Franchise Costs: Detailed Estimates of Primrose Schools Franchise Costs (2019 FDD)

Updated September 29, 2019.

Detailed Estimates of Primrose Schools Franchise Costs Based on Item 7 (Estimated Initial Investment) of Primrose Schools’ 2019 Franchise Disclosure Document

For Build-to-Suit Program

1.  Initial Fee:  $50,000 to $80,000

• The Initial Fee is payable in full when you sign the Franchise Agreement.

• The Initial Fee is $50,000 if you qualify for the VetFran program (for your first Facility only), $70,000 if you are an existing franchisee, and $80,000 if you are a new franchisee.

2.  Real Estate Fee:  $25,000

• You and/or your Real Estate Affiliate (if applicable) must pay Primrose Schools a nonrefundable Real Estate Fee for certain services to assist you in developing the Facility, which, depending on the Program, may be payable in installments.

3.  Security Deposit for Lease and Limited Rent Guarantee Fee:  $0 to $125,000

• Your landlord may require you to pay a security deposit for your lease. Primrose Schools estimates that the amount of the security deposit may range between $0 and $100,000, but the amount could be higher depending on your market, the cost of your rent, and the arrangement that you negotiate with your landlord.

• In limited and unique circumstances, Primrose Schools may provide a limited rent guarantee in favor of your landlord specifically for the purposes of renting the real property, building, and improvements for the Facility from such landlord. If Primrose Schools elects to provide the guarantee, it will require you to pay it a $15,000 nonrefundable limited rent guarantee fee.

4.  Utility Security Deposit:  $10,000 to $30,000

• Utility companies may require a deposit before you occupy your premises and install fixtures and before you begin receiving services. These deposits may or may not be refundable.

5.  School Equipment and Supplies:  $222,000 to $340,000

• The furniture, fixtures, equipment, teaching materials, computer hardware and software, toys, and other items needed to operate a Facility are described in confidential planning and ordering materials that Primrose Schools will provide to you.

• Primrose Schools will review your proposed orders of these items with you while the Facility is under construction.

• Typically, the purchase of these items may be financed through a lender as part of the overall project costs.

• The low estimate is for a smaller Facility, and the high estimate is for a larger Facility.

• This estimate does not include Sales Tax (where applicable) and Freight Charges.

6.  Insurance:  $4,000 to $8,000

• You must maintain insurance of the types and amounts required by Primrose Schools.

• The cost of insurance will depend on policy limits, the types of policies, the location of your Facility, and other factors.

• The estimate assumes quarterly payments of your annual premium and includes payments for your first quarter. You may be able to negotiate the method of payment with your insurance agency or carrier.

7.  Initial Training and Opening Support Fee:  $35,000

• The Initial Training and Opening Support Fee described above is for your first Franchise. However, Primrose School’s current policy is to reduce the Initial Training and Opening Support Fee to $18,000 for Franchises you purchase after your first Franchise.

8.  Marketing, Advertising, and Grand Opening:  $40,000 to $45,000

• You must spend a minimum of $40,000 for grand opening advertising, including advertising and promotional activities that you will conduct prior to operating your Facility, which may vary depending on the conditions within your market.

• This includes, but is not limited to, advertising, public relations, direct mail, digital and other media, marketing materials, promotional items, initial printing of stationery or business cards, enrollment materials, installation of bus graphics, and other grand opening expenses.

• Primrose Schools may require you to submit to it in writing a detailed proposal of your grand opening expenditures, and you may not implement your plan until Primrose Schools has approved it.

• Primrose Schools may require you to deposit with it up to the full $40,000 for grand opening advertising at a specified time prior to the Opening Date, and Primrose Schools will spend such money on pre-opening marketing on your behalf. You must spend prior to opening any remaining amount necessary to meet the minimum spending obligation.

• Primrose Schools must approve any marketing materials before they are used.

9.  Initial Software License Fees:  $2,000 to $2,500

• Primrose Schools will designate certain software that you must purchase and use in the Facility (the “Software”). Primrose Schools currently requires you to buy school management software, software for parent communications, and a teaching assessment tool. Primrose Schools may also require you to purchase CRM software and guest satisfaction software.

• Primrose Schools estimates the current initial license fees and set-up costs to be $2,000 to $2,500, and Primrose Schools estimates that the software licenses cost between $450 and $550 per month.

• Primrose Schools may change any of the required Software from time to time upon notice to you.

10.  Transportation Vehicle:  $900 to $42,000

• Unless Primrose Schools determines using a vehicle is not required, only a vehicle that meets Primrose Schools’ requirements can be used in the operation of your Facility. Any vehicle used must comply with all applicable federal and state laws and regulations.

• The purchase price of the vehicle will vary depending on the vehicle chosen, but you may be able to lease a vehicle for approximately 48 to 60 months at an estimated cost of approximately $900 to $1,200 per month.

11.  Licenses:  $4,000 to $7,000

12.  Miscellaneous Expenses:  $10,000 to $45,000

• You may spend up to $45,000 for miscellaneous expenses, such as storage of supplies; legal fees for document review and the formation of a corporate entity; and payment of payroll and other incidental expenses before you open your Facility.

13.  Financing Cost:  $55,000 to $75,000

• This is an estimate of finance charges you may have to pay prior to and at the closing of your loan, inclusive of lender and U.S. Small Business Administration fees.

• If the U.S. Small Business Association is a party to the loan, you may be required to pay a SBA Guaranty Fee based upon the loan amount plus lender loan fees.

• Additional details regarding the SBA Guaranty Fee are available on the U.S. Small Business Administration’s website.

• There may be other lender fees and related costs and expenses in obtaining financing.

14.  Additional Funds for 3 Months:  $180,000 to $420,000

• This is an estimate of your initial expenses for the first three months of operation, such as payroll, supplies, utilities, and other start-up expenses.

• Primrose Schools relied on information provided by certain of its franchisees’ lenders in preparing the estimate for additional expenditures.

15.  Total:  $637,900 to $1,279,500

• These figures are based on Primrose Schools’ experience working with franchisees to develop Facilities and information reported from franchisees, and assume that such costs remain
  constant until your Facility has been completed.

Total Estimated Initial Investment for Other Development Programs

• Real Estate Affiliate Development Program:  $4,558,400 to $5,721,500
• Permanent Lease Program:  $3,132,900 to $4,477,000
• Independent Development Program:  $4,528,400 to $5,676,500