BIG O TIRES ITEM 7 NOTES & REFERENCES

ITEM 7 Explanatory Notes

Explanatory Notes
General Note: We are relying on our years of experience in the retail tire store and automotive repair and service business to compile these estimates. It is impossible to provide the exact investment required of each Big O franchisee due to the many factors that influence the total project cost, such as location, amount of space leased, cost of land and building, the amount, types and condition of the equipment that is already on the premises, and other costs peculiar to a specific site. The initial investment, as well as the availability and terms of financing, will vary considerably depending on the methods and amount of financing, your creditworthiness, collateral you may have and lending policies of financial institutions. The equipment and other items are shown in full, although they may be financed or leased. You are encouraged to discuss the operations of a Big O Store with Big O franchisees. (See Exhibits K-1 and K-2 for lists of current and certain former Big O franchisees.) You should also review these figures carefully with a business advisor before making any decision to purchase a Big O Store franchise. None of the fees or payments to us listed in this Item are refundable, unless otherwise provided. Payments to third parties may or may not be refundable depending on your agreement with such third parties; however, usually such payments are nonrefundable.


Note 1: Initial Franchise Fee. The initial franchise fee may vary as described in Item 5. You must reimburse us for any taxes (other than income taxes) we pay on your initial franchise fee so that the net amount received by us is as set forth in the Franchise Agreement. In the event any incentive reduces the amount of the initial franchise fee to less than $10,000, you will still be required to pay $10,000 with the franchise application and any amount of this payment in excess of your initial franchise fee will be
applied to your accounts receivable for products purchased from us.


Note 2: Initial Training – Fees, Travel and Lodging Expenses. We may charge you training fees, except that the initial Online Training, Facilitated Training, and on-location training program for one person are included in the initial franchise fee. In addition, you will have to bear expenses arising in connection with your training, such as travel, daily transportation to and from the training facility, and any other living expenses. We will pay for lodging during the classroom portion of the new franchisee orientation training program. See Item 11 under “Training” for more details.


Note 3: Real Estate Leases. If you do not own adequate space, you will need to lease or purchase the land and building for your Store. Typically locations for a Store are prime retail sites. You will generally need a facility of 5,000 to 7,536 square feet to operate your store with a prototypical store sized at 6,240 square feet. If leased, the base monthly rent is estimated to range from $6,000 to $17,000 per month, depending on geographic location, size of the premises and other economic factors. Typically, these leases are triple net leases, under which the tenant must pay all taxes, insurance and maintenance expenses over and above the base rent amount. The estimate provided assumes that you will rent the facility and that you must provide a security deposit of one month’s base rent to the landlord. In a build-to-suit lease, the landlord may include some or all of the improvements, fixtures, and signs in the cost to build the building and factor these costs into your lease payments. You may elect to purchase the land and building rather than renting. If you purchase the land and build your store, your estimated combined costs for the land and building construction may range from $1,200,000 to $2,000,000 depending upon market conditions. If you purchase an existing building and remodel it, your costs may be less. You will not incur the premises rent costs listed above, but will have to factor in additional costs for financing, acquisition and construction of the building. If you purchase an existing Big O Store from an existing Big
O franchisee and Big O is either the lessor or a sublessor, you will be required to sign a Deferred Maintenance Agreement which requires the buyer or seller of the Big O Store to repair conditions of the Big O Store from our inspection of the Big O Store within 90 days of the purchase (Exhibit Z).

Note 4: Equipment, Fixtures and Other Fixed Assets. The high estimate is based on the purchase of new equipment and fixtures and the low estimate is based on the purchase through Big O, or others, of used or refurbished equipment and fixtures. You must provide an irrevocable letter of credit to secure payment of the equipment order. The entire balance you owe for equipment and fixtures and the amount due for your initial inventory order must be paid in full before your initial inventory order is
shipped to you. Another alternative is to lease equipment, in which case you must provide proof of the equipment lease agreement.


Note 5: Construction, Remodeling, Leasehold Improvements and Decorating Costs. These estimates do not include new construction; the cost of new construction is discussed in Note 3 above. The cost of remodeling, leasehold improvements and decorating costs will vary based on a variety of factors, such as the location of the Store and the type and condition of the building to be remodeled, improved or decorated. This estimate includes the amount of any real estate development fee if we develop the site for your Store and use a third party developer to develop the site and your Store. This estimate also includes the amount of any real estate consulting charges if you utilize the services of members of the Big O real estate department for consultation in regard to the development, construction, remodeling or conversion of your Big O Store. See Item 5.


Note 6: Insurance and Other Security. You must maintain insurance described in Article 21 of the Franchise Agreement and in our Manual and as required by the terms of your lease or sublease, as may be applicable. We may change these insurance requirements periodically. Currently, the types of insurance and the minimum dollar amount of coverage you must maintain are: (a) Workers’ Compensation; (b) Comprehensive or Commercial General Liability (including among other things, product liability) with limits not less than $1 million per occurrence and $2 million general aggregate; (c) Vehicular/Automobile Liability of not less than $1 million per occurrence combined single limit; (d) “All Risk” Property for repair/replacement coverage and valuation of all assets and Business Income/Extra Expense insurance; (e) Garage liability of not less than $1 million per occurrence and $2 million general aggregate and Garagekeepers Legal Liability of not less than $100,000 combined single limit per location; and (f) Commercial Umbrella Liability of not less than $1 million per occurrence combined single limit. Other insurance coverage is recommended by Big O and you must maintain these other coverages if required by law where the franchised business operates. These may include Inland Marine, Boiler and Machinery, Employment Practices Liability and Comprehensive Fidelity/Crime. The
investment amounts set forth in the table represent three months of initial commitment costs with additional premiums at or just before opening. Premiums for these coverages will vary greatly because of location, amounts of coverage, values being insured, annual sales, number of employees, experience ratings, and other factors. A transferee of a Franchised Business or a franchisee opening a Conversion Store (defined below) must, at our discretion, obtain a surety bond or letter of credit of not less than $10,000 (or such other amount as we may periodically designate) to secure payment of contributions to the National Marketing Program,
the Local Fund, or both. Fees for these bonds or letters of credit will vary based on a variety of factors, including the transferee’s or other franchisee’s creditworthiness. As used in this disclosure document, the term “Conversion Store” means a Big O Store converted from a non-Big O Store. It does not include a Store that converted from a PDF Store to a BFF Store


Note 7: Computer Hardware and Software. You must acquire, install and use the BOT POS System that includes the TBC Hardware Model. You must pay (i) the DST software license fee to Big O, (ii) all fees for installation, conversion, training and onsite support to Big O, and (iii) monthly fees for maintenance, support, and training to Big O, or as otherwise directed by DST and Big O. Franchisees acquiring the BOT POS System are also responsible for all hardware and management costs. The estimated approximate average initial cost to purchase and install the BOT POS System (including the license fee, installation fee, conversion fee and store training and on-site go live support fees described in Item 6) is $20,500 to $32,500 (See Item 11 for more details). If you request integration of your accounting system with the BOT POS system at your option, then additional fees range from $3,374 to $5,428 will apply (which are included in the high end of this estimate). These costs do not include taxes, shipping fees, or the travel expenses for the POS trainer.


Note 8: Non-recurring Pre-opening Costs. This estimated amount includes deposits for utilities, fees for city, state and local business licenses, any loan origination fees, any bank fees, and other non-recurring expenses.


Note 9: Additional Funds. The disclosure laws require us to include this estimate of all costs and expenses to operate your Big O Store during the “initial period” of the business, which is defined as three months or a longer period if “reasonable for the industry.” We are not aware of any established longer “reasonable period,” so our disclosures cover a three-month period. This amount includes estimated pre-operational expenses not listed above, as well as estimated additional funds necessary to pay on-going expenses not covered by sales revenues for the first twelve months of operations, including payroll costs. You may have additional expenses starting or converting your business. Your costs depend on several factors, including how much you follow our methods and procedures, your management skill, experience and business acumen, local economic conditions, the local market for our products and services, the prevailing wage rate, competition, your competitive advertising and promotion, and the sales
level reached during the initial period. Also, if you wish to become a franchisee of a new Store with an anticipated “high” cost real estate project, you must, at our discretion, meet certain higher net worth and liquidity requirements before we approve you as a franchisee. The current standards for high real estate costs are $2 million or more for purchased real estate or lease payments of $17,000 per month or more for leased real estate. The current net worth and liquidity requirements are a net worth of $300,000 or
more and liquid assets (that is, cash and cash equivalents) of $100,000 or more when you are leasing an existing store or a new store and a net worth of $500,000 or more, and liquid assets of $150,000 or more for a high cost real estate project.


Note 10: Total Estimated Initial Investment. We have relied on our experience since 1962 in the retail tire store and automotive service business in compiling these estimates. You should review these figures carefully with a business advisor before making any decision to purchase a franchise. Other than the limited situations discussed in Item 10 of this disclosure document, we do not offer financing directly or indirectly for any part of the initial investment.


YOUR ESTIMATED INITIAL INVESTMENT
TO SIGN AN AREA DEVELOPMENT AGREEMENT


Except for the Development Fee (see Item 5), there is no additional initial investment required under the Area Development Agreement. A portion of the Development Fee is applied against the initial franchise fee for each Big O Store you open under the Area Development Agreement. You will incur the estimated initial investment described above for each Big O Store franchise that you open and operate whose Franchise Agreement is covered by your Area Development Agreement.

ITEM 5

INITIAL FEES

Except as described below, the initial franchise fee is $35,000 and is due as follows: (i) $10,000 when you submit to us a franchise application and sign a Franchise Deposit Receipt Agreement, a copy of which is attached to this disclosure document as Exhibit E; and (ii) $25,000 when you sign the Franchise Agreement and before you commence your training.

 

Except as provided in this paragraph, the initial franchise fee, including the deposit, is fully earned when charged and is non-refundable under any circumstances. First, if we do not approve the franchise application, we will refund the initial $10,000 to you. Second, if you fail to successfully complete the initial training program, we may terminate the Franchise Agreement and upon receipt from you of a general release in a form approved by us, refund a portion of the initial fee; the portion refunded will be the initial franchise fee less the costs we incurred in your approval process, your training and any other administrative expenses. Finally, if you sign a Franchise Agreement without the Premises (as defined in Article 1 of the Franchise Agreement) for the Store identified in the Franchise Agreement and you are unable to locate and obtain our approval of Premises within 12 months after the effective date of the Franchise Agreement, we may terminate the Franchise Agreement at our option, in which event we will refund the initial franchise fee actually paid to us less $10,000 for the site selection services we provided to you upon receipt from you of a general release in a form approved by us. If you sign a Franchise Agreement in a situation where a franchise broker has been involved in the acquisition or sale of the franchise, the initial franchise fee paid by you when you sign a Franchise Agreement is nonrefundable under any circumstances.

In the event any incentive reduces the amount of the initial franchise fee to less than $10,000, you will still be required to pay $10,000 with the franchise application. Upon your execution of the Franchise Agreement, any amount of this payment in excess of your initial franchise fee will be applied to your accounts receivable for products purchased from us.

If you are an existing franchisee in good standing whose Franchise Agreement is expiring, you may renew your franchise by signing our then current form of Franchise Agreement (“Successor Franchise Agreement”) for a successor term of 10 years. We may, in our sole discretion, agree to a shorter Successor Franchise Agreement term if you are unable to extend your lease or sublease for the full Successor Franchise Agreement term. We waive the payment of the initial franchise fee for a Successor Franchise Agreement, but you must pay a successor franchise administration fee. See Item 6 below.


If you pay the Initial Franchise Fee when you sign your Franchise Agreement without having selected a site, and an existing Big O Store is subsequently transferred to you, you will receive a credit against your trade account with us in an amount equal to the amount you paid for the Initial Franchise Fee, less the amount of the transfer fee that would have been applicable to that transfer.
 

First Option Rights. Subject to certain exceptions generally described in this paragraph or Item 12, each franchisee is granted an option to apply for any new Big O franchise to be located within five miles of the franchisee’s existing Big O Store, determined as a radius of five miles from the geographic center of your location. You must meet certain conditions to exercise your First Option Rights, including that you are in compliance with your Franchise Agreement, as determined solely by Big O. If you apply for a Big O franchise using your first option rights, the franchise deposit of $10,000 must be paid with your application to exercise your first option rights. The balance of the initial franchise fee must be paid to us at the time specified by us in our notice of the right to exercise first option rights, but in no event later than the earlier of: (a) date you sign the new Franchise Agreement, or (b) 120 days from the deadline for submitting an application to Big O to exercise your first option rights (this deadline is 30 days after Big O gives notice that the franchisee may exercise its first option rights). The franchise deposit becomes nonrefundable upon our approval of your franchise application. See Item 12 for a more detailed discussion on your First Option rights.


Associate Franchise Discount. Full-time employees (also referred to as “associates”) of Big O Tires, LLC or affiliated companies (such as TBC Retail Group) who have been employees on an uninterrupted basis for at least five years will be eligible for a 50% reduction of the initial franchise fee (to $17,500) for a newly developed Big O Store. The employee must resign his or her position with Big O Tires, LLC or the affiliated company and assume full-time active management of the Big O franchise. The associate will not be entitled to this associate franchise discount if the associate purchases an existing Big O franchise. Also, to be entitled to this associate franchise discount, the associate must be acquiring a majority interest in the new franchise. If the associate does not continue to meet this ownership requirement for at least two years after acquiring the new franchise, the associate must pay us the difference between the initial franchise fee which would have been due had the associate not qualified for the reduction (which is now $35,000) and the reduced initial franchise fee the associate did pay.


Automotive Leadership Discount. If an applicant has been a majority owner or a senior manager of one or more automotive repair facilities for ten or more consecutive years, Big O will discount the initial franchise fee for a newly developed Big O Store by 50%. This incentive does not apply to the purchase of an existing Big O Store franchise. Also, to be entitled to this discount, the qualifying owner or manager must be acquiring a majority interest in the new Big O franchise. If that individual does not continue to meet this ownership requirement for at least two years after acquiring the new franchise, the franchisee must pay us the difference between the initial franchise fee which would have been due had the individual not qualified for the discount (which is currently $35,000) and the discounted fee actually paid.

 

U.S. Military Veterans & First Responders. We will reduce the initial franchise fee by 50% (to $17,500) for franchisees who are U.S. military veterans and first responders (as established in accordance with our policies as we may adopt periodically) and for franchisees that are corporations, limited liability companies or other entities for which a U.S. military veteran or first responder owns a majority of the equity interest (“U.S. Military Veteran & First Responder Program”). The U.S. Military Veteran & First Responder Program is available to qualified individuals who either have received an honorable discharge from one of the U.S. Armed Forces (i.e., Army, Navy, Air Force, Coast Guard or Marine Corps), or are currently serving in one of the U.S. Armed Forces and eligible to receive an honorable discharge, or their entities as noted above. It is also available to first responders who were employed for a minimum of five years as a law enforcement officer, medical doctor, nurse, emergency medical technician or fire fighter, and who apply for a franchise after ending their service as a first responder. This reduction applies only to the first Big O franchise established by the veteran, first responder, or the veteran’s or first responder’s company. If you do not continue to meet this ownership requirement for at least two years after acquiring the new franchise, you must pay us the difference between the full initial franchise fee which would have been due had you not qualified for the U.S. Military Veteran & First Responder Program
(which is currently $35,000) and the reduced fee actually paid, which amount becomes due immediately at the time you no longer meet the ownership requirement. We reserve the right to extend, change or discontinue the U.S. Military Veteran & First Responder Program at any time.


Additional Store Development Program. Subject to the eligibility standards set forth below, if you are an existing franchisee of ours and desire to purchase an additional franchise, sign a Franchise Agreement by June 30, 2022, and open a Store by March 31, 2023, the initial franchise fee will be $10,000, payable when you sign a Franchise Agreement. To be eligible for this program, you must be qualified (as determined by Big O in its sole discretion) to operate an additional Store or Stores. A franchisee who is approved for this Additional Store Development Program must pay all applicable franchise fees for its additional Store (“Additional Store”) as described herein. However, we will reduce the standard royalty to 1% during the first 12 months of Store operation, 2% during the 13th to 24th month of Store operation, with the full royalty fee commencing on the 25th month of Store operation and
continuing through the remainder of the term. In certain situations as described in Item 10, we will provide financing assistance to existing franchisees who are approved by us (in our sole discretion), to acquire, open, and operate additional Big O Stores. In particular, as you and we may negotiate, you may receive up to $100,000 in financing to acquire initial tire inventory from RDCs only. We will match dollar for dollar up to $20,000 the amount you spend on opening advertising. You will be required to spend the matching funds within 180 days after opening for business and in accordance with any other conditions and deadlines determined by us. These incentives and special royalty arrangements are described with more detail in Items 6 and 10, and are not assignable to others without our consent. If you fail to remain a franchisee or meet the ownership requirement described below under “Eligibility for Certain Programs” for the two year period following the Commencement Date for the Additional Store,
you will be required to pay the balance of the $35,000 initial franchise fee to us, in addition to any other amounts owed under the Franchise Agreement or any other agreement with us. If you qualify for this incentive, you and we will execute the Existing Franchisee Incentive Rider attached to the Franchise Agreement as Schedule 8.

 

To be eligible for any reduced initial franchise fee as a participant in the Additional Store Development Program, the new franchisee must be the same person (that is, individual or entity) or have the same majority owner as the franchisee for the other Store or Stores on which the discount is based. If you do not continue to meet this ownership requirement for at least two years after acquiring the new franchise, you must pay us the difference between the initial franchise fee (which is now $35,000) which would have been due had you not qualified for the reduction and the reduced initial franchisee fee you did pay. This payment is due upon the date the new franchisee no longer meets these ownership requirements.

 

Midas Franchisee. If you are currently a franchisee of Midas in good standing under your franchise agreement with Midas and desire to acquire a Big O Store franchise, we will reduce the initial franchisee fee to $17,500. This reduction only applies for the first Big O Franchise established by the Midas franchisee. If you do not continue to meet this ownership requirement for at least two years after acquiring the franchisee, you must pay the difference between the initial franchise fee you actually paid
and the full initial franchise fee which would have been due had you not qualified for the Midas franchisee incentive (which is currently $35,000), which amount becomes due immediately at the time you no longer meet the ownership requirement. We reserve the right to extend, change or discontinue the Midas franchisee incentive at any time.


New Franchisee Program. If you are a new franchisee who signs a Franchise Agreement by June 30, 2022, and opens a Store by March 31, 2023, we will match dollar for dollar up to $15,000 the amount you spend on opening advertising. You will be required to spend the matching funds within 180 days after opening for business and in accordance with any other conditions and deadlines determined by us. If you qualify for this incentive, you and we will execute the New Franchisee Incentive Rider attached to the
Franchise Agreement as Schedule 7.


Market Development Incentive. In the event we decide to target a market or region for development or expansion, we may use any combination of incentives to new or current franchisees in order to support the development of any market, in our discretion. Such incentives may include the waiver or reduction of initial fees, the waiver or reduction of royalties, providing matching funds for advertising and remodeling, or any incentive or combination of incentives offered under any other program.


Other Fee Waivers. We may waive all or part of any initial franchise fee in our discretion. Except as stated above, all initial franchise fees are uniform as to all persons currently acquiring a franchise and are nonrefundable once paid unless we determine otherwise at our sole discretion. However, we have relationships with various franchise brokers to whom we agree to pay a success fee for referring to us and working with franchisee prospects or raw leads that we are not currently in discussions with and have not previously contacted. The success fee varies and can be up to $35,000 depending upon the services the franchise broker is providing.


Development Fee and Area Developer Incentives. If you sign an Area Development Agreement, you will pay us a fee for the right to develop multiple franchise units (the “Development Fee”) when you sign that agreement. Only new franchisees may sign an Area Development Agreement. The Development Fee is equal to the total initial franchise fees payable for the two or three Big O Stores that you and we agree you will develop under the Area Development Agreement, discounted as set forth below. The Development Fee is $50,000 if you are opening two Big O Stores under the Development Agreement, or $60,000 if you are opening three Big O Stores under the Development Agreement. The Development Fee is nonrefundable and fully earned by us when you sign an Area Development Agreement, but we will apply the portion of the Development Fee you have paid applicable to each Big O Store to satisfy the initial franchise fee due under the franchise agreement you sign for that Big O Store covered by your Area Development Agreement. As an area developer, we will also provide you a discounted initial franchise fee for each Store. The full $35,000 initial franchise fee will apply for your first Store, a reduced initial franchise fee of $15,000 will apply for your second Store, and a reduced initial franchise fee of $10,000 will apply for your third Store (if applicable). The first Store may be acquired in a transfer from an
existing Big O franchisee in compliance with the terms of the applicable franchise agreement, but the subsequent Stores to be developed may not be existing Big O Stores acquired in a transfer. In certain situations as described in Item 10, we will provide financing assistance to existing franchisees who are approved by us (in our sole discretion), to acquire, open, and operate additional Big O Stores. In particular, as you and we may negotiate, you may receive up to $100,000 in financing to acquire initial
tire inventory from RDCs only. We will match dollar for dollar up to $15,000 the amount you spend on opening advertising. You will be required to spend the matching funds within 180 days after opening for business and in accordance with any other conditions and deadlines determined by us. The Area Development Agreement opening marketing match incentive is not available for a Store acquired in a transfer. Some of these incentives and special royalty arrangements are described with more detail in Items 6 and 10. Incentives are not assignable to others without our consent. In particular cases, including in situations where we decide to target a market or region for development by an area developer, we may modify these incentives or use any combination of incentives being offered to new or current franchisees for area developers or both, including the waiver or reduction of the Development Fee, the initial franchise fee or royalties, and providing matching funds for advertising and remodeling. The incentives
described in this paragraph only apply to those Big O Stores opened pursuant to the Area Development Agreement and only if you are in compliance with the Area Development Agreement, including the Development Schedule. These incentives are unique to the signing of the Area Development Agreement and are not offered to other franchisees.


A maximum of one incentive program listed above is generally available for the acquisition of any particular franchise, regardless of whether the qualifications for multiple incentives are met except that the “U.S. Military Veterans & First Responders” and “Midas Franchisee” incentives can be combined with the “New Franchisee Program” incentives described above.

 

Alternate Incentive Programs. Prior to June 29, 2021, we offered different incentives than those listed above. If a prospective franchisee signed a Franchise Deposit Receipt Agreement and paid a deposit by the dates specified in those previous incentive programs as described in the applicable Franchise Disclosure Document disclosed at the time or that we otherwise agree upon, the franchisee may, in our discretion, receive those prior period incentives instead of the incentives set forth above even if the Franchise Agreement is entered after June 29, 2021. Further, we may offer any of the above incentives or any combination of incentives, and modify or waive some or all of the qualification requirements for these incentives, in situations involving the transfer of a Big O Store franchise, the reopening of a closed Big O Store, or the opening of additional Big O Stores on terms presented to existing franchisees at the annual Big O National Convention in our sole discretion. In transfer situations, we may
also offer a credit against a franchisee’s trade account for improvements made to the transferred Big O Store’s facility and equipment, in our sole discretion.


Equipment and Signage. The equipment, tools, signage, leasehold improvements, and decorations needed to operate a Big O Store that may be purchased from us are estimated to cost from $0, if you purchase these items entirely from approved third parties, up to $635,000 (excluding applicable sales and use tax, if any). You will pay these amounts to us pursuant to an invoice we issue following each order. For purchases of these items from third parties, payment will be made directly to the third party or vendor according to its payment terms. Generally, this expenditure is not refundable and we do not finance it, but we have in certain cases provided funding for equipment as described in Item 10. We may also assist you in locating financing opportunities from third parties for this expenditure.


Inventory. The cost of the initial product inventory that may be purchased from us (consisting of tires and other products) is estimated to be between $55,000 and $125,000 (excluding applicable sales and use tax, if any), unless you are acquiring an existing Big O Store by a transfer and paying the transferor for these items. You will pay these amounts to us pursuant to an invoice we issue following each order. For items purchased from third party vendors, payment will be due according to the vendors’ credit terms. Generally, this expenditure is not refundable and we do not finance it, but we have in certain cases provided funding for equipment as described in Item 10.

Rental Payments. Typically, you will enter into a third party lease for the property of the Big O Store premises and negotiate your own terms, or you may acquire the land and construct the building and improvements yourself. Alternatively, when we own the premises or lease it from a third party, we will lease or sublease the Store premises to you. When you lease or sublease the property from us, the first month’s rent and taxes must be paid to us when your Big O Store opens. The rent and taxes typically range from $6,000 to $17,000 per month. You must also pay us a security deposit, typically in the amount of one month’s rent. These expenditures are non-refundable except that the security deposit may be refunded in certain cases pursuant to your lease or sublease with us. These expenditures are not financed by us except to the extent described in Item 10.


Computer Hardware and Software. You must acquire, install, and use the BOT POS System. The BOT POS System includes in part our required computer, monitor, printers, router, and related items, all configured to our specifications (referred to as the “TBC Hardware Model”). You must pay the software license fee, all fees for installation, conversion, training and onsite support, and monthly fees for maintenance, support, and training to us. We will then pay these fees to DST Inc., a Solera company (“DST”), which provides the computerized point of sale system, as described further in Item 6. The initial fees are estimated to range from $8,500 to $9,500, and the monthly fees thereafter are initially $219 per month. You will also be required to purchase computer equipment comprising the TBC Hardware Model which costs approximately $10,000 to $13,000 (not including applicable taxes or additional third party services which may be required, such as backup, storage, anti-virus protection, etc.). You may, but are not required, to purchase this computer equipment from us. These amounts paid to us are nonrefundable. You will purchase other computer hardware and other software for your Big O Store from third parties.