Franchise Costs: Detailed Estimates of Gyu-Kaku Japanese BBQ Franchise Costs (2019 FDD)

Detailed Estimates of Gyu-Kaku Japanese BBQ Franchise Costs Based on Item 7 (Estimated Initial Investment) of Gyu-Kaku Japanese BBQ’s 2019 Franchise Disclosure Document

For 2,000 Square Foot Single Restaurant

1.  Initial Franchise Fee:  $50,000

2.  Construction and Leasehold Improvements (Net Landlord Contribution):  $840,000 to $960,000

• You will have to lease or purchase a location for your Licensed Restaurant. These estimates assume that the location of your Licensed Restaurant will be a leased, unimproved, unfurnished unit.

• If you purchase a location or construct a free standing or expansion building, your initial investment will be much greater, the exact amount depending on size and location.

• Typical locations include strip malls, store front, free-standing buildings, and commercially-zoned houses.

• This estimated range is based on Gyu-Kaku’s experience constructing locations in Los Angeles, California, Honolulu, Hawaii, and New York City, New York, however, rent can vary widely and is dependent upon factors such as size, location, demand, general economic conditions of the town or city in which your Licensed Restaurant is located, and condition of the premises.

• This includes the cost estimate of building out the location.

• You must perform or have performed any construction, remodeling, or additions necessary to cause the premises to conform to applicable Federal, State, County, City, local laws, ordinances, codes, rules and regulations, and to meet Gyu-Kaku’s requirements for the layout, design, construction, fixtures, equipment, installation, and trade dress appearance of a Gyu-Kaku restaurant.

• You must use Gyu-Kaku’s design guidelines and meet its other standards and specifications in building out your Licensed Restaurant, and Gyu-Kaku may require you to engage, at your sole cost, a designated or recommended construction consultant.

• Construction and remodeling costs vary widely, depending upon the location and facilities such as air conditioning, electrical, and plumbing, and the terms of your lease.

• Gyu-Kaku is creating the “Gyu-Kaku Restaurant Prototype” which coordinates and conforms all participants to comply with a standard purchasing policy from vendors with whom Gyu-Kaku set up national accounts.

• Gyu-Kaku will review quotes from vendors you may have worked with in the past, but final selection of each vendor will be made by Gyu-Kaku’s Development Team.

• Once your Licensed Restaurant is built, you must maintain its condition and appearance in an acceptable level of cosmetic appearance, and not more than once during the term of your Franchise Agreement (after the fifth anniversary of the effective date of your Franchise Agreement), you must, at Gyu-Kaku’s request and your expense, refurbish, remodel, and improve your Licensed Restaurant to conform to Gyu-Kaku’s then-current specifications.

3.  Equipment, Furniture, Fixtures, and Signage:  $135,052 to $164,256

4.  Computers and Telecommunications:  $23,038 to $28,850

• You must obtain and use an Aloha point-of-sale (“POS”) system and related computer hardware and software.

5.  Initial Opening Assistance by Franchisor:  $1,980 to $7,668

• Gyu-Kaku will provide you with opening assistance by its representatives during the first 10 days after the opening date of your Licensed Restaurant. These charges represent the aggregate costs of airfare, lodging, meals, and car rental for 2 representatives if you are opening a 2,000 square foot or a 3,500 square foot Licensed Restaurant, or 3 representatives if you are opening a 5,000 square foot Licensed Restaurant.

6.  Pre-Opening Labor:  $26,600 to $31,590

7.  Travel and Living Expenses:  $1,000 to $5,000

• You must pay the expenses of persons attending the Initial Training Program including transportation, lodging, meals, and wages. The amount will depend, in part, on the distance you must travel and the type of accommodation you choose. The estimates provided above contemplate the training of one person for 90 days in Los Angeles, California.

8.  Professional Fees – Architects:  $36,000 to $45,000

9.  Legal/Professional Fees:  $2,700 to $3,300

10.  Opening Inventory:  $12,960 to $15,840

11.  Opening Supplies:  $14,395 to $18,455

12.  Insurance Deposits and Premiums:  $2,700 to $3,300

• As an independently owned and operated franchisee, you are responsible for all costs or liabilities arising from the operation of your Licensed Restaurant, and it is imperative you carry adequate insurance to protect yourself.

• You must maintain insurance of the types and minimum amounts (naming Gyu-Kaku as an additional insured) that Gyu-Kaku specifies in your Franchise Agreement or the Manual.

• To the extent permissible under law, these insurance requirements may be satisfied with a combination of primary, umbrella, and/or excess policies.

• The costs of premiums will vary based on location of the Licensed Restaurant and any prior claims history.

13.  Market Introduction:  $12,600 to $15,400

14.  Licenses, Permits, and Deposits:  $5,400 to $6,600

15.  Miscellaneous Expenditures:  $10,000 to $20,000

16.  Working Capital:  $10,000 to $15,000

• These amounts are the minimum recommended levels to cover your operating expenses for 3 months. However, Gyu-Kaku cannot guarantee that such an amount will be sufficient. Additional working capital may be required if sales are low or fixed costs are high.

17.  Total:  $1,184,424 to $1,390,259

• These estimates cover your initial cash investment up to the opening of your Licensed Restaurant. They do not include your cash needs to cover any borrowings.

• You should not plan to draw income from the operation during the start-up and development stage of your Licensed Restaurant, which may extend for longer than the 6-month “initial phase” described above.

• Gyu-Kaku does not finance any part of the initial investment. Gyu-Kaku relied on the experience of its executive officers (aggregating more than 40 years) in determining these figures.

For 3,500 Square Foot Single Restaurant

• Estimated Initial Investment:  $1,487,808 to $1,818,613

For 5,000 Square Foot Single Restaurant

• Estimated Initial Investment:  $2,033,454 to $2,496,498