Franchise Costs: Detailed Estimates of Metal Supermarkets Franchise Costs (2020 FDD)

Detailed Estimates of Metal Supermarkets Franchise Costs Based on Item 7 (Estimated Initial Investment) of Metal Supermarkets’ 2020 Franchise Disclosure Document

1.  Initial Franchise Fee:  $39,500

• When you sign the Franchise Agreement, you must pay an initial franchise fee in an amount that varies depending on the circumstances.

• Metal Supermarkets does not finance this or any other fee.

2.  Equipment, Furnishings, and Fixtures:  $40,000 to $90,000

• You will need to purchase certain items of equipment, including one or more trucks, saws, a shear, as well as office furniture, racking, fixtures, security systems, and other improvements. Metal Supermarkets may recommend that you acquire other processing equipment.

3.  Permits, Licenses, and Professional Fees:  $1,000 to $5,000

• This estimate includes professional fees, incorporation fees, business permits and licenses.

4.  Computer System, Software, and Telecommunication System:  $7,000 to $13,000

• You must purchase a computer system for access to the software which is hosted by Metal Supermarkets on its system or a third-party system.

• You will receive hosting services through Metal Supermarkets to allow you to use the software and you will incur monthly hosting fees. These fees are subject to periodic changes.

• You will still be responsible for any additional third-party charges associated with any of these services including, but not restricted to, local telephone lines and Internet connections.

5.  Insurance:  $3,000 to $5,000

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

7.  Security Deposits, Utility Deposits:  $5,000 to $10,000

8.  Leasehold Improvements:  $10,000 to $18,000

9.  Signage:  $2,000 to $5,000

10.  Opening Inventory:  $40,000 to $70,000

11.  Initial Advertising:  $15,000 to $30,000

• You must deposit $15,000 with Metal Supermarkets upon signing the Franchise Agreement, which is the minimum amount you are required to spend on approved advertising during the first 12 months of the operation of your Store. No interest will be accrued or paid on this deposit.

• The funds must be spent on approved advertising, and Metal Supermarkets can periodically revise and specify the expenditures that constitute approved advertising. You must make these advertising expenditures in reasonable regular intervals during this 12-month period, and Metal Supermarkets has the right to make some of these advertising expenditures on your behalf.

• You and Metal Supermarkets will periodically reconcile Metal Supermarkets’ expenditures for these purposes, and provide each other with appropriate verification (receipts, etc.) as Metal Supermarkets specifies to substantiate these advertising expenditures. Metal Supermarkets will draw from your advertising deposit for advertising expenditures it makes on your behalf and otherwise adjust the balance of that deposit accordingly.

• Funds from the advertising deposit will also be released to you to reimburse you for the approved advertising expenditures you make during the first 12 months of the operation of your Store.

12.  Real Estate Leasing:  $9,000 to $27,500

• If you do not own a location for your Store, you must purchase or lease a space approved by Metal Supermarkets. Stores typically are either free-standing street locations or in multi-tenanted buildings in industrial areas.

• The cost of purchasing and developing a site for a Store will vary considerably depending on such factors as the location and size of the site and the local real estate market.

• You will need to purchase or lease a site of approximately 4,000 to 6,000 square feet.

• Metal Supermarkets estimates that gross lease costs may range from $5.50 to $11.00 per square foot but may vary greatly depending primarily upon the location of the premises.

• The figures in the estimate are calculated on the following assumptions: (a) you will have to pay five months’ rent (made up of one month’s rent before you open, three months’ rent after you open, and one month’s rent as a security deposit); (b) for space in the range of 4,000-6,000 square feet; (c) at $5.50 to $11 per square foot per year.

• If the site you choose is larger, or has a higher rental cost, or if you cannot negotiate a pre-opening abatement of rent down to one month, then your costs will be higher than those in the chart.

• Rent varies considerably from market to market, and from location to location within each market. Rents may vary beyond the range that Metal Supermarkets has provided, based on factors such as availability, general industrial market conditions in the relevant area, the type and nature of improvements needed to the premises, the size of the Store, the terms of the lease, and the desirability of the location.

• If you decide to purchase the property for the location of your Store, you will incur additional costs that Metal Supermarkets cannot estimate.

13.  Additional Funds for 3 Months:  $40,000 to $80,000

• This estimate, based on Metal Supermarkets’ and its affiliates’ experience operating stores, is of your pre-opening expenses and working capital requirements for your first three months of operations.

• Metal Supermarkets estimates that you will need working capital of $40,000 to $80,000 for general operating expenses, including inventory, payroll, payroll expenses, employee withholding taxes, worker’s compensation costs, facility operating expenses (such as electricity and gas), insurance, security, repairs and maintenance, local marketing (excluding the $15,000 deposited with Metal Supermarkets for approved advertising), and other costs.

• Your Store must, at all times, at a minimum be staffed by you (or the Operating Principal) and a minimum of two qualified employees. In Metal Supermarkets’ experience, employees typically are paid between $12 and $25 per hour, but those amounts may be different depending on the market in which you operate your Store and the compensation approach you choose to take.

• These figures are estimates, and Metal Supermarkets cannot assure you that you will not have additional expenses in starting the Store.

• Your actual cost will depend on factors such as your management skill, experience, and business acumen; local economic conditions; the local market for the Store; the prevailing wage rate; competition in the marketplace; and the sales level reached during the start-up phase.

• This estimate does not include any amounts for debt service or any of your personal living expenses.

14.  Total:  $216,500 to $403,000

• These payments are only estimates and your costs may be higher, depending on your particular circumstances. These estimates are based on Metal Supermarkets’ experience in establishing franchises.

• Metal Supermarkets does not offer any financing for your initial investment. The availability and terms of financing with third-party lenders will depend on factors such as the availability of financing generally, your creditworthiness, and the policies of lending institutions concerning the type of business to be operated.

• The Metal Supermarkets brand is approved for eligibility for Small Business Association (“SBA”) loans. This eligibility does not guarantee that you will obtain financing or that any financing you do obtain will meet with Metal Supermarkets’ approval, or contain favorable or other specific terms.