Highlights of WSI’s Item 19 Financial Performance Representations (2013 FDD) – Part 1

The franchise is for WSI Businesses which provide full service Digital Marketing systems to businesses under the trademark WSI, and other authorized marks.

Explanatory Notes for Part 1 – Analysis of Certain Sales Information

Certain Sales by US-Based Graduates of WSI’s Quick Start Program

Between January 1, 2012 and December 31, 2012, 33 U.S. franchisees entered the System. Of that number, 29 franchisees entered the Quick Start Program (“QSP”) and 19 of the 29 franchisees in the QSP reported sales of WSI Digital Marketing systems within the first 3-4 months after beginning operations (the “Measurement Period”).

Commencement of operations is measured from the date a franchisee successfully completes the mandatory initial training program and opens its business.

This analysis contains average sales and related information for those 19 franchisees in the QSP who reported sales during the Measurement Period (“Reporting Franchisees”).

The QSP is a 90-day coaching program that is made available to all new franchisees following completion of the mandatory initial training program. Franchisees participate within one month following the completion of initial training.

The QSP offers coaching in the WSI System and in sales and marketing and business start-up. The goal is to expedite a franchisee’s start-up phase of their business by providing one-on-one and group coaching to the specific needs of the franchisee.

The analysis is based on sales by the Reporting Franchisees of WSI Digital Marketing systems either delivered, or initiated though not completed, within the Measurement Period. The time to close sales varies such that some of the sales included in this analysis may have been initiated but not completed during the Measurement Period.

Assumptions

All Reporting Franchisees are included in the number below regardless of which type of territorial license they hold. The type of license held does not restrict the type of internet solutions that a franchisee can sell.

Average Sales Price. The average sales figure indicates the total reported sale price of the internet solutions, whether a one-time charge or a deposit with monthly payments, divided by the total number of reported sales. There were 48 sales reported by the Reporting Franchisees. Of the 48 sales included in this analysis, 19 (39.5%) attained or exceeded this average and 29 (60.5%) were below this average.

Average Mark-Up. The mark-up is the sale price divided by development costs. Of the 48 sales included in this analysis, 16 (33%) attained or exceeded this average and 32 (67%) were below this average.

Average Time to First Sale. The average time to first sale is calculated from the first day on which the franchisee commences the QSP to the day on which their first sale is made. Of the 48 sales included in this analysis, 88% attained or exceeded this average and 12% were below this average.

Recurring Revenue. Certain sales reported during the Measurement Period also include an additional recurring monthly amount for services rendered following the initial sale and charged on a monthly basis. Recurring revenue is derived from services and hosting and from other related technology requirements.

Sales that do not have recurring revenues may be due to client budget or lack of client need for these services. The length of time during which recurring revenues are earned varies considerably.

Part 1 – Analysis of Certain Sales Information

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