(1) The Initial Franchise Fee for your first Angry Crab Shack is $50,000. The Initial Franchise Fee for your second and subsequent Angry Crab Shacks is $45,000 if you do not execute a Development Agreement. This Initial Franchise Fee and estimated initial investment is for a single restaurant and does not include any additional rights that may be acquired to open additional restaurants. We have the right to reduce or waive the Initial Franchise Fee in certain cases. The Initial Franchise Fee for your Angry Crab Shack will be $40,000 beginning with your first Angry Crab Shack if you are: (i) a veteran of the United States military (having been honorably discharged from the U.S. armed forces); or (ii) a current or former firefighter or police officer. The Initial Franchise Fee is non-refundable. The Initial Franchise Fee includes the training expenses for three (3) individuals. There is a charge of $1,500 per additional person attending the Training System.
(2) If you do not own a suitable location, you must lease or purchase the Premises for your Angry Crab Shack. If you lease the Premises, the property owner or sub-landlord will generally require a security deposit, the amount of which generally ranges from one month of monthly rent to six months of monthly rent. The amount of your security deposit will vary according to your area, the type of location (street location, enclosed mall, strip center, or freestanding building), and various other factors. A lease security deposit may be non-refundable and is paid directly to the property owner of the Premises. In addition, in certain lease transactions, the property owner may require you and your owners to personally guarantee the lease. If you decide to purchase land and construct your own building or buy an existing building, you can expect to add the cost of the real estate to the total investment indicated in this Item 7 of the Disclosure Document. Real estate costs vary considerably depending on fair market values in your area; size, condition, and location of the Premises; and municipal requirements. Construction costs also vary considerably depending on fair market values in your area; size, condition, location of the Premises; labor costs (union versus non-union); and equipment requirements. The square footage generally needed to establish an Angry Crab Shack is between 5,500 and 7,000 square feet. This breakdown includes approximately 3,000 square feet of dining space, 1,500-2,500 of kitchen space, and 1,000-1,500 of bar space. The probable locations for an Angry Crab Shack are a street location, enclosed mall, strip center, or freestanding building with dense residential and strong daytime working populations.
(3) The broker’s fee is typically 3% of the total lease amount and is estimated to be between $0 and $15,000 but all or part of the real estate broker’s fee is typically paid by the Landlord.
(4) You must pay the travel and living expenses for three (3) people to attend our training program in Mesa, Arizona. Your travel and living expenses will include airfare, hotel, and food for approximately three (3) weeks. This amount may be significantly higher if you reside in certain remote areas or if you and we agree that you may bring more than three (3) people through the training program. This amount does not include salaries, if any, for you and your employees.
(5) This amount includes estimated costs of furniture, furnishings, installations, equipment, trade fixtures, and certain other items for your Angry Crab Shack Premises, the amount and specific items of which will vary depending upon the location, size, and condition of a particular restaurant. You must purchase restaurant equipment for your Angry Crab Shack from approved vendors and according to our specifications. The list of approved vendors is included in our Confidential Operations Manual. The Landlord may provide some leasehold improvements, but if not, they will be at your expense. The total amount of leasehold improvements for your Angry Crab Shack will vary greatly, depending on the type of Premises for your Angry Crab Shack, condition of the Premises, and what improvements you require. You must use approved third party architects and project management firms for the design and construction oversight of your Angry Crab Shack. In addition, you must use approved third party contractors for the construction of your Angry Crab Shack. The list of and/or criteria for approved architects, engineers, and contractors is included in the Confidential Operations Manual.
(6) As with any retail business, you will purchase inventory continuously as long as you operate your Angry Crab Shack. This figure only represents an estimate of the initial inventory you will be required to purchase in opening your Angry Crab Shack.
(7)You must provide liability insurance equal to or greater than the following minimum insurance coverage requirements for each of your Angry Crab Shacks.
|Type of Coverage
|Commercial General Liability
||$1,000,000 per occurrence/$2,000,000 aggregate
|Products/Completed Operations Liability
||$1,000,000 per occurrence/$2,000,000 aggregate
||$1,000,000 per occurrence/$2,000,000 aggregate
|Fire Legal Liability
|Building Improvements and Betterments including Business Personal Property Coverage
||Replacement cost coverage on all tenant improvements (including inventory, furniture, fixtures, equipment, and supplies) or as required by your Landlord
||Coverage to cover your Net Sales and continuing expenses including Royalty Fees or other fees or expenses payable to us for a period of not less than 12 months
|Flood, Earthquake and Volcanic Eruption
||If you are in a flood zone or an area subject to earthquakes, hurricanes, tornadoes, or volcanoes.
||$1,000,000 or greater amount required by statute
|Hired and Non-Owned Automobile Liability
Each of the policies described above must have a deductible no greater than $1,000 except for the Employer Liability coverage, which may have a deductible of $5,000.
The required Commercial General Liability, Fire Legal Liability, Products/Completed Operations, Medical Payments and Hired and Non-Owned Automobile Liability insurance limits may be accomplished by the purchase of a commercial umbrella policy with a $5,000,000 limit, which includes the underlying for combined single limit $1,000,000 per occurrence and $2,000,000 aggregate, including $1,000,000 personal injury, $350,000 Fire Legal Liability and $5,000 medical payments, and the limit of $1,000,000 non-owned and hired auto, if no vehicles are owned or leased by you.
Each insurance policy must name us, our affiliates and our respective officers and owners as additional named insured, contain a waiver by the insurance carrier of all subrogation rights against us and our affiliates for casualty losses and must require 30 days prior written notice to us before being modified, cancelled or terminated and 30 days prior written notice to us before the policy expires.
Some property owners may require higher levels of public liability insurance under their leases. Initial premiums for public liability insurance are subject to change due to market forces beyond either of our control. Failure to maintain such insurance may result in loss of your franchise. The cost of other coverage, including workers’ compensation coverage and your discretionary purchases, varies widely. You must obtain all insurance we require from a carrier rated “A-VII” or better. It must also provide that failure by Franchisee to comply with any term, condition, or provision of the contract, or other conduct by Franchisee will NOT void or otherwise affect the coverage afforded us.
You must always keep the required insurance coverage in force, and you must comply with any changes we make periodically to our insurance requirements. If your Angry Crab Shack is located in a flood zone or an area subject to earthquakes, hurricanes, tornadoes, other similar hazards, you may want to obtain additional specific insurance to cover these risks; such insurance may increase your premiums significantly. Upon thirty (30) days’ notice to you, we may require you to increase the minimum coverage of the insurance referred to above as of the next renewal date of any policy, and require different or additional kinds of insurance at any time, including excess liability (umbrella) insurance, to reflect inflation, identification of special risks, changes in law or standards of liability, higher damage awards or other relevant changes in circumstances.
At the time you sign your Lease and annually, at least 10 days prior to renewal of your insurance coverage, and at any other time on our request, you must provide us with certificates of insurance or copies of insurance policies confirming that you are in compliance with our insurance requirements, as well as evidence that you have paid the premiums you owe for the insurance we require. You will pay your insurance premiums directly to your insurance broker or to the insurance company issuing the policy. You must have insurance and have provided a copy of your certificate of insurance, which meets our requirements, to Franchisor before you may open your Angry Crab Shack. In the event you fail to obtain or maintain the required insurance coverage, we reserve the right, but are not obligated to, obtain the required insurance on your behalf and charge the insurance premium to you.
(8) This represents an estimate of miscellaneous costs that you may incur in addition to the classes of costs identified in Item 7.
(9) You will be required to conduct a grand opening advertising campaign in conjunction with the opening of your Angry Crab Shack. You must pay all costs of the grand opening, including publicity costs and promotional costs, plus the full cost of any price reductions or other customer inducements. If applicable, we will assist you with developing and carrying out this grand opening campaign.
(10) You should retain business professionals (advisors, accountants, attorneys) to assist you in evaluating, establishing, and managing your Angry Crab Shack. This is an estimate of the fees that you will incur in the retention of such professionals.
(11) Cash flow from your operations may not be adequate to cover operating and other costs during the initial phase of business. The range shown estimates your expenses during the first three months of operation. These expenses include payroll costs (excluding any wage or salary paid to you), other miscellaneous expenses, and working capital. We cannot guarantee that you will not have additional expenses starting the business. Your costs will depend on factors such as how closely you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions; the local market for our product; the prevailing wage rate; competition; and the sales level achieved during the initial period. The estimated additional funds is based upon our experience as a franchisor and our Affiliates’ experience operating company stores.
(12) Your initial investment for a new Angry Crab Shack depends primarily upon the size, configuration, location, who pays the costs to develop the real estate and/or construction of your Angry Crab Shack, and the amount and terms of financing, if any. The initial funds required is estimated because most costs are not within our control and may frequently change. These figures are estimates based upon our experience in opening and operating Angry Crab Shacks and we cannot and do not guarantee that your costs will fall within the stated ranges. These estimated ranges are based on our experience. Costs are constantly changing. You should obtain current cost information at the time you purchase your franchise.
We make no representation or warranty regarding the period within which your business will break even and/or have positive cash flow. We relied upon our experience and our affiliates’ experience to compile these figures. Franchisor and its affiliates will not finance all or a part of the initial investment.
(13) These figures are estimates only and it is possible to significantly exceed these estimates. We cannot guarantee that you will not have additional expenses starting the business. Your costs will depend upon such factors as how much you follow our methods and procedures; your management skill, experience and business acumen; whether you personally manage your Angry Crab Shack or hire a manager; fluctuations in prices of goods; the region in which your Angry Crab Shack is located; local economic conditions; whether the Premises is in a new or existing center; the physical size and location of your Angry Crab Shack; the condition of the premises and the amount and nature of tenant improvements required; the architectural criteria of the center; the HVAC & electrical systems present or necessary; the local market for our products; the prevailing wage rate; competition; and the sales level reached during the initial period. You should review these figures carefully with a business advisor before making any decision to purchase a franchise.