GARAGE TEK - FDD UFOC ITEM 7 Detail

ITEM 7

ESTIMATED INITIAL INVESTMENT

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). We do not finance any portion of your initial investment.

1                     Franchise Fee. The initial franchise fee is discussed in detail in Item 5. This fee may be different if development rights are purchased. This development fee is discussed in detail in Item 5.

2                     Equipment Furniture and Fixtures. Your equipment, furniture and fixtures consist of the following items: a specifically designed truck which we recommend that you lease rather than purchase, lettered to our specifications; miscellaneous office equipment, such as two computers, copier, fax machine, telephone, desks and chairs; and one complete installation of our Branded Product in your showroom and lap top computer. If you are currently in the closet design business, you will still have to upgrade your telephone system so that you have a totally dedicated "GarageTek" line and a "GarageTek" showroom.

For a GarageTek Express franchise, you will need a specifically designed truck which we recommend that you lease rather than purchase, lettered to our specifications; miscellaneous office equipment, such as a laptop, copier, fax machine, telephone, desk and chair. You must have a totally dedicated "GarageTek" phone line for your business.

3                     Real Property. You will need approximately between 2,500 and 3,000 square feet of interior space for your Facility, which should be located in a high end industrial or commercial space. The cost per year for leasing commercial space varies considerably depending upon the location and market conditions affecting commercial property. We estimate the costs of leasing commercial space to be anywhere from $16,000 to $28,000 per year. This figure does not include the cost of electric or any other charges. Security deposits could be one to three months as additional rent, which may be required by the Lessor. If you are purchasing a GarageTek Express franchise, we are presuming that you will operate it from your home and will not need to rent space.

4                     Construction Costs. You will need to install plumbing, lighting and electrical systems, and slat walls, carpeting and painting which comply with our specifications. The cost will vary depending on the condition of the Facility and the amount of construction work and/or dollars negotiated from the landlord. In addition, you are required to have your landlord build-out a showroom as part of your space. If you are purchasing a GarageTek Express franchise, you will not need construction since you will be operating from your home.

5                     Signage. You will need to install interior and exterior signage.

6                     Inventory. You will need to purchase your opening inventory of Branded Product from us.

7                     Grand Opening Advertising. Prior to opening the Franchised Business, the advertising which you need may include media buys and promotional items including point-of-sale displays and merchandise. If you are purchasing a GarageTek Express franchise, you are not required to conduct a grand opening advertising campaign. If you choose to do so, however, the advertising you intend to use must be approved by us.

8                     Training. You will have salary, travel and lodging expenses. You will also have expenses associated with our initial training program. For this training program, we provide instructors and instructional materials, but you will need to arrange for transportation, lodging and food for yourself and up to two employees and for any wages for those employees. The cost will depend on the distance you must travel and the type of accommodations you choose. In addition, and at our option, we will send between one and three of our staff members to your Facility to assist you in setting up. You will be responsible for paying us for our airfare, lodging, local transportation and food for our staff members during the time they are at your Facility. Included in this amount is a three month training program that is conducted by Sandler Institute, at the office located nearest to your location. Your cost for this program is $2,000.

9                     Insurance. The figures in the chart are your quarterly premiums. In rare cases, you will have to pay the entire annual premium in a lump sum; generally you pay your premiums quarterly or semi-annually.

10                  Zoning. Unless you must get a variance, waiver or otherwise change current zoning conditions for your location, you have a zoning expense of approximately $1,000. If you are purchasing a GarageTek Express franchise, you will likely not incur this cost.

11                  Utilities. We estimate that you will need to provide deposits for utilities. The amount of these deposits will vary depending upon the practices of the utility companies. In addition, you may have to give your landlord one to three months of rent as a security deposit. If you are purchasing a GarageTek Express franchise, you will not incur this cost.

12                  Professional Fees. You will need to have an attorney and an accountant and possibly other professionals.

13                  Real Estate Broker. An independent real estate broker''s commissions are typically paid by the landlord. If you are purchasing a GarageTek Express franchise, you will not incur this cost.

14                  Supplies. These include your uniforms, purchase orders, small tools, stationery and business cards.

15                 You are required to purchase two software packages when you purchase the Franchised Business. One is the Cabinet Vision CAD Package, and the cost is $3,600; and the other is the Market Sharp Customer Management Package, the cost is $2,800. You will also need a laptop and printer that are able to utilize the required software packages. See Item 11 for more details.

16                 Marketing and Promotion. You must spend between $30,000 and $45,000 during your first year of operation on various marketing and promotion programs during the year, which may include promotions and sales, print media, tv commercials, radio ads, newspaper ads. This sum is in addition to your grand opening expenditures and your marketing fund and local advertising commitments. This marketing and promotion expense is not applicable to a GarageTek Express franchise.

17                 Additional Funds. You will need capital to support ongoing expenses, such as payroll, utilities, and local advertising to the extent that these costs are not covered by sales revenue for your first three months of operation. New businesses often generate a negative cash flow. We estimate that the amount given will be sufficient to cover ongoing expenses for the start-up phase of the business, which we calculate to be three months. This is only an estimate and there is absolutely no guarantee or assurance that additional working capital will not be necessary during this start�up phase or anytime thereafter. In fact, there is a very good chance that you will need additional working capital.

18                 Total Capital Required. We relied upon our three years of experience in selling the Branded Product when preparing these figures. However, these figures are merely estimates and there is no assurance that additional working capital will not be necessary during this initial three month phase at any time after the initial three months.

If we sell you development rights, your initial investment will not be different than as stated in this Item, with the exception of the Development Fee. The reason for this is because an area developer has to open at least one Facility, which will serve as his/her base of operations.