(1)
The initial franchise
fee is $25,000 for single unit franchisees and is paid when you sign the
Franchise Agreement. (See Item 5 for more details and for a discussion of
reduced initial franchise fees under a Development Agreement, and certain other
limited circumstances.) Also, see Note 11 below.
(2)
If
offered in your market, and if you choose to have us manage your SALON''s
construction, the Turnkey Development Fee charged will be $10,000. (See Items 1
and 5 for more details on the Salon Development Addendum and Turnkey
Development Fee). Other development costs paid to us, and that we pay to
third-parties under the Salon Development Addendum, are otherwise reflected in
Item 7 (e.g., equipment and signage costs).
(3)
Financing
may be available for some of your leasehold improvements, fixtures, signage and
furnishings through lessors or third parties. If you finance these items, you
will incur financing costs.
The minimum size for a SALON
is approximately 800 square feet. The typical size for a SALON is approximately
1,000 to 1,400 square feet.
In some circumstances, with
our consent, it may be possible to convert an existing free-standing building
or a pre-existing facility as long as it conforms to all of our standards. The
costs for conversions are too individually variable to be realistically
predicted.
You may be required to pay an
architect fees for plans and drawings for your SALON. The amount you pay will
vary and may be significantly higher in some markets than in others if your
local code requires mechanical, electrical, and plumbing drawings.
You are responsible for
obtaining all necessary permits or licenses necessary for the siting,
construction, renovation and operation of the franchised business.
Our estimate is based upon
your landlord providing you with a location that is a "vanilla box"
(does not require any demolition and is in good commercial condition for your
construction), with sufficient electricity and plumbing, ceiling and lighting
fixtures meeting our requirements, concrete flooring, and air-conditioning (1
ton a/c unit per 200 square feet).
(4)
You
will spend up to $10,000 to advertise and promote your SALON during the period
from 30 days before opening through 180 days following opening of your SALON.
We expect that this amount will be between $5,000 and $10,000. We will
determine the plan and related budget. In some instances, and only with your
permission, the amount spent on market introductory expenses will be greater
than $10,000. The market introductory expenses are in addition to your other
advertising and marketing expenditures.
(5)
We
believe that it is important for you to consult with your own accountant,
attorney, risk management and/or business advisor before making any decision to
enter into a Franchise Agreement with us. You should also use an attorney or
other business advisor to review any lease or other agreements that you enter
in connection with your SALON or other independent business relationship.
(6)
Prepaid
rent and security deposits are general required by landlords, utilities and
certain other merchants or government entities. Based on our experience, we
have found that prepaid rent is generally non-refundable. Security or other
deposits may be refundable either in full or in part, depending on your lease
or contract.
(7)
This
is an estimate of your initial insurance premium for required property and
public liability insurance. Your costs will vary depending on your market, the
amount of coverage you select, your insurance carrier and other factors. The
cost of other coverage, including your discretionary purchases, worker''s
compensation and other types of coverage cannot be estimated as they vary
widely on a market-by-market basis. We set minimum insurance requirements for
our SALONS but we recommend that you seek the advice of an independent risk
management professional and/or insurance broker to determine the additional
coverage you should have in place for your SALON. See Item 8 for more details regarding
insurance.
(8)
Some
suppliers may offer trade credit terms for retail inventory, professional
products used in providing services to consumers and training of your
personnel, as well as general shop supplies. You may be able to arrange
financing for part of your inventory expense with some suppliers. We do not
offer trade credit terms on any products sold by us or arranged by us for sale
to you from third party suppliers.
(9)
This
is an estimate only for the additional operating capital needed to operate your
SALON during the initial 3 months after you open for business. We have relied
on experience and data collected from our affiliate''s company-owned SALONS to
compile this estimate. We cannot guarantee that you will not have additional
expenses starting the business. The estimate includes items such as initial
payroll taxes (including payroll to cover the pre-opening training period for
some of your SALON staff), continuing and royalty fees, Brand Fund
contributions, professional fees (including accounting and computer fees),
additional advertising, insurance (including health insurance and workers''
compensation), rent, repairs and maintenance, bank charges, miscellaneous
supplies and equipment, initial SALON staff recruiting expenses, state tax and
license fees, depreciation/amortization, deposits and prepaid expenses (if
applicable) and other miscellaneous items.
The expenses you incur during
the start-up period will depend on factors such as local economic and market
conditions, whether your SALON is located in a new market or a mature market,
your experience and business acumen, competition, and the sales level you reach
during this initial period. Additional operating expenses will be incurred in
connection with the ongoing operation of your SALON and periodic reinvestment
will be necessary following the initial start-up phase for leasehold
improvements, equipment, fixtures, and other assets.
(10)
We
have relied on the experience and data collected, from our affiliate''s
company-owned SALONS to compile these estimates. The figures in the table are
estimates. Your costs will depend on a number of factors including local
economic and market conditions; how much and how well you follow recommended
and prescribed methods and procedures; your management skill, experience and
business acumen; the local market for hair cutting and styling services; the
prevailing wage rates; competition; and the size of your SALON. We cannot
guarantee that you will not have additional expenses in starting the business.
You should consult with a lawyer, accountant, business advisor, and/or other
professionals before making a decision to purchase a franchise. We do not offer
financing to franchisees either directly or indirectly in connection with their
initial investment requirements. The availability and terms of financing
obtained from third parties will depend upon factors such as the availability
of financing generally, your credit worthiness, collateral which you may make
available, policies of local lending institutions concerning the type of
business or the purpose for which money will be used, and other similar
factors.
(11)
Your
costs may vary if you purchase an existing SALON or convert an existing SALON.
In addition to the table
above, the following notes describe the initial fees for multiple SALONS under
a Development Agreement. (See also Item 5.)
(12)
For
franchisees that enter into a Development Agreement for the establishment of
multiple SALONS, the initial franchise fee is as follows:
The fee for the first SALON is
paid to us when you sign the Development Agreement. The fees for the additional
SALONS are paid when you sign the Franchise Agreement for each SALON.
(13) In addition to the
initial franchise fee for each SALON, you must also pay us, when you sign the
Development Agreement, a multiple unit development fee of $5,000 multiplied by
the number of SALONS to be developed under the Development Schedule.
For illustrative purposes
only, if you enter into a Development Agreement for ten SALONS, the initial
''franchise fee and development fee payable to us at the time you enter into the
agreements will be as follows:
■��� Initial Franchise Fee $25,000
Units Two through Ten���������������������� $45.000
(9 x $5,000)
Total Fees Due $70.000
Multiple unit franchisees can expect to have
additional capital and operating expenses which single unit franchisees may or
may not incur. For example, we may provide our multi-SALON franchisees a
continuing royalty credit of V2 of one percent. To qualify for this credit you will
likely require an office, training capabilities, multi-unit management and
other support personnel. We have not included these additional costs in the
above projections as they will likely not occur with the opening of your first
SALON, nor are they reasonably estimated due to the uniqueness of each
multi-SALON franchisee''s independent business determinations.
Unless otherwise noted above,
all of the above fees are uniform and none of the above fees are refundable to
you.
