MAUI WOWI - FDD UFOC ITEM 7 Detail

(2)      

ITEM 7

YOUR ESTIMATED INITIAL INVESTMENT

Ka''anapali Cart or Event Concession Trailer Operating Unit Operating

(Note I)

Drive-Thru or In-Line Operating Unit (Note 1)

(1)     There are three types of MAUI WOWI unit franchises that you may purchase: a Single Unit Franchise, a Standard Franchise, and an Empire Builder Franchise. (See ITEM 1.) Regardless of the type of franchise you choose to buy, your initial investment will depend mainly on the type of Operating Unit you choose to open as your first Operating Unit. Therefore, the anticipated initial investment estimates provided in the chart are broken down based on the type of Operating Unit you select as your first Operating Unit. If you acquire a Single Unit Franchise, you will be required to sign the Fixed Kiosk or Retail Store Operating Unit Rider. If you acquire a Standard Franchise or an Empire Builder Franchise, upon signing your Franchise Agreement, you will be required to sign an Operating Unit Rider regarding the type of Operating Unit you will operate for your first Operating Unit. If you are purchasing a Standard Franchise or Empire Builder Franchise, you will be required to execute an additional Operating Unit Rider for each additional Operating Unit you choose to open prior to you opening that Operating Unit, and you will incur additional costs for opening and operating additional Operating Units.

(2)     The Initial Franchise Fee is $27,500 for a Single Unit Franchise, $36,500 for a Standard Franchise and $59,500 for an Empire Builder Franchise (see ITEM 5). Initial Franchise Fees are paid only once based on the type of franchise acquired by you. A Single Unit Franchise may not operate a Ka''anapali Cart or an Event Concession Trailer Operating Unit.

(3)     The Hawaiian Vendor Tour Fee is $3,500 should you (or, if you are not an individual, then a managing member, partner or officer of you designated by you to participate personally in the MAUI WOWI Business) choose to attend the optional Hawaiian vendor tour program. You may, at your option, have additional individuals attend the Hawaiian vendor tour program by paying an additional Hawaiian Vendor Tour Fee for each individual. The Hawaiian Vendor Tour Fee may be partially refunded if you cancel your attendance in the Hawaiian vendor tour program (or the attendance of any other individual) within a certain time frame, but you will be required to pay the Hawaiian Vendor Tour Fee in full again if you reschedule the attendance of you or any other individual for the Hawaiian vendor tour program. (See ITEM 5.)

(4)     The Hawaiian Vendor Tour Fee will also cover your living and transportation expenses during the Hawaiian vendor tour program, but you are responsible to pay for all of your air transportation expenses associated with the Hawaiian vendor tour program. The cost of the air transportation expenses will vary depending on where you will be traveling from, the time you will be traveling, and other factors. We also provide a Mainland Training Program for up to two individuals (or up to three individuals if you purchase an Empire Builder Franchise) at a location we designate in the Denver, Colorado metro area, or at another site designated by us, without an additional fee. (See ITEM 11.) You must pay your own transportation and living expenses (including the expenses for a hotel room(s) for six to nine nights) during the Mainland Training Program. If you cancel your attendance at the Mainland Training Program within two weeks of the first day of Mainland Training Program, you will be charged a $500 cancellation fee unless we waive this fee in writing. If you purchase an Empire Builder Franchise, we will later provide the Mainland Training Program for an additional Manager for each subsequent Operating Unit you elect to open after the first Operating Unit.

(5)     Depending on what type of Operating Unit you choose to operate, you may incur lease or concession license charges. If you choose a Retail Store or a Fixed Kiosk Operating Unit, or if you choose to operate Ka''anapali Cart or an Event Concession Trailer at a Permanent Site rather than an Event, you will be required to purchase or lease real property where your Operating Unit will be located. You will need approximately 200 to 1,200 square feet of floor space. The estimates in the tables include the first three month''s lease payments, and a security deposit equal to one month''s rent. We used a lease rent rate of between $4.00 and $25.00 per square foot. However, the lease rent rate and required deposit varies considerably from location to location. If you operate an H-E-B Retail Store (as defined in ITEM 12), you will pay rent in an amount set by H-E-B, in its sole discretion, per month, plus additional rent in the form of a concession royalty equal to 8 percent of your gross revenues in excess of an amount set by H-E-B, in its sole discretion, per month. See ITEM 12 for more information regarding the H-E-B Retail Stores.

If you choose to operate from a Ka''anapali.Cart or an Event Concession Trailer at an Event, you may be charged a concession license charge by the organizer of the Event. These costs vary depending on the Event and its organizer.

You should investigate these charges before you agree to operate at a particular Permanent Site or. Event. (See also Note 8 below.)

(6)     You must pay for the Ka''anapali Cart, Event Concession Trailer or Fixed Kiosk immediately upon executing the Operating Unit Rider for the relevant Operating Unit. Shipping costs for the Ka''anapali Cart and Event Concession Trailer, which you must purchase from our Affiliate, are included in this estimate and vary depending on type of unit and delivery destination, but are estimated to range from $0 to approximately $2,500. If you will operate from a Fixed Kiosk, the Fixed Kiosk must be purchased from our designated supplier at an estimated cost of $78,188 to $129,938. The shipping costs for the Fixed Kiosk are included with the construction costs ("see Note 7, below). Additionally, these estimates include the Marketing Fee (as defined in ITEM 11), which will be added to all of these costs. If you will be operating an Event Concession Trailer, you will need to own a suitable vehicle to tow the Event Concession Trailer. We have not included the cost of a vehicle or trailer (other than the Event Concession Trailer itself) in these estimated costs.

(7)     The cost incurred to construct a Fixed Kiosk or Retail Store will depend on a large number of factors that will vary by the location for the Fixed Kiosk, In-Line, Stand-Alone, or Drive-Thru Operating Unit, including the Permanent Site you choose, the region of the country where your MAUI WOWI Business is located, and the costs incurred to run necessary electrical and water lines. The highest end of this estimate, $350,000, represents the high estimate for the costs of construction of a Drive-Thru Operating Unit.

(8)     This fee is payable only if you engage the services of an independent commercial broker to assist you in locating a Permanent Site. In some cases, the broker''s fee may be paid partially or fully by the landlord, however, this fee is ultimately your responsibility. The broker will generally assist you in identifying a Permanent Site and negotiating the business terms, but you or your attorney must still negotiate the legal terms of any lease you sign. You must clearly understand all terms and conditions of the lease agreement. This fee is payable based on the terms you negotiate with your broker.

(9)     You must purchase espresso machines, blenders, signage, decor and other equipment as listed in the Library of Operating Manuals and as may be otherwise designated by us. If you are operating a Ka''anapali Cart or an Event Concession Trailer Operating Unit, you must buy the Hawaiian coffee equipment from our Affiliate but you are not obligated to buy the Espresso program. If you are operating a Retail Store or a Fixed Kiosk, you will be required to purchase both the Hawaiian coffee equipment and the Espresso equipment, but this equipment will be purchased from a supplier or a third party rather than us or our Affiliate. The Marketing Fee will also be added to all purchases of MAUI WOWI Supplies and Equipment and MAUI WOWI Products. (See ITEM 11.)

(10)  In addition to the required equipment purchases discussed above, there are other items of equipment that, although not mandatory, are generally recommended that you acquire. This includes a custom transport trailer for the Ka''anapali Cart, if applicable, which ranges in price from $3,000 to $9,000, a cooler that costs $3,672 and a three-basin sink that costs $6,336. All of these items are available from our Affiliate. You will be charged a 12 percent Marketing Fee on all equipment purchases. Although we do not require it, for some locations the local zoning, health, or similar regulations may require that you invest in (1) a three-basin sink with hot water and splash guard; (2) a free-standing metal insulated cooler, (3) Ka''anapali Cart walls; or (4) plumbing and electrical installation for the Ka''anapali Cart. We have not included estimates for Ka''anapali Cart walls or plumbing and electricity for the Ka''anapali Cart in the chart. We have also not included costs for optional equipment for a Retail Store, due to the fact that equipment needs for Retail Store are widely variable and are therefore determined on a case by case basis.

(11)  We and our Affiliate have established a network of professional organizations to assist all franchisees opening Fixed Kiosk and Retail Store Operating Units. You are required to work with vendors designated by us and our Affiliate for the location, development and construction of your Fixed Kiosk or Retail Store, including architects, real estate brokers, millwork, signage and equipment suppliers, construction service providers, and contractors. If you use the designated vendors, you will be charged a turnkey assistance fee ("Turnkey Assistance Fee") of $17,500. If you are unable to use any of the designated vendors, you must obtain our prior written approval to use an outside vendor or vendors. The materials, use of materials, accuracy in design, warranty review, and other pertinent items related to such outside vendors must also be approved in writing by us. We may withhold our approval in our discretion for any reason. An additional $3,000 will be charged for using an outside vendor, and an additional $1,000 will be charged for using an outside non-approved signage vendor. The TumKey Assistance Fee includes payment up to $5,000 of your architect fees if you use a preferred architect designated by us in writing or $4,000 of your architect fees if you use an architect other than a preferred architect we designate. You are responsible for any amount owed to the architect you use in excess of these amounts. If you purchase an Empire Builder franchise, the TumKey Assistance Fee that you will be charged upon signing the Operating Unit Rider for your second Operating Unit at a Permanent Site will be reduced by 50 percent, and the TurnKey Assistance Fee will be waived for the third and all subsequent Operating Units that you later open at a Permanent Site pursuant to the Franchise Agreement.

The TurnKey Assistance Fee shall not be refundable in whole or in part under any circumstances. However, if you for any reason do not proceed with the opening of the Fixed Kiosk or Retail Store for which the TurnKey Assistance Fee was paid and later elect to open and operate a Ka''anapali Cart or Event Concession Trailer, the amount of the TurnKey Assistance Fee paid, less the amount of any out-of-pocket expenses incurred by us in rendering the turnkey assistance services described above and an amount determined by us in our sole discretion as a fee for the performance of such services through the date that you notify us in writing of your decision not to proceed with the opening of the Fixed Kiosk or Retail Store, will be applied by us toward the purchase price of the Ka''anapali Cart or Event Concession Trailer, provided that the Operating Unit Rider to open the Ka''anapali Cart or Event Concession Trailer is executed within 30 days after you have notified us in writing of your decision not to proceed with the opening of the Fixed Kiosk or Retail Store.

The TurnKey Assistance Fee for H-E-B Retail Stores (described in ITEM 12, below) is $9,000 (the "H-E-B TurnKey Assistance Fee"). In accordance with your Franchise Agreement, you will pay the standard TurnKey Assistance Fee of $17,500. If you are awarded the H-E-B Retail Store, the excess of the standard TurnKey Assistance Fee and the H-E-B TurnKey Assistance Fee will be held by our Affiliate and either applied to the TurnKey Assistance Fee for a later Retail Store or Fixed Kiosk Operating Unit you may acquire, applied to a Ka''anapali Cart or Event Concession Trailer you may acquire, or applied toward your equipment purchases for your H-E-B Retail Store. If the H-E-B Retail Store is your final Operating Unit permitted under the Franchise Agreement, we may, in our sole discretion, permit you to apply any amounts left over towards other purchases. We pay the first $5,000 of your architect fees if you use a preferred architect, designated by us in writing.

(12)  The minimum required opening inventory varies by Operating Unit. For each Operating Unit type, you are required to purchase a designated minimum number of cases of MAUI WOWI Blends for making smoothies. You must buy this amount of opening inventory from a supplier designated by us when you sign your Operating Unit Rider to open an Operating Unit. We may, in our sole discretion, permit you to buy lesser initial amounts of opening inventory depending, in part, on your proximity to a distribution center of our suppliers.

(13)  You must purchase and install at your expense signage based on our System standards, as described in the Library of Operating Manuals or as we may otherwise designate.

(14)  This figure includes the cost range for a point-of-sale system ("POS System"), credit card processing, a high speed internet connection and back office computer systems. These systems are currently required only for Retail Stores, Fixed Kiosks, and Ka''anapali Cart or an Event Concession Trailer Operating Units operating from Permanent Sites. They are currently optional for Ka''anapali Cart or an Event Concession Trailer Operating Units operating from Events. You are required to use the POS System designated by us. (See ITEM 11.) We reserve the right to require a POS System, credit card processing, and back office computer system for the K''anapali Carts and Event Concession Trailers operating from Events. The range in the cost of these systems is dependent upon a number of factors, including the number of terminals, type of hardware, type and number of peripheral devices, additional software requirements and back office computer configuration.

(!5) The Miscellaneous Opening Costs include utility costs, permitting/plan check fees, business entity organization expenses, insurance and deposits for the first three months of operation of your MAUI WOWI Business, as well as the miscellaneous small wares. If you purchase an Empire Builder Franchise, we will engage a business and franchise law attorney to provide you with up to one hour of phone consultation to discuss business entity organization issues, file all necessary documents needed for incorporation and pay state assessed filing fees of up to $1,000 (you will be responsible for additional amounts if your state has filing fees in excess of $1,000), and provide suggestions on establishing corporate bylaws and minutes.

(16)  This is for budgeting purposes only to account for unanticipated expenses. This estimates your pre-operational expenses, which we have not listed above, as well as additional funds necessary for the first three months of your business operations but excludes any revenue you may generate from operating your MAUI WOWI Business. These figures are estimates and we cannot guarantee that you will not have additional expenses starting the MAUI WOWI Business. Your costs will depend on factors such as: how closely you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions; local zoning or regulation compliance; the local market for our products and services; the prevailing wage rate; competition; and the sales level reached during this initial period. This item includes a variety of expenses and working capital items during your start-up phase such as: legal and accounting fees; advertising, promotional expenses and materials; employee salaries and bonus programs; and other miscellaneous costs. However, this item excludes your salary and also excludes any sales, use or similar taxes that may be assessed by your state or local authorities. Please check with your local and state governmental agencies for any taxes that may be assessed.

(17)  We relied on our principals'' and our predecessors'' principals'' combined 25 years of experience in the fresh fruit smoothie business as well as reporting provided by some of the over 300 franchise operators of ours to compile these estimates. This is an estimate of your initial investment and is based on our estimate of nationwide average costs and market conditions prevailing as of the date of this Disclosure Document. You must bear any deviation or escalation in costs from the estimates that we have given. You should review these figures carefully with a business advisor before making any decision to purchase a franchise. Presently, we do not offer financing for any part of your initial investment (see ITEM 10). The availability and terms of financing from independent third parties depends on factors such as the availability of financing generally, your creditworthiness, other security and collateral you may have and policies of lenders. Your costs may be even greater than the high range noted in the chart if you purchase an Empire Builder Franchise or Standard Franchise and open multiple Operating Units.

(18) All of the payments to us and our Affiliate are nonrefundable under any circumstances once paid, except that the Initial Franchise Fee and Hawaiian Vendor Tour Fee are partially refundable only in those circumstances set forth in ITEM 5 above. Payments to third parties may or may not be refundable depending on your agreement with such third parties; however, usually such payments are nonrefundable.