Hounds Town USA Franchise Costs: Estimated Initial Investment (Item 7, 2023 FDD)

• Hounds Town USA facilities will typically be 5,000 to 7,000 square feet in size and these estimates are based on this sizing. If you open a larger footprint your costs may be materially higher. These costs may also vary depending on the market conditions, economic factors, conditions of the space, and the local economy where you elect to open your Hounds Town USA facility.

• The low estimate factors in situations where Hounds Town USA may reuse existing materials such as flooring, FF&E, and other materials.

1.  Initial Franchise Fee:  $49,000

• The Initial Franchise Fee is $49,000 for the purchase of a Single Franchise.

• If you purchase a Multi-3 Franchise, the only additional initial cost that you will incur over the purchase of a Single Franchise will be the higher Initial Franchise Fee, until you open the additional Hounds Town USA Business(es).

• The Initial Franchise Fee for a Multi-3 Franchise is $125,000 and allows you to open up to three Hounds Town USA Businesses.

2.  Launch Fee:  $30,000

• The Launch Fee for your first Hounds Town USA Business is $30,000. Your Launch Fee will be discounted by 10% from Hounds Town USA’s then-current fee for your second and each additional Hounds Town USA Business.

3.  Pre-Opening Marketing Package:  $15,000

• The Pre-Opening Marketing Package covers the initial advertising Hounds Town USA conducts on your behalf before opening. This includes digital and traditional marketing initiatives.

4.  Microsite and Social Media Setup:  $300

• Hounds Town USA will set up your microsite and social media accounts. You must pay the $300 one-time fee for this service.

5.  Financial Training Access:  $300

• Hounds Town USA partners with outside training companies that provide access to their learning management system that provides training on profit and loss statements, balance sheet review, and understanding cash flow management. This is a one-time fee.

6.  Travel Expenses Related to Training:  $3,000 to $10,000

• Hounds Town USA provides both the first phase of training (the “Initial Training Program”) and the second phase of training (the “Immersion Training Program”) in Denver, Colorado, its affiliate’s location in New York, or at another location designated by it.

• You must pay for airfare, meals, transportation costs, lodging, and incidental expenses for all Initial Training Program and Immersion Training Program attendees.

• The Initial Franchise Fee includes both the Initial Training Program and Immersion Training Program for up to two people (including the managing owner); if additional initial training is required, or more people must be trained, an additional fee will be assessed.

• The low estimate assumes you will not elect to send additional people to the Initial Training Program. The high estimate assumes you send one additional person to the Initial Training Program and pay the initial training fee for the additional person(s) of $1,500 and the program is extended and you pay the extended training fee of $500.

7.  Pre-Opening Lease Payments:  $0 to $24,000

• This estimate is for the first three months’ lease payments for your Hounds Town USA Business (some landlords may require six months’ down payment). The Hounds Town USA Business will need approximately 5,000 to 7,000 square feet. Some of Hounds Town USA’s franchisees have received free rent for the first two to six months of their pre-opening lease term. The low estimate assumes you would not pay rent prior to opening.

• The costs for your space will vary significantly from location to location and are dependent on such factors as the general cost, location, and availability of commercial real estate in your exclusive territory, the type of space selected, and the amount of space desired.

• Your pre-opening lease payments may vary based on factors out of Hounds Town USA’s control such as permitting and zoning.

8.  Furniture, Fixtures, and Equipment:  $30,500 to $43,000

• The estimated initial investment includes costs related to the purchase of the grooming equipment, tables, tubs, washer, dryer, grooming tools, required puppy playground, fencing, Facility cleaning equipment, and related expenses.

9.  Leasehold Improvements:  $225,000 to $388,000

• In most cases, you will need to build out the interior of your Hounds Town USA Business before opening. The costs will vary widely and may be significantly higher than projected in this table, depending on factors such as property location, population density, economic climate, prevailing interest rates and other financing costs, the conditions of the property, and the extent of alterations required for the property.

• This estimate does not include any construction allowances or tenant improvement credits that may be offered by your landlord. In 2020, the range of these allowances and credits was from $0 to $60,000.

• All locations are required to maintain a minimum indoor temperature of 52 degrees Fahrenheit and a maximum indoor temperature of 82 degrees Fahrenheit.

• This estimate does not include any additional extensive improvements to a building such as installing electrical and plumbing systems or installing or upgrading HVAC systems.

10.  Architect Fees:  $6,500 to $15,000

11.  Site Survey:  $1,500 to $4,000

• Hounds Town USA will conduct a site survey on your behalf. This estimated expense would be paid to the company or firm that conducts that site survey. You must use the firm that Hounds Town USA designates to conduct the site survey.

12.  Concept Design:  $2,500 to $6,000

• Hounds Town USA will procure a CAD drawing of your location and this estimated expense will be paid to the company or firm that creates the CAD drawing. Requested revisions to the CAD drawings after Hounds Town USA’s approval may increase this expense.

• You must use the firm that Hounds Town USA designates to produce the Concept Design.

13.  Security and Utility Deposits:  $7,000 to $10,000

• Your actual deposit payments may vary depending upon your location and your market’s retail lease rates. Hounds Town USA facilities will typically be 5,000 to 7,000 square feet in size.

• If you purchase instead of lease the premises for your Hounds Town USA Business, then the purchase price, down payment, interest rates, and other financing terms will determine your monthly mortgage payments.

• This estimate does not include any construction allowances that may be offered by your landlord.

• Building and construction costs will vary depending upon the condition and size of the premises for your Hounds Town USA Business and local construction costs.

14.  Opening Inventory:  $500 to $1,000

• This estimate is for your opening inventory of retail items and one pallet of approved dog food.

15.  Post-Opening Marketing:  $25,000

• You must spend a minimum of $25,000 on grand opening advertising.

16.  Business Licenses and Permits:  $200 to $2,500

• You may be required to obtain business licenses from local government agencies to operate your Hounds Town USA Franchise. You may also need a building permit while you are building out your Hounds Town USA Business.

17.  Fire Alarm System:  $10,000 to $15,000

• Your location must be centrally alarmed to your local fire department. You may be required to install a fire alarm system with this capability. Cost will depend on the local fire codes, fire departments, municipalities, laws and ordinances within the town in which your business is located, all of which must be strictly followed.

18.  Logo Gear and Uniforms:  $1,000 to $3,000

• This estimate includes three months’ worth of folders, brochures, business cards, staff shirts, report cards, Hounds Town USA bandanas for dogs, plus one or two Hounds Town USA branded retail items such as dog toys. It also includes three months’ worth of items in the Hounds Town “birthday bar”, which includes treats, cakes, toys, and signage.

• This estimate includes enough uniforms for three months of your opening team.

19.  Signage:  $3,000 to $8,000

• This estimate is for a full signage on the front exterior of the building as well as interior signage. This includes an illuminated sign along the front entrance of the building, and one road sign.

• The type and size of the signage you install will be based upon the zoning and property use requirements and restrictions. There could be an occasion where certain signage is not permitted because of zoning or use restrictions.

20.  Insurance:  $2,100 to $4,000

• This estimate includes the first three months of payments of annual insurance policies. You must obtain and maintain, at your sole expense, the minimum insurance requirements detailed in the Franchise Agreement Attachment D and satisfy all of the other insurance-related obligations in that Attachment.

21.  Computer Hardware:  $0 to $2,500

• This estimate includes the computer equipment, software and installation, printer, and any other peripherals required. You must purchase the designated point-of-sale cash register system for your Hounds Town USA Business.

22.  POS Setup Fee:  $500

23.  POS Fee – 3 months:  $900

24.  Closed Circuit Camera Systems:  $10,000 to $20,000

• This estimate includes the cost to install a closed-circuit camera system in your Facility. This system is for internal use only (not for customers or third parties).

• The camera system must provide video coverage of all areas of your Facility including all entryways, parking lots, and outdoor areas. The system must be recorded through the use of a DVR or similar system, with the ability to access, playback, and save video.

25.  Professional Fees:  $2,500 to $6,000

• Hounds Town USA strongly recommends that you hire a lawyer, accountant, or other professional to advise you on this franchise offering. Rates for professionals can vary significantly based on area and experience.

26.  Vehicle Lease, Signage, Insurance:  $0 to $8,000

• You must have a vehicle (“Vehicle”) for your Hounds Town USA Business with a wrap with the approved Hounds Town USA artwork prior to opening the Hounds Town USA Business as a branding and marketing channel. There are specific situations such as municipality or HOA codes which do not allow for a wrapped vehicle. You may request a variance in these situations.

• Your Vehicle must be in good working order, and must be approved by Hounds Town USA in advance.

• Hounds Town USA’s estimates assume that you will lease your Vehicle. If you purchase the Vehicle, your initial investment will be higher than the figures listed in the chart.

• The cost of vehicle signage can range between $2,500 and $3,500, depending on the type of Vehicle the signage is being installed on and the size of the signage.

27.  Bookkeeping Services:  $900

• You must use Hounds Town USA’s approved supplier for bookkeeping services. This estimate includes the monthly payment to the vendor for the first 90 days after you open your Hounds Town USA Business.

28.  Additional Funds for 3 Months:  $30,000 to $80,000

• These amounts represent Hounds Town USA’s estimate of the amount needed to cover your expenses for the initial three-month start-up phase of your Hounds Town USA Business.

• They include payroll costs during the first three months of operation (but not any draw or salary for you), initial Technology Fees, utilities, advertising, rent, accounting and other professional fees, memberships, the travel, lodging and meal costs for Hounds Town USA’s trainer(s) to provide the phase 2 training at your location, and other operational expenses.

29.  Total Estimated Initial Investment:  $457,200 to $771,900