FDD Talk: Average Annual Sales and Gross Margin for Master Owners of Anago Cleaning Systems (2013 FDD)

Highlights of Anago Cleaning System’s Item 19 Financial Performance Representations (2013 FDD)

Anago Cleaning Systems Master Franchise – Introduction

• As a Master Franchisee, you will be authorized and obligated to sell to qualified persons within your defined territory unit franchises for the operation of a janitorial service business and to provide services to your unit franchisees.

• You will be required to enter into a Unit Franchise Agreement with each of your unit franchisees and to comply with your obligations as subfranchisor under those agreements, including entering into commercial janitorial service contracts and assigning the performance of services under those contracts to your unit franchisees.

Anago Cleaning Systems Master Franchise – Annual Sales and Gross Margin

• Set forth below is information showing the unaudited Annual Sales and Gross Margins as self-reported by certain Anago Master Franchise Owners’ businesses during the company’s fiscal years 2012, 2011, and 2010.

• “Average Annual Sales” means total collected billing for all janitorial work to include day porter services, special or unscheduled services, and sales of supplies by the Master Owners. These numbers do not include any federal, state, or local taxes collected on behalf of franchised outlets, or any revenue collected by the Master Owners for the sale of Unit Franchises.

• “Average Annual Gross Margin” means amounts attained after royalty has been paid to the franchisor and after payments are made to the Unit Franchisees for cleaning service contracts, but does not include down payments for the purchase of a Unit Franchise or any prepayments for additional janitorial work, supplies, or equipment made by the Unit Franchisees, which can increase actual Gross Margin achieved. These numbers do not include any federal, state, or local taxes collected and paid on behalf of franchised outlets.

• The information in this Item comes from current Owners of Anago Subfranchise Businesses (“Master Owners”) as of December 31, 2012 and not any previous owners of the same territory. They are all franchised outlets and not corporately held.

• All Master Owners included have territories that have been opened from less than 1 year to greater than 10 years. You will be opening a new territory and therefore may not experience similar results.

• Some Anago Master Franchise Owners own multiple territories. The charts below reflect the Gross Margins of their combined territories. In FY 2012, 20.0% of the Master Franchise Owners had multiple territories. In FY  2011, 21.1% of the Master Franchise Owners had multiple territories. In FY 2010, 26.7% of the Master Franchise Owners had multiple territories.

• Gross Margin does not reflect your profits or net income because the franchisor will take deductions from Gross Margin before sending monies to you. Your portion of the Gross Margin is subject to further deductions and adjustments authorized by the Franchise Agreement.

• In addition to deductions and adjustments made by the franchisor, you will incur other expenses that will reduce your profits or net income, such as land, building, and/or equipment rent; labor; debt service; depreciation and amortization; advertising; administrative expenses such as accounting or legal expenses; taxes; licenses; insurance and others. These expenses vary from Master Owner to Master Owner.

• The information set forth in the charts reflect the actual results of existing Anago Master Franchise Owners’ businesses, and should not be considered as the actual or probable results that will be realized by any Master Franchisee. A new Master Franchisee’s individual financial results are likely to be lower.

FY 2012

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