HOMEWATCH INTERNATIONAL - FDD UFOC ITEM 7 Detail

ITEM 7

Explanatory Notes

All amounts paid to us are non-refundable.�� Third-party suppliers will determine whether P3yments_tQ_them_are_refundable.

Note 1. Initial Franchise Fee. The initial franchise fee is $30,000 for a Territory containing a minimum of 30,000 and up to 35,000 persons who are 65 years of age or older.� A-SecofidIf you qualify, vou mav purchase a second Territory may-be-awafded-for ana reduced initial franchise fee of $24;500-for-a--Temtory-ce^taming-a--mmimum--of--30;00 franchise-fee--will--be4rH3reased

-3-5^)00 -or- less-than�30_;QQ0-persons-age-65- or-older-�See-Item�5:�The�High�amount-assumes-two Teriitories-wim-30;000-persons-age-65-or-older-in-each:--T^

ske24.500. if vou develop both Territories at the same time. See Item 5 for more information. The initial franchise fee includes, without additional charge, an initials Start-Up Package which includes an initial supply of printed marketing materials. If jgu^ Bjasinesse5>�yp.u.^iist...p.ay_man

CAREGIVER Business plus a $15_T000 development fee for the second and each additional Business to^ be ..de^hjperj^ We_ar^jy the non^ gJlbse^ujgpt.. Business tp^e^ deyelopjgd^^^^^

r^maindeiiof which is paid according to the Development Schedule. See Item 5,

Note 2. Rent-.---You-must-re approved by us withir^m-me^rths-of^e^pfettng-thc initial traimng-pregram:�Lease-eosts-roay vary signifieantly-depertding~-on~the-geographie-loeation of-your-440MEWATGH-GAREGlVER�^usmessT Both-the4HglHend-afKl-4ow-efld-fH3UFe-in-^

approximately-350-to-600 square-feet-of office space that de^s not-require leasehold-improvements---If you choose-to-rent-unimproved-ofTk;e-spacey-the--eest--fo^

paneling, carpeting, cleetric^wirirHjT-pafflting �The-eost-of-leasehe4d
inu?r^ements-mav-vary-substanfelly-ffom locatien-toleeatien:�Note- 3.------ Initial Telephone System

OFFERING G�RCl J LA R�^iNCJUSE, D1S�LDS URL D ۣUM�iSI " 14

Costs. These are the costs associated with installation and set up of your telephone system. You must have a minimum of two dedicated HOMEWATCH CAREGIVERS Business telephone lines and a-hve personan employee answering your phone number at all times during regular business houis.-to-addkienj you-must-flave-an--aflswering-system--eapaM^

hours-a-day,-seven-days-a--week-.- - You must have one personeniployee on call 24 hours a day to return urgent phone messages. Your telephone system must be capable of being rolled to a pager or cell phone, and must also be able to handle conference calls. You will incur additional monthly charges for your telephone service, the first six months of which arc included in the chart under estimated-Additional Funds (See also Note 9 below).

Note 4;2j Training Expenses. Tuition for up to three individuals attending our initial training program is included in your initial franchise fee. You are responsible for all travel, lodging and living expenses associated with attendance at the initial training program and other training programs. We provide four lunches and one evening dinner during the initial training program .^eeJLtejnJLL

Note 5.4* Office Equipment and Computer Hardware and Software. You must purchase a Microsoft compatible computer^d specified-softwarcr-We also- require thatyouhave_s a cellular phone ferdeoj,catejd_tft your Business, a fax machine and a copy machine. You are required to have a DSL, T I high-speed broadband access to the Internet_T which can be via DSL, a fractional T-l_r or wireless Internet conncctionscable, installed at your office location. You

Note 5. Computer Software. You are requiredJp. purchase certain software from us which eureentlyce^ $2r5QQydueat--W to

QU�JiP5ted.._ermra ______________________________________________ See..Jle.ms..J>, 8 and 11 for more

information about the software you are required to purchase7--Youare-required4obTfflg^aptof>coinpiH^ to the initial training program: to operate your Business.

Note 6. Insurance, Liability and Bonding. It is your responsibility to obtain and provide to us proof of insurance and maintain the following insurance .coverage: (i) comprehensive general liability and professional liability insurance for the Office Location and the Business with an initial limit of not less than $1,000,000 combined single limit; (ii) bonding of your caregiver employees or independent contractors, and employees with accounting or bookkeeping duties, in the amount of $25,000 per employee or independent contractor; (iii) automobile liability insurance covering all employees with authority to operate a motor vehicle in an amount not less than $ 1,000,000; (iv) unemployment insurance; and (v) all-risk personal property insurance in an amount equal to at least 90% of the replacement costs of the contents and tenant improvements located at the Office Location. As soon as you achieve annualized Gross Billings of $1,500,000 or more, your minimum coverage requirement for comprehensive general liability and professional liability insurance will be $2,000,000 combined single limit. The required policies of insurance must list us, HII, as an additional insured and provide for 30 days advance written notice to us of cancellation. The cost of the insurance premium will vary depending on the location and size of your Business premises and the number of employees. The cost of the insurance premium may also change periodically due to changes in insurance rates._See IternJL

Note 7. Workers Compensation Insurance. You are also required to carry workers compensation insurance to cover your employees. The premium rate varies from state to state (currently from 2.3% to 9.13%) and Q.ur.estiroateJs based on the estimatedam64jm-efannuala..b.a$e payroll for your first year in business.

Note 8. Opening Advertising Campaign. You are required to spend a minimum of $5,000 on an opening advertising campaign to promote and market the HOMEWATCH CAREGIVERS Services provided by your Business,�� I.f_yjDjj_purchase a second Territory aLihe same time as the first

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Territory, vou must spend a minimum of $2_T000 for an opening advertising campaign for the second Territory. These expenditures are. in addition to Local Advertising expenditures. See-Jtem-4Tr We encourage you to immediately implement a marketing program as outlined in our Operations Manuals. Our staff will help you design and implement this initial advertising campaign. See Item 11.

Note 9. Additional Funds. This amount is an estimate of your pre-operational expenses that are
not listed above, as well as estimated additional funds necessary for the first six months of your Business
operations. These expenses include payroll costs, including costs for an operations and/or marketing
position, but do not include any draw or salary or personal living expenses for you. This estimate also
includes amounts incurred for rent, marketing and advertising^ office expenses, insurance, taxes,
royalties, costs for telephone service, legal and accounting fees and other operational expenses. You must
rent approximately 350 to 600 square feet of commercial office space within vour Territory and at a
location approved by us within six months of completing the initial training program. Lease costs
may vary significantly depending on the geographic location of your HOMEWATCH
CAREGIVERS Business. These figures are estimates and we cannot guarantee that you will not have
additional expenses starting the Business. Your costs will depend on factors such as: how much you
follow our methods and procedures; your management skills; experience and business acumen; local
economic conditions; the local market for our services; the prevailing wage rate; competition; and the
sales level reached during this initial period. You may incur expenses in-^enneetien-with-the
establishment-of-telephone_rtelephoneansw��������������������������������������������������������������������� You may also

incur expenses-for business license fees, legal fees, and accounting fees. These expenses vary substantially from location to location.

Note 10. Total Estimated Initial Investment We relied on our principals''three decades in the home services business to compile these estimates. These estimates do not include any salary or draw for you. You should review these figures carefully with a business advisor before making any decision to purchase the franchise. We do not offer financing directly or indirectly for any part of the initial investment. See ItemJiL

Note 11: Multiple HOMEWATCH CAREGIVERS Businesses. Except for the discounted initial franchise fee for a second Business deyelopj^^jmultan^

mentioned above (See Note 1), if you sign a Development Agreement you will incur the costs

describedJn..^

mayjip.t.j:e.aufce..yim^

the first Business, in our discretion.