Highlights of SweetFrog’s Item 19 Financial Performance Representations (2013 FDD)
Explanatory Notes for Table 1 (Statement of Period and Monthly Average Net Sales for Select Affiliate-Owned Shops)
- SweetFrog has prepared the attached statements of (1) net sales and (2) average net sales and selected expenses for 9 Affiliate-Owned Shops that were in operation for the entire period January 1, 2012 through December 31, 2012.
- As of December 31, 2012, there were 41 additional Affiliate-Owned Shops that were not included because those Shops were not open during that entire 12 month period.
- All Shops included offer substantially the same products and services to the public that franchised sweetFrog Shops are expected to offer.
- The information presented is unaudited and was prepared using uniform accounting methods consistent with generally accepted accounting principles and on a basis consistent with those included in sweetFrog’s annual audited consolidated financial statements.
- The Affiliate-Owned Shops included use the same accounting methods and system.
Explanatory Notes for Table 2 (Statement of Period Average Net Sales and Selected Expenses for Select Affiliate-Owned Shops)
- Net Sales means all revenue from the sale of all services and products and all other income of every kind and nature related to the Shop, whether for cash or credit and regardless of collection in the case of credit.
- Gross Profit is calculated by subtracting Cost of Goods Sold from Net Sales.
- Labor includes employee wages, payroll taxes, and benefits for Hourly and Management Labor at the Shops. The Labor also includes allocated payroll expenses for District Management and performance based compensations for Shop and District Management.
- Rent includes rent, property taxes, and other miscellaneous items.
- Repair and Maintenance includes equipment repair and maintenance and building janitorial service.
- Utilities include costs for gas, electricity, water, and sewage.
- Other Operating Expenses include, but are not limited to, royalty fees (5% of sales), costs for shop supplies, office supplies, uniforms, armored car, credit card fees, bank charges, telephone and internet expenses, taxes and fees, insurance, and equipment rental charges.
- During the time period covered above, these Affiliate-Owned Shops did not pay any advertising and marketing fees that you are required to pay SweetFrog. In addition, given that Affiliates operate multiple sweetFrog shops, the Affiliate will benefit from economies of scale that may not be available to you.
- EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization.
Explanatory Notes for Table 3 (Average Monthly Gross Sales for Certain Licensed Shops)
- SweetFrog has prepared this statement of average gross sales for 12 Licensed Shops that were in operation for the entire period from January 1, 2012 through December 31, 2012.
- As of December 31, 2012, there were 23 additional Licensed Shops that were not included because:
- (1) 20 of those Licensed Shops pay royalty fees to SweetFrog on a flat fee basis and SweetFrog does not have gross sales information from those Licensees; and
- (2) 3 of those Licensed Shops pay on a percentage basis but SweetFrog waived the royalty fee due for this period.
- Licensed Shops operate under the “sweetFrog” name and sell similar products to Franchised Shops. Unlike Franchised Shops, Licensed Shops are not required to pay marketing or advertising fees to SweetFrog’s Affiliate.
- Under SweetFrog’s License Agreements for the Licensed Shops, SweetFrog does not have the right to audit the computer systems, books, and records for Licensed Shops to obtain additional information regarding gross sales of the Licensed Shops.
- The information below was taken from royalty reporting forms submitted by Licensed Shops. SweetFrog believes the information to be accurate but has not audited the Licensed Shops’ records to confirm this information.
- The License Agreements do not define “gross sales” but SweetFrog considers the term to mean total selling price of all services and products and all income of every other kind and nature related to the Licensed Shop.
- Since SweetFrog only began franchising in April 2012, and its first franchised sweetFrog Shop opened on June 8, 2012, SweetFrog does not have sufficient historical information for the franchised sweetFrog Shops to make a reliable financial performance representation.