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Financial Performance

Financials are an important consideration in choosing any franchise. What does a typical location gross? What are the biggest expenses? And most importantly, how much money will you take home at the end of the year?

The table below contains financial information for the three company-owned and two franchised Chop Stop restaurants that were open and continuously operating for at least 12 months as of December 31, 2018 under our “standard” format. Please refer to the footnotes below the table for important information regarding the individual expenses and other important details. Also, please keep in mind the following:

Some outlets have earned this amount. Your individual results may differ. There is no assurance you’ll earn as much.

Operational Figures for Calendar Year Ended December 31, 2018

Restaurant 1 Restaurant 2 Restaurant 3 Restaurant 4 Restaurant 5
Gross Sales (1)
$1,395,290
$1,139,828
$1,070,307
$1,014,738
$976,449
---Food & Beverage Sales (2)
$1,305,397
$1,087,230
$1,016,926
$959,925
$927,353
---Retail Sales (3)
$89,893
$52,598
$53,381
$54,813
$49,096
Cost of Sales (4) (17)
$390,487
(27.99%)
$324,054
(28.43%)
$322,646
(30.15%)
$298,821
(29.45%)
$271,889
(27.84%)
---Food & Beverage Costs (5) (17)
$349,055
(26.74%)
$299,858
(27.58%)
$297,478
(29.25%)
$273,624
(28.50%)
$250,554
(27.02%)
---Retail Costs (6) (17)
$41,432
(46.09%)
$24,196
(46.00%)
$25,168
(47.15%)
$25,197
(45.97%)
$21,335
(43.46%)
Labor (7) (17)
$364,779
(26.14%)
$302,506
(26.54%)
$283,347
(26.47%)
$299,156
(29.48%)
$280,787
(28.76%)
---Wages (8) (17)
$286,450
(20.53%)
$248,729
(21.82%)
$233,261
(21.79%)
$262,618
(25.88%)
$237,080
(24.28%)
---Taxes Benefits & Insurance (9) (17)
$78,329
(5.61%)
$53,777
(4.72%)
$50,086
(4.68%)
$36,538
(3.60%)
$43,707
(4.48%)
Occupancy Expenses (10) (17)
$89,440
(6.41%)
$66,609
(5.84%)
$53,746
(5.02%)
$55,365
(5.46%)
$76,457
(7.83%)
Operational Expenses (11) (17)
$156,585
(11.22%)
$132,884
(11.66%)
$102,402
(9.57%)
$85,528
(8.43%)
$126,976
(13.00%)
General & Admin Expenses (12) (17)
$105,280
(7.55%)
$88,445
(7.76%)
$96,728
(9.04%)
$96,911
(9.55%)
$76,235
(7.81%)
---Royalties (13) (17)
$67,108
(4.81%)
$54,812
(4.81%)
$50,892
(4.76%)
$48,675
(4.80%)
$47,514
(4.87%)
---Brand Fund Fees (14) (17)
$6,711
(.48%)
$5,481
(.48%)
$4,989
(.47%)
$4,867
(.48%)
$4,752
(.49%)
---Other (15) (17)
$31,461
(2.25%)
$28,152
(2.47%)
$40,847
(3.82%)
$43,369
(4.27%)
$23,969
(2.45%)
Net Operating Income (EBITDA) (16) (17)
$288,719
(20.69%)
$225,330
(19.77%)
$211,438
(19.75%)
$178,957
(17.64%)
$144,105
(14.76%)

The FTC’s Franchise Rule permits a franchise to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets; if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in the table above may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in the table above, for example, by providing information about possible performance at a particular location or under particular circumstances.

The table above contains information for each of the 3 company-owned and 2 franchised Chop Stop restaurants that were open and continuously operating for at least 12 months as of December 31, 2018 under our “standard” format. Our “standard” format requires a Chop Stop restaurant to have access to a dedicated parking lot and a minimum footprint of at least 1,100 interior square feet. A total of 8 Chop Stop restaurants were open as of December 31, 2018. Three of these locations are excluded from the table above. One location (a franchised location) was excluded because it was not in operation for at least 12 months as of December 31, 2018. One location (a company-owned location) was excluded because it does not operate under our “standard” format. Finally, one location (a company-owned location) was excluded because it serves as our designated training location and, as a result, incurs costs of goods and labor expenses that are materially higher than, and not representative of, a typical company-owned or franchised Chop Stop restaurant.

The Chop Stop restaurants presented in the table above are all located in California, have a footprint ranging from 1,100 to 1,350 square feet, and have been open from 1 to 8 years. Each Chop Stop restaurant presented above is located on a major thoroughfare and has an adjacent open-air parking lot. The company-owned and franchised restaurants included in the table above are substantially similar.
Some restaurants have earned the amounts listed above. Your individual results may differ. There is no assurance that you will earn as much.

NOTES:

1). “Gross Sales” means the aggregate amount of all sales of goods and services, whether for cash, on credit or otherwise, made or provided in connection with each Chop Stop restaurant, excluding sales tax.

2). “Food & Beverage Sales” means Gross Sales related to food items prepared at the Chop Stop restaurant and fountain beverages.

3). “Retail Sales” means Gross Sales related to prepackaged items such as cookies, chips and bottled beverages that the Chop Stop restaurant resells to customers.

4). “Cost of Sales” means costs that are directly attributable to the preparation or purchase of menu items and other goods sold at the Chop Stop restaurant. This amount includes the cost of ingredients and packaging, but does not include labor, marketing, overhead or other general expenses of the Chop Stop restaurant. Cost of Sales is the sum of Food & Beverage Costs (as defined below) and Retail Costs (as defined below).

5).“Food & Beverage Costs” means costs that are directly attributable to the preparation of food and beverage items prepared at the Chop Stop restaurant.

6). “Retail Costs” means costs that are directly attributable to prepackaged items such as cookies, chips and bottled beverages that the Chop Stop restaurant resells to customers.

7). “Labor” means costs attributable to the wages, benefits, employment taxes, insurance and other compensation for the employees of the Chop Stop restaurant, including shift leaders. “Labor” does not include any employment expenses associated with a full-time manager. Your Restaurant must have a full-time manager. We assume that you(or if you are an entity, one of your owner) will serve as the Operating Manager. Labor is the sum of Wages (as defined below) and Taxes, Benefits and Insurance (as defined below).

8). “Wages” means costs attributable to wages and compensation for employees of the Chop Stop restaurant, including shift leaders, but excluding full-time managers.

9). “Taxes, Benefits and Insurance” means costs attributable to benefits, employments taxes and insurance related to employees of the Chop Stop restaurant, including shift leaders, but excluding full-time managers.

10). “Occupancy Expenses” means costs attributable to rent, taxes and insurance associated with the Chop Stop restaurant premises.

11). “Operational Expenses” includes costs attributable to utilities, supplies & equipment (kitchen, janitorial, office, front-of-house), repairs & maintenance, local marketing, sales incentives, security, delivery commissions, and other miscellaneous expenditures directly related to the operation of the Chop Stop restaurant.

12). “General & Administrative Expenses” is the sum of “Royalty Fees” (as defined below), “Brand Fund Fees” (as defined below), and “Other” (as defined below).

13). “Royalty Fees” means the Royalty Fee described in the franchise disclosure document. Although company-owned locations are not required to pay a Royalty Fee, for purposes of consistency in the table above, we included a Royalty Fee equal to 5% of Net Sales (as defined in the franchise disclosure document) for each company-owned location.

14). “Brand Fund Fees” means the Brand Fund Fee described in the franchise disclosure document. The company-owned locations included above contributed to the Brand Fund on the same basis as the franchisees included above.

15). “Other” includes those general & administrative expenses attributable to accounting, human resources, legal and other professional fees, technology fees, dues & subscriptions, bank fee, and other miscellaneous expenditures related to the operation of the Chop Stop restaurant.

16). “Net Operating Income (EBITDA)” represents earnings before interest, taxes, depreciation and amortization, and is calculated by subtracting Cost of Sales, Labor, Occupancy Expenses, Operational Expenses and General & Administrative Expenses from Gross Sales.

17). “% of Sales” expresses the relevant expense category as a percentage of Gross Sales. The percentage figures provided for “Food & Beverage Costs” and “Retail Costs” are expressed as a percentage of “Food & Beverage Sales” and “Retail Sales,” respectively.

ADDITIONAL NOTES TO THE FINANCIAL PERFORMANCE REPRESENTATION:

A). Written substantiation for the financial performance representation will be made available to the prospective franchisee upon reasonable request.

B). The information presented above relates to the actual historical performance of the Chop Stop restaurants presented above. The financial information we utilized in preparing the table above was based entirely upon information reported to us by Chop Stop Inc. and our franchisees. None of this information was audited.

C). You are responsible for developing your own business plan for the Restaurant, including capital budgets, financial statements, projections and other elements appropriate to you particular circumstances. We encourage you to consult with your own accounting, business, and legal advisors in doing so.

D). The financial performance representation does not reflect all costs or expenses that must be deducted from Gross Sales to obtain your net profit, including without limitation any compensation required for a full-time manager, interest, taxes, depreciation or amortization. You should conduct an independent investigation of the costs and expenses you will incur in operating your Restaurant. Franchisees or former franchisees, listed in the disclosure document, may be one source of this information.

 Other than the above information, we do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets, nor do we authorize our employees or representatives to make any such representations either orally or in writing. If you receive any other financial performance information or projections of your future income, you should report it to Mark Kulkis at 2626 Foothill Blvd, Suite 230, La Crescenta, CA 91214, telephone (818) 369-7350, contact the Federal Trade Commission, and the appropriate state regulatory agencies

Frank GallagherFinancial Page

If you have additional questions or concerns, please call (818) 369-7350
during regular business hours:
9:00 AM - 5:00 PM PST, Monday - Friday.