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Business Description

We are a Delaware limited liability company formed on August 7, 2013. Our principal place of business is at 4350 Baker Road, Suite 350, Minnetonka, MN 55343; telephone number is (952) 923-1223.

Prior Experience

We began franchising Device Pitstop® businesses in September 2013 and, as of the date of this disclosure document, we have 1 company-owned Store and 11 Device Pitstop® franchises. One of these franchisees converted their Store from another brand and are currently operating under the Device Pitstop® trademark. We do not have any predecessors. We are a wholly-owned subsidiary of NTY Franchise Company, LLC formerly known as CMF Holdings, LLC (“CMF”). NTY Franchise Company shares our principal business address. NTY is the parent company of 4 affiliate franchise companies. Since December 2006, our affiliate, Clothes Mentor, LLC (“Clothes Mentor”), has offered franchises for the operation of Stores under the name “Clothes Mentor” that buy and sell used and new women's clothing and accessories. As of December 31, 2018, Clothes Mentor had 135 franchised Clothes Mentor® stores and one Clothes Mentor® store operated by its affiliate. Clothes Mentor's principal place of business is 4350 Baker Road, Suite 350, Minnetonka, MN 55343. Our affiliate, New Uses, LLC (“New Uses”), sells franchises for the operation of stores under the name “New Uses” that buy and sell used and new home furnishings and accessories, including furniture, electronics, lamps, artwork, tools and household items and accessories. Certain electronics and related products offered for sale at New Uses® stores may be the same or similar to those offered under this franchise offering. New Uses was formed in May 2011. New Uses began franchising in July 2011, and its principal place of business is 4350 Baker Road, Suite 350, Minnetonka, MN 55343. As of December 31, 2018, New Uses had 7 franchised New Uses® stores and one New Uses® store operated by its affiliate. Our affiliate, NTY Clothing Exchange, LLC (“NTY Clothing Exchange”) sells franchises for the operation of stores under the name “NTY Clothing Exchange” that buy and sell used and new clothing and accessories for teens and young adults. NTY Clothing Exchange® stores may offer certain products that are offered for sale in Clothes Mentor® Stores, such as shoes, purses and other accessories. NTY Clothing Exchange was formed in January 2014. NTY Clothing Exchange's principal place of business is 4350 Baker Road, Suite 350, Minnetonka, MN 55343. As of December 31, 2018, NTY Clothing Exchange had 4 NTY Clothing Exchange® franchised stores. Our affiliate, Children's Orchard, LLC (“Children's Orchard”) sells franchises for the operation of stores under the name “Children's Orchard” that buy and sell used and new clothing, accessories and toys for kids from infant to age 13. Children's Orchard was formed in January 2014 as NTY Kids, LLC. In February 2015, it acquired certain assets of the Children's Orchard® system and changed its name to Children's Orchard, LLC. Children's Orchard's principal place of business is 4350 Baker Road, Suite 350, Minnetonka, MN 55343. As of December 31, 2018, Children's Orchard had 25 franchised Children's Orchard® stores. Our affiliate, BST Software Company (“BST”), a Delaware corporation, owns proprietary third- party software for use in point-of-sale cash registers and back-office computers for tracking, analyzing and reporting sales, inventory and other operational information, customized for use in Device Pitstop® franchised businesses. As described further in Item 11, you must license the Proprietary Software (as defined in Item 11) from BST for use in operating your Store. BST shares our principal business address. We sell franchises for the operation of stores under the name “Device Pitstop” (“Stores”) that buy, sell and service used and new consumer electronic devices, including laptops, tablets, digital music players, cell phones and accessories to retail customers. Many of the items offered for sale in the Store will be used items and accessories purchased from customers, off lease, vendors, suppliers or other individuals, although we and other suppliers may be the supplier for a limited number of items.

Business Offered

You will receive the right to own and operate an individual Store that: (i) buys and sells used and new electronic devices, including laptops, tablets, digital music player, cell phones and accessories; and (ii) provides related upgrades, and support services for these devices. The Store will be operated at a location we approve, offering the products and services we approve and using our formats, designs, methods, specifications, standards, operating and marketing procedures and the “Licensed Marks” (as defined in Item 13), including “Device Pitstop” (collectively, the “System”). Most of your inventory will be used electronic devices, including laptops, tablets, digital music players, cell phones and accessories purchased from customers, suppliers or other individuals. Some of the inventory items sold at the Store will be factory refurbished items that are purchased from manufacturers and certain suppliers. We or other suppliers may be the designated supplier or only supplier for a limited number of items. See Item 8 for further information. We may refuse to allow you to open your Store unless you have a minimum of $30,000 (at cost) in inventory.

Initial Fees

We offer an individual unit franchise. The “Initial Franchise Fee” for an individual unit franchise is $25,000 for each Store. If you already own and operate a Device Pitstop® Store, the Initial Franchise Fee for each additional Store is $20,000. You must pay the Initial Franchise Fee when you sign the Franchise Agreement. The Initial Franchise Fee is payable in a lump sum and is not refundable under any circumstances. In addition to the Initial Franchise Fee, you must purchase the Proprietary Software, and purchase or lease point-of-sale hardware and other software (“POS System”), and back office service and repair station hardware and software (the “Service Area Tech Package”). The Service Area Tech Package includes backroom computers and services, tools, and other required hardware and software. If you purchase these items, you must purchase them from BST and currently, the Proprietary Software license is $3,000, the POS System is $7,750, and the Service Area Tech Package is $10,500. You must pay BST these fees when your order the items. If you lease the POS System and Service Area Tech Package, you will license the Proprietary Software from BST (currently $3,000) and will lease the POS System and Service Area Tech Package from a third party as part of a larger start-up package that also includes the fixtures and supplies. These fees are payable in a lump sum and not refundable.

Financing

We do not offer direct or indirect financing. We do not guarantee your note, lease or obligation, nor do we receive payment or other consideration for the placing of financing.

Franchisee Revenue and Profit

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances. The information below includes average annual Net Sales and Gross Profit of all 10 franchised Device Pitstop® Stores in operation for the entire calendar year ended December 31, 2018, divided into quartiles. The information below does not include information from the one Store operated by our affiliate. “Net Sales” means all revenues received from the sale of goods and services, whether for cash or by check, credit card or trade, in connection with the Store, less sales tax, discounts and customer refunds and returns. “Gross Profit” is Net Sales less Cost of Goods and does not reflect any expenses related to Store operations. “Cost of Goods” means the franchisee's cost of the Product and inventory shrinkage only and does not include other cost of goods such as freight or warranty expense. In Table 1, the first quartile includes the average Net Sales of the 2 Stores with the highest Net Sales for the 2018 calendar year. The second quartile includes the average Net Sales of the 3 Stores with the second highest Net Sales for the 2018 calendar year. The third quartile includes the average Net Sales of the 3 Stores with the third highest Net Sales for the 2018 calendar year. The fourth quartile includes the average Net Sales of the 2 Stores with the lowest Net Sales for the 2018 calendar year. Additionally, we own and operate one Device Pitstop® Store in Minnesota, and for the 2018 calendar year we achieved $496,655 in Net Sales. This Device Pitstop® Store reflects the standard Device Pitstop® Store prototype and offers the same products and services as those offered by franchised Device Pitstop® Stores. In Table 2, the first quartile includes the average Gross Profit of the 3 Stores with the highest Gross Profit for the 2018 calendar year. The second quartile includes the average Gross Profit of the 3 Stores with the second highest Gross Profit for the 2018 calendar year. The third quartile includes the average Gross Profit of the 3 Stores with the third highest Gross Profit for the 2018 calendar year. The fourth quartile includes the average Gross Profit of the 2 Stores with the lowest Gross Profit for the 2018 calendar year. Some Device Pitstop® Stores have earned this amount. Your individual results may differ. There is no assurance that you'll earn as much. Written substantiation of the data used in preparing this financial performance representation will be made available to you upon reasonable request. Other than the preceding financial performance representation, we do not make any financial performance representations. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor's management by contacting Michael Smith, Device Pitstop, LLC, 4350 Baker Road, Suite 350, Minnetonka, MN 55343, (952) 923-1223, the Federal Trade Commission, and the appropriate state regulatory agencies.