This special FDD Talk series will highlight the financial performance representations of over 20 Children’s franchises, with a cross-analysis of the featured franchises to be published at the end of the series.

Highlights of DigiKids’ Item 19 Financial Performance Representations (2012 FDD)

• The franchisee will operate a DigiKids Child Safety ID business, which markets, sells, and provides child safety IDs on CD-ROM and other media designed to aid in the safe recovery of children upon a missing child emergency, and other services to the public related to child safety.

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  The franchisor offers two programs:  a single DigiKids Child Safety franchise in a single non-exclusive territory, and a multi-unit program under an Area Development Agreement.

• The total investment necessary to begin operation of a DigiKids franchise is between $32,310 and $40,210. This includes $29,900 that must be paid to the franchisor or affiliate.

• The total investment necessary to begin operation of a DigiKids Area Development franchise is between $61,410 and $68,310 for a 5 Unit Area Development Agreement, $95,410 and $103,310 for a 10 Unit Area Development Agreement, and $130,410 and $138,310 for a 15 Unit Area Development Agreement. This includes $58,000 that must be paid to the franchisor or affiliate for a 5 Unit Area Development Agreement, $93,000 for a 10 Unit Area Development Agreement, and $128,000 for a 15 Unit Area Development Agreement.

Nature of Projections

• The following projection is a mathematical calculation presented to demonstrate possible gross earnings or revenue you might expect from owning a DigiKids Child Safety ID franchised business, and is based on hypothetical assumptions regarding sales volume and not on past performance.

• The projections represent, to the best of management’s knowledge and belief as of June 1, 2011, the date of the projection, expected gross profit for the projected periods if the hypothetical assumptions occur.

General and Administrative Expenses (Overhead)

• General and administrative expenses (overhead) cannot be meaningfully estimated by the franchisor, as they will vary greatly from operation to operation based in part on whether you choose to use an outside office or hire employees for example, and other factors.

• General and administrative expenses (overhead) are not included in the estimates.

• The estimates assume that you will operate the business support functions out of an office in your home, and that you presently own a suitable vehicle to travel to onsite events and transport the DigiKids On Site Studio.

• Please note there may be other costs and other expenses not identified.

Estimated Gross and Net Revenue

• The examples are based on operating with one or more DigiKids On Site Studios utilizing DigiKids Child ID Software, suggested hardware and duplication equipment, and following the procedures outlined in the DigiKids Operating Manual or other systems and procedures as communicated by the franchisor from time to time.

• These estimates are based on a 50-week work year, working 1-5 days per week offering Parent Pay and Sponsored Events. Workdays and schedules are set by individual franchisees.

Earnings Potential – Parent Pay Events

100 ID Kits Sold Per Month (25 Kits Per Week)

• Original IDs Per Year:  1,250
• Duplicate IDs Per Year:  625
• Estimated Average Revenue Per Week:  $563
• Estimated Gross Revenue Per Year:  $28,125
• Less Estimated Cost of Sale 26.9%:  ($7,569)
• Estimated Net Revenue Per Year:  $20,556

200 ID Kits Sold Per Month (50 Kits Per Week)

• Original IDs Per Year:  2,500
• Duplicate IDs Per Year:  1,250
• Estimated Average Revenue Per Week:  $1,125
• Estimated Gross Revenue Per Year:  $56,250
• Less Estimated Cost of Sale 26.9%:  ($15,138)
• Estimated Net Revenue Per Year:  $41,113

300 ID Kits Sold Per Month (75 Kits Per Week)

• Original IDs Per Year:  3,750
• Duplicate IDs Per Year:  1,875
• Estimated Average Revenue Per Week:  $1,688
• Estimated Gross Revenue Per Year:  $84,375
• Less Estimated Cost of Sale 26.9%:  ($22,706)
• Estimated Net Revenue Per Year:  $61,669

400 ID Kits Sold Per Month (100 Kits Per Week)

• Original IDs Per Year:  5,000
• Duplicate IDs Per Year:  2,500
• Estimated Average Revenue Per Week:  $2,250
• Estimated Gross Revenue Per Year:  $112,500
• Less Estimated Cost of Sale 26.9%:  ($30,275)
• Estimated Net Revenue Per Year:  $82,223

Earnings Potential – Sponsored Events

1 Sponsored Event Per Month (12 Per Year)

• Average Event Fee:  $1,720
• Estimated Average Revenue Per Week:  $442
• Estimated Gross Revenue Per Year:  $22,080
• Less Estimated Cost of Sale 26.9%:  ($5,950)
• Estimated Net Revenue Per Year:  $16,130

2 Sponsored Events Per Month (24 Per Year)

• Average Event Fee:  $1,720
• Estimated Average Revenue Per Week:  $883
• Estimated Gross Revenue Per Year:  $44,160
• Less Estimated Cost of Sale 26.9%:  ($11,899)
• Estimated Net Revenue Per Year:  $32,261

3 Sponsored Events Per Month (36 Per Year)

• Average Event Fee:  $1,720
• Estimated Average Revenue Per Week:  $1,325
• Estimated Gross Revenue Per Year:  $66,240
• Less Estimated Cost of Sale 26.9%:  ($17,849)
• Estimated Net Revenue Per Year:  $48,391

4 Sponsored Events Per Month (48 Per Year)

• Average Event Fee:  $1,720
• Estimated Average Revenue Per Week:  $1,766
• Estimated Gross Revenue Per Year:  $88,320
• Less Estimated Cost of Sale 26.9%:  ($23,798)
• Estimated Net Revenue Per Year:  $64,522

Assumptions

Duplicate IDs Per Year

• Assumes that duplicate ID kit orders performed at the same time as original DigiKids ID Kit average a 50% order rate of original IDs performed.

Estimated Gross Revenue Per Year

• Assumes total Best Value Pricing of $25.00, which is the suggested sales price for an original and duplicate DigiKids ID Kit purchased at the same time ($20 + $5).

• Does not include Sponsored Event Revenue, allowance for credit card processing fee, discount coupons, special promotions, sales tax, or other discounts or donations by you, if any.

• All franchisees set their own final pricing, which may be higher or lower.

Cost of Sale – Parent Pay Events

• Cost of Sale includes the DigiKids ID Kit and other material needed to provide child safety IDs in school or retail events, and assumes that the cost of marketing and promotional material will average $1.00 for each original ID performed, and that ID and Promotional Kits are purchased by you in multiples of 6.

• Cost of Sale does not include salary or other compensation to owner/operator and/or employees, Territory or Internet and Software fee, general and accounting expenses normally associated with the business, including the cost of a home office, Internet access, additional advertising, telephone or vehicle expense, insurance, freight, and other expenses.

Average Event Fee

• Assumes a 4-hour event with an Event Fee following the company’s pricing guidelines in the DigiKids Operating Manual for unlimited Child ID Events, and parent pay, duplicate ID orders performed at the same time as original ID average a 20% order rate of original IDs performed.

• All franchisees set their own final pricing, which may be higher or lower.

Cost of Sale – Sponsored Events

• Cost of Sale includes an average of 60 original and 12 duplicate DigiKids ID Kits per event; pre-event and ongoing event marketing and promotional material; and an allowance for paid event help such as an employee or independent contractor.

• Cost of Sale does not include salary or other compensation to owner/operator and/or employees, Territory or Internet and Software fee, general and accounting expenses normally associated with the business, including the cost of a home office, Internet access, additional advertising, telephone or vehicle expense, insurance, freight, and other expenses.

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