Highlights of HobbyTown USA’s Item 19 Financial Performance Representations (2013 FDD)

• The franchise involves the retail sales of hobby, toy, entertainment, collectible, and gift merchandise. The types of merchandise which you may sell within these categories consist of model railroading, radio controlled items, tools and paints, models, games, model rockets, science, seasonal activity kits, art supplies, educational toys, and other recreational toys.

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  The company offers two categories of franchise stores. A “Core Concept” store is smaller in size, ranging from 1,200 to 1,999 square feet. A “Comprehensive Model” store is larger in size, ranging from 2,000 to 4,000 square feet. Both models are full-line hobby shops.

• The average annual franchisee sales results for 2012 are shown in this Item 19 under the section entitled “2012 Actual Sales Results”. The reported sales figures were achieved during calendar year 2012.

• There were 155 stores in the HobbyTown USA franchise system at the end of 2012 of which 145 were open during the entire 12 month period and included in the reported amounts.

• Twenty-two of these stores are referred to as “Mega Stores” because they operate with an inventory level of $300,000 or greater. Seventy-one of these stores are referred to as “Enhanced Core Stores” because they operate with an inventory level of between $150,000 and $299,999. Fifty-two of these stores are referred to as “Core Stores” because they operate with an inventory level of up to $150,000.

• The franchised stores included in this financial performance representation were located throughout the United States in primarily urban areas with protected territories ranging from 200,000 persons to over 500,000 persons. Other factors that vary among stores (and which influence individual financial results), including the Mega Stores examined and reported in the financial performance representation, are local market demographics, location, store size, inventory level, local management, and marketing expenditures.

• Since the financial performance representation is based on HobbyTown USA franchises in operation for 12 months or longer, individual franchise results of a new franchisee may differ from, and be less favorable than, the result stated in the financial performance representation.

• The financial performance representation figures do not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the gross revenue or gross sales figures to obtain your net income or profit.

HobbyTown USA Actual 2012 Sales Results for Mega Stores (Inventory of $300,000 or Greater)

Inventory Level:  $400,000 and Above (8 Stores)

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