FREQUENTLY ASKED QUESTIONS

1. Who is Java Kai?
The name of the Franchisor is “Java Kai Etcetera, Inc.,” which was incorporated in Hawaii on October 20, 2000. The Franchisor also does business under the registered trademark of “HAWAII’S JAVA KAI.” The officers/stockholders of the corporation are Brent Hickman (President); Jennifer Mix-Hickman (Secretary); Terence Mix (Vice President); and Janet Mix (Treasurer). This is a family-owned business; we are all part of the same family. The effective date of franchise approval by the State of Hawaii was November 30, 2000.

2. Does the Company have any Affiliates?
An affiliated company is “Java Kai Roasting Co., LLC,” which is a Hawaiian limited liability company. Both businesses are located in the same office. Java Kai Roasting is owned by the same four stockholders that own the corporation. In addition to roasting and supplying the coffee to the HAWAII’S JAVA KAI stores, and other wholesale accounts, Java Kai Roasting Co. also has been operating coffee houses since 1997.

3. What does a Java Kai store sell?
The franchise being offered is for retail cafes (coffee houses) offering a limited menu, including specialty coffees, an array of hot and cold beverages (including fruit smoothies and blended coffee drinks) and baked goods, along with prepackaged coffee beans and coffee-related and Hawaiian-themed retail items. [OC, Item 1, p. 1; FA, p. 1]

4. How much does a franchise cost?
The initial franchise fee is $30,000. [OC, Item 5, p. 4; FA, p. 4] Estimated initial costs (including the franchise fee) range from $168,998 to $355,898, including franchise fee, leasehold improvements, furniture and fixtures, working capital, small and large equipment, initial inventory and other necessary items. [OC, Item 7, p. 8; FA, sec. 5.2, pp. 6-7] The price will depend on the size of your store, the type of materials, the equipment package you choose and any menu options you may choose. Ongoing monthly costs include a royalty fee to Franchisor of 6% of Gross Sales and 3% of Gross Sales for local advertising, payable by you the Franchisee directly to the advertiser for the Franchisee’s store. Franchisor reserves the right to establish a general advertising fund of up to 1% of Gross Sales. [OC, Item 6, pp. 5-6; FA, sec. 11-12, pp. 11-14]

5. What are some of the Benefits?
The franchise includes use of all trademarks owned by the Franchisor, as well as all benefits of using the Java Kai System. That System includes all proprietary recipes and menu items, the distinctive exterior and interior layout along with our design and color scheme; exclusively designed signage, and decorations; the HAWAII’S JAVA KAI Confidential Operations Manual, which includes service procedures and techniques, operating procedures, methods and techniques for inventory and cost controls, record keeping and reporting, personnel management, purchasing, sales promotion and advertising; and all of the necessary training to implement the System. [OC, Item 1; FA, secs. 8.1, 8.2, 8.4 and 9]

6. Will you help with finding my site?
Yes, Java Kai will assist and provide guidelines for selection of a store site, but the final decision is yours, subject to the approval of Java Kai. [OC, Item 11E; FA, sec. 5.1]

7. Who will roast my coffee?
The Franchisee must purchase all required coffees from Java Kai Roasting Co., LLC, or other suppliers approved by the Franchisor. The price of the coffee will be based upon its cost to produce plus a reasonable markup consistent with the industry. [OC, Items 5,7 (fn 8) and 8; FA, sec. 14.3] Though not required under the Offering Circular and Franchise Agreement, Java Kai Roasting currently will agree to enter a contract with all new Franchisees to sell its coffee to the Franchisee at a 25% discount from its standard wholesale prices offered in the industry.

8. Can I run the store with a manager from afar?
No, the Franchisee is required to be an owner-operator; meaning direct and full-time (at least 35 hours per week) supervision of the franchise. We want to create a family, owner-feel to the stores. This can only be accomplished by having the owners around. You can be a “Silent” Partner as long as you have a Partner that is an active owner-operator. A trained and competent employee acting as a full time manager may be used when the Franchisee is otherwise unavailable. [OC, Item 15; FA, sec. 14.4]

9. How long will it take to open my store?
Once a location has been found, it typically takes between 3 to 5 months to open a new store. The store must be opened within 180 days after signing of the Franchise Agreement, unless otherwise approved by the Franchisee in writing. Reasons for granting extensions are set out in the Offering Circular. [OC, Item 11F; FA, sec. 5.3.1]

10. I have no experience in coffee. Is that alright?
Yes! We will train you on all facets of the business, including coffee. We will provide an initial training program for you, and up to two assistants, for a period of 2 to 3 weeks, which will include an understanding of the conceptual plan, financial controls, promotion and merchandising methods, management and operational techniques, and maintenance of quality standards. The Confidential Operations Manual will also be used at this time.

11. Is the training additional?
No, the cost of the training is included in the Franchise Fee. The cost of transportation, room & board is not included.

12. Will you help me, even after my store has opened?
Yes! During commencement of operation of the cafe, we will provide one of our representatives for approximately 5 days to provide assistance and guidance in operating the cafe. This cost is included in the Franchise Fee. [OC, Item 11A; FA, secs. 8.1 and 8.2] We offer additional on-going support, especially during the critical first year of business. You will have access to our toll-free support number, fax, email, and website.

13. Will I be given a Protected Territory?
We do not grant exclusive territories, but cannot establish more than one cafe per 50,000 population within a county. In Hawaii, or other similar resort locations, we cannot establish more than one cafe per 200,000 seasonal population. [OC, Item 12; FA, sec. 3] For example, with annual tourism of approximately 1,000,000, we cannot place more than 5 cafes on the Island of Kauai. We will analyze your market area, determine site feasibility and assist in the site selection. Remember, we want you to succeed and will do what we can to help.

14. How much money will I earn?
We do not make an earnings claim, and thus cannot promise that you will earn a certain amount of money. The reason is that it’s difficult to predict exactly how much money you will earn, because it substantially depends upon you: how efficient you are and how closely you will follow our system. The quality of the personnel you hire, and a number of other factors can also have an impact upon you earnings. We thus stay away from making such representations.

15. What is the Offering Circular and Franchise Agreement?
The franchise agreement is the contract between the parties to the franchise relationship: you and Java Kai Etcetera, Inc. The Offering Circular restates the franchise agreement more in “plain English” and also provides information about the franchisor, its officers, directors and management personnel.
We know that you will have many more questions, but hope this answers some of your basic ones. Please feel free to give us a call so we can set up a meeting and explain what we have to offer you in more detail.

Until we meet….

Aloha!