FDD Talk 2013: Average Sales, Cost of Goods Sold, and Other Expenses for ZIPS Dry Cleaners Businesses (2013 FDD)

Highlights of ZIPS Dry Cleaners’ Item 19 Financial Performance Representations (2013 FDD)

Explanatory Notes for Section I – Historical Financial Performance Representation for Select Franchised Businesses

• Presented below are the average total income, average total cost of goods sold, average gross profit, and average selected costs and expense data for 12 Franchised Businesses during the period January 1, 2012 through December 31, 2012.

• The company considers these 12 Franchised Businesses to be “mature” since they have been in operation for at least 1 year. All 12 Franchised Businesses were open and operating during the 12 month period January 1, 2012 to December 31, 2012. These businesses are located in Maryland, Pennsylvania, and Virginia.

• The 2 Franchised Businesses that are not included have not been in operation for 1 year and therefore are not considered mature.

• This data was compiled from unaudited financial statements submitted to the franchisor by the Franchised Businesses. The company believes the information is accurate, but it has not audited or verified the information and cannot verify that the information was compiled using consistently applied accounting principles.

Explanatory Notes for Section II – Historical Financial Performance Representation for Select ZIPS Dry Cleaners Businesses Operated by ZIPS Founders Members

• Presented below are the average total income, average total cost of goods sold, average gross profit, and average selected costs and expense data for 18 ZIPS Dry Cleaners Businesses operated by ZIPS Founders Members during the period January 1, 2012 through December 31, 2012.

• The company considers these 18 Businesses to be “mature” since they have been in operation for at least 1 year. All 18 Businesses were open and operating during the 12 month period January 1, 2012 to December 31, 2012. These businesses are located in the District of Columbia, Maryland, Pennsylvania, and Virginia.

• The 4 Businesses that are not included have not been in operation for 1 year and therefore are not considered mature.

• This data was compiled from unaudited financial statements submitted to the franchisor by the Businesses. The company believes the information is accurate, but it has not audited or verified the information and cannot verify that the information was compiled using consistently applied accounting principles.

Explanatory Notes for Section III – Systemwide Historical Financial Performance Representation

• Presented below are the average total income, average total cost of goods sold, average gross profit, and average selected costs and expense data for 18 ZIPS Dry Cleaners Businesses operated by ZIPS Founders Members and 12 Franchised Businesses during the period January 1, 2012 through December 31, 2012.

• The company considers these 30 Businesses to be “mature” since they have been in operation for at least 1 year. All 30 Businesses were open and operating during the 12 month period January 1, 2012 to December 31, 2012. These businesses are located in the District of Columbia, Maryland, Pennsylvania, and Virginia.

• The 4 Businesses operated by ZIPS Founders and 2 Franchised Businesses that are not included have not been in operation for 1 year and therefore are not considered mature.

• This data was compiled from unaudited financial statements submitted to the franchisor by the Businesses. The company believes the information is accurate, but it has not audited or verified the information and cannot verify that the information was compiled using consistently applied accounting principles.

Explanatory Notes for Sections I, II, and III

• Average Total Income – This figure is an average of all income and revenue from the sale of all services and products to customers.

• Total Cost of Goods Sold – The average Total Cost of Goods Sold includes the total costs of all services and products sold at ZIPS Dry Cleaners Businesses (such as alterations, supplies, leather costs, customer claims, dry cleaning and laundry supplies, waste disposal, and cash overage/shortage). These costs may vary from year to year, or within a year, due to fluctuations in the prices of supplies and/or materials, transportation costs, and/or shipping costs.

• Total Gross Profit – This figure represents the Total Income minus the Total Cost of Goods Sold.

• Labor Costs – The Labor Costs include salary, wages, or benefits (including vacation pay) for employees and management personnel. Franchisees may compensate managers differently or may compensate one or more individual owners in lieu of one or more managers.

• Rent – This includes rent, property taxes, and miscellaneous items. Rent consists of minimum rents, percentage rents, common area maintenance charges, and any sales or other taxes. Property taxes are real estate taxes and assessments levied against the property upon which the business is located.

• Repairs and Maintenance – This includes equipment repair and maintenance, store cleaning, and window cleaning.

• Utilities – This includes alarm system monitoring, satellite and cable costs, and charges for gas and electric. The charges for water are included in either the Utilities category or the Rent category, depending upon whether such charges are payable under the terms of the lease for the particular ZIPS Dry Cleaners Business.

• Total Significant Other Costs and Expenses – This is the total of all costs shown in the table including Labor, Rent, Repairs and Maintenance, and Utilities.

Section I – Historical Financial Performance Representation for Select Franchised Businesses

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