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Stephen G., Sr Financial Expert
Category: Finance
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# I have a Franchise Disclosure Document that I need to

### Customer Question

I have a Franchise Disclosure Document that I need to calculate Estimated Initial Investment for the category of Lease Deposit plus First Month of Rent and then a second category of Leasehold Improvements.
For Lease Deposit plus First Month of Rent I need it to be calculated on \$18.60 and \$26 per square foot, but I don't know how to do that. Am I calculating it over the life of the lease, just the first year??? HELP?
On the Leasehold Improvements - Do I add those dollar amounts to the Demolition, OH&P, Supervision and Travel the construction company charged us, divided by 12 - or divide that by the amount of square feet??? OMG - I have not clue as to what I should do. Please help.
Submitted: 7 months ago.
Category: Finance
Expert:  Stephen G. replied 7 months ago.

It's based upon the rate (18.60 & 26.) x sg footage which gives the annual rent, divided by 12 to give you the monthly rent.

For the Leasehold Improvements, what is it that you are trying to show? Is the disclosure requirement defined?

Customer: replied 7 months ago.
Are you saying to multiply 4000 sf x 18.60 and then divide that by 12 to get the monthly rent for the first year? The lease is for 7 years, what about the remaining 6 years.For Leasehold Improvements I believe I need to calculate what the improvements would be per square foot (this is what I'm asking you since you're the expert :)Our entire construction costs are \$320,315 (below.) My boss asked me to separate out the Leasehold improvements from the the rest of the construction costs. So, in the FDD I have to list how much per square foot the build out of 4000 sq feet would be based on what we spent on the leasehold improvements (at least i'm assuming that is what I need to do - is this correct?) And I'm also assuming that I need to include the demolition, OH&P, supervision, and travel...correct? How do I do this? Is it the the total of 320315/4000 x 12 again?Startup Expenses
Buildings/Real Estate
Demolition \$10,800
OH&P \$38,900
Supervision \$10,800
Travel \$5,600
Total Buildings/Real Estate \$66,100
Leasehold Improvements
Carpentry Dryall \$90,946
Accoustical Ceilings \$22,125
Paint / Wall Coverings \$14,291
Flooring \$33,715
Plumbing \$8,830
Electrical \$29,125
HVAC \$24,185
Fire Alarm \$5,345
Fire Suppresion \$7,375
Permits \$1,500
Engineering \$6,000
Total Leasehold Improvements \$243,437
Customer: replied 7 months ago.
The first part of your answer doesn't make sense to me because if I do the math like you are saying to do it I get \$2,580.65
4000sq /18.60*12 = \$2,580.65 per month for 12 months. How is that possible when with triple nets we're paying \$6200 per month. Please see below.Clinic - 1st 3 Months Sq Ft \$ per Sq Ft Mo Extended Annually Extended
Monthy Lease (w/Triple Nets) 4000 \$18.60 \$6,200.00 \$74,400.00
Lease Deposit \$6,200.00
Total \$12,400.00
Expert:  Stephen G. replied 7 months ago.

You didn't multiply the correct numbers. (You didn't give me the sg ft initially)

So, using what I told you seems to come out property:

18.60 x 4,000. Sg Ft = 74,400/12 = \$6,200. month.

So, I think you reversed the numbers to divide & those to multiply - in fact I know you did. (You wouldn't divide the sq feet by the \$18.60 cost per foot then multiply it by 12 - that number doesn't represent anything).

Start-up expenses by definition don't include Leasehold Improvements; So if you have the Leasehold Improvements figure, then you would divide those cost by the Sq ft to give you a cost per sq feet which would be the proper measurement. So you simply take the Leasehold Improvements \$243,437. /4,000. = \$60.86 per sq ft

That would be the kind of measure that would be normal.

You wouldn't arbitrarily add in other costs; just what the system categorized as Leasehold Improvements.

Please remember to rate my response as that is the only way we receive credit for our work.

Thanks very much,

Steve G.