$57

Business Description

The franchisor is Abbey Carpet Co , Inc. , which will be referred to in this disclosure document as “we,” “us,” or “ABBEY” ‘You” means the person or entity that buys the franchise If you are a corporation, partnership, or other entity, certain provisions of the membership agreement also apply to your owners/partners and will be noted Abbey Carpet Co , Inc was incorporated in 1958 under the laws of the State of California as a retail carpeting store Abbey Carpet Co , Inc started as a family-owned business and by 1966 had grown from one store to eleven stores In 1966, Abbey Carpet Co , Inc discontinued operating any retail businesses and operated only as a buying service centered in Sacramento, California Abbey Carpet Co , Inc has continued to offer such buying service memberships and in 1971 became one of the first franchises to be registered under California's Franchise Investment Law On November 20, 1995, Abbey Carpet Co of Florida, Inc was incorporated under the laws of the State of Florida Effective January 1, 1996, Abbey Carpet Co, Inc was merged into Abbey Carpet Co of Florida, Inc which subsequently changed its name to Abbey Carpet Co , Inc ABBEY is now a corporation organized and existing under the laws of the State of Florida with its principal offices located at 3471 Bonita Bay Boulevard, Bonita Springs, Florida 34134 The above referenced merger changed only the state of incorporation of the franchisor The merger was not intended to affect the business, management, or ownership of ABBEY has members located throughout the United States ABBEY does not currently own or operate any retail floor covering outlets, however. Abbey Carpet of Naples, LLC, a company owned by Phihp Gutierrez, a person listed in Item 2 below, owns and operates an Abbey Showroom in Naples, Florida ABBEY and its predecessor have not sold franchises in any other lines of business during the last 10 years ABBEY has never done business under another name We do not have a parent company

Prior Experience

In light of the merger transaction described above, the former Abbey Carpet Co, Inc , a California corporation, could be deemed to be a predecessor of ABBEY The former address of Abbey Carpet Co , Inc , a California corporation, was 3434 Marconi Street, Suite A, Sacramento, California 95821. Floors To Go, LLC ("FTG") is a Florida limited liability company that was organized on June 3, 2002 under the name Floors To Go Acquisition, LLC and is owned by Philip Gutierrez, ABBEY'S Chairman, Chief Executive Officer and sole shareholder FTG is the owner and franchisor of Floors To Go Showrooms, a floor covering and home fashion franchise FTG was organized for the sole purpose of acquiring certain assets of Floors To Go, Inc , a California corporation ("FTGI"), and to operate as the franchisor of the Floors To Go System In June 2002, FTG acquired certain assets of FTGI, with a principal office located at 4295 Business Drive, Shmgle Springs, California 95682 FTG has 153 showrooms operating at this time FTG is located at the same address as ABBEY FTG is not engaged in any other line of business and has never offered franchises in any other line of business

Business Offered

The individual or business entity becoming a member will be licensed for five (5) years to utilize the Abbey System and the Abbey Carpet & Floor'^'^ trademarks, trade names and service marks, as the same currently exist (the "Marks") Memberships m the Abbey System are offered on both a single-showroom and a multiple-showroom basis, and members that choose to operate more than one Showroom will not be required to pay an Initial Membership Fee (defined in Item 5 below) or any Service Fees or Advertising Fees (defined respectively in Item 6 below) for their additional Showrooms Only the first Showroom will be required to pay the Initial Membership Fee, and only the first Showroom will be entitled to the $1,000 sign credit (described in Item 7, footnote 7 below) The minimum purchase requirements are set forth in Item 8 below (see Section 7 1 of the Membership Agreement) The Abbey System is based upon owner/operators of floor covering showrooms selling to individual consumers from a variety of samples provided by ABBEY The showrooms then purchase the customer orders from ABBEY approved floor covering and window treatment vendor This concept is such that a member of the Abbey System can offer a wide variety of quality floor covering and window treatment products to the consumer by selling from samples and then purchasing merchandise necessary to supply a particular consumer's needs at special prices negotiated by ABBEY from designated vendors The concept eliminates the need to maintain a substantial inventory of floor covering and window treatment products The special orders of merchandise so sold are obtained from ABBEY-approved floor covering and window treatment vendors at prices that normally are less than those available to a store not participating in the Abbey System. The Abbey Carpet & Floor membership concept is intended for and directed toward the experienced owner/operator of an existing floor covering store, and accordingly ABBEY does not provide site selection, business financing, employee training, or management supervision before or after the execution of any Abbey Carpet & Floor Membership Agreements The Abbey System competes with other national floor covering marketing and merchandising systems ABBEY IS not aware of any regulations applicable specifically to the selling of floor coverings other than laws and regulations applicable to businesses in general, including, without limitation, the Americans with Disabilities Act, Federal Wage and Hour Laws, and the Occupational Safety and Health Act

Initial Fees

Except as provided in Item 5(C) below, as a new member, you will be charged an Initial Membership Fee of $32,000 This fee is payable as follows (a) $1,000 is paid at the time your Membership Agreement is signed, and (b) the remaining $31,000 is paid through the Abbey Cashback Program (described below) whereby you will grant ABBEY the right to retain all proceeds allocable to you from the Abbey Cashback Program up to the $31,000 amount or for a five-year time period, whichever occurs first (referred to hereafter as the "Cashback Participation") If the Cashback Participation does not generate proceeds to ABBEY of $31,000, whatever lesser amount of proceeds is collected by ABBEY over the five-year participation period on your behalf will be deemed payment in full for your Initial Membership Fee If your Membership Agreement is terminated prior to completion of the initial five-year term, the remaining balance of the Initial Membership Fee shall be due and payable by you to us in cash immediately upon the date of any such termination The Abbey Cashback Program consists of various floor covering and window treatment manufacturers offering Cashback incentives for the purchase of selected floor covering and window treatment products When you purchase such selected carpets and/or floor coverings you will be credited with a cash rebate based upon a percentage of the selected carpets and/or floor coverings purchased These percentages range up to 8% of the purchase price of selected items Such cash rebates will be paid to ABBEY on your behalf when you earn such CashBack incentives ABBEY will hold such funds, without liability for interest, and after verification of amounts received, and after setting off any amounts that you owe to ABBEY, will distribute such funds to you annually or semi-annually You are eligible to participate in the Abbey CashBack Program and will be notified on a regular basis of qualifying CashBack items received on your behalf The Initial Membership Fee entitles you to participate in the Abbey System and to receive various marketing materials currently available through the Abbey System Proceeds from the Initial Membership Fee are, in part, profit to us and are, in part, used to pay some of the following costs and expenses acquired by us for (1) obtaining and screening Members, (2) administering the exclusive territories, (3) providing assistance to Members, (4) accounting fees and legal fees, (5) protection of our commercial symbols, names, Marks and copyrights, (6) developing new product lines, marketing programs and advertising materials, (7) paying salaries and benefits to our management and employees, and (8) marketing and selling memberships In addition to the Initial Membership Fee, you will be obligated to make certain other expenditures, which are described in Items 6 and 7 below Some of these expenditures must be made before you can open your Showroom for business However, other than the Initial Membership Fee, you will not be required to pay ABBEY or its affiliates any fees or amounts for services or goods received from them prior to the time you open your Abbey Showroom for business The Initial Membership Fee is not refundable except that if you reach $1,000,000 of first quality, running line purchases, exclusive of promotional products, special purchases and SP's, through the Abbey System within the twelve-month period beginning on the 90'^'' day after the date your membership begins, your Initial Membership Fee will be waived, and aU payments you have made for that fee will be refunded to you by ABBEY on or after the fifteenth month after the date your membership begins B Multiple Showroom Memberships If you open or convert more than one Showroom on or after the execution of your initial Membership Agreement, you will pay the $32,000 Initial Membership Fee for your first Showroom (see Item 5 A above), but you will not be required to pay an additional Initial Membership Fee or any Service Fees or Advertising Fees (see Item 7 below) for any additional Showrooms that you own and operate If you add additional Showroom(s) simultaneously with the execution of your first (initial) Membership Agreement then an additional Schedule "A" will be attached to such Membership Agreement for each additional Showroom If you would like to operate additional Showrooms subsequent to the execution of your initial Membership Agreement, we must approve the opening of such additional Showroom(s), and you must execute the then-current membership agreement (see Section 3 3 of the Membership Agreement) The Early Termination Fee described below applies to each of your Showrooms C Membership Promotions We may offer promotions for limited periods of time in the form of credits against Initial Membership Fees as part of a program designed to promote the execution of membership agreements, and to encourage the opening of Abbey Showrooms We may, in the future, change the Initial Membership Fee then being charged to new members D Master Franchisee ABBEY has a master franchisee that has the right to sub-franchise the Abbey System in Utah, Montana, south-eastern Idaho, and Wyoming, except for Laramie county (see Exhibit "L") New members located in those territories are required to execute a membership agreement with the master franchisee and are charged an initial membership fee of $2,000

Financing

Neither ABBEY nor any of its agents or affiliates offers any financing arrangements, directly or indirectly, to you except that ABBEY permits deferred payment of the Initial Membership Fee which is paid over a period of time in conjunction with the CashBack Participation program (see Section 7 2 of the Membership Agreement) The CashBack Participation program is described in greater detail under Item 5(A) above No interest will be charged to you and no separate promissory note will be executed by you The amount of the Initial Membership Fee which is deferred is $31,000 ABBEY has not in the past and does not intend in the future to sell, assign or discount to a third party any note, contract or other obligation of yours which is owed to ABBEY ABBEY does not arrange financing from other sources, and accordingly, does not receive payments for placing financing ABBEY does not guarantee your note, lease or obligation

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 We do not make any representations about a member's future financial performance or the past financial performance of company-owned or franchised outlets We also do not authorize our employees or representatives to make 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 our management by contacting Ted Dlugokienski, Abbey Carpet Co , Inc , 3471 Bonita Bay Boulevard, Bonita Springs, Florida 34134, (800) 873-2223, the Federal Trade Commission and any appropriate state regulatory agencies