Initial Investment Table
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ABCDE
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December 2017
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Classic Rock Coffee
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Itemized Investment
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Actual or Estimated Amounts
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Name of ExpendituresMinimumMaximum
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Initial Franchise Fee$39,000$39,000
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Rent (1 month plus security deposit)
$5,000$20,000
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Utility Deposits$500$2,000
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Leasehold Improvements$0$100,000
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Architecture, Project Management, Equipment$185,000$200,000
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Initial Inventory$11,320$21,520
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Store Supplies$1,675$1,875
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Insurance & Licensing$600$1,500
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Training expenses$0$1,500
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Signage$10,000$20,000
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Office Supplies & Computer$3,000$5,000
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Advertising for Grand Opening
$4,000$8,000
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Miscellaneous Start-Up Expenses
$500$2,000
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Additional Funds (3 months)$60,000$90,000
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TOTAL:$320,595$512,395
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The rent estimate contemplates one month’s rent plus a lease security deposit of an equal amount, and is based on rent expenses in Springfield, Missouri. Rent expense for a facility from which to operate the Store will vary, based on location, square footage, age and condition of the structure, lease arrangements and other such factors (the typical Classic Rock Coffee Co. will be approximately 1800 to 2000 square feet). All other charges, which may include, without limitation, marketing fund, promotional fund, common area charges, utilities, taxes, insurance, etc., as imposed by the lessor will be as per the lease and your responsibility. Leases sometimes specify minimum rent and percentage rent applicable above a threshold sales volume.
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Utility companies may require you place a deposit before installing telephone, gas, electricity and related utility services. These deposits may be refundable in accordance with the agreements made with the utility companies.
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The cost of construction and leasehold improvements depends upon the size and condition of the premises, the local cost of contract work and the location of the Store. The range of figures set forth for a Store is the cost of reasonable renovation or leasehold improvements, and may be less if the lessor provides a construction allowance to you. Included in the estimate are construction charge-backs for landlord-provided work. Fixtures include counters, tables, chairs, wall coverings, decorations and other such fixtures. The cost of fixtures will vary, depending on the seating capacity of the facility, lease or finance terms available to you, the layout of the facility and other relevant factors. The high estimate contemplates leasehold improvements for approximately two thousand (2,000) square feet.
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The equipment necessary for the operation of a Classic Rock Coffee Co. includes LaMarzocco 3 Group, Mazzer Grinders (for espressos), Ice Machine (Hoshizaki F330C), Iced Tea Brewer, Undercounter Fridge (Everest ETR1), Dual Temp Undercounter (Everest ETRF2), Dual Temp Upright (Everest ESRF2), and POS System, in addition to other equipment. You may purchase or lease approved brands and models from approved suppliers. The cost of the equipment will depend on financing terms available, the size of the Store, brands purchased and other factors.
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Your initial inventory must be purchased from approved vendors as have been designated in accordance with the Franchise Agreement. Initial inventory consists of various coffee beans, syrups, sauces, protein powders, mugs, grinders, t-shirts, hats, and other supplies to be utilized in the operation of the Store, as well as other merchandise or products to be sold by the Store. The initial inventory expenditure will vary according to anticipated sales volume and current market prices for supplies.
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You are responsible for making arrangements and paying the expenses for any persons attending the training program including, without limitation, transportation, lodging, meals and wages. The amount expended will depend, in part, on the distance such persons must travel and the type of accommodation you or they choose. The estimate provided contemplates training for three (3) to ten (10) days (at the rate of $150 per day, for up to three (3) individuals) as further provided in Section 5(a)(iii) of the Franchise Agreement.
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These amounts are the minimum recommended levels to cover operating expenses, including employees’ salaries for three (3) months. However, we cannot guarantee that such an amount will be sufficient. Additional working capital may be required if sales are low or fixed costs are high. The disclosure laws require us to include this estimate of all costs and expenses to operate your Store during the “initial phase” of your business, which is defined as three (3) months or a longer period if “reasonable for the industry.” We are not aware of any established longer “reasonable period” for the coffee shop industry, so our disclosures cover a three-month period.
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None of the estimated expenditures listed in the table are refundable, except (i) utility deposits are usually refundable, and (ii) lease security deposits may be refundable. We do not offer, directly or indirectly, financing for any of the above expenditures. The availability and terms of financing will depend on many factors, including the availability of financing generally, your creditworthiness, other security that you may have, and policies of lending institutions concerning the type of business being operated by you. All estimated initial investment expenses are based on figures in Springfield, Missouri. Estimated initial investment expenses can range in greater amounts from the estimated initial investment expenses for locations outside of Springfield, Missouri. We have prepared these estimates based on our experience. Except as expressly indicated otherwise, these estimates cover your initial cash investment up to the opening of your Store. They do not provide for your cash needs to cover any financing incurred by you or your other expenses. You should not plan to draw income from your Store during the start-up and development stage of your business, the actual duration of which will vary materially from store to store and cannot be predicted by us for your Store (and which may extend for longer than the three-month “initial phase” described in Note 7 above). You must have additional sums available, whether in cash or through a bank line of credit, or have other assets, which you may liquidate or against which you may borrow, to cover other expenses and any operating losses you may sustain, whether during your start-up and development stage, or beyond. The amount of necessary reserves will vary greatly from franchisee to franchisee and will depend upon many factors, including the rate of growth and success of your Store, which in turn will depend upon factors such as the demographics and economic conditions in the area in which your Store is located, the presence of other Classic Rock Coffee Co.’s or other public awareness of our business and its Marks (as defined below) within the general vicinity of your proposed Store, your ability to operate efficiently and in conformance with our recommended methods of doing business, and competition. Because the exact amount of reserves will vary from operation to operation and cannot be meaningfully estimated by us, we urge you to retain the services of an experienced accountant or financial advisor to develop a business plan and financial projections for your particular operation.
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