Item 7
ESTIMATED INITIAL INVESTMENT YOUR ESTIMATED INITIAL
INVESTMENT
Franchise Agreement
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Initial Franchise Fee (1)
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$20,000
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$20,000
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Lump sum
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Upon
signing Franchise Agreement
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Knockouts
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Leasehold improvements
(2) .
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$11,550
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$36,500
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As invoiced
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As arranged
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Independent contractors
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Lease
payments and other rental expenses (3) - first three months
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$2,500
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$11,250
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Per lease
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Monthly
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Landlord
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Point of Sale Register, hardware, software and
Equipment (4)
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$20,000
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$40,000
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Lump Sum
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Prior to opening Salon
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Suppliers, Knockouts or designated vendors
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Freight Charges (5)
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$1,500
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$2,500
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Lump sum
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As incurred
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Freight carriers or
suppliers
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Signage (6)
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$5,200
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$6,500
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As invoiced
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Prior to opening Salon
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Suppliers, Knockouts or designated vendors
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Initial Inventory (7)
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$2,000
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$4,000
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Lump sum
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Prior to opening Salon
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Suppliers,
Knockouts or designated vendors
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Architectural/ Engineering
(8)
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$2,000
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$3,000
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As invoiced
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Prior to opening Salon
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Suppliers, Knockouts or designated vendors
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Travel,
lodging and meals for initial training (9)
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$1,000
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$1,500
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As incurred
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As incurred
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Airlines,
. hotels and restaurants
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Business Supplies
(stationery, business cards, brochures, paper and other materials) (10)
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$3,000
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$4,000
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Lump sum
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Prior to opening Salon
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Knockouts or independent suppliers
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Business licenses, permits,
etc. (for first year) (11)
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$1,250
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$2,000
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As incurred
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As arranged
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Various agencies
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Telephone and utility
deposits and expenses
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$1,000
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$1,500
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Lump sum
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As arranged
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Suppliers
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(1)
See Item 5 for more
information about the Initial Franchise Fee and Area Development Fee.
(2)
The
cost of leasehold improvements will vary depending on numerous factors,
including: (i) the size and configuration of the premises, (ii)
pre-construction costs (e.g., demolition of existing walls and removal of
existing improvements and fixtures), and (iii) cost or materials and labor
which may vary based on geography and location. These amounts are based on the
cost of adapting our prototypical architectural and design plans to remodel and
finish-out of the Salon and the cost of leasehold improvements. These figures
are our best estimate based on remodeling/finish-out rates and conditions in
the Dallas, Texas metropolitan area. These amounts may vary substantially based
on local conditions, including the availability and prices of labor and
materials. These costs may also vary depending on whether certain of these
costs will be incurred by the landlord.
(3)
The
estimated lease payments are for the first month''s rent and assume that the
premises of the Salon will be in a strip shopping center or urban location
ranging in size from approximately 1,000 to 1,500 square feet, and that no
security deposit is required. Further, the estimated lease payments assume base
annual rental rates ranging from $10 to $30 per square foot. The actual amount you
pay under the lease will vary depending on the size of the Salon, the types of
changes that are allocated to tenants under the lease, your ability to
negotiate with landlords and the prevailing rental rates in the geographic
region. If you engage the services of a commercial real estate broker, you may
be required to pay a finder''s or brokerage commission. These fees typically are
payable by the landlord but, occasionally, the tenant is responsible for this
payment.
(4)
You
must purchase equipment meeting our specifications to be used in the Salon. We
have established relationships with equipment vendors for certain equipment
used in the Salon that meet our specifications. See Item 11 for more
information about our computer requirements.
(5)
These
amounts represent your cost for freight shipping of equipment and inventory to
your Salon.
(6)
These
amounts represent your cost for pricing boards, logo and descriptive signs.
Your landlord may have different restrictions it places on interior and
exterior signage which may affect your costs.
(7)
These
amounts represent your initial inventory of supplies for use in the first month
of operating the Salon.
(8)
These
fees are estimates of your costs in obtaining any architectural and design
services necessary for the construction of the Salon. You must adapt our
prototypical plans and specifications, which we provide to you for the
construction of the Salon.
(9)
These
estimates include only your out-of-pocket costs associated with the training of
you and your Controlling Principals (including travel, room and board). These
amounts do not include any fees or expenses for training any other personnel.
These costs will vary depending on your selection of lodging and dining facilities,
mode of transportation and distance to the training location.
(10)
You
must purchase business cards, brochures and other written materials for use in
the Salon. You will typically purchase amounts that may last as long as six
months.
(11)����� . These are
estimates of the costs for obtaining local business licenses, which typically
remain in effect for
one year. These figures do not include occupancy and construction permits,
which may be included in the leasehold
improvement costs. The cost of these permits and licenses will vary
substantially depending on the location of the
Salon. The estimates also include utility deposits.
(12)
These
figures are estimates of the cost of the annual premiums for the insurance you
must obtain and maintain for the Salon.
(13)
You
will be required to spend the then-current expenditure requirement for the
grand opening. The expenditure requirement will vary depending upon the size
and population of the Territory. All advertisements proposed to be used in the
grand opening advertising campaign are subject to our review and approval. Your
grand opening advertising campaign must be conducted in the 60-day period
comprising 30 days prior to and 30 days following opening of your Salon.
(14)
These
amounts are our estimate of the amount needed to cover your expenses for the
start-up phase of your business, including: (i) professional fees in connection
with obtaining and establishing the franchise business, (n) three months''
payroll for a manager and four hourly employees, and (iii) a minimum of $3,000
required to be in your checking account for EFT purposes and other costs. We estimated
the start-up phase to be three months from the date the Salon opens for
business. These figures are estimates and we cannot assure you that you will
not have additional expenses starting the Salon. Your actual costs will depend
on factors such as your management skill, experience and business acumen, local
economic conditions, the local market for products, the prevailing wage rate,
competition and the sales level reached during the start-up phase. These
amounts do not include any estimates for debt service.
We based these estimates on
the experiences of our current management. You should carefully review these
estimates with your own financial advisor before deciding to purchase a
franchise.
Except as specifically stated
above, the amounts given may be subject to increases based on changes in market
conditions, our cost of providing services and future policy changes. At the
present time, we have no plans to increase payments over which we have control.
Except as specifically noted above or as determined by the supplier or vendor,
the amounts are nonrefundable. ....
We have not included a
separate table for the initial investment if you sign an Area Development
Agreement. Other than the Area Development Fee (see Item 5), actual start-up
costs pertaining to Salons 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.
