VS BARBERSHOP - FDD UFOC ITEM 7 Detail

ITEM 7

ESTIMATED INITIAL INVESTMENT

The amounts of all of the non-fixed expenditures, other than the permits and licenses, will be determined when you contact and negotiate with the respective vendor, supplier, etc. The costs of permits and licenses will be determined by contacting the appropriate governmental entity.

None of these expenditures, other than the rental security deposit, the telephone and utility deposits and the insurance premiums, is refundable. The rental security deposit will be refunded in accordance with the terms of the lease. The utility deposits will generally be refundable in accordance with the terms fixed by the utility companies. The insurance premiums may be refundable for future periods in accordance with the terms fixed by the insurance carrier.

No part of your initial investment in the franchise will be financed by us. Footnotes

¹� If this is not your first V''s Barbershop or if you have been honorably discharged from the U.S. armed forces, the initial franchise fee that you will pay will be $20,000. See Item 5. Therefore, the amount of your total investment for each franchise will be reduced by $5,000. In addition, if you sign the Multi-unit Agreement, you will pay 50% of the initial franchisee fee for each additional franchise upon your signing the Multi-unit Agreement and the balance of the initial franchise fee for each additional franchise at the time you sign the then-current franchise agreement.

²� You must lease the premises for your V''s Barbershop. Typical locations are upscale strip/lifestyle shopping centers with close proximity to parking fields. The typical V''s Barbershop has between 1,200 and 1,500 square feet. Your real estate costs will vary, depending upon your geographic area and the location of your V''s Barbershop. Rental rates have typically ranged from $2,500 to $8,750 per month. When required, the security deposit has typically been equal to one month''s rent.

In addition, you will be required to engage a real estate broker on our approved list to assist you in selecting a site and negotiating the letter of intent for the lease. The cost, which is estimated to be up to $10,000, is not included in the table because all or part of the real estate broker''s fee is typically paid by the landlord; if all of the real estate broker''s fee is not paid by the landlord, your real estate expenses will be increased in the amount that you will pay. (However, costs may be up to 200% higher in Alaska, Hawaii and most urban/metropolitan areas.) See Items 5, 8 and 11.

³ The architect''s fee will typically be between $7,500 and $10,000 plus expenses, but may be higher if additional work is required, depending upon the size and configuration of your premises and other factors. See Item 5.

⁴ You will be required to use a licensed and bonded contractor approved by us for the construction of the premises. (Your millwork will be purchased from our approved vendor and the fabrication of your millwork will not be part of your contractor''s work.) In order to avoid excessive construction costs, we recommend that you obtain competitive bids from contractors.

⁵ See Items 5, 6 and 8.

⁸ In connection with your grand opening, you must conduct a grand opening marketing and advertising campaign in accordance with a plan approved by us prior to the grand opening. You must spend at least $5,000.

⁷ The Franchise Agreement requires you to carry insurance of the types and in the amounts set forth in our Operation Manual. In addition, you must comply with the insurance requirements of your lease or other agreements, if any, and applicable worker''s compensation laws must be complied with. These insurance policies must name us (and our Affiliates designated by us) as an additional insured.

The insurance policies must insure you and us (and our Affiliates designated by us) against any liability in connection with the operation of your V''s Barbershop. The insurance must be placed with an insurance carrier or carriers satisfactory to us and may not be subject to cancellation or any material change except after 30 days'' prior written notice to us. The insurance policies must provide that your failure to comply with any term, condition or provision of the contract, and any other conduct by you, will not void or otherwise affect the protection afforded to us (or our Affiliates) under the policy. Certificates of insurance with respect to the insurance policies must be provided to us for all insurance policies in effect during the term of the Franchise Agreement.

If you sustain a loss by reason of fire, flood or other casualty of a type typically covered by insurance, and that casualty is caused wholly or partially by us (or our Affiliates'') acts or omissions, you must look solely to the proceeds of your insurance policy for reimbursement of the loss, and neither you nor any insurance carrier may recover damages against us (or our Affiliates) by way of direct action, subrogation, assignment of claims or otherwise. You will waive all rights of recovery by you, any insurance carrier or other person, and must notify each insurance carrier of that waiver.

If you fail to pay any premium when due or any policy is in default, we may, but are not obligated to, pay any premium and/or take any action necessary to cure that default. In this event,_syou must immediately pay to us the amount paid or expended by us to cure that default, plus interest. See Item 6.

Includes miscellaneous items, such as legal fees and expenses in connection with incorporating, store supplies and initial store cash.

⁹�� Includes additional barber supplies and inventory, salaries for barbers and shoeshine personnel, additional rent, additional insurance premiums, utility expenses and other working capital items. Does not include any amount for your compensation. Assumes that you personally manage your V''s Barbershop. Will vary depending upon the level of sales in the franchise during your initial operating period.

Note that we make no representation or warranty regarding the period within which your V''s Barbershop will break even and/or have positive cash flow, which may exceed three months. See Item 19.

Assuming that you recognize sales in the franchise during your initial operating period, you must pay royalties (5% of Gross Sales on a weekly basis; up to 18% of Gross Sales with respect to any period during which you are in breach of your financial obligations under the Franchise Agreement) and advertising payments (3% of Gross Sales on a weekly basis) to us. In addition, you may be required to contribute a designated percentage of your opening day sales (or sales for other periods) to a charity designated by you or us, as we may elect. See Item 6.

¹⁰� All costs (other than the royalties and advertising payments) will be up to 200% higher in
Alaska, Hawaii and most urban/metropolitan areas.

We relied upon our Affiliate''s and our franchisees'' experience operating V''s Barbershops to compile these figures.

These figures are estimates only and it is possible to significantly exceed costs in any of the areas listed. We cannot guarantee that you will not have additional expenses starting and operating the business. Your costs will depend, among other things, upon such factors as how much you follow our methods and procedures; your management skill, experience and business acumen; whether you personally manage your V''s Barbershop or hire a manager; the region in which your V''s Barbershop is located; local and national economic conditions; whether the premises is in a new or existing center; the physical size and location of your V''s Barbershop; the skill and experience of your barber staff; the condition of the premises and the amount and nature of tenant improvements required; the architectural criteria of the center; the HVAC & electrical systems present or necessary; the local market for the services and products offered by V''s Barbershops; the prevailing wage rate; competition; and the sales level reached during the initial period. You should review these figures carefully with a business advisor before making any decision to purchase a franchise.