Franchise Costs: Detailed Estimates of Primrose Schools Franchise Costs (2017 FDD)

Updated February 4, 2018.

Detailed Estimates of Primrose Schools Franchise Costs Based on Item 7 (Estimated Initial Investment) of Primrose Schools’ 2017 Franchise Disclosure Document

For Build-to-Suit Program

1.  Initial Fee:  $50,000 to $75,000

• 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 $75,000 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 $115,000

• 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:  $252,000 to $285,000

• The equipment needed to operate a Facility is described in a booklet that Primrose Schools will provide to you (the “Order Book”) and includes teaching materials, computer hardware and software, furniture, toys, contractor-furnished equipment, and other items.

• The Order Book is part of the Confidential Manuals, and Primrose Schools will review your Order Book with you during the Initial Training program or shortly before or after you attend such program.

• Typically, financing may be arranged through local banks for the purchase of these items.

• 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:  $35,000 to $45,000

• This estimate includes the pre-opening marketing, including advertising and promotional activities that you will conduct prior to operating your Facility, which may vary depending on the conditions within your market.

• Primrose Schools will assist you in developing the pre-opening marketing plan and budget. Primrose Schools must approve these materials before they are used.

9.  Initial Software License Fees:  $4,280 to $5,578

• You must obtain from Primrose Schools’ designated vendor a software license to use Child Care Management Software that has been customized for the System (the “Software”), the cost of which will range from $675 to $1,595 based on the software and equipment you select. You will be required to pay an annual software extended support plan for the Software after your first year of using the Software.

• You must also obtain a software license for Primrose Schools’ current software for parent communications. The software license fee is currently $229 per month, but is subject to change. The estimate includes your first 12 months of license fees.

• In addition, you must obtain a software license for Primrose Schools’ current teaching assessment tool. The software license fee currently ranges from $8.95 to $9.95 per student per year in certain specified classrooms, but is subject to change. The estimate includes your first 12 months of license fees.

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:  $16,500 to $21,500

• This is an estimate of finance charges you may have to pay prior to and at the closing of your loan.

14.  Additional Funds for 3 Months:  $170,000 to $207,000

• 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:  $716,680 to $1,046,078

• These figures are based upon construction and development costs as of the date of the 2016 Disclosure Document 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:  $4,004,680 to $5,829,078
• Developer Lease Program:  $741,180 to $1,075,578
• Permanent Lease Program:  $2,414,680 to $3,469,078
• Independent Development Program:  $3,525,180 to $5,799,578