FDD Talk: Average Cost to Customer and Other Performance Metrics for Welcomemat Services Businesses (2013 FDD)

Highlights of Welcomemat Services’ Item 19 Financial Performance Representations (2013 FDD) – Part 2

Explanatory Notes for Part II – Average Number of Certificates Sold Per Month

• Part II of this Item presents the average number of “Certificates” sold per month during the Measurement Period by all 9 Reporting Franchisees, including the Reporting Franchisee who was excluded from Part I.

• A “Certificate” is one mailing insert sold in one zip code. Generally, advertising space in mailers is sold on a per-zip code basis, and Welcomemat Clients pay franchisees based on the number of zip codes within which their advertising materials will appear.

• The “System-Wide Average Monthly Certificate Sales” for all of the Reporting Franchisees was calculated by taking the sum of each Reporting Franchisee’s “Average Certificates Sold Per Month” and dividing it by the total number of Reporting Franchisees.

• The “Average Certificates Sold Per Month” by each Reporting Franchisee is calculated by taking the total number of Certificates sold by each Reporting Franchisee during the Measurement Period, and dividing it by the total number of months the Reporting Franchisee was in operation.

• This table is based on the average number of Certificates sold by Reporting Franchisees in both previously developed and undeveloped markets.

Explanatory Notes for Part III – Average Set-Up Fee and Average Cost to the Customer Per Household in the Territory

• Part III sets forth the average set-up fee charged by the Reporting Franchisees to Welcomemat Clients during the Measurement Period to secure and establish placement in the franchisee’s monthly mailer, including artwork design and set-up services (the “Set-Up Fee”).

• Part III of this Item also sets forth the average cost to the Welcomemat Client per household in the Territories of Reporting Franchisees during the Measurement Period.

• The “Average Set-Up Fee” was calculated by taking the sum of the Set-Up Fees charged by Reporting Franchisees to Welcomemat Clients during the Measurement Period, and dividing it by the total number of new Welcomemat Clients obtained by Reporting Franchisees during the Measurement Period.

• This table is based on the fees charged by Reporting Franchisees in both previously developed and undeveloped markets.

• The “Average Cost to Welcomemat Client Per Household” encompasses the amounts invoiced to each Welcomemat Client for each mailing piece and setting it into the monthly mailer, printing and mailing services.

• The cost to the Welcomemat Client per household means the cost to the customer each month divided by the total number of households in the Territory. The Average Cost to Welcomemat Client Per Household was calculated by taking the sum of each franchisee’s Welcomemat Client’s cost per household during the Reporting Period, and dividing it by the total number of Welcomemat Clients.

Explanatory Notes for Part IV – Reporting Franchisees’ Gross Profit and Net Profits in Connection with First Mailings

• Part IV of this Item sets forth information concerning the Gross Income and Net Income earned by all 9 Reporting Franchisees in connection with their first and second mailings during the Measurement Period.

• The terms “Gross Margin” and “Net Profit” are defined as set forth in Part 1 of Item 19.

Part II – Average Number of Certificates Sold Per Month Between January 1, 2012 and December 31, 2012