FDD Talk: Average, High, and Low Net Sales of Adam & Eve Retail Stores (2013 FDD)

Highlights of Adam & Eve’s Item 19 Financial Performance Representations (2013 FDD)

Adam & Eve Franchise – Introduction

• The franchisee will operate a store for the marketing and retail sale of lingerie, apparel, shoes, leather accessories, a selection of intimate novelty items, DVDs, and other associated products.

• The total investment necessary to begin operation of a new Adam & Eve Store is $171,050 to $350,700. This includes between $90,000 to $120,000 that must be paid to the franchisor or affiliate.

• The total investment necessary to begin operation of a conversion Adam & Eve Store is $95,550 to $221,700. This includes between $80,000 to $110,000 that must be paid to the franchisor or affiliate.

• The franchisor may also offer a multi-unit operator agreement to an individual or company that agrees to develop at least two Adam & Eve Stores in a specific geographic area. A multi-unit operator will pay a development fee that is equal to 100% of the initial franchise fee for the first Store to be developed, plus a deposit of $15,000 for each additional Store that will be developed.

• The franchisor will apply a pro rata portion of the development fee toward the initial franchise fee due for each Store, and the balance of the reduced initial franchise fee is payable by you when you sign the Franchise Agreement for each Store.

• The total investment necessary under the multi-unit operator agreement will vary depending on the number of Stores to be developed.

Adam & Eve Franchise – Average, High, and Low Net Sales

• The figures used in this Statement are net sales only. Net income will vary from Store to Store depending upon factors such as cost of goods sold, labor costs, and other costs relating to the operation of the Franchised Business.

• The franchisor offered substantially the same services to the Franchised Businesses described in this Statement. The Stores offered substantially the same products and services to the public as you will.

• The Franchised Businesses report gross receipts information to the franchisor based upon a uniform reporting system. Starting in late 2010, however, new franchisees were required to install a software system that would allow the franchisor access to gross margin data, and two franchisees converted their 6 pre-existing stores into Adam & Eve Stores.

• In 2012, there were 17 Stores utilizing the software system. Those Stores averaged a gross margin of 64%. The low end of the average was 51%. The high end of the average was 69%.

2006