Franchise Costs: Detailed Estimates of Cereality Franchise Costs (2015 FDD)

Detailed Estimates of Cereality Franchise Costs Based on Item 7 (Estimated Initial Investment) of Cereality’s 2015 Franchise Disclosure Document

For a Traditional Restaurant (Located Within a Shopping Mall, Strip Center, or Similar Venue)

1.  Initial Franchise Fee:  $14,000 to $30,000

• The initial franchise fee is $30,000 for your first and second traditional Cereality franchise, and is reduced to $17,500 for your third and all subsequent traditional Cereality franchises.

• If you are currently an active or active reserve member of the U.S. Armed Forces, have been honorably discharged from the U.S. Armed Forces, or are a 501(c)(3) organization, you will receive a 20% discount on the Initial Franchise Fee.

• The Initial Franchise Fee includes the training fee for two individuals.

2.  Lease Review Fee:  $0 to $1,250

• A $1,250 Lease Review Fee shall be paid by you to Kahala Franchising (the franchisor) upon your request to Kahala Management’s real estate department to review your entire unexecuted lease and provide any suggested changes (this is an optional service, with the determination of whether to utilize Kahala Management’s real estate department to be made in your sole discretion).

3.  Rent/Security Deposit (for 3 Months):  $6,000 to $30,000

4.  Travel and Living Expenses (for 2 Persons) While Training (Not Including Salaries, If Any, for You and Your Employees):  $2,500 to $5,000

5.  Real Estate:  Amount Not Specified

• The minimum square footage needed to establish your Cereality restaurant is approximately 1,200 to 1,500 square feet for a traditional restaurant.

6.  Architectural and Project Management Fees:  $5,000 to $9,500

• You must, at your own cost and expense, use the franchisor’s designated and approved third-party design architect to prepare the initial design drawings for your Franchised Business.

7.  Leasehold Improvements:  $25,000 to $125,000

• The landlord may provide some leasehold improvements, but if not, they will be at your expense. The total amount of leasehold improvements will vary greatly, depending on the type of premises for your restaurant (pad site with drive-thru on the high end, versus modular kiosk or retrofitted existing restaurant on the low end), condition of the premises, and what improvements you require.

8.  Restaurant Equipment, Furniture, and Small Wares:  $50,000 to $75,000

• This amount includes estimated costs of furniture, furnishings, installations, equipment, trade fixtures, and certain other items on the restaurant premises, the amount and specific items of which will vary depending upon the location, size, and condition of a particular restaurant.

9.  Interior and Exterior Signage and Menu Panels:  $3,000 to $20,000

10.  Computer Hardware, Software (POS System):  $10,000 to $20,000

11.  PCI Compliance Costs:  $150 to $1,300

12.  Opening Inventory (Food and Paper):  $2,500 to $5,000

• As with any retail business, you will purchase inventory continuously as long as you operate your Cereality restaurant.

13.  Business Insurance:  $1,000 to $5,000

• You must provide commercial general liability insurance in minimum liability limits of $1,000,000 (or greater, if applicable state laws or regulations require) for each occurrence and with an aggregate of not less than $2,000,000, and maintain other insurance in accordance with state law requirements.

14.  Miscellaneous Opening Costs:  $4,750 to $15,500

15.  Grand Opening:  $0 to $5,000

• You may be required, depending on the location of your Cereality restaurant, to conduct a grand opening advertising campaign with the opening of your restaurant. You must pay all costs of the grand opening, including publicity costs and promotional costs, plus the full cost of any price reductions or other customer inducements.

16.  Depository Account:  $3,000

• At the time you sign the Franchise Agreement, you will set up a depository account of $3,000 with your local banking institution. You are required to maintain a balance of $3,000 in this account at all times. This will mean that you must replenish the depository account of $3,000 after Kahala Franchising makes any withdrawals.

• Kahala Franchising will withdraw funds electronically on each Wednesday from the depository account. The withdrawals are based upon the figures you report and constitute Royalty Fees and Advertising Fees.

17.  Additional Funds – 3 Month Initial Period:  $5,000 to $15,000

• The range shown estimates your expenses during the first three months of operation. These expenses include payroll costs (excluding any wage or salary paid to you), other miscellaneous expenses, and working capital.

18.  Total:  $131,900 to $365,550

• These estimated ranges are based on the franchisor’s experience and information provided by franchisees.