1.
ITEM 7
YOUR ESTIMATED INITIAL
INVESTMENT
(**) In the State of Connecticut only, the fees are fully refundable if we fail to deliver the products, equipment or
supplies or fail to render the services necessary to begin substantial
operation of the business within forty-five days of the delivery date stated in
your contract and you notify us in writing and demand that the contract be
canceled.
In general, none of the
expenses listed in the above chart are refundable, except any security deposits
you are required to make may be refundable and the initial franchise fee is
partially refundable in certain circumstances (see Item 5).
Notes:
1.
The
initial franchise fee is discussed in detail in Item 5 above. It is not
refundable, except as discussed in Item 5. This fee may be different if
development rights are purchased. Amounts paid to suppliers or third parties
(other than us) may or may not be refundable, depending on the arrangement you
make with your supplier. In addition, if you are a Development Agent, you will
pay us a lump sum, non-refundable Development Agent Rights Fee of between
$200,000 and $500,000, depending on the size of your Development Area, when you
sign the DAA.
2.
It
is our standard practice to select a site within your geographic area,
utilizing the services of our network of real estate brokers. Our brokers are
familiar with commercial real estate contracts and terms and will identify a
suitable location and, at our discretion, assist in negotiating lease terms
with the landlord.� The terms of the lease and the amount of the monthly lease
payment and security deposit will depend on the geographic location and size
and condition of the premises and the demand for the premises by other
prospective tenants. These recurring overhead costs cannot be estimated. You will
lease space from the owner of the mall or retail center on terms negotiated by
you and the owner, with the assistance of our network of real estate brokers.
3.
Leasehold
improvement and construction costs vary significantly depending on the
condition, location, size and configuration of the Unit premises, the layout of
the mall or retail center, and other factors relating to the geographic
location of the business, suppliers, government regulations, labor costs and
other considerations. You will contract directly with the architect,
construction contractor and possibly other construction suppliers on terms
negotiated by you. We will consult with you regarding the construction of the
Unit.
4.
This
estimate includes the cost of all equipment, including the cash register and
accounting reporting system, and the estimated charges for you to hire a
general contractor for the construction in the mall or retail center.
5.
You
will contract with a local architect and pay the architect directly. This fee
is an estimate of the architect''s cost.
6.
This
category includes an estimate of security deposits, utility deposits, food
service licenses and other prepaid fees that you will be required to pay.
7.
The
cost of initial inventory and supplies, including food supplies, vary with the
local market. The above figures are based upon estimates of reasonable
quantities of inventory and supplies for the start-up of the business. The cost
of the Gift Card program is $275 for the initial setup which includes the fee
for 2 IP terminals, first month''s service fee and initial supply of 500 Gift
Cards and 500 FreshBerry branded brochures.
8.
This
category includes miscellaneous opening costs and expenses such as installation
of telephones and a high speed internet connection, initial insurance premiums,
cost of uniforms and employee recruitment, out-of-pocket expenses for travel to
training, training costs, and other miscellaneous costs.
9.
This
category is an estimate of initial operating capital required to initiate the
operation of the business. This is only an estimate of the amount of operating
capital needed.
10.
These
fees are for miscellaneous real estate costs, such as broker incentives and
market analysis studies.
11.
Additional
funds may be required by you before the Unit is opened and to maintain the
business during the first few months of operation. This category is intended to
cover unforeseen costs that may arise during the initial six month phase of the
business. It is anticipated that the Unit will not open for at least four
months from the date of execution of the Franchise Agreement and cash flow may
be minimal during the first few months the business is open.
12.
We
cannot guarantee the actual total cost to open the franchise or the amount of
operating capital required to operate the business. Your actual costs may vary
greatly and will depend on many factors such as the size and condition of the
space and cost to convert to a FreshBerry Unit, your management skill,
experience and business acumen, local economic conditions, the local market for
the products, the prevailing wage rate, advertising expenditures, rental
charges, level of competition, and the sales level achieved during the initial
period.�� These figures should be reviewed carefully with a business advisor
before making a decision to purchase the franchise. In compiling these figures,
we relied on the experience of CFS, our affiliate, who has offered franchises
for a restaurant operation since January 1999.
The above estimates of your
initial investment do not include optional business organizational expenses or
overhead expenses such as legal fees for review of the Franchise Agreement,
review of the lease and the contracts with construction suppliers, organization
of a new business entity, etc. Whether or not any such expenses are incurred is
entirely at your discretion and cannot be predicted or estimated by us.
We have not included a separate
table for the initial investment if you sign an Area Development Agreement. If
you become an area developer, you will pay a development fee equal to $25,000
for the first Unit to be developed plus $15,000 for each additional Unit to be
developed under the Area Development Agreement. The development fee is applied
pro rata to the initial franchise fees due for each Unit to be developed after
the first. Other than the initial fee for the Area Development Agreement,
actual start-up costs pertaining to the actual Units opened under the Area
Development Agreement are as estimated above, subject to potential increases
over time or other changes in circumstances. If you execute an Area Development
Agreement, your professional fees such as legal and financial may be higher.
We have not included a separate
table for the initial investment if you sign a Development Agent Agreement. The
Development Agent must own a minimum of two "FreshBerry" Units in the
Development Area. In addition, if you are a Development Agent, you will pay us
a lump sum, non�refundable Development Agent Rights Fee of between $200,000 and
$500,000 when you sign the DAA. In addition, the States of California, Illinois and Washington require you to register as a subfranchisor, which includes filing
your own disclosure document with your own financial statements. We estimate
that your legal, accounting and registration filing fees in those states will
initially cost between $10,000 and $20,000. You will incur annual
re-registration fees (see Item 6).
