Notel: We do not
finance any fees. The Initial Franchise Fee is non-refundable. -The $36,000
Initial Franchise Fee is for a single
It''s A Grind Storo.�Under the Franchise
Agreement offorod with this Offering Circular,
now franchisees acquiring an existing
It''s A Grind franchisod business will
pay to us the then current Initial
Franchise Fee for a single storo
and sign our current form of Franchise Agreement for the
full term.�The current Initial Franohiso
Foo is $36,000, but it could bo higher if you decide
to transfer your franchisod business
at a later date,
Refer to Item 5 for information on initial franchise
fees, including fees payable under a NROA or Multi-Unit Franchise Agreement.
If
you sign a NROA when you sign your Franchise
Agrocment for your first It''s A Grind
location, you pay us the Initial Franchise
Foo of $30,000 for your first It''s A Grind location,
plus an option foo of $15,000 towards a second
It''s A Grind franchiso. You pay us the remaining $15,000
of your second Initial Franchise Fee if
you sign a sooond It''s A Grind Franchise
Agreement,
If you sign a Multi Unit
Franchiso Agroomont, you pay us a Development
Foo equal to $10,000 times the minimum
number of It''s A Grind Stores to bo opened
under yew Development Schedule. The
Development Foo is fully earned by us when
paid and is non refundable. Notwithstanding
any standard Initial Franchise
Fee provision in any It''s A Grind Franohiso
Agroomont that you sign, you also pay us an Initial
Franohiso Foo for each Franchise
Agroomont that you and we sign under your Multi Unit
Franchise Agreement as follows:
A:�������� $27,500
for each It''s A Grind Store under your Multi
Unit Franchise
Agreement if
you develop and operate three or four It''s
A Grind Stores; or
�������� $25,000
for each It''s A Grind Storo under your Multi
Unit Franohiso
Agfeemont
if you develop and operate five
or more It''s A Grind Stores,
We will apply $10,000 of
the development fee against each
of-the Franchise Agreements that you sign
under your Multi Unit Franchiso
Agreement for 3 or more Stores^�When you sign
your Multi Unit Franohiso Agreement,
you pay us the Initial Franchise Fee for
your first It''s A Grind Storo to be
opened under your Multi''Unit Franchise
Agreement. You pay the Initial
Franchise Fee for each additional It''s A
Grind Storo to be opened under your Multi
Unit Franchiso Agroomont on the oarlior
of: (1) the execution of the lease for that It''s
A Grind Storo or, (2) 6 months boforo tho latest date that
tho It''s A Grind Storo must bo opened,
as described in your Dovolopmont
Schedule (attached as Exhibit MUFA
III to your Multi''Unit Franchiso Agreement).
See Item 5 of this Offering Circular.
Note 2: The cost of leasehold improvements will vary
significantly depending upon many factors, including, without limitation,
square footage, geographic area, market climate, labor market (e.g., prevailing
wage rates, union labor restrictions, etc.), type and condition of the
facility, location, condition of the leased premises and price difference
between various suppliers and contractors. These estimates assume you are
establishing a traditional It''s A Grind Store in a typical neighborhood
shopping center or free standing building. In some circumstances, it may be
possible to convert an existing free standing building, a pre-existing
facility, a multi-level office or commercial facility, regional mall, food
court, etc. with our consent as long as it conforms to all of our standards and
specifications^ The costs of leasehold improvements are your sole
responsibility and will vary depending upon your negotiations with the landlord
or third parties prior to occupancy, or they may be financed through the landlord
or third parties. You may be able to negotiate for "tenant
improvement" allowances that can help to reduce your net construction
costs. This is an important factor for you to consider in choosing a location.
Additional important cost factors are the condition in which a landlord
delivers a space, the extent to which it has existing improvements, such as
restroom facilities, electrical, HVAC, storefront, doors, concrete slab, and
other elements, and the nature of the building/site, among other factors, all
of which will significantly impact the costs you should expect to incur. The
estimated cost range provided reflects net costs, and assumes a typical
tenant improvement allowance of $10 to $20 per square foot for a store of
approximately 1250 to 1450 square feet. These assumptions do not apply in all
instances because of all of the above-noted variables. If you receive little or
no tenant improvement allowance and the landlord delivers the site with few, if
any, improvements and/or the building has site specific issues affecting
development costs, you could expect to incur additional costs of $20,000 to
$50,000, or higher. Most Franchisee locations do not offer Drive-Thru service.
If you elect to construct a Drive-Thru, you can expect to incur additional leasehold
improvement costs, which can be $40,000 or more. Wo roliod-ueen
our 5 years of franchising experience
in compiling these estimates, You should
consult with a qualified, licensed contractor for cost estimates specific to
your site before signing the lease, since we cannot predict or warrant what
future costs may be. You are responsible for obtaining all necessary permits
and licenses required for the location, construction, renovation or operation
of your It''s A Grind Store.
Note 3: The cost of the equipment, furniture,
fixtures, Point of Sales ("POS") computer system, music system,
web-based camera system and other equipment includes the estimated costs of all
such items that are necessary to open and operate your It''s A Grind Store in compliance
with our standards and specifications. Most Franchisee locations do not offer
drive-thru service. If you elect to construct a Drive-Thru, you can expect to
incur additional equipment costs, which can be $30,000 or more. You must
purchase or lease a POS Computer System and Software Programs for use in your
It''s A Grind Store that are approved by us, that meet all our current standards
and specifications, and that are fully compatible with our POS Computer System
and Software Programs. We currently require that you obtain and use QuickBooks
software for bookkeeping and accounting purposes. We estimate that costs for
the POS Computer System, Software Programs and QuickBooks software typically
are in the $15,000 range. {See Item 11 of this Offoring-GifGular
Disclosure Document)-fe*^-a description of tho computer
systom). Wo do not provide any financing,
but the initial purchase of the equipment,
furniture, fixtures and POS computer
system may bo financed or leased
through your own third party sources, depending
upon your creditworthiness and lender/leasing
company requirements. Any equipment financing
or equipment leasing arrangomonts are solely
your responsibility.�Tho amount you may qualify to
finance or lease, tho interest rato,
and the length of any financing or leasing
arrangements are subject to negotiations
botwoon you and your londor or leasing company.
�You must also are required to subscribe to
a music service obtained from an approved supplier, which currently costs $60,
per month, per store.
Note 4: Before you sign a lease you must obtain an
It''s A Grind sign drawing that meets all our specifications and is specific to
your location ("Approved Sign Criteria") from our Designated Supplier
of signage services. If you elect to construct a Drive-Thru, you can expect to
incur additional signage costs, which can be $15,000 or more. You must obtain a
final approved sign plan ("Approved Sign Plan") from us and/or our
designee and have the sign drawing and sign plan incorporated into your lease.
You must use our Designated Supplier for construction and installation of your
signage. You must remove and replace at your cost any sign at the It''s A Grind
Store location that does not meet the Approved Sign Criteria and Approved Sign
Plan.
Note 5: If you do not own adequate space, you must
lease retail space for your It''s A Grind Store. Typical locations for an It''s A
Grind Store are strip shopping centers in suburban commercial areas having
1,200 to 1,700 square feet. Rent is estimated to range between $2,500 and $7,500
per month and will vary significantly depending on such factors as square
footage, market climate, type of facility, location (relating to the location
of the shopping center within a community and to the location of the leased
premises within the shopping center), condition of the leased premises, the age
and popularity of the shopping center where the leased premises is located,
etc. If the cost of leasehold improvements is amortized into your lease, your
monthly lease rates could significantly increase. (See Note 2 regarding
leasehold improvements). The figures in the chart reflect an estimate of first
and last month''s rent. The high range amount also assumes an additional 3 to 4
months of rent payments prior to opening, due to construction delays or other
delaying factors.
Note 6: Professional fees include payments to
architects, construction management services, accountants and attorneys, and
other consultants. You must use our designated supplier of architectural
services ("Designated Architect"). All franchisees must pay our
Designated Architect a "test fit" fee of up to $1,000 for a
preliminary layout and design for a Store. You must use our Designated
Architect to prepare a complete set of site-specific, architectural design
drawings, including the mechanical, plumbing, electrical and other applicable
plans, (the "architectural drawings") for your Store, which must be
consistent with the test fit and in compliance with all of our standards and
specifications. You also are required to use a supplier designated for construction
management services and signage. These designated suppliers and our Designated
Architect are collectively called "Designated Suppliers". You are
responsible for hiring our Designated Suppliers and paying them directly for
their services. The. range provided assumes you use our Designated Suppliers
for your architectural, signage and construction management services, among
other various professionals and consultants. We currently
do not receive any paymont, commissions or othor
compensation from tho Dosignatod ArchitoGt
or tho designated construction management
services or signage services suppliers,
but wo have tho right to do so.
The above estimates also assume that your legal,
accounting and other professional fees will be based on the establishment of a
sole proprietorship ownership model and a simple lease review. If you establish
a corporation or other legal entity and/or conduct more extensive negotiations
regarding your ownership organization or regarding your lease, then your
professional fees will increase accordingly. The above cost range also reflects
estimated costs that you will incur in using a required prospective employee
survey form/evaluation service designed to assist you in building a quality
store team. You will employ this service on an ongoing basis, as needed, based
upon your staffing needs.
Note 7: You are required to
maintain adequate insurance coverage prior to occupying the leased space. The
estimated expenses included in the above Chart include estimates for your
initial premium for the required property and public liability insurance and is
the estimated cost per year per It''s A Grind Store. The cost of other coverage
is not included in the estimates.
You must keep in force at your expense and by advance
payment of premium at least the following insurance coverage:
(1)
Worker''s
compensation, employer''s liability, and such insurance to meet statutory
requirements;
(2)
Comprehensive
general liability insurance, including product liability, property damage, and
personal injury coverage, with a combined single limit of at least $1,000,000;
(3)
"ALL
RISK" or special property coverage of not less than current replacement
cost of your It''s A Grind Store''s glass, equipment, fixtures and leasehold
improvements sufficient in the amount to restore your It''s A Grind Store to
full operations;
(4)
Business
Interruption insurance with coverage for at least 12 months for actual losses;
(5)
Employee
fidelity bonds in the amount of $10,000 per employee for each employee; and
(6)
If
you have company-owned vehicles, automobile liability insurance for owned and
non-owned automobiles including personal injury, wrongful death, and property
damage with single limit coverage of at least $1,000,000.
We may from time to timoperiodically
require you to upgrade your insurance as to policy limits, deductibles, scope
of coverage, rating of carriers, etc. If a Franchisee signing an addendum to
their Franchise Agreement for a non-traditional location operates in a site
shared with other businesses, then the Franchisee must meet additional
requirements, such as coverage for common areas and other items. (Refer to
Exhibit Q of this Offering CircularDisclosure
Document).
Note 8: Training costs will vary depending upon the
number of persons attending the training, the length of stay, the distance
traveled, the lodging and stores selected, and type of transportation utilized.
Note 9: The estimate for opening inventory is based
upon all of the inventory required to open your It''s A Grind Store.
Note 10: You must pay us a Grand Opening Fee of $5,000
prior to attending the Initial Training program for a grand opening
advertising, marketing and promotion package (the "Grand Opening
Fee"). Refer to Item 11 for more information on the package. We will
advise you in connoction with tho Grand
Opening, which will bo conducted
in accordance with our standard plans, ac adapted for
your It''s A Grind Store. The Grand Opening package
will bo in tho form, and using the advertising
and promotional campaign and materials,
spocifiod by us, and may bo required
to include a brief statement regarding the availability
of It''s A Grind franchises. Tho Grand Opening
package will include direct marketing
materials and production ready, customized
promotional slicks/items.�You will not
bo permitted to participate in tho Initial
Training program until wo have received
tho Grand Opening Foe.
If you aro acquiring a Storo from
an existing franchise, then you must
pay us a Fivo Thousand Dollar ($5,000) foo for a marketing,
advertising and promotion package
for the It''s A Grind Store (tho
"Transferee Initial Advertising
Package"). The Transferee Initial Advertising
Package wtti bo in accordance with
our then current requirements
for a
Transferee''s Initial
Advertising Package- and other applicable
specifications.�The Package will
include direct marketing materials
and production ready, customized promotional
slicks/items. You will not bo permitted
to participate in the Initial Training
program until wo havo received the Initial
Advertising Package foe. Wo may waive or
reduce the�Grand�Opening�expenditure�and/or
other�advertising�expenditure
requirements in limited instances
whoro the venue or other circumstances warrant
it in our judgment. (See Item 11)
Note 11. Additional Funds is an estimate of
certain-funds needed to eevef-cover certain business (not personal)
expenses before and during the first 36 months of operation of your business. You
must spend at least 2% of your monthly
Gross Sales for local advertising
and promotional activities.�In
addition, at your cost, you must also
participate in and pay for ail promotions
designated by us for the market
in which your-It''s A Grind Store is located,
display all in store promotional materials
and pay for the cost of products being promoted.
You must oomploto our report forms monthly and
send them to us to show that you havo fulfilled
your monthly requirement for local advertising
oxpondituros. You must receive our prior written
approval for any local advertising and
promotional activities that you use. Wo estimate
local advertising exponccs to range
from $450 to $1,200 per month, but thoso
expenses can vary significantly�These expenditures
by you are in addition to your National Marketing
and Development Fund contributions. You
also will need to support on-going costs of your business, such as payroll,
utilities, rent, utilities, taxes, loan payments, rent,
roal estate cost, security
deposits, marketing expenses, overhead
expenses and other costs, to the extent that revenues do
not cover business expenses. This is only an estimate
of these costs, and we cannot guarantee that the amounts specified will be
adequate or know whether or not any revenues will cover expenses. You may
willmay need further funds than those shown during the first 63
months of initial operation, and additional fundsn or afterwards. We do not
furnish or authorize our salespersons or any other persons or entities to
furnish estimates as to the capital or other reserve funds necessary to reach
"break-even" or any other financial position, nor should you rely on
any such estimates. We relied upon our 7 years of franchising experience, as
well as our and our affiliate''s store operating experiences, in compiling these
estimates.
The 63-month period from begirw+ng-opening the
business covers the time by which
most Franchisees are fully operational, but
does not necessarily mean that you will have reached "break-even,"
"positive cash flow," "profitability" or any other
financial position by that point or at any other point in time. In addition,
the estimates presented relate only to certain costs associated with your It''s
A Grind Store and do not cover any personal, "living," unrelated
business or other expenses you may have, or amounts such as royalty payments,
marketing fund payments, debt service on any loans, sales and/or use taxes on
goods and services, and a variety of other amounts not described above.
Although we make no estimates or representations regarding financial
performance of an It''s A Grind Store, we recommend that, in addition to the
additional funds shown, you have sufficient personal resources to cover your
living and other expenses for more than 3 months.
Note 12. All of the above figures are estimates of
certain initial start u pre-opening and initial
operatingp expenses. It is not all-inclusive, and we cannot guarantee you will
not have additional expenses in starting your It''s A Grind Store. The total
figure listed in the above chart does not include compensation for your time or
labor. Your costs will vary depending upon such factors as: how closely you
follow the It''s A Grind System; your management and marketing skills;
experience and general business ability; and local and general economic
conditions. Additionally, and as noted in Item 11, Stores often open between 8
and 18 months after the Franchise Agreement is signed. We do not and cannot
predict to what extent costs at the time that you incur them will vary from the
information contained in this chart, but they may vary significantly.
Miscollanoous-Total costs to begin
operations and other financial requirements may be more or less than the
figures specified above. Many of these factors are primarily under your control
in your independent operation of the business, and may include necessary
licenses, permits or certifications. You are solely responsible for identifying
and complying with all applicable laws, regulations and ordinances, including
all licenses and permits that may be required for your It''s A Grind Store. We
have made no provisionThe foregoing is not
an estimate fer�of capital or other reserve funds necessary for you to reach
"break-even" or any other financial position, nor do any of these
estimates include any finance charges, interest or debt service obligations, er
personal expenses or other excluded amounts, as described in Note 11. You
should not assume that revenues from your customers will necessarily-cover
your initial (or other)later expenses. You should review these
figures carefully with a business advisor, -(such as an accountant,) before
making any commitments.
We cannot assure you that you will not have additional
expenses in starting your business. Your actual cost will depend upon a number
of factors, including local economics and market conditions and the size of
your It''s A Grind Store. We urge you to review these figures carefully with a
business advisor, accountant and attorney before making any commitments. We do
not offer financing either directly or indirectly for any of the above items. The
availability and terms of outside financing
depends upon factors, such as the availability
of financing generally, your credit
worthiness, security you may have to
offer a lender, policies of lending
institutions concerning the type
of business to be operated by you, and other
such factors. These amounts do not include estimates
for any debt service, interest or finance
charge.
