Item 7: Estimated Initial Investment
All payments made to us are non-refundable. Payments made to third parties may or may not be refundable depending on the terms agreed to by you and the third party.
All figures relate to the development and opening of one new JUICE IT UP® juice bar. If you acquire an operating JUICE IT UP® juice bar from our Affiliate, BBI, the price you pay for its assets and other terms will be negotiated between you and BBI and are not reflected in the above chart. Refer to the form of Asset Purchase Agreement attached as Exhibit E of this disclosure document. If you are an Area Developer, the figures provided are estimates for the opening of your first store. Your other stores may be opened many months later, and we do not and cannot predict to what extent costs at the time that you incur them will vary from the information contained in this chart. They may vary significantly.
1. Your Estimated Initial Investment: Except for the “Additional Funds” category shown above, the table shows estimated expenses until your Unit first opens for business. Most of these funds are non-refundable, except for some insurance payments and security deposits in certain instances.
2. Initial Franchise Fee/Initial Area Development Fee: If you open 3 or more Units in a defined area under an Area Development Agreement, the initial franchise fee for each Traditional Unit is $25,000 for your 1st Unit, $20,000 for your 2nd and $15,000 for your 3rd and each such subsequent Unit identified on your Development Schedule. The high-end estimates of the initial franchise and initial area development fees can go higher for an Area Developer with a Development Schedule that calls for more than the minimum number (3) of units (i.e., having 4 or more). VetFran Franchises may be included in the Development Schedule, but we do not discount the $10,000 initial franchise fee for Veterans. Area Development fees of ½ the amount of the initial franchise fees due for each Unit are paid when you sign the Area Development Agreement and are credited toward the initial franchise fees due, but are not refundable. Franchise fees for Non-Traditional Units can range from $2,500 to $25,000, depending on the type of Non-Traditional Unit purchased, whether purchased in a single or multi-unit transaction, the location of the Unit and other factors. VETFRAN PROGRAM: The Initial Franchise Fee for veterans qualified under the IFA’s VetFran Program, as described in Item 5, is $10,000 for each JUICE IT UP® Unit purchased, regardless of quantity.
3. Real Estate: These figures are based on the assumption that premises will be rented and include 3 months’ rent and a security deposit. The premises will probably be located in a strip center, mall, food court or market center; the size will range from 800 square feet to 1,200 square feet.
4. Tenant Improvements: This category includes the cost of permanent construction modifications to leased premises including walls, ceilings, floors, plumbing, electrical and HVAC. Low estimate is based upon an 800 square ft. partially improved space. High estimate is for an unimproved space of approximately 1,200 square ft requiring extensive demolition. Landlord TI allowance is excluded from both of these estimates but we recommend that you try to negotiate for some amount of TI allowance with your Landlord.
5. Signs & Menu Boards: This category includes exterior and interior signage and graphics. Low estimate assumes 1 outdoor sign, interior graphics and signage including 5 menu boards. High estimate includes an additional exterior sign in addition to the interior signage.
6. POS System & Office Equipment: In addition to the POS (point-of-sale) cash register system, this category includes back office items such as a combination fax, copier and printer, personal computer, telephone, printer & miscellaneous office equipment, and a 42” or larger TV for the customer area. Some Units may require 2 POS systems, plus safes and telephone.
7. Furniture, Fixtures & Other Equipment: This category includes “Trade Fixtures” such as freezers, refrigerators, food preparation equipment, cabinets, janitorial equipment, alarm systems, installation, freight and taxes. Low range would be a non-traditional layout with limited menu items. High range is full menu traditional layout units.
8. Utility Deposits and Sales Tax Bonds: This category may include sales tax deposits or bonds, sewer hookup charges, utility deposits, and security deposits on leased equipment.
9. Expenses While Training: You must arrange and pay for transportation, meals, lodging and incidentals for you and your Designated Manager while attending our training programs. The amount you spend will depend upon several factors, including the distance you have to travel and the type of accommodations you choose. We based this estimate upon such expenses anticipated for 2 people, for 5 days, including approximate costs for hotel, airfare, etc. You will also be responsible for wages you pay your staff during training.
10. Grand Opening Event: Within the first 30-45 days after opening your Unit, you must spend at least $3,000 on grand opening advertising and promotion, but may choose to spend more. We recommend that you spend $5,000 to do a proper Grand Opening, involving the Chamber of Commerce in your community. As discussed in Item 6, an existing operating Unit requires a re-opening expense of at least $2,500.
11. Additional Funds: This category includes estimated employee wages, opening cash, professional fees and other miscellaneous expenses that you may incur from signing and during the first 90 days of your operations. This is an estimate and we cannot guarantee that you will not have additional expenses or that additional working capital will not be necessary during or after this start-up phase. Your actual costs will depend on factors including your management skill, experience and business acumen, local competition and economic conditions, the local market for the Unit, the prevailing wage rate, and the sales level reached during the start-up phase. We relied on the experience of our management in developing these figures. You should review them carefully in light of local conditions and the current economic outlook, consulting a business advisor if necessary.
Item 19: Financial Performance Representation
The included information is based on unaudited reports of Total Sales Revenue (“TSR”) collected by us daily from a POS system used by the 67 franchisee-owned Traditional Units that were open a full year as of the end of 2015. These 67 Units are divided into 5 Groups showing the lowest and highest TSR within that Group for Traditional Units open a year or more. The Table also presents the Average Unit Volume of Sales (“AUV”) for each Group. The AUV shown for the 5 Groups does not include Non-Traditional Units, however, the AUV for Non-Traditional Units is presented at the bottom of the chart along with the AUV for all Traditional Units, equaling 83 total Units, some of which were operated for less than the full year as of the end of 2015.
With regard to the figures shown in each of the 5 Groups; there are 13 Units in the Top 20%, with 7 stores above the average of $588,834 AUV; in the Top 40%, 14 of the 26 stores were above the average of $523,853 AUV; in the Top 60%, 21 of the 39 stores were above the average of $481,927 AUV; in the Top 80%, 29 of the 52 stores were above the AUV of $445,673; and in All Stores 36 of the 67 stores were above the AUV of $400,196.
With regard to the figures shown at the bottom of the chart related to AUV for the all Traditional and Non-Traditional Units; 37 out of 76 Traditional Unites were above the average of $371,880 AUV and 4 stores of the 7 Non-Traditional Units were above the average of $240,623 AUV.
As used herein, “Total Sales Revenue” means the aggregate amount of all sales of Juice It Up! products, other items and services made and rendered in connection with the operation of a Unit including sales made at or away from the premises of such Unit, whether for cash or credit, but excluding all federal, state or municipal sales, use or service taxes collected from customers and paid to the appropriate taxing authority. (This definition differs from and should not be confused with, the definition of Adjusted Gross Sales in the Franchise Agreement.) The Average Unit Volume of Sales is the sum of the Total Sales Revenue for all Units in that Group divided by the number of Units in the Group.
This information does not consider factors such as the geographic location, operator experience, investment costs or market conditions, related to the Units included in any given Group. There is no assurance that future sales will correspond to sales from the last fiscal year or any other particular year. These figures should not be considered as the actual or potential revenues that will be realized by any franchisee. Results will differ widely from one location to another, without respect to their geographic region.
The company does not represent that any franchisee can expect to attain any particular gross sales volume.
A new franchisee’s individual financial results may differ from the results stated in this financial performance representation.
We encourage you to consult with your own accounting, business, and legal advisors to assist you to prepare your budgets and projections, and to assess the likely or potential financial performance of your Unit prior to signing the Franchise Agreement. We also encourage you to contact existing JUICE IT UP® franchised store operators to discuss their experiences with the System and their store businesses. Notwithstanding the information set forth in this Item 19, existing JUICE IT UP® franchisees are your best source of information about franchised store operations.
Other than the preceding financial performance representation, we do not make any financial performance representations. We also do not authorize our employees or representatives to make financial performance representations either orally or in writing. If you are purchasing an existing unit, however, we may provide you with the actual records of that unit. If you receive any other financial performance information or projections of your future income, you should report it to our management by contacting our President, Frank N. Easterbrook at 17915 Sky Park Circle, Suite J, Irvine, CA 92614, (949) 475-0146 ext. 230, the Federal Trade Commission, and the appropriate state regulatory agencies.