Updated June 18, 2018.

Detailed Estimates of Flip Flop Shops Franchise Costs Based on Item 7 (Estimated Initial Investment) of Flip Flop Shops’ 2018 Franchise Disclosure Document

1.  Initial Franchise Fee:  $35,000

• If you are signing more than 1 Franchise Agreement at the same time, the initial franchise fee for
  the second and subsequent Franchise Agreements signed at the same time will be $17,500.

2.  Rent for First 3 Months:  $3,300 to $36,000

• Flip Flop Shops Stores are typically located in commercially zoned retail centers. Due to the cost of land acquisition and new construction, the premises for Flip Flop Shops Stores are normally leased. These amounts assume that you will lease the premises for the Store and do not include costs of land acquisition and construction of a building.

3.  Security Deposit:  $2,200 to $12,000

4.  Leasehold Improvements:  $35,000 to $80,000

• The leasehold improvements estimate is based on the cost of adapting the company’s prototypical architectural and design plans (including professional fees for the design professional the company designates) to a facility containing approximately 500 to 1,000 square feet.

• The leasehold improvement ranges will be affected by various factors like the location of the Store and local market conditions. The estimate assumes that the landlord will provide connections to adequate electrical, gas, water, and sewage service.

• Your actual costs may or may not include site preparation and finish-out costs, depending on the arrangements you negotiate with your landlord. If your landlord contributes to the cost of finish-out, total leasehold improvement costs could be reduced.

• These costs are the franchisor’s best estimate based on commercial leasing and remodeling/finish-out rates the company and its franchisees have experienced with their Flip Flop Shops Stores. These estimates may vary substantially based on your ability to negotiate with your landlord and your financial strength, as well as on local commercial leasing, labor rates, and other local conditions.

5.  Signage:  $5,000 to $10,000

6.  Furniture, Fixtures, and Equipment:  $24,000 to $43,000

• These amounts include the cost of the furniture, fixtures, equipment, decor items, and exterior signage required for your Flip Flop Shops Store, including the interior decor system/modules which you must purchase and have installed in your Flip Flop Shops Store.

7.  Initial Training Expenses:  $3,000 to $5,000, plus employee wages (if any)

• The franchisor provides initial training to your Initial Operating Principal and Lead Manager (if applicable) at no additional charge. You must pay all expenses you or your employees incur in the initial training program, like travel, lodging, meals, and wages.

• Your costs will vary depending upon the number of employees trained and your selection of salary levels, lodging and dining facilities, and the mode and distance of transportation. Your cost for wages will vary substantially depending on whether your Operating Principal receives wages and whether your Operating Principal serves as a Lead Manager or you hire separate individuals to fill those positions.

8.  Point of Sale and Computer Hardware and Software:  $6,000 to $9,000

• This amount includes the cost of point of sale and computer hardware and software that you must use in the operation of your Flip Flop Shops Store as well as the technology support fee for the first year and the software assurance fee for the first 3 years.

9.  Initial Inventory/Supplies:  $36,000 to $42,000

• The franchisor estimates that this range will cover the costs of your initial inventory of flip flops, sandals, and other inventory. Your costs will vary depending on various factors, including the size of your Store, the time of the year in which your Store opens, your initial sales projections, and the population density in the area of your Store.

10.  Professional Services:  $8,000 to $12,000

• This estimate is for the cost to establish an entity to hold the franchise and review the franchise documentation, and for professional fees related to acquiring and reviewing a lease for the Store premises.

• Some real estate brokers may require you to pay a fee for assistance in locating a site for the Store in lieu of, or in addition to, the standard commission the real estate brokers receive. The high end of the estimate also includes the estimated fee to engage a real estate broker to assist you in locating a site for the Store.

• The cost of professional services can vary widely.

11.  Promotional Expenses:  $2,500 to $5,000

• You must carry out a grand opening promotion for the Store in compliance with the company’s written specifications. The franchisor must approve all advertising items, methods, and media.

12.  Insurance:  $800 to $1,500

• This amount represents an estimate of the down payment on your annual insurance premiums. You must obtain the insurance coverage described in the Franchise Agreement. The franchisor must be named as an additional insured on these policies. Your cost of insurance may vary depending on the insurer, the location of your Store, your claims history, and other factors.

13.  Additional Funds for Initial 3-Month Period:  $5,000 to $20,000

• You will need additional funds during the start-up phase of your business to pay employees, purchase supplies, and pay other expenses. The franchisor estimates the start-up phase to be 3 months from the date you open your business. These amounts do not include any estimates for debt service.

14.  Total:  $165,800 to $310,500

• These figures are estimates and the franchisor cannot guarantee that you will not have additional expenses.

• The franchisor relied on the experience of FFS, Inc.’s Flip Flop Shops Stores and the experience of franchised Flip Flop Shops Stores to compile these estimates.