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ITEM 7

-------------------------------------------------------- INITIAL INVESTMENT

 

The following table provides an estimate of the major initial expense categories involved in establishing a Restaurant.�You should review the table carefully with a business advisor before malting a purchase decision. Footnotes follow the Table.

����������� -ESTIMATED INITIAL INVESTMENT FOR LITTLE CAESARS CARRYOUT

 

YOUR ESTIMATED INITIAL INVESTMENT (Franchise Agreement)

 

F.xnemhtnre^ � ''� .�*�*>�" "Vtf�>�tt�^-5iti3'' as	'' ■ Estimated- Gost �''mhuiit'' ^ ''	=-Method of ,~��Payment1	-nrWhen Due.,	^-To Whom -Payment iaiu bilMad�
Initial Franchise Fee (See Note l''l	$15,000 to $-20,000	Lump sum	When site for Restaurant is submitted for approval	Little Caesars
Rent (See Note 2'')	$-1,500 to $5,000	As Arranged	Monthly	Lessor
Leasehold Improvements (See Note 3;1	$-50,000 to $200,000250.000	As Arranged	As Incurred	Suppliers
Fixtures, Equipment, and Signage (See Nfita.4''1	$ 70.00080,000 to $450^000170,000	As Arranged	As Incurred	Little Caesars and Suppliers
Grand Opening Advertising_(S�� Note 5''1	$-5,000 to $-fcQOQ 10.000	As Arranged	As Incurred	Little Caesars and Media

 

 

 

 

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(2Q We estimate that the required square footage will be 1,200 to 1. 6001.600 square Meet. The estimate reflected in the table is for a monthly lease payment. If you purchase real property, the cost would be significantly more, and varies depending upon the location and other factors.

 

�3fQ Leasehold improvements must conform to the prototype plans which we will furnish to you, and be made in conformance with our standard specifications. You will be responsible for ensuring that your final plans conform to local laws and building codes, which may involve paying architect and/or engineering fees_r as well as the cost of building permits. Leasehold improvement costs vary considerably according to fair market values in your area, your real estate interest (leasehold or ownership), location and whether you or your landlord develops the location. These estimates do not include out of the ordinary costs such as costs related to extensive redesign, permitting variances, legal obstacles, impact fees, etc.

 

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Additional factors that typically affect your initial investment include your cost to negotiate the lease (or buy the property), including legal fees, local real estate market values, terms under which other locations have been leased, how the costs to renovate or develop the land, building and other site improvements are allocated between you and the landlord, interest costs and the negotiations- of the parties, among others.

 

�4$ Fixtures, equipment, and signage must conform to our standard specifications. The estimated amount is for new items and includes the purchase of computer equipment and related initial training of its use, as described in Item 11. If you are able to acquire used items, this estimate would be lower.

 

�5/------- Please soo)������������������������������� See Item 11 for details on advertising expenses.

 

�6/------- Please sool������������������������������� See Item 11 for details on training expenses.

 

�7/} We estimate that the range given will be sufficient for supplies and the initial amount of products needed to open the Restaurant.

�8jQ You will need to procure at or prior tobefore signing a lease and the opening of the Restaurant, and will need to maintain in full force and effect at all times during the term of the Franchise Agreement, at your expense, an insurance policy or policies protecting you, Little Cnesarsus and itsour affiliates, and our and their respective shareholders, directors, employees, and agents against any demand or claim with respect to personal or bodily injury, death, or property damage, or any loss, liability, or expense whatsoever arising or occurring at or in connection with the Restaurant;�. All insurance policies must provide no fewer than 30 davs'' prior written notice for cancellation or non-renewal. A schedule of the policies that you are required to maintain are listed below.- Little CaesarsWe shall be added as an additional named insured and certificate holder on all liability policies. Little CaesarsWe may require additional or different insurance coverages in the future. Your insurance carrier must be rated at least A-VIII.

 

 

A. Property.

i.         Property should be insured on an all risk form including back up sewers and

drains and to its full replacement eestvalue. Property includes buildings, if applicable, improvements &and betterments, equipment, inventory and other miscellaneous personal property.

ii.        Loss of income should be insured for a $250,000 limit per occurrence for 12

months. This insurance should be written on an all risk form including back up of sewers and drains and off premise utilttvpower failure-that includes overhead transmission lines.

B.����� During construction of a rostaurantRestaurant. an all risk builders risk policy shall be maintained in an amount equal to 100% of the construction value and also

general liability insurance per item C below and workers compensation per item E below.

C.                   Comprehensive General Liability with limits as follows:

General Aggregate������������������������������������������������������������������������������ $2,000,000

Products-Xompleted Operations������������������������������������������������������ -$1,000,000

Personal & Advertising Injury���������������������������������������������������������� -$1,000,000

Each ooourrcnccOccurrence������������������������������������������������������������� -$1,000,000

Fire Damage����������������������������������������������������������������������������������������� 1.000.000$300.000

Standard coverage must include:

Bodily Injury�������������������������������������������������������� Personal Injury

Product Liability�������������������������������������������������� Contractual Liability

Property Damage������������������������������������������������� Fire Damage Liability*

Host Liquor Liability

Advertiser''s Liability

Incidental Malpractice

*It is recommended that the Fire Damage limit be reviewed for adequacy, especially if the Restaurant is in a free standing building.

D.                  Automobile Liability for:

 

Owned atttesAutos (if any) $1,000,000
Hired Autos $1.000.000
Non-owned autesAutos*������������������������������������������������������������������� -|1,000,000

Hired autos------------------------------------------------------------------------ 1,000,000

 

�----- Jllf approved for delivery^ the minimum amount of insurance for non-owned

auto coverage is recommended to be $5,000,000.

E.                    Workers compensation�statutory limits* Compensation as required bv law with coverage as follows:

 

Part 1 : Workers Compensation - Statutory Benefits

 

Part 2: Employer''s liabilitvLiabilitv:

 

$100,000 each aeoidentEach Accident $500,000 Disease policy limitPolicy Limit $100,000 Disease each emploveeEach Employee

Such insurance shall include a waiver of insurer''s rights of subrogation against Little Caosarsus.

F.                    Stop Gap Liability (Employer''s Liability) - required if any Restaurants are located in the following states or territory:�� Montana, North Dakota, Ohio,

Washington, West Virginia, Wyoming-and, Puerto Rico₄ andpj- any state where Franchisees�beoome�self insured for�workers¹�oompensationa franchisee (Employer) is approved to self-insure for Workers'' Compensation.

G. Liquor Liability Insurance - required if your Restaurant, with Little Caesor''spur prior written approval, sells alcohol, with limits of $1,000,000 Each Common Cause and $1,000,000 Policy Aggregate.

LL Ht�Insurance that is also reoommendod inoludoswe also recommend franchisees consider include:

�                                                Property insuranoelnsurance for Flood & Earthquake

�                                                Loss of income for off promise utility failurelncome for Off-Premise Utility Service Failure that includes overhead transmission lines

�                                                Property insuranoelnsurance for EDP/Computer and& Media

�                                                Property���� insuranoe------------- fer------- temperature--------- change-------- (food

speikeelnsurance for Temperature Change (Food Spoilage'')

�                                                Crime insuranoe for employee dishonesty, depositors forgery and tesslnsurance for Employee Dishonesty. Depositors Forgery and Loss of menevMoney

�                                                Excess / Umbrella / Excess Liability

�                                                Employee Benefit Liability

�                                                Employer Practices Liability

�9/) In addition to monthly charges, you also may need to provide deposits for utilities. The amount of such deposits and utility costs will vary with the location of the Restaurant and the practices of the utility companies.

�10/) This estimate includes business licenses and health department certificates. If your Restaurant will serve alcoholic beverages, your expenses will be greater.

�11/) You will need capital to support on-going expenses, such as payroll, to the extent that these costs are not covered by sales revenue. New businesses often generate a negative cash flow. Your costs will depend on factors such as: how much you follow our methods and procedures; your management skill, experience, and business acumen; local economic conditions; the local market for our products; the prevailing wage rate; competition; and the sales level reached during the initial period. We estimate that the amount given will be sufficient to cover on-going expenses in excess of cash receipts for the first 3 months of Restaurant operations, excluding royalty and advertising contributions. This is only an estimate, however, and there is no assurance that additional working capital will not be necessary during or after the initial phase. We relied upon our previous experience with our own units as well as those franchisees who informed us of their experiences. These estimates involve Restaurants which follow our grand opening and marketing plans.

All payments to us are non-refundable. Whether payments made to others will be refundable will depend on your arrangements with them. ,

�1/) The initial fee may exceed $80,000 if the Territory Reservation Agreement allows for the development of more than 16 restaurants. Please sooRestaurants. See Item 5 for details for this expense.

(2Q You may incur additional legal-and₄ accounting and other fees for reviewing the Territory Reservation Agreement.

(3/) You will incur the expenses listed above in the first table of investment for Little Caesar Carrvoutthis Item 7 for each restaurantRestaurant that you develop under the Territory Reservation Agreement.

 

 

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