consisting of 1,000 to 1,200 square feet. Larger locations and Extreme Pita Stores located in food courts or other non-traditional locations may be more expensive based upon the facility design and other criteria imposed upon you by the landlord. These costs also assume that the landlord provides you with a standard "Vanilla Shell" prior to the date you begin your leasehold improvements. The costs to complete your leasehold improvements will vary widely and may be significantly higher than projected in this table, depending on such factors as the city or town in which you propose to operate, property location, population density, economic climate, prevailing interest rates and other financing costs, the conditions of the property, current building code requirements, current permit requirements, implementation and enforcement of the Americans With Disabilities Act in particular jurisdictions, and the extent of alterations required for the property. You should investigate all of these costs in the area where you wish to establish your Extreme Pita Store and the costs associated with modifying the specific property in which you choose to locate your Extreme Pita Store. In some limited cases, these costs have added more than $50,000 to the cost of opening an Extreme Pita Store. Your costs will also be higher if your landlord does not provide you with a Vanilla Shell finish or if you select a location greater than 1,200 square feet. To avoid excessive leasehold improvement costs, we strongly recommend that you select your contractor carefully by obtaining several bids prior to signing a construction contract. The estimates do not include exterior renovations to your Extreme Pita Store.

(6)                Actual equipment and furniture costs may vary due to additional seating and costs associated with installing the ventilation system. The current price is based on seating for 20 to 30 customers.

(7)                Freight charges will vary by location but should not exceed $5,000.

(8)                This includes window graphics and design, and interior and exterior signage.

(9)                This includes engineering drawings and architectural design layout drawings.

(10)            The promotional campaign will differ by region and may include printing and distribution of promotional coupons, newspaper advertisements, charitable donations. The distribution of promotional food items is not included.

(11)            This includes a sufficient opening supply of food inventory, cleaning supplies and paper products.

(12)            These fees will vary based upon the square footage and the location of your Extreme Pita Store. The landlord may impose other fees and expenses, depending on the terms and conditions of the lease. Additional fees and expenses, if any, will be as set out in the lease or sublease, as the case may be. As well, the city or county may impose higher permit and license fees.

(13)            These fees arc the estimated fees charged by your lawyer to review the franchise Agreement and other documentation, to advise you, and to incorporate a business entity on your behalf to enter into the Franchise Agreement. You arc also encouraged to seek the advice of an accountant and a financial advisor.

(14)            You must use a personal computer in the operation of your Extreme Pita Store and a letter quality printer to print reports generated by your personal computer. You are required to secure an email account and PC-compatible computer software and hardware and any letter quality printer that meet the standards and specifications required by us. The standards and specifications we are currently using are set forth in the Operations Manual.

(15)            This is the amount of working capital that we recommend you have in your bank account upon store opening to cover various expenses during your first three months of operation, but is subject to change depending upon your circumstances and financing requirements imposed by your bank. The range is based on anticipated working capital, wages, food and beverage costs, supplies, utilities, ordinary maintenance, and other normal day-to-day operating expenses. In addition, you should consider the cost of labor in operating your franchise. Labor costs comprise a significant component of the costs of operating a franchise outlet. The cost of labor is influenced by factors such as the amount of time invested in a franchise outlet by the franchisee, the level of sales at the Extreme Pita Store, the number of hours a franchised business is open and the average number of staff required and market rates for labor which can vary by location. As well, any incentive or bonus programs for employees of a franchisee would also form part of the labor costs for a franchised business. In addition to the items listed above, you should be prepared to have cash available to pay your personal living expenses for at least the first six months of the Extreme Pita Store''s operation. The exact amount of working capital required will vary considerably with each Extreme Pita Store but must be sufficient to finance your operations until the Extreme Pita Store produces positive cash flow. We have not included your personal living expenses in this estimate nor have we included any sales tax, or other use tax, income tax, or any other tax in this estimate. You should consult with your independent advisors to develop your own business plan with cash flow chart in order to ensure that you have the amount of capital necessary to cover any cash short fall in the initial months of operation since the range of potential costs provided in this Franchise Disclosure Document is only an estimate.

(16)            While we do not oblige you to do so, you may wish to install a security system and a safe at your Extreme Pita Store. Our point of sale system is capable of supporting a security system and we advise to contact our point of sale system supplier should you require any additional information in this regard. We do not require or recommend any type of security system. The cost estimated in this ITEM 7 does not include any monthly monitoring fees.

(17)            The high/low amounts will vary and may exceed our estimates based on the size of your Extreme Pita Store. These estimates arc based on a typical Extreme Pita traditional street front store ranging in size from 1,000 to 1,200 square feet. These high/low amounts will also be affected by whether you elect to oversee the construction of your own Extreme Pita Store or you choose to engage us or your Area Developer to undertake responsibility for constructing your Extreme Pita Store. If you retain us or your Area Developer to construct your Extreme Pita Store, you will be required to pay us a Construction Management Fee that will not exceed 7% of the total cost of all leasehold improvements, furniture, fixtures, equipment and graphics.

We relied on the experience of certain officers of the Extreme Pita in the quick service restaurant business to complete these estimates. Because these figures are only estimates, it is possible to both reduce and/or exceed costs in any of the areas listed above. You should review these figures carefully with a business advisor before making any decision to purchase the franchise. Neither Extreme Pita, nor any of our affiliates, provides or assists with financing arrangements for you. If you obtain financing from others to pay for some of the expenditures necessary to establish and operate your Extreme Pita franchise, the cost of financing will depend on many factors, such as your credit worthiness, collateral, the financier''s lending policies, the financial condition of the lender, and the regulatory environment.

The amounts expended may vary from one location to another. These amounts do not include the cost to you of any financing that may be required to establish your Extreme Pita Store. Your costs will also depend on factors such as how well you follow the Extreme Pita System, your management skills, your experience, your business acumen, your active involvement at the Extreme Pita Store, general and local market conditions, the location of your Extreme Pita Store, the presence of any competition, prevailing wage rates, and the level of sales obtained by you during the initial period of operating your franchise.