What is the range of estimated initial investment for a Cinnabon Full Bakery located in a Traditional Location?

ITEM 7

ESTIMATED INITIAL INVESTMENT

YOUR ESTIMATED INITIAL INVESTMENT: FULL BAKERY LOCATED IN A TRADITIONAL LOCATION

This estimates your expenses if you are opening a Full Bakery in a Traditional Location.

Your costs will vary depending upon the location of the Bakery, its condition, and the need for additional designs, plans, and drawings, if applicable.

1. Rent. The figures in the table reflect our estimates for leasing the Bakery premises and include only one month of rent.

The typical location for a Full Bakery is in a high-traffic or retail mall area. An in-line location for a Full Bakery typically ranges in size from 650 to 900 square feet and has about 12 seats and three to six tables. A kiosk location for a Full Bakery typically is 250 to 400 square feet and does not include any seating. A typical Auntie Anne's Co-Branded Bakery occupies about 1,600 square feet of space. A typical Carvel Co-Branded Bakery or Swirl Bakery occupies about 1,800 square feet of space.

Your rent will depend on the site's size, condition, visibility, accessibility, and location, local market conditions, demand for the premises among prospective lessees, and the arrangement you negotiate with the landlord. In certain major metropolitan markets such as Boston, Chicago, New York, Los Angeles, San Francisco, Seattle, and Washington, D.C. and in certain other high demand districts, prevailing market rents could be significantly higher than the high estimate. Because of the wide variation in lease rates for retail space, you should consult with a local commercial real estate broker to get a more accurate estimate of costs in your market.

If you choose to instead purchase real estate, we are unable to estimate the total cost of purchasing suitable premises for your Bakery or the amount of any down payment that would be required.

• 1. Initial Franchise Fee. See Item 5. For Co-Branded Bakeries, the Initial Franchise Fee estimate includes both the Initial Franchise Fee paid to us ($30,500) and the initial franchise fee paid, as applicable, to Auntie Anne's under the Auntie Anne's® Franchise Agreement for the right to operate an Auntie Anne's® franchise ($35,500) or to Carvel under the Carvel® Franchise Agreement for the right to operate a Carvel® franchise ($30,500).
• 1. Construction and Build Out Costs. This estimate includes fees paid to a general contractor you engage to build out the Bakery to meet our Standards (and for a Co-Branded Bakery, the standards of the Co-Branded Franchisor too). Leasehold improvements include but are not limited to HVAC, electrical, carpentry, floor covering, and painting. The cost of a general contractor will vary widely depending on the size and condition of the premises, whether or not there are any existing and comparable leasehold improvements in the premises, the extent and quality of improvements you desire over and above our minimum requirements, your landlord's cash contribution to the cost of the improvements, and the local costs of material and labor. In certain major metropolitan markets such as Boston, Chicago, New York, Los Angeles, San Francisco, Seattle, and Washington, D.C., costs could be significantly higher than the estimates provided here due to local market rates for materials and labor. This estimate does not include leasehold improvements for new free-standing buildings or new free-standing buildings with a drive-thru, as the costs for this format may vary significantly. For Co-Branded Bakeries (other than a Swirl Bakery), the estimate is based on mall and streetside locations. The Swirl Bakery estimate is based on streetside locations.

You may be able to negotiate tenant improvement allowances from your landlord. The estimate is presented net of estimated tenant improvement allowances. For the low estimate, we estimated a tenant improvement allowance of $30,000, which is approximately the average tenant improvement allowance that our franchisees have reported to us. For the high estimate, we assumed that a tenant improvement allowance was not available.

• 1. Permitting. This estimate includes the cost of acquiring construction permits, including permit fees. Your costs will vary depending upon your Bakery's location. In some markets, the costs of required permits may significantly exceed our estimates.
• 1. Equipment Package. You must purchase or lease from an Approved Supplier certain equipment (like kitchen equipment) and machinery that complies with our Standards (and for a Co-Branded Bakery, the standards of the Co-Branded Franchisor too). Your actual costs will vary depending on a number of factors including, without limitation, building codes and health requirements of the state where your Bakery is located.

These amounts do not include the costs of any owned, hired, or leased delivery motor vehicles that you may utilize in the operation of the Bakery. If you offer delivery and catering services under the terms of the Franchise Agreement, you may need to purchase at least one branded catering vehicle equipped per our specifications, which will cost approximately $25,000 to $35,000 if purchased, or $500 to $700 per month if leased, although leased costs may vary significantly.

Millwork.

You will incur expenses for millwork at the Bakery, which may include the cost of purchasing cabinets and counters from Approved Suppliers and installing them in the Bakery.

Furniture.

You must purchase from Approved Suppliers furniture that meets our Standards, such as tables, chairs, and office furniture.

Menu Board, Graphics, and Interior Signage.

This estimate includes the cost of purchasing digital and/or static menu boards and interior signage from Approved Suppliers.

The cost will vary based on the size of your Bakery.

Opening Inventory.

You must purchase an opening inventory of food and paper products, which will vary in cost based on the size, location, and projected sales of your Bakery.

We estimate that the range given will be sufficient to cover a supply of food and paper products for one to two weeks of Bakery operations.

For Full Bakeries, this item also includes a marketing opening kit.

Additional Funds 3 Months.

This estimates the additional funds you may need to cover expenses you will incur before your Bakery opens and in its first three months of operation.

These expenses may include, without limitation, employee salaries, wages, and benefits, payroll taxes (including payroll to cover the pre-opening training period for your staff), Royalty Fees, Advertising Contributions, ongoing fees due to the Co-Branded Franchisor (if you operate a Co-Branded Bakery), additional advertising expenses, additional inventory, miscellaneous supplies and equipment, rent, bank charges, state tax and license fees, deposits, prepaid expenses, and other miscellaneous items.

We have based these figures on our experience franchising Bakeries and our affiliate's experience opening and operating Bakeries.

You may incur other categories of expenses or expenses in excess of this estimate.

• 1. Grand Opening Marketing. You must conduct a grand opening advertising campaign with the opening of your Bakery. You must pay all costs of the grand opening, including publicity costs, promotional costs, plus the full cost of any price reductions or other customer inducements. Costs may vary depending on your market and the type of advertising used. You must spend for a grand opening advertising program at least (i) $3,000 for a Bakery in an Other Location, (ii) $7,500 for a Bakery in a Streetside Location, (iii) $6,000 for a Co-Branded Bakery in an Other Location (which covers both brands), and (iv) $15,000 ($25,000 if the Bakery is one of your first four Co-Branded Bakeries in an Emerging Market) for a Co-Branded Bakery in a Streetside Location (which covers both brands) in accordance with an advertising plan that we designate or approve . We may require you to pay this amount to us or the Ad Fund for us to spend in accordance with a grand opening advertising plan that we designate or approve.
• 1. Legal and Accounting Fees. This estimate includes the cost of legal and accounting fees that you may incur in establishing your business. Such expenses may include fees payable to attorneys and accountants that you will need to use for the review of this Disclosure Document and the related agreements (and for Co-Branded Bakeries, the cost to review the Franchise Disclosure Document and related agreements for the Co-Branded Franchise), as well as for entity formation and lease negotiation.
• 1. Insurance. You must obtain and maintain during the term of your Franchise Agreement, at your expense, a comprehensive business insurance program, including property, commercial general liability, automobile liability, business property, umbrella, workers' compensation, employment practices liability, cyber liability, and (if you serve alcohol) dram shop liability insurance. The types and minimum amounts of insurance coverage that we currently require are described in Section 13.2 of the Franchise Agreement but are subject to change. We may obtain a master insurance policy on behalf of the System for certain types of coverage and require you to pay all or a portion of your proportionate share of coverage under the master policy to us or our Approved Supplier. This figure estimates the cost of your insurance premiums for your first year of operation based on our minimum requirements. Your cost of insurance wil

You should review this information, including the footnotes, carefully, conduct your own investigation and seek the help of qualified advisors before making any decision about an initial investment in a Bakery.

None of these fees or payments are refundable unless otherwise noted below.

Bakeries located in non-traditional venues like office buildings, hospitals, stadiums or university food service facilities will likely experience lower initial investment expenditures than Bakeries in traditional locations like malls or strip centers.

Total Initial Investment.

These figures are based on our experience franchising Bakeries and our affiliate's experience opening and operating Bakeries.

For Express Bakeries that will be located in the space of a Host Facility, these figures do not include the additional initial investment for the Host Facility.

Your actual investment and expenditures and initial cash outlay may vary from the amounts shown if you choose to purchase your Bakery, if you choose to build a larger or smaller Bakery than our standard design, or if your Bakery is located in an expensive market.

Source: Item 7 — Estimated Initial Investment (FDD pages 45–59)