Detailed Estimates of Cinnaholic Franchise Costs Based on Item 7 (Estimated Initial Investment) of Cinnaholic’s 2018 Franchise Disclosure Document

1.  Initial Franchise Fee:  $35,000 for each Bakery

• The initial franchise fee includes the loan of Cinnaholic’s Operations Manual and initial training for up to two individuals having responsibility for the day-to-day operations of your Bakery. The initial franchise fee is not refundable under any circumstances.

• As discussed in Item 5 of the Disclosure Document, you will pay a Development Fee based on the number of Bakeries you must develop under the Development Agreement.

• In most circumstances, the Development Fee is credited against the initial franchise fee you must pay for each Bakery developed and opened according to your Development Schedule. If a Bakery is not established in accordance with the Development Schedule, the Development Fee that would have otherwise been credited towards payment of the initial franchise fee for that Bakery will be forfeited and retained by Cinnaholic.

2.  Rent:  $5,000 to $10,000

• These figures presume that you will be leasing the Bakery premises and only represent rent for three months.

• Cinnaholic is unable to estimate the total cost of purchasing suitable premises for your Bakery or the amount of any down payment that would be required.

• Rent will vary depending upon the size of the premises, the site’s condition, its location, building size, access to major streets, demand for the site, the build-out requirements and construction or other allowances from the landlord, and the requirements of individual landlords.

• These figures are based upon Cinnaholic’s initial experience in Berkeley, CA and the experience of its franchisees in 2015 through 2017.

• These figures may vary considerably in other parts of the United States.

• Regardless of whether you lease or purchase the Bakery premises, a typical Cinnaholic Bakery occupies approximately 700-1,200 square feet of net rentable space. A Cinnaholic Bakery may be either a freestanding building or an in-line retail plaza space, but, in any event, the Bakery requires ample parking, good visibility, and availability of prominent signage.

3.  Security Deposit:  $3,000 to $6,000

• Your lessor may require a security deposit before you take possession of the premises. This deposit may or may not be refundable.

4.  Real Estate and Improvements:  $75,00 to $125,000

• The cost of leasehold improvements will vary widely depending upon the size and condition of the premises, whether or not there are any existing and comparable leasehold improvements in the premises, the extent and quality of improvements desired by you over and above Cinnaholic’s minimum requirements, landlord’s cash contribution to the cost of the improvements, and the like.

• Improvements include electrical, carpentry, floor covering, painting, plumbing, heating, ventilation, and air conditioning. These expenses include fees paid to the General Contractor.

5.  Travel and Living Expenses While Training:  $3,000 to $10,000

• Cinnaholic provides initial training at no charge for up to three individuals, but you must arrange and pay for all food and lodging expenses for the people who attend the initial training program. Costs vary depending on the distance traveled and the type of lodging.

• The amount shown does not include the cost of transportation.

6.  Furnishings, Fixtures, Equipment, and Decorating:  $25,000 to $60,000

• You must purchase or lease certain equipment (like bakery and kitchen equipment), machinery, furniture, and décor and trade dress items, all of which must comply with Cinnaholic’s specifications and standards.

• Costs will vary depending on a number of factors including, without limitation, building codes and health requirements of the state where your Bakery is located.

7.  Signage:  $3,000 to $7,500

• The cost of your exterior sign will vary depending upon the size, color, and back-lite channel letters of the sign and other specifications Cinnaholic and the landlord may require.

8.  Opening Inventory:  $3,000 to $5,000

9.  Computer Hardware/Software:  $1,000 to $2,000

10.  Grand Opening:  $5,000 to $7,000

• You must conduct a grand opening promotion with the opening of your Bakery. You must pay all costs of the grand opening, including publicity costs, pre and/or post opening coaching, promotional costs, plus the full cost of any price reductions or other customer inducements.

• $1,500 to $2,000 (of the $5,000) must be spent on a public relations vendor of Cinnaholic’s choice or approval.

• Costs may vary depending on your market and the type of advertising used, however, you must spend a minimum of $5,000 during the period 30 days before and 60 days after the opening of your Bakery or, if you purchased an existing Bakery, 60 days after the purchase of your Bakery.

• Part of your grand opening promotion will include obtaining pre and/or post opening coaching by a vendor designated by Cinnaholic and the cost of this coaching will count toward your required grand opening promotion expenditures.

11.  Professional Fees:  $2,000 to $4,000

12.  Insurance:  $1,000 to $2,000

• This figure is an estimate of the annual cost of maintaining the insurance required by the Franchise Agreement.

13.  Miscellaneous Opening Costs:  $2,000 to $5,000

• This figure includes amounts for utility costs, business licenses, permits, opening assistance, software monitoring, and the cost of training your employees.

14.  Additional Funds – 3 Months:  $15,000 to $30,000

• This estimates the funds needed to cover 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.

15.  Total Estimated Initial Investment:  $178,000 to $308,500

• Cinnaholic relied on its management’s business acumen to compile these estimates.

• The amount shown is based upon Cinnaholic’s predecessor/affiliate’s experience in Berkeley, CA and the experiences of its early franchisees in 2015 and 2016.

• Cinnaholic does not offer direct or indirect financing to franchisees for any of these items.