Notes to Item 7 Chart
Initial Franchise Fee. The amounts identified in the chart
are the Initial Franchise Fees for your first Store with us. As noted in Item
5, wo will reduce the Initial Franohisc Fee to $20,000 for your second and-each
odditional Store willvusor, ii''..you a�gujre rights under the Rapid StartCommercial
.Sales
Program^�See-Item-5 for-details on the development-schedule and
fees applicable under the Rapid Start Program.^for^^rj[ir^t_Comjriercial Sales
Facility. The low esti_matg_of $20.000 assumes you acquire rights to operate an
additional Store under the Incentive Program.
2���� Rent.� These estimates are for three months'' rent,
covering one month''s rent� a_pd_your security
tb us.lTJS44S.09
deposit (first and last month''s-rent), and one months'' pre opening-ren
t). You may be able to negotiate more favorable terms (e.g., rent abatement for
one or more months before you open your business) with your landlord; if so,
your costs will vary.
The-typicol Full Service-Store fooility requires-4 ;200 square
feet-ormore-efretoil space, and a-Retail-Qnlv-Store tvpicolly-requires 750 souore
feet-or-more of retail space:--The-above estimate The rent estimate provided
under the heading "Commercial Sales Program" contemplates thai vou
acquire commercial office space, outside of the home and in a commercially
zoned setting that has at least 300 square feet. The office space must have
sufficient space for the POS System and allow for adequate
temperature-controlled space for inventory storage. The office space must have
a commercial business .address and be capable of receiyjn^commercial
deliveries. A loadinfi_dock is
The rent estimate provided under the heading "Retail
Store" contemplates rent for a 1,200 square foot Full-Service Store (ond-a
750 square foot Retail-Only-Store) at the rate of $15 to $4238 per square foot,
including common area maintenance charges and taxes. The typical Store facility
will have a minimum of,.600 square feet of retail space with other spacejn the
back of the Store,, depending .on, the overall size of the localtgjL
Your rent expenses may vary widely based on factors such as
geographic location, the size of your Store_or Commercial Sales Facility, local
rental rates, your lease term, the current occupancy/vacancy | rates for retail
space in your market, and other factors, and may be considerably higher in
large metropolitan areas and urban downtown areas.
Utility Security Deposits. Lessors and utility companies may
require you to place a deposit before occupying the premises and before
installing telephone, gas, water, electricity and related utility services.
Leasehold Improvements. You will not be required to incur
leasehold improvement expenses for a
Commercial Sales Facility, however, vour Commercial Sales Facility must convey
a professional
imaj^^itabjejfpiic^^����� husipe^s^ReraJiojiS, The cost of construction and
leasehold improvements for a Store depends upon the size and condition of the
premises, the nature
and extent of leasehold improvements required, the local cost of contract work
and the location of the
Store. The range of figures above-jor a Store, includes the cost of reasonable
renovation or leasehold |
improvements, including flooring and installation of fixtures, but may vary if
the lessor provides you
a construction allowance. The estimate in the above chart abeygjojiaJSiorc
assumes that the leasehold \
improvements will be made to "vanilla shell" premises whose flooring,
walls, ceilings, mechanical
and electrical systems arc prepared for Store construction.
Fixtures and Equipment. The Manual and/or supporting
documentation provided by our Store Build Out Department describes the fixtures
and equipment necessary for a Store, which include shelving, fixtures,
counters, POS systems, computer hardware and software, and other items. The
estimate assumes that you will incur set-up and testing (connecting_c�a_bIes
and other basic installation") costs | for your POS system in the range of
$0 (for example if you do the work yourself) to $1,000 (for example if you hire
an outside vendor). The estimate provided-inoludes o required purohose ofFjtce.pl
as noted below in this Note 5-Drop Boxes for each-Store at a current
cost of $105 per-Drop-Box-and 10 Cortridge Recycling Bins for each Store at a
current cost of $55 per Cartridge Rooycling Bin. �ouf vou currently do not
purchase directly from us or pay us for any equipment or fixture purchases,
however (and as noted more fully in Item 8), we may facilitate your purchase of
materials by receiving your payments for them, passing those payments onto the
supplier, and then delivering the
fb us l71S4Jg.no
supplies to you. In these cases, we wjll act as a
pass-through for payments to the supplier, as all revenues afewill be passed
along to third parties who ultimately produce and/or supply these products. (See
Item 6 for more information on_pass-through payments to suppliers.) We reserve
the right in the future to receive payments from your purchases of equipment
and fixtures for which we act as a conduit. Except as noted in note 11 to this
Item 7. vou will not incur expenses for retail store fixtures and equipment for
a Commercial Sales Facility, but will be required to purchase a POS system,
related software licenses (including the PQS Software license) and accessories,
as well as product storage shelving and other miscellaneous items.
Initial Inventory. Before beginninglf vou acquire, rights under
the Commercial Sales Program, we i^uireJhaLyQu_b.egiiuvour operation with a smalLrecammended
inventory of Carjridges. but then continue to build vour inventory specific to
the needs of the commercial customers vou acquire. Generally speaking, once vou
acquire a customer requiring a specific Cartridge item, vou are required to
keep thai Cartridge item in slock. Detailed Commercial Sales Program inventory
requirements and procedures are documented in the Manual and/or supporting
documentation provided bv our Operations Department. (See Item 8 for more
information on initial inventory charges.) If you acquire rights to a retail
Storet then before vou open the Store for business operations, you must
purchase an initial inventory of Cartridges related^olher merchandise and
products of the type and quantity that we require, as provided in the Manual
and/or supporting documentation provided by our Store Build Out Department, and
as described in Item 8 of this Offering Circular-iPisclosure DoeumenL Shipping
costs will be extra.
Insurance. You must procure and maintain throughout the term
of the Franchise Agreement insurance of the types and amounts that we require
(as described in Item 8 of this Offering Ciroular).Disclosure Document^
including automobile insurance for the Service Delivery Vehicle. The cost of
insurance will vary based on policy limits, type of policies procured,
geographic location, and other related factors. The estimate in the chart above
is for your initial premium payment for approximately three months of coverage.
The method of payment of premiums varies, and often is paid either annually or
quarterly in advance.
Training Expenses. You will not pay us a fee for initial
training. You will be responsible, however, for your own costs and expenses
(and those of your employees) to attend the initial training. Specifically, you
must arrange and pay for transportation, meals, lodging, and wages for any persons
attending training. Your costs will likely vary depending on a number of
factors, such as distance to travel, choice of accommodations, the number of
employees attending the training sessions, and the type of transportation you
use.
The low-estimate contemplates that you-reside in the general-vicinity
of o-training facility; and-the
high estimote includes costs-for on out-of state franchisee attending the training-program.
We highly
recommend (and have made our estimates-based on) attendance of two people-at-training,
however
you may send-as mony employees-as you reasonably request (subject-to-physicol
space constraints at
the-training sessions).�Among other expenses, the figures-representestimate
.provided represents
anticipated costs for our threelwQ-part training program: =(a) Part I, which is
our threefiyg-day
business training-course that youwill complete as soon as you are accepted-os a
franchisee, (b) Port 11,
which is our-five-day store operalions-lraining course that-you-will complete before
you open your
Store, and (o) Part HI,-which isour five day-product ion training-course mot
you-also-must-complete
before you open your Store. ^ncLtbXPjiriJJU-^i^�������� course. Under
the Commercial Sales_EcQgramr the training courses are
designed to be attended as soon as vou are accepted as a franchisee in
concurrent weeks prior to opening vour Commercial gales Facility. If vou
acquire rights to operate a retail Store, you_may attend the operations
training course (Part II) only
(b. us. 17 984 4 8.09
gfjercxecuting a real estate lease or purchase aj^^meniand
prior to opening your..Storg_. The figures also represent anticipated costs
such as a $440]00 per-diem allowance (meals & hotels) and a $740400 travel
allowance_per round!cipjQjgjiI, If you send additional persons to training, or
if you incur higher per-diem expenses, your costs will be higher.
Additional store training is optional but highly encouraged.
Training requirements are described in Items 6 and 11 of this Offering Circular-Disclosure
Document.
Regardless of whether you acquire rights under the
Commercial Sales Program or to a Storer the low
estimate in each column contemplates that vou reside in the general
vicinity of a training facility, and
the high estimate includes costs for an out-of-state
franchisee attending the training program. We
have made our estimates based on the attendance of one
person at training.JiQw^yej
many employees as you reasonably request (subject to
physical space constraints at the training
Signage. You must acquire and install interior and exterior
signs bearing the Proprietary Marks as we require. The cost of this signage
will vary based upon the supplier, location of your business, local laws and
ordinances, the landlord''s signage requirements, and other similar factors. You
cannot install or use any signage unless we have approved it in writing. You
will not be required to incur
JnjmOL�r exterior signage expenses for a Commercial Sales
Facility, but are free to do so under our
existing requirement set forth for Stores.
10�� Grand Opening Advertising. You must spend at least the
minimum amount shown on Grand Opening advertising and promotion within two
months qfter30 davs prior to the StefeStore''s or Commercial
Sales Facility''s first epensdav open for business and 60
davs following this date. You must develop
and submit to us for prior approval a grand opening
marketing plan. If vou fail to do so. we have the
right (but not the obligation) to prepare a grand opening marketing
plan for vpu.
11��� Salesperson Expense. You are-required tohire. engago.
or utilize-theservioes of a salesperson-to-help promote the producls-and services-provided
ot the Store:- The-figures in the chart-above-assume a
monthly solory of $2,500 for this solcsperson during the
three months after the Store first opens for buGineso.QfXiee_Eguipmcnt.�� The
Operatioj]s_Manual and/or other written materials issued by us
describe the office equipment that vou must acquire prior to
commencing operations under the
Commercial Sales Program. This equipment includes, but is
not necessarily limited to. a facsimile
machine, laser printer, telephone, desk, chair and the POS
System.� Except as noted below in this
Note 11, you do got purchase directly from us or pav us for
any eflliipment or fixture purchases, however, (and as noted more fullv in Item
8), we mav facilitate YQU.r_pucc.hase of materials by receiving younpayments
for them_pas_ing those payments onto the suppliej_and_lhen delivering the
ijIvvL^u)^-_^Mi_^rtXJJivitia_tvi,iuvjii,-u��mift^iu��.ijaxiui-iua
vimuuk._i_i_aim-iLUgu^vmiviJU.iK-iiiv
Supplies to vou. In these cases, we act as aj3ass_tbrQUgh.fbr-Davments
to the, supplier, as all revenues are passed along to third parties who ultimately
produce and/or supply these products. We reserve the
right in the future to receive payments from vour purchases
of equipment and fixtures for which we
act as a conduit.
12�� Additional Funds. -The disolosure laws require us to
estimate-all-costs and expenses to operate your fronohiGo during the
"initial phase" of your buainooo, wrhich is defined as at looot three
months or a
reosonahle-period-for the industry-:�We are not awore of any-established-"initial
phase''�for-this industry-rsoour-disclosures for�Additional Funds" cover o
three month periods
■These figures ossumethat you will cover-the-fellowing
costs: three-months poyroll (and related-taxes and payroll-expenses) for a
minimat-staffi-real property rentol-for-the second and ■■third-month
n>.us.l7<)8448.0o
following opening (the- fi rot month is cove-rod under tho heading
"Ronl"); advertising, promotion, travel ond entertainment; business
insurance; utilities; telephone and general office expenses. The
oatimatos do not cover Royalty Fees, Advertising Foes, or
cost of goods sold, nor do they cover any interest or other financing costs you
may incur, which will vary depending on how much you borrow.
These estimates also do not provide for your cash needs to
cover any financing costs that you incur or your personal-living expenses. You
must have-additional sums available, whether in-eash-or-through
a bank lino of credit, or have other assets that you eon
liquidate or QgoinGt which you may borrow, to
cover personal living expensesandany operating losses you
may sustain, whether during your-^tart-up and development stage, or boyond.Ser^dce_jDeliverv
Vehicle. You_musLac^jr�_ari_a^ vehicle and utilize an_>pproved vehicle wrap
prior to opening for business, as noted more fullv in the
Operations Manual or as we otherwise specify in writing. As
of the date of this Disclosure Document, only two vehicles are approved for use
in connection with the rapid refill franchise; the Scion Xb and the Chevrolet
HHR. The recommended and preferred service delivery vehicle is the
