What is excluded from the 'Total Labor Expense' calculation for 7 Brew stores?

According to 7 Brew's 2025 Franchise Disclosure Document, the calculation of 'Total Labor Expense' for its stores includes actual store-level payroll, the store's general manager's salary and benefits, payroll taxes, and bonus expenses. However, the document explicitly states that area manager salaries or incentives are not included in this calculation. This means that while the costs associated with managing the individual store are accounted for, the costs of overseeing multiple stores within a region are not.

For a prospective 7 Brew franchisee, this distinction is important for understanding the financial performance representations provided in the FDD. When evaluating the 'Total Labor Expense' margin, franchisees should recognize that this figure reflects only the labor costs directly related to operating their specific store. It does not include any portion of the costs associated with regional or area management, which are borne separately by 7 Brew.

This exclusion provides a clearer picture of the store-level labor costs that a franchisee will be responsible for managing. It allows for a more accurate comparison of labor expenses across different 7 Brew locations, as it eliminates the variability that could arise from different area management structures or compensation models. Franchisees can use this information to better forecast their own labor costs and assess the potential profitability of their 7 Brew franchise.

It is common in the franchise industry to delineate store-level and corporate-level expenses in financial reporting. This separation helps franchisees focus on the costs they can directly control and manage, while also providing transparency into the franchisor's overhead and support structure. By excluding area manager costs from the 'Total Labor Expense,' 7 Brew aligns with this practice and provides franchisees with a more relevant and actionable financial metric.