What factors can influence the ongoing costs of operating a Caring Transitions franchise?

• 1. You should have approximately $4,000 to $38,000 of additional funds for the on-going costs of your business, such as payroll, utilities, advertising, taxes and similar items, to the extent that business costs are not covered by receipts during the first 6 months of operation. These figures are estimates and we cannot guarantee that you will not have additional expenses starting the business, that these amounts will be adequate, or that additional investment by you will not be necessary during the 3 months of initial operation or afterwards. New businesses (franchised or not) often have more expenses than income. Your costs will depend on factors such as how closely you follow our recommended methods and procedures; effectiveness of advertising; your management, marketing, and general business skills and experience; local economic conditions; the local market for our products and services; the prevailing wage rate; local competition; and the sales level you achieve during the initial phase. You may also incur expenses for legal fees, accounting fees, and local permits and operating authorizations necessary to start your business, which may vary considerably from one area

to another. In formulating the amount required for additional funds, we relied upon the experience of our executive team in starting and operating other businesses, and on the business model we have developed for Caring Transitions franchises; neither Caring Transitions nor any of our executives have ever operated a business similar to the franchised business.

• 1. The terms of your lease will depend on the size, location, condition, and desirability of the premises. You will probably be required to pay a normally refundable security deposit, which is reflected in the above chart. We recommend that you operate your franchise from your home.
• 1. You must obtain and maintain the types and amounts of insurance coverage described in Item 8 under the heading "Insurance." We must be named as an additional insured on these policies. We estimate that the average total annual cost for the required insurance coverage will be between $2,000 and $4,000. The premium is typically due before the effective date of the coverage unless your insurance company offers monthly or quarterly payment terms. Insurance costs will vary depending upon the location and size of your office, the number of employees and other factors, and may change from time to time due to changes in insurance rates. You must also maintain workers' compensation coverage and any other insurance that may be required by law in your territory.

Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 16–19)