Status Update Communication

Hi Jacky,

See my responses below.


1. Compared with the break even plan you created, the Net Gain/Loss, accurately, the net loss of each month, is far away than your plan stated. For example, the Net Gain/Loss in Month 2 of Surf City store is -$3,574 in the table. However, in the P&L statement of July, 2015, the Net Income of Surf City store is -$13,502, which is almost $10,000 more loss than you planned. Besides of the lower sales revenue, the huge expense is the main reason for the big loss in my opinion. Can I get to know why the expense was higher than you expected? Can you find some ways to decrease the expense in order to improve the store performance?

July had 3 pay cycles in it instead of 2 like normal months. So you are seeing an additional full payroll which makes the financials for that month look worse. Two months out of the year this occurs because there are 4.33 weeks in a month instead of 4 weeks. We made dramatic changes to the expenses in July and August. Some of which you won't see the reduction on until the next statement you should be getting today or tomorrow.

2. From the break even plan of Carolina Beach, the store would not break even in the first year. Even in the Month 12, the predicted Net Gain/Loss is -$2,511, and the Cumulative Gain/Loss is -$48,144. I am so worried about this store because the Net Income of Carolina Beach store in July, 2015 was -$14,431, which is also far away from your plan. Do you have any ideas or plan to change this situation? Based on your plan, when will this store break even? Do you have a plan for the second year?

Yes, we will use profit from the other 2 stores to accomodate for the loss. Again, we hope to do better than this and are working hard to achieve that. We wanted to be very conservative thought in the break even so that it did not give the ideal situation but more of the worst case.

3. Regarding the 3rd store location, I could not find it on Google Map. Can you confirm with the address please: Bayshore Commons Shopping Center located at 140 Hays Lane, Wilmington, North Carolina.
Can you also send me a screenshot of the store location?

It's a brand new location and plaza. Here is a link to view pictures. http://www.loopnet.com/xNet/MainSite/Listing/Profile/Profile.aspx?LID=18962033

4. I could not click the June icon on the Portal, so the document was not downloaded. Can you send me the June P&L statement please? Also, I am looking forward to the August statement.

Okay I will check and make sure it is sent to you today. I'm not sure why it isn't downloading but we will get it to you today.

Thank you so much. We will keep in touch.

Best,
Jacky

Best Wishes,


Sabrina Wall

Franchise Brokers Association
Executive Director

Office 888-317-7429
Fax 321-445-3784




On Tue, Sep 15, 2015 at 9:23 AM, Jacky Li wrote:

Hi Sabrina,

Thank you for your update and answers. After reading the document I received, here are some questions I have now:

1. Compared with the break even plan you created, the Net Gain/Loss, accurately, the net loss of each month, is far away than your plan stated. For example, the Net Gain/Loss in Month 2 of Surf City store is -$3,574 in the table. However, in the P&L statement of July, 2015, the Net Income of Surf City store is -$13,502, which is almost $10,000 more loss than you planned. Besides of the lower sales revenue, the huge expense is the main reason for the big loss in my opinion. Can I get to know why the expense was higher than you expected? Can you find some ways to decrease the expense in order to improve the store performance?

2. From the break even plan of Carolina Beach, the store would not break even in the first year. Even in the Month 12, the predicted Net Gain/Loss is -$2,511, and the Cumulative Gain/Loss is -$48,144. I am so worried about this store because the Net Income of Carolina Beach store in July, 2015 was -$14,431, which is also far away from your plan. Do you have any ideas or plan to change this situation? Based on your plan, when will this store break even? Do you have a plan for the second year?

3. Regarding the 3rd store location, I could not find it on Google Map. Can you confirm with the address please: Bayshore Commons Shopping Center located at 140 Hays Lane, Wilmington, North Carolina.
Can you also send me a screenshot of the store location?

4. I could not click the June icon on the Portal, so the document was not downloaded. Can you send me the June P&L statement please? Also, I am looking forward to the August statement.

Thank you so much. We will keep in touch.

Best,
Jacky




On Tuesday, September 15, 2015 9:48 AM, Sabrina Wall wrote:


Hi Jaiqi,

Please find the enclosed letter and attachments to provide an overview of your project status. Let us know if you have any questions. We would be happy to go over the information with you.

Here are the answers to your question.

1. The two stores' net income shows negative. Based on your experience, how long this negative situation will last?

We provided a very realistic break even proforma for you which details our plan for you. It is attached to the email.

2. How will you reimburse the loss of net income? Will you withdraw money from the initial $500k investment funds?

The $500,000 is being used to run the stores and on qualifying expenses per the immigration rules.

3. Regarding the invitial $500k investment funds, how much money is left in my bank account?

Your investor letter shares a snapshot of your bank accounts from last week.


4. I could not download June statement on the portal. Can you send it to me please?

I believe Amanda helped you with this already. The statements are in the portal and you should receive the August statement tomorrow.

Hope this helps. Have a great night.

Best Wishes,

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