FDD Talk 2014: Our Latest Views on Painting with a Twist’s Average Gross Revenue System-Wide, and Based on Number of Facebook “Likes”

Highlights of Painting with a Twist’s Item 19 Financial Performance Representations (2014 FDD) – Part 1

• Painting with a Twist did not have any franchisor-owned outlets as of January 1, 2014.

• This Item sets forth certain historical data submitted by Painting with a Twist franchisees, including average and median annual gross revenue, annual gross revenue based on Facebook “Likes,” average payroll expenses, and average income earned from the Painting with a Twist Studio prior to the grand opening for the period from January 1, 2013 to December 31, 2013 (the “Measurement Period”).

• During the Measurement Period, there were 107 Painting with a Twist franchises. This Item sets forth historical data for the 55 Painting with a Twist franchisees that were open and operating for more than 12 months as of December 31, 2013 for whom the franchisor has complete sales data (“Reporting Franchisees”).

• Of the Reporting Franchisees, 24 own and operate more than one location (the “Multi-Unit Owners”) and 31 own and operate a single location (the “Single-Unit Owners”). Also, 12 Painting with a Twist franchisees were excluded from the calculations because they did not follow the franchisor’s management and staffing recommendations including:

• (i) following the office responsibilities as set forth in the Manuals;
• (ii) following the store marketing procedures as set forth in the Manuals; and/or
• (iii) holding the number of classes as set forth in the Manuals.

• Painting with a Twist has not audited nor independently verified this information.

• The fifty-five (55) Painting with a Twist franchisees represented herein operate in the following states:  Arkansas, Colorado, Florida, Georgia, Kentucky, Louisiana, Michigan, Missouri, Mississippi, North Carolina, New York, Ohio, Pennsylvania, Tennessee, Texas, and Utah.

Explanatory Notes for Part I – Average and Median Annual Gross Revenue

• The chart below presents the Average Annual Gross Revenue and Median Annual Gross Revenue for all Reporting Franchisees during the Measurement Period.

• “Gross Revenue” for purposes of this Item 19 is defined as the total of all sales invoices or other items or services billed to the customer for all “completed sales” less any discounts during the Measurement Period. Sales of products and services are considered “completed sales” when the franchisee collects final payment from the customer or by the date that is one month after final receipt of all products and/or services sold to the customer, whichever is earlier.

• “Median” means that 1/2 of the Reporting Franchisees achieved Annual Gross Revenue that exceeded the Median Annual Gross Revenue, and 1/2 had Annual Gross Revenue below the number presented.

• The averages presented for Multi-Unit Owners are based on financial information for each store, not the sum of their stores.

Explanatory Notes for Part II – Reporting Franchisees’ Annual Revenue with Social Media

• The table below sets forth the Reporting Franchisees’ Annual Revenues during the Measurement Period based on the number of “Likes” on Facebook the Reporting Franchisees obtained as of the end of the Measurement Period.

• “Likes” were determined by the number of “Likes” each Reporting Franchisee’s Facebook page received as of the end of the Measurement Period.

Part I – Average and Median Annual Gross Revenue (for the Period from January 1, 2013 to December 31, 2013)

All (55 Painting with a Twist Franchisees)