Estimated Initial Investment Example | Sample Franchise Disclosure Document | Item 7


(Column 1)Type ofexpenditure (Column 2)Amount (Column 3)Method ofpayment (Column 4)When due (Column 5)To whom paymentis to be made
Initial franchise fee $15,000 (note 1) Lump sum At signing offranchiseagreement Belmont Mufflers,Inc.
Travel and livingexpenses whiletraining $2,500 to $5,000 As incurred During training Airlines, hotels, andrestaurants
Real estate andimprovements (Note 2) (Note 2) (Note 2) (Note 2)
Equipment $40,000 (note 3) Lump sum Prior to opening Belmont or vendors
Signs $2,200 Lump sum Prior to opening Abbey SignCompany
Miscellaneousopening costs $8,000 (note 4) As incurred As incurred Suppliers, utilities,etc.
Opening inventory $8,800 (note 5) Lump sum Prior to opening Belmont or vendors
Advertising fee -3 months $500 As incurred(% of gross sales) Monthly Belmont
Additional funds -3 months(note 6) $23,000 to $45,000 As incurred As incurred Employees,suppliers, utilities
TOTAL(note 7) $100,000 to$124,500 (note 8)(Does not includereal estate costs)


  1. See Item 5 for the conditions when this fee is partly refundable. W e do not finance any fee.
  2. If you do not own adequate shop space, you must lease the land and building from us. Typicallocations are light industrial and commercial areas. The typical Belmont Mufflers Shop has 8,000square feet. Former three-or-four-bay gasoline service stations have been converted into aBelmont Mufflers Shop. Rent is estimated to be between $52,000 – $120,000 per yeardepending on factors such as size, condition, and location of the leased premises.
  3. This payment is fully refundable before equipment installation. After installation, we deduct$3,000 installation costs from your refund.
  4. This includes security deposits, utility costs, and incorporation fees.
  5. This payment is fully refundable before we deliver your inventory. After delivery, we will deduct a10% restocking fee from your refund.
  6. This estimates your start-up expenses. These expenses include payroll costs. These figuresare estimates and we cannot guarantee that you will not have additional expenses starting thebusiness. Your costs will depend on factors such as: how much you follow our methods andprocedures; your management skill, experience and business acumen; local economicconditions; the local market for our product; the prevailing wage rate; competition; and the saleslevel reached during the initial period.
  7. Except as indicated, we do not offer direct or indirect financing to franchisees for any items.
  8. We have relied on our 24-years of experience in the muffler business to compile theseestimates. You should review these figures carefully with a business advisor before making anydecision to purchase the franchise.

This article is part of a series of articles on starting a franchise in Minnesota.
The content of this post has been copied from the Federal Trade Commission’s Franchise Rule 16 C.F.R. Part 436 Compliance Guide

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