Detailed Estimates of Frost Gelato Franchise Costs Based on Item 7 (Estimated Initial Investment) of Frost Gelato’s 2013 Franchise Disclosure Document

• All estimates in this Item 7 are based upon new Frost Gelato Shoppe locations with a building/premise size of approximately 1,300 to 1,900 square feet for a Frost Gelato Shoppe which is constructed within a 2 to 4 month period.

• All fees imposed by the franchisor or its affiliates are non-refundable unless otherwise noted. Fees and expenses paid to vendors or other third parties may or may not be refundable depending on the arrangements you make with them.

1.  Initial Franchise Fee:  $35,000

• The Initial Franchise Fee is $35,000 for your Frost Gelato Shoppe. If you commit to opening five Frost Gelato Shoppes under an Area Development Agreement, you will pay a reduced initial franchise fee of $25,000 for each of the five Frost Gelato Shoppes.

• The Initial Franchise Fee is non-refundable once paid. The Initial Franchise Fee is uniformly applied to all franchisees.

2.  Architectural Design Fee:  $0 to $7,000

• If franchisee is unable to successfully obtain approved architectural designs off of the franchisor’s master designs, the franchisor may charge a Franchise Architectural Design Fee of up to $7,000, to engage a third-party vendor to perform large architectural design services for you. The Architectural Design Fee is non-refundable once paid.

3.  Real Estate Leasing:  $7,500 to $15,000

• If you do not own adequate space, you must lease space for your Frost Gelato Shoppe. Generally, this will require you to pay the first and the last month’s rent, plus a security deposit, at the time you sign the Frost Gelato lease.

• Frost Gelato Shoppes are generally located in upscale strip shopping centers, suburban power centers, downtown locations, classy or upscale business centers, office parks, and lifestyle centers.

• The typical size of a Frost Gelato Shoppe is approximately 1,300 to 1,900 square feet.

4.  Leasehold Improvements/Construction:  $70,000 to $350,000

• These estimates assume that the landlord will provide a shell space which, at a minimum, includes concrete floors, demised walls, HVAC, roof, exhaust vent chaseway, restrooms, flooring, lighting, and utilities sufficient for a Frost Gelato Shoppe.

• The estimates do not include the costs of any necessary site development or engineering work, nor do they include capitalized costs of rent or other occupancy costs, over the life of the lease or the life of your investment.

• In addition, these amounts do not reflect costs for the purchase of unimproved land and construction of a Frost Gelato Shoppe building, which also would result in a significantly greater investment.

5.  Furniture and Fixtures:  $5,000 to $10,000

• These amounts include costs for chairs, tables, restaurant smallwares, TV/stereo system, office furniture, safe, window treatments, artwork/artifacts, menu boards, ceiling fans, plants, computer hardware and software, miscellaneous decor items, and interior signs required for the Frost Gelato Shoppe.

6.  Equipment, Computer, Hardware, Software, POS:  $150,000 to $250,000

• This amount includes all equipment to make and display gelato, other frozen treats, and other Products offered for sale from your Frost Gelato Shoppe. You will be required to purchase this equipment directly from the franchisor.

• These amounts also include computer-related costs for wireless network equipment, computer hardware, wireless camera system, complete point-of-sale system (“POS System”), back of the house computer hardware, and all necessary guest check printers, credit card “swipe/read” terminals, printers, and modems which you will be required to purchase from the approved supplier.

7.  Signs:  $7,000 to $14,000

• You must purchase the franchisor’s approved signs for the exterior of your Frost Gelato Shoppe.

8.  Insurance:  $800 to $1,200

9.  Opening Inventory and Supplies:  $15,000 to $25,000

• The franchisor estimates that the range given will provide sufficient inventory (food, beverage, and disposables) for opening your Frost Gelato Shoppe. These amounts may vary according to your sales volume and approved local suppliers’ terms.

• The required supplies will include, but not be limited to, non-branded paper products, stickers, silverware, etc., some of which will be purchased directly from the franchisor or its affiliate.

10.  Security and Utility Deposits/Licenses:  $0 to $10,000

• These amounts include an estimated security deposit (equal to one month’s rent) and utility deposits. These amounts also include the estimated cost of obtaining a license or permit from a state agency to sell food. Franchise taxes are not included.

11.  Pre-Opening and Grand Opening Promotional Expenses:  $3,500 to $7,500

• You are required to spend a minimum of $3,500 but you should plan to spend between $3,500 to $7,500 on your pre-opening advertising (at least 30 days before the grand opening of your Frost Gelato Shoppe) and on your grand opening. The recommended grand opening celebration should last at least one week.

12.  Professional Fees (legal, accounting, and consulting):  $500 to $1,000

13.  Business Permits and Licenses:  $500 to $1,000

14.  Travel Related Expenses for Training:  $500 to $5,500

15.  Additional Funds/Working Capital for 3 Months:  $25,000 to $45,000

• This estimate includes your initial start-up expenses (other than the items separately identified in the table) during the Frost Gelato Shoppe’s first 3 months of operation. They include rent, common area maintenance, insurance, property taxes, other typical lease expenses, payroll, uniforms, administrative, janitorial, maintenance, utilities, raw ingredients for operation, and any public viewing/listening licenses.

• These figures do not include standard pre-opening expenses, royalties, or advertising fees payable under the Franchise Agreement or debt service and assume that none of your expenses are offset by any sales generated during the start-up phase.

16.  Total:  $320,300 to $777,200

• The franchisor relied on the experience of its affiliates and their principals in opening and developing a company-owned Frost Gelato Shoppe to compile these estimates.