Highlights of Nathan’s Famous’ Item 19 Financial Performance Representations (2012 FDD) – Part 1

• The franchise offered is for the operation of a Nathan’s Famous restaurant. Nathan’s Famous restaurants are fast-service restaurants operating in buildings that feature the company’s trade dress. A Nathan’s Famous restaurant offers customers the brand’s proprietary hot dogs (made with a proprietary spice formula) as well as crinkle-cut french fries, hamburgers, assorted sandwiches, platters, and other fast-service menu items.

• The estimated total initial investment necessary to begin operation of a Nathan’s Famous restaurant franchise varies depending on the type of restaurant operated:

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  $440,943 to $1,040,360 for a “traditional” freestanding restaurant;

• $276,360 to $659,610 for an in-line restaurant or restaurant operated in a food court;

• $86,092 to $190,500 for a restaurant operated from a kiosk (and, if you decide to build the optional preparation area, your additional costs for the preparation area will range from $12,700 to $58,335);

• $82,200 to $264,100 for a restaurant operated as a Mobile Unit.

• All of the above include an initial fee of $30,000 ($15,000 for restaurants operated from a kiosk, Mobile Unit, or a limited menu restaurant) that you must pay to the franchisor. These figures do not include co-branding costs.

• If you want to add an Arthur Treacher’s co-branded operation to your Nathan’s Famous restaurant, you will incur additional estimated costs of between $16,500 to $31,000.

• If you want to add a Nathan’s Famous branded menu operation to your new or existing food service establishment, the estimated initial investment ranges from $33,000 to $66,300, including an initial license fee of $7,500.

• If you want to add an Arthur Treacher’s branded menu operation to your new or existing food service establishment, the estimated initial investment ranges from $24,404 to $61,486, including an initial license fee of $7,500.

• If you sign an area development agreement, your estimated initial investment under that agreement will vary depending on how many restaurants you will develop. This includes a development fee that you must pay to the franchisor, the amount of which will be subject to the parties’ mutual discussion and agreement, and will vary under the circumstances, taking into account a number of factors.

Average Gross Sales for Domestic Restaurants

• The section below provides the average gross sales, based on the reported sales, for all domestic Nathan’s Famous restaurants, including franchised and company-owned restaurants, but excluding: (a) branded menu program operations and Nathan’s Famous co-branded operations with Miami Subs restaurants; and (b) restaurants that first opened for business after March 28, 2011 (i.e. restaurants that were not in operation for the company’s full fiscal year ended March 25, 2012).

• For the purpose of providing the information in this section, the franchisor divided the system of domestic Nathan’s Famous restaurants into the following five distinct categories:

• restaurants located within enclosed shopping malls;
• restaurants located within transport hubs (such as airports, train stations, and travel plazas);
• restaurants located within entertainment venues (such as hotel casinos and game room establishments);
• traditional freestanding restaurants; and
• limited menu restaurants, co-branded or otherwise, located within another concept (other than branded menu program operations and Nathan’s Famous co-branded operations with Miami Subs restaurants) and seasonal restaurants.

• The sales numbers for franchised restaurants are based on sales reporting provided to the franchisor by the franchisees for the purposes of making royalty payments and marketing development fund contributions. The franchisor has not audited these figures and cannot verify their accuracy.

• The gross sales numbers below are for the franchisor’s fiscal year ended March 25, 2012.

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