Kilwins Chocolates Franchise Inc Kilwins Chocolates Fudge Ice

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Kilwins Chocolates Franchise, Inc.

Kilwins Chocolates Franchise, Inc.

Kilwins Chocolates, Fudge & Ice Cream • • • Kilwins History The Kilwins Advantage

Kilwins Chocolates, Fudge & Ice Cream • • • Kilwins History The Kilwins Advantage Franchising History Business Model Core Values Quality Store Growth Unit Economics Getting Started Kilwins Facts 2

Don and Katy Kilwin purchase a Petoskey, MI bakery and begin making delicious baked

Don and Katy Kilwin purchase a Petoskey, MI bakery and begin making delicious baked goods and high quality candy, adding their first marble slab fudge in 1948. 1947 1978 Don and Katy sell the bakery side of the business and devote full -time focus on what they loved most – making candy. Kilwins History Don and Katy sell the business to Wayne and Lorene Rose who opened satellite stores in Harbor Springs, Mackinac Island Traverse City. 1982 2000 1971 1979 Don and Robin Mc. Carty enter the business. Don continues to lead the business today. Kilwins begins to franchise its business model, and expand its retail reach. 1995 Kilwins rents a Florida distribution center to service our southern stores. In 2005, we constructed a purpose-designed distribution center which now services our southern stores with our dedicated truck fleet. Today Don and Robin Mc. Carty purchase Kilwins from the Roses, and begin to further expand the Kilwins brand retail network. Kilwins continues to manufacture its highquality signature products in Petoskey. Products are distributed from centers in Michigan and Florida to over 125 retail stores in the Eastern U. S. 3

A History of Product Quality Since 1947 Don Kilwin with his original copper kettle

A History of Product Quality Since 1947 Don Kilwin with his original copper kettle circa 1970 Katy Kilwin hand-crafting chocolates Wayne Rose in the 1980’s Don and Robin Mc. Carty with Wayne and Lorene Rose and Katy Kilwin in 1995 4

There Are Over 125 Locations Today 5

There Are Over 125 Locations Today 5

The Kilwins Advantage • 80 years of brand experience • A fun and exciting

The Kilwins Advantage • 80 years of brand experience • A fun and exciting business • A solid business model: v. High quality products v. Caring franchisees v. Brand loyalty through satisfied customers • You have the advantage of our proprietary, award-winning recipes of Hand-Crafted Chocolates, Made-In-Store Fudge & Caramel Apples, and Original Recipe Ice Cream 6

The Kilwins Advantage • A highly-experienced dedicated Kilwins support team • Superior average unit

The Kilwins Advantage • A highly-experienced dedicated Kilwins support team • Superior average unit sales compared to similar concepts • High-quality products delivered fresh and timely in dedicated Kilwins climatecontrolled trucks • Our enthusiastic franchisees! 7

Franchising History • Kilwins franchised its first store in 1982, after the company proved

Franchising History • Kilwins franchised its first store in 1982, after the company proved the concept for 35 years. • Kilwins utilizes a comparatively conservative development strategy to effectively support growth. • In addition to our over-sized flagship store located in Petoskey, MI, which we use as our product & design laboratory, we have one typically-sized company store located in Harbor Springs, MI, which helps support franchisee training and product development activities. • We have a proven business model with product as a strong foundation. This product model is a key differentiator in our industry segment. Our products include: • Hand-Crafted Fine Chocolates • Made-in-store Mackinac Island Fudge, “The Perfect” Caramel Apples, Brittle & Caramel Corn • Original Recipe Ice Cream • Take-It-Home Products 8

Steady Growth Since 2000 140 120 100 80 60 40 2000 • • •

Steady Growth Since 2000 140 120 100 80 60 40 2000 • • • 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Our store count has more than doubled since 2000. As of December 31, 2018, we have 127 open stores. We have the production capabilities, distribution, support team and processes in place to effectively support strong future growth. 9

We strive to create enjoyment and make people happy! 10

We strive to create enjoyment and make people happy! 10

The Kilwins Vision “The Best Confections & Ice Cream You’ll Ever Enjoy!” 11

The Kilwins Vision “The Best Confections & Ice Cream You’ll Ever Enjoy!” 11

Kilwins Three Core Values One: “Do your best”: • Be passionate, curious, purposeful and

Kilwins Three Core Values One: “Do your best”: • Be passionate, curious, purposeful and committed. • Strive for quality and excellence in reputation. • Always plan, execute and measure results. • We are all part of a team! Be disciplined, responsible and accountable. 12

Kilwins Three Core Values Two: “Treat others the way you want to be treated.

Kilwins Three Core Values Two: “Treat others the way you want to be treated. ” • Be honest with yourself, and others. • Respect people’s rights, opinions, culture, time, resources and feelings. • Use common sense. • Be humble and forgiving. • Live with integrity, trust and trustworthiness. 13

Kilwins Three Core Values Three: “Have Fun!” • Keep your life in balance. •

Kilwins Three Core Values Three: “Have Fun!” • Keep your life in balance. • Be yourself. • Be a kid in a candy store! 14

Our Quality Franchisees: • They are fun & upbeat. • They love being around

Our Quality Franchisees: • They are fun & upbeat. • They love being around people! • They enjoy delivering great customer service & great products. • They lead their teams by example. Quality Locations: • We look for tourist & vacation areas, especially with beaches & boardwalks • We seek quaint, historic & charming destination downtowns & shopping areas with great dining. • Kilwins is where people linger and “hang out”! 15

Our Current Geographic Focus is Eastern US Alabama Arkansas Colorado Delaware Florida Georgia Illinois

Our Current Geographic Focus is Eastern US Alabama Arkansas Colorado Delaware Florida Georgia Illinois Indiana Louisiana Massachusetts Maryland Michigan Missouri New Hampshire New Jersey New York North Carolina Ohio Rhode Island South Carolina Tennessee Texas Virginia Wisconsin TOTAL 1 2 2 1 31 3 8 1 1 1 3 25 2 1 4 6 12 2 1 6 3 2 4 4 127 16

Unit Economics • Average annual store sales increased to $703, 618 (2018) • Kilwins

Unit Economics • Average annual store sales increased to $703, 618 (2018) • Kilwins stores have higher average sales than any of our primary competitors. (see next page) • We capture and share key financial metrics for our franchisees. • Our support efforts are heavily geared toward driving store profitability. • The investment level for our stores is higher than some concepts, but we believe that provides the basis for higher long-term returns to our franchisees. 17

R 's ita at W er e Ic ot hi e BY TC go

R 's ita at W er e Ic ot hi e BY TC go Sl ab an M t. S m la ne ed e ta rd us C bi ns m re a er ak ob ar bl R M C R in - ce en oz Fr /P ite -L i. D st Ta s tt' Ab bo sk Ba l. I ea R ze lm y er am or y s in s az ct Fa re C et Pr e te la lw -D en aa g on St r's te d H co ho C ol C tn M us Br ky oc R Ki Unit Economics – Competition Average Annual Store Sales (Kilwins = $703 K) 800000 700000 600000 500000 400000 300000 200000 100000 0 Source of Data: 2019 FDD’s 18

Franchisee’s Initial Investment Low High Initial Franchise Fee 40, 000 Construction Build-Out 183, 496

Franchisee’s Initial Investment Low High Initial Franchise Fee 40, 000 Construction Build-Out 183, 496 Equipment 87, 978 Store Construction Oversight Fee 5, 000 POS 13, 777 Inventory 24, 024 Signs & Awnings 1, 049 40, 000 446, 322 170, 901 5, 000 14, 791 39, 471 23, 847 350, 324 735, 332 1, 953 5, 000 2, 411 588 100 665 250 9, 393 5, 000 19, 998 9, 380 1, 100 21, 587 1, 500 15, 000 90, 000 Comments Tangible and Intangible Assets Start-up Expenses Lease/Rent Advertising Insurance Training Expenses Business Licenses Professional Fees Security Deposits Reserve Working capital reserves Total Potential Investment Franchise fee is due upon signing the franchise agreement. This includes the architect. Total depends on the amount of work. This varies by the finishes selected and amount of cabinetry needed. This is an oversight fee for oversight and review of plans This includes 2 POS registers and 2 calibrated scales. This varies by time of year. Varies with local codes, landlord restrictions, and our design criteria. Varies depending on specific lease agreements Grand Opening advertising requires a $5, 000 minimum. Insurance is dependent on location type and needs. Assumes two franchisees attending our orientation training. Licenses are dependent on local government regulation. Legal, accounting or other advisors as hired by franchisee. Utility and telephone deposits, varied by community. Cash required during start-up business phase (3 months). $381, 290 - $898, 274 All amounts are based on disclosures in the Kilwins 2019 FDD We are providing this information to you as a lender or potential lessor to a prospective “Kilwins” franchisee. This information is solely for your use and may not be shared with any other party, including the prospective franchisee, without our prior written consent. Copyright © 2019 Kilwins Chocolates Franchise, Inc. 19

Getting Started • Qualification: v Request for consideration (Kilwins Application) v Financial qualifications v

Getting Started • Qualification: v Request for consideration (Kilwins Application) v Financial qualifications v Core value compatibility • Disclosure: v Kilwins Franchise Disclosure Document (FDD) v Pro forma development • Site selection and approval: v Refundable deposit 20

In Review: Kilwins is: • • A top 50 franchise (Franchise Business Review) A

In Review: Kilwins is: • • A top 50 franchise (Franchise Business Review) A member of the IFA (International Franchise Association) SBA Registry Certified A Participating Member of Vet-Fran (program of the IFA designed to assist Veterans) • A proud recipient of 2010 Michigan’s Top 50 (companies to watch) • The 2011, 1 st place winner for Best Fudge in Northern Michigan (Traverse Magazine) • Rated as the #1 Chocolate & Ice Cream store by Entrepreneur Magazine 2011, 2012, 2013, 2015, 2016, 2017 and 2018 21

In Review: Kilwins is: • • • A top 50 franchise company #1 rated

In Review: Kilwins is: • • • A top 50 franchise company #1 rated by Entrepreneur Magazine A proven business model The industry leader in sales per store A fun place to visit as a customer A fun business to own and operate Exciting, engaging, upbeat and FUN! Genuinely different than our competition Proud of our culture, business model & our stores A true uniquely Americana experience 22

In Review: Kilwins is… …a unique brand experience. Approximately 30% of our confections are

In Review: Kilwins is… …a unique brand experience. Approximately 30% of our confections are made in the front window of the store adding “theater” and a strong customer draw! …a proven, established business model, the segment leader in average unit sales. …a fun business to own and run, and a place where customers want to shop. …“Sweet in every Sense since 1947!” 23