1Franchise Fee/Development Fee. If we grant the franchise under a Development Agreement, you must pay a development fee equal to $5,000, which is credited against the $25,000 initial franchise fee. We do not finance any portion of the fee. See Item 5.
2Real Property and Improvements. The typical Restaurant has approximately 3,500 square feet. We expect that most franchisees will operate in stand-alone Restaurants, although some franchisee-operated Restaurants will be located at in-line shopping centers. Rent varies widely from location to location, but we estimate the rent (including common area maintenance and other similar changes) to range from $70,000 to $120,000 per year depending upon the size, condition, and location of the leased premises. A one month security deposit is also generally required, which we generally estimate to be between $5,000 to $10,000. The cost of remodeling the leased premises to meet our design specifications for leasehold improvements depends upon the condition and configuration of the existing retail space. If you elect to purchase the site for your Restaurant, your land acquisition costs will vary depending upon a multitude of factors including the size and location of the property, and the availability of financing on commercially reasonable terms. In addition, site improvement costs may vary based upon soil and environmental conditions, availability of utilities to the site, the topography of the site, the size of the parcel, local zoning, and other building requirements. Building costs will vary depending on commercial construction costs in your Assigned Area. We are unable to estimate the cost of purchasing a site and/or constructing a building on the purchased or leased site.
3Equipment and Furniture. Cost of equipment, furniture, fixtures, and decor will vary based upon the size of the Restaurant. These costs include all equipment (other than computer and point of sale equipment) necessary to operate the Restaurant including standard fixtures and equipment, indoor and outdoor menu boards, decor, and furniture.
4Miscellaneous Opening Costs. Includes construction insurance, utility deposits, licenses and business permits, pre-paid expenses, company organization costs and other professional fees and pre-opening costs.
5Opening Inventory and Supplies. This amount represents the cost of food products and condiments and office and store supplies necessary to initially stock the Restaurant for operation.
6Grand Opening Advertising. You must conduct a grand opening advertising and promotional program for the Restaurant during the period commencing 14 days before and ending 180 days after its opening and to expend at least $2,500, or, if required by us, at least $5,000. You will be able to utilize the marketing and public relations and media materials we have developed or approved. The cost of the initial grand opening advertising is between $2,500 and $5,000 and depends greatly upon the market, media buying power, and the number of Restaurants in the existing market. This amount includes the estimated cost of newspaper and radio advertising, circulars, coupons, and other media for the grand opening and the first three months of business. It does not include the Marketing and Advertising Fund contribution of up to one-half percent (0.5%) of your 28-day period Gross Receipts which you must pay at our discretion, or contributions to any applicable advertising cooperatives of up to two percent (2.0%) of your 28-day period Gross Receipts, which, again, you must pay at our discretion, each of which, if implemented, is deductible from your required local advertising expenditure not to exceed two percent (2.0%) of your 28-days period Gross Receipts.
7Additional Funds. This amount represents an estimate of the funds needed to cover pre-opening expenses, utilities, uniforms, recruitment, in-store training expense, and additional opening capital for other variable costs (e.g., electricity, telephone, heat, etc.), paper, cleaning, and other supplies. These figures are estimates and we cannot guarantee that you will not have additional expenses starting the business. Your costs will depend on various factors, including: how carefully you follow our methods and procedures for operation; your management skill, experience, and business acumen; local economic conditions; your location; the local market for quick food products and services; competition; the prevailing wage rate; and the sales level reached during the initial period. This amount does not include any amounts payable to you as a draw or salary. Our estimates of additional funds are based on our past experience in operating affiliate-owned locations.