Detailed Estimates of A&W Restaurant Franchise Costs Based on Item 7 (Estimated Initial Investment) of A&W Restaurant’s 2014 Franchise Disclosure Document

For an Inline A&W Restaurant

1.  Real Estate:  Not Included

• The amount of leasable space required to construct a new inline Restaurant is approximately 2,100 square feet.

• Real estate costs vary significantly depending on numerous factors including whether you purchase for cash, finance your purchase, or lease. The real estate costs also vary considerably according to site size, prevailing regional land and rental costs, street access, and other factors.

• Financing costs vary with the amount financed, prevailing interest rates, and other terms.

• Rental costs may include (in addition to base rent) percentage rent, common area maintenance, or other occupancy costs.

• Because of the significant variations, real estate costs are not included in the initial investment estimate.

2.  Professional Fees, Licenses, and Permits:  $60,000 to $80,000

• Local, municipal, county, and state regulations vary on what licenses and permits are required by you to operate a Restaurant. For example, you may need city and county occupational licenses and a city food handler’s license. These fees are paid to governmental authorities, when incurred, before commencing business.

• You may decide to incorporate prior to the execution of the Franchise Agreement. You may also have to comply with the fictitious, assumed, or trade name statutes of the state in which the Restaurant will be located.

• The fees for these procedures may vary depending on state law, the prevailing rate of attorney’s fees, and the scope of legal services requested. These costs are paid to the attorneys, newspapers, and governmental agencies, and are usually needed before starting business.

3.  Building Costs Including Sitework:  $495,000 to $530,000

4.  Signs:  $30,000 to $60,000

• As noted above, many factors, including the type and size of the Restaurant and its location, will affect final costs. The estimates used in the above charts represent the approximate construction costs, equipment costs, signage costs, and costs for furnishings and decor of a new Restaurant.

5.  Furnishings, Fixtures, and Equipment:  $150,000 to $275,000

• Costs vary depending upon the size of the Restaurant and the equipment package required for the menu served. The typical equipment and fixture list includes freezers and refrigerators, sinks, hot water heater, several types of shelving, exhaust fans and hoods, hot food table, items for preparing and serving food, floor safe, cooking appliances, ice cubes and storage bin, beverage and cup dispensers, coffee brewer, and other items needed to operate a Restaurant.

• Some Express Restaurants may not require a walk-in freezer and certain other items.

6.  Initial Franchise Fee:  $30,000

7.  Grand Opening Promotion Deposit:  $5,000

• Upon execution of the Franchise Agreement, you are required to pay a $5,000 grand opening promotional deposit (in addition to the initial franchise fee).

• Once you have opened the Restaurant for business and completed the approved grand opening promotion, you will be eligible for reimbursement of up to the $5,000 paid of your approved expenditures in connection with your grand opening promotion. You must submit receipts and/or invoices evidencing the approved expenditures in order to receive the reimbursement.

8.  Training Expenses:  $6,000 to $25,000

• A&W certifies franchisee-owned training units at locations determined by A&W for training. A&W is currently providing the initial training program to two individuals free of cost but will charge $200 per day for each additional trainee you would like to attend.

• You must pay for any training supplies or materials and the labor costs and other related costs associated with providing training to you. These costs range from $250 to $5,000.

• You will be responsible for all compensation, insurance, travel, and living expenses that you or the participant incurs in connection with the training program.

• A&W may furnish you an A&W representative to assist in the opening activities of the Restaurant. If additional training assistance is requested by you or deemed necessary by A&W, you must reimburse A&W for its reasonable expenses in providing the A&W representative for an additional period, including the representative’s salary and living and travel expenses.

• These costs are non-refundable when incurred.

9.  Miscellaneous Opening Costs:  $7,000 to $11,000

• This estimate includes supplies used and wages paid during pre-opening on-site training, uniforms, smallwares, security deposits, legal fees, business permits and licenses, and other prepaid expenses.

10.  Opening Inventory:  $9,000 to $11,000

• Typical opening inventory items include root beer mugs, paper products, food products and ingredients, root beer concentrate and bottlers sugar, and other soft drink beverages.

11.  Additional Funds (3 months):  $45,000 to $150,000

• This estimates your initial start-up expenses for a 3-month period. These expenses include, among other items, payroll costs, royalties, advertising, trash removal, promotional expenses, management bonus, insurance, taxes and licenses, bank charges, cost of sales, utilities, and repair and maintenance.

• Estimates of revenues generated from the Restaurant during this three-month period are not included.

• These figures are estimates and A&W cannot guarantee that you will not have additional expenses starting the business.

12.  Total:  $837,000 to $1,177,000

• These estimates were compiled based upon information from A&W’s experience in the Restaurant Business as well as recent Restaurant openings.

For a Freestanding A&W Restaurant

• The total estimated initial investment necessary to begin operation of a Freestanding A&W Restaurant ranges from $837,000 to $1,177,000.

• The amount of property required to construct a new A&W Freestanding Restaurant with an area of 2,500 square feet is approximately 28,000 to 35,000 square feet.

For an Express A&W Restaurant

• The total estimated initial investment necessary to begin operation of an Express A&W Restaurant ranges from $122,500 to $518,000.

• The amount of property (or of leasable space) required to construct a new A&W Express Restaurant with an area of 600 to 800 square feet is approximately 600 to 800 square feet.

For a C0-Brand A&W Restaurant (Conversion/Remodel)

• The total estimated initial investment necessary to begin operation of a conversion/remodeled A&W Co-Brand Restaurant ranges from $137,500 to $533,000.

• Real estate costs generally are not applicable to a conversion/remodel project for an A&W C0-Brand Restaurant.

For a C0-Brand A&W Restaurant (Ground Up Construction)

• The total estimated initial investment necessary to begin operation of a new A&W C0-Brand Restaurant ranges from $1,119,000 to $1,827,000.

• The amount of property required to construct a new A&W C0-Brand Restaurant with an area of 2,300 to 2,600 square feet is approximately 35,000 square feet.