FDD Talk 2013: Average Gross Sales and Comparable Store Sales Growth for Flip Flop Shops (2013 FDD)

Highlights of Flip Flop Shops’ Item 19 Financial Performance Representations (2013 FDD)

Explanatory Notes for Section I – Average Annual and Weekly Gross Sales

• This section of the financial performance representation includes information relating to the average annual Gross Sales and average weekly Gross Sales for the period from January 1, 2012 to December 31, 2012 (the “Reporting Period”) for the 41 franchised Flip Flop Shops Stores in the United States (excluding Stores in U.S. territories) and Canada that operated during the entire Reporting Period and were open and operating as of December 31, 2012 (the “Sample Stores”).

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  The 41 Sample Stores represent 58.6% of the Flip Flop Shops Stores in the United States (excluding Stores in U.S. territories) and Canada open as of the end of the Reporting Period. Information for Stores outside of the 50 United States and Canada is not included in this Item 19.

• The Gross Sales realized will vary from Store to Store and will be directly affected by many factors, such as the Store’s size, geographic location, competition in the marketplace, the presence of other Flip Flop Shops, and the quality of management and service at the Store.

• This financial performance representation reflects only revenue of the Sample Stores and does not reflect any cost of sales, operating expenses, and other costs or expenses that you will incur in operating the Store, including the royalty fees and advertising contribution that you must pay under the terms of the Franchise Agreement.

• The franchisor compiled these figures from the individual Stores’ actual reported Gross Sales for the Reporting Period. This information has not been audited or otherwise verified by the company.

• Five of the Sample Stores are located in Canada, and the Gross Sales figures for those Stores were converted from Canadian Dollars to U.S. Dollars using the exchange rates in effect at the time of payment of royalties.

• Sixteen of the Sample Stores (39%) had Gross Sales above the average annual Gross Sales figure, and 25 of the Sample Stores (61%) had Gross Sales below the average annual Gross Sales figure.

• Sixteen of the Sample Stores (39%) had Gross Sales above the average weekly Gross Sales figure, and 25 of the Sample Stores (61%) had Gross Sales below the average weekly Gross Sales figure.

Explanatory Notes for Section II – Comparable Store Gross Sales

• This section of the financial performance representation includes information relating to the total percentage change in comparable Store Gross Sales from calendar year 2011 to calendar year 2012 for the 24 franchised Flip Flop Shops Stores in the United States (excluding Stores in U.S. territories) and Canada that operated during all of calendar year 2011 and all of calendar year 2012 (the “Comparable Sales Sample Stores”).

• The 24 Comparable Sales Sample Stores represent 34.3% of the Flip Flop Shops Stores in the United States (excluding Stores in U.S. territories) and Canada open as of the end of the Reporting Period.

• The figure was determined by adding the total Gross Sales of the Comparable Sales Sample Stores for calendar year 2011, adding the total Gross Sales of the Comparable Sales Sample Stores for calendar year 2012, and then determining the total percentage change between those two numbers.

• Twelve of the Comparable Sales Sample Stores (50%) experienced an increase in Gross Sales at or above the average percentage, and 12 of the Comparable Sales Sample Stores (50%) experienced an increase in Gross Sales below the average percentage or experienced a decrease in Gross Sales.

Section I – Average Annual and Weekly Gross Sales