All figures are correct as @ 17 March 2015 Page 1

Introduction A new business should always start with a business plan. You need to be methodical, precise and detailed. Starting a new business with Evolve Entertainment is no

different. Set goals, create a structure, formulate key performance requirements, build contingencies and share these insights with your team at Evolve. This

business planning guide, our induction training program and ongoing support provided by our team will assist you to build and implement your plan

from choosing your kiosk locations through to local promotion of your kiosks. Your business plan will be initially be built around the 4 kiosk minimum requirement

when becoming a Kiosk franchisee with Evolve Entertainment.

You have chosen a business with existing tools and systems. For your business to succeed you should

focus on the use of these tools and systems. At Evolve, we will provide and assist in the key operational

areas of the business including...

ACTION

Start your business plan today – you will Property negotiation

Kiosk deployment logistics

Customer care

Product orders

IT

Technical support

Training & development

Reporting

Marketing

modify this plan as you progress, but it will form

the foundation of your success.

Passion, ambition, commitment and perseverance comes from you as the business operator with the reward being a profitable and enjoyable business

experience. We wish you every success.

The following guide outlines the initial set up costs and ongoing costs of operating a kiosk business. Additional information will be made available to you upon

registering your interest on the day of the trade show or through www.fegroup.com.au/franchising

Legal Disclaimer

All financial assumptions and calculations provided in this documentation have been provided in good faith and derived from sources believed to be reliable and accurate. You must

seek your own independent financial and legal advice about the viability of any pricing models. No warranty, expressed or implied, is made or given by - or on behalf of FEG,

Blockbuster Australia, Evolve Entertainment and its related entities, or their officers or employees, or any other person on their behalf, as to the accuracy or completeness of the

information or opinions contained in this document. You will need to independently review and evaluate any pricing models and its commercial viability as it applies to your

individual circumstances.

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Where is the best place for a kiosk? Where does the consumer go most often? That is where you will find a great kiosk opportunity. The

kiosk provides value and convenience – perfect for the impulse market. Consumers are spoilt for choice

when it comes to entertainment in the modern day so we locate our movie rental kiosks to

be top of mind, easily accessible and at great value.

There is in excess of 1500 movie rental kiosks trading in Australia today (including other brands).

Mostly, these kiosks are located in shopping centers anchored by a supermarket, stand alone

neighbourhood supermarkets, and medium large convenience retail outlets. It is no surprise that these

locations are often prominent, easy to access locations where consumers visit multiple times per week.

ACTION

Make a list of potential locations in and around

your main area of interest and add them to your

business plan. Discuss these with your team at

Evolve.

Our modeling suggests there is the potential for between 4000 and 5000 kiosks in the Australian marketplace by the time this business reaches its peak.

Movie rental kiosks are expected to become commonplace at other easily accessible locations where consumers visit often such as service stations.

Where can I build my kiosk business? The first place you should consider for your kiosk business is in and around your local area. These

Kiosks will be easy to get to for merchandising and maintenance, plus you already know the area. The

reality is that you can build this business anywhere. Existing kiosks are located all over Australia from

regional townships with small populations to capital cities.

We suggest this business is built in clusters of kiosks. A cluster of kiosks is easier to service than kiosks

spread far and wide. In metropolitan areas, a group of neighbouring suburbs will present a number of

kiosk opportunities alone. While in regional areas a group of small townships where one or two kiosks

are located in each town can also make for an effective cluster.

ACTION

When expanding into areas that aren’t local to

you, your kiosks will need someone locally to

attend to them for both merchandising and

maintenance.

Often your due diligence can be as simple as just looking around you. Supermarkets, as an example, are located in areas of established population or areas of

developing populations. Let this be one of your guides to use in establishing potential viability of a kiosk. Another good suggestion is to put a kiosk where a

video store has closed or is about to close.

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Are there any existing kiosks for sale? Nearly all of the kiosks in the market place are owned by our existing franchisees; however, Evolve can

facilitate a transfer of ownership if a sale agreement can be made between the parties. By purchasing

established kiosks if the opportunity exists, you will realize net profit sooner and find it easier to start up

new kiosk locations. We encourage you to consider the purchase of existing franchised kiosks with your

business plan and not discount a particular area of interest just because there are existing kiosks already

trading.

How much time will I need to put into this business?

ACTION

Consider investing in established kiosks as part of

your business plan.

You will be busy in the beginning, either if you buy existing opportunities or if you look to deploy new locations. Once your cluster is deployed and your kiosk

business is established and you can expect to allocate approx average 1hr per kiosk per week when operating with the minimum required number of 4 kiosks.

Once a month

Order your movies

Remove older movies from kiosks

Give your kiosks a clean

Once a week

Sticker and case your movies

Enter the barcodes into the Kiosk Care

website

Update point of sale materials

Spend some time with the store owner

Relationship Management

Merchandise your kiosks

Check weekly reporting and reconcile

accounts

ACTION

Allow one hour per kiosk per week as a guide for

the time it will take to service your kiosks. This

business will occupy your every thought until you

reach your forecasted kiosk numbers. The next

kiosk location is always the BIG ONE.

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Documentation Preparation / Administrative Fee for a Kiosk Franchise agreement*

$4,500

Territory Fee per kiosk** Starting from $2,500

**A territory fee is payable upon installation of each kiosk, which enables you to operate a kiosk

within that location

Income vs. Expenditure NB. ALL FIGURES SHOWN ARE EX GST UNLESS OTHERWISE STATED AND ARE CORRECT AS AT THE DATE OF PRINTING HOWEVER SUBJECT TO CHANGE.

Summary of Costs

Kiosk Equipment Rent charge

The kiosk equipment rental charges are shown in the table below. Single upfront payments are required for your first 4 kiosks deployed. Three year rental options

are available through Evolve @ 14% interest paid weekly for each additional kiosk deployed after your first 4 kiosks. A weekly license fee of $28.85 (ex GST) is paid

ongoing from month 36 for all kiosks.

Equipment

(DVDPlay Kiosk)

DVD Single

Upfront

Payment

Optional

Weekly

Rental

License Fee

after month 36

Equipment

(2381 Kiosk)

DVD Single

Upfront

Payment

Optional

Weekly

Rental

Kiosk only $12,350 $90.63 $28.85

Indoor Unit $14,000 $110.02 Kiosk & Topper $12,700 $93.20 $28.85

Kiosk & Topper & 1 Wing $13,200 $99.87 $28.85

Outdoor Unit $15,000 $117.88 Kiosk & Topper & 2 Wings $13,700 $100.54 $28.85

Fixed Capital Expenses

The below are one off expenses payable when establishing your kiosk franchise agreement.

Application Fee* $1,000

Training Fee* $6,500

*Single one off charges payable at the beginning of your franchise agreement and

valid for the 5 year term of your agreement

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Marketing Levy 3% of total revenue

Hardware Maintenance $68.25

Public Liability Insurance $9.62

Training $14.99

Ongoing Monthly Expenses

The table below shows ongoing monthly expenses payable to Evolve Entertainment (ex gst).

Budgeted Monthly Expenses

The below expenses should be budgeted for each month to give you the best opportunity to establish a successful kiosk business.

NB. These are recommended investment levels only.

Franchise Fees 12% of total revenue

Merchant Fees 7% of total revenue

Software Maintenance $30.89

Telecoms (Internet) $44.98

Product Purchases

27% - 32% reinvestment

of total revenue

NB. Minimum monthly

spend of $600

Local Marketing $50

Consumables (barcode, cases

etc)

1% of total revenue

Occupancy

Between 5%-10% of total

revenue or $350 - $650 per

month

Merchandising (stocking the

kiosk )

$25 per kiosk per week

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Revenue

Kiosk Revenue

The revenue generated per kiosk will be different based on several factors surrounding the individual kiosk. All kiosks price

points are set by the franchisee, also the level or marketing per kiosk can result in the average rental value being different.

Evolve have various detailed 5 yr forecast budgets P&L’s available for review prior to deciding if the kiosk vending business is

the right franchise for you. A Franchise Business Manager will arrange a time to suit with you to discuss this in finer detail.

Targeted Kiosk ROI

The below table indicates the daily rentals kiosks can achieve, and as such the classification of the kiosk. The 5 yr forecast budgets

P&L’s utilize these classifications in accurately forecasting the turnover and expected profit your kiosk business can achieve.

A kiosk rated “Low” over the course of 12 months with an average rental value of $4 per rental will achieve approximately a 23% ROI

when excluding kiosk rental payments and at a occupancy lease of 8%.

For the minimum 4 kiosk fleet- with 2 kiosks classified medium, 1 high and 1 low - the expected ROI over a 5yr term is approx 34%.

Ramp Up

Month 1

Month 3

Month 12

Month 24

Month 36

Month 48

Month 60 # of

Kiosks

High 20 21 23 27 33 34 36 1

Medium 15 15 18 21 25 26 27 2

Low 10 10 12 14 16 17 18 1

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All figures are correct as @ 17 March 2015

How much do I need to get me going?

Getting started

A one off application fee is payable when applying to become a Video Ezy or Blockbuster kiosk franchisee. Successful candidates are then supplied with their

franchise agreement and attend the comprehensive kiosk business induction training. The costs of starting your kiosk business are shown below and are

required to be paid at or before your attendance at the induction training.

Initial Franchise Agreement (5 year term) $4,500*

Application Fee $1,000*

Kiosk Business Induction Training $6,500*

TOTAL $12,000 (ex GST)

What we are unable to budget for you is any extra expense you incur in obtaining independent legal and/or financial advice related to starting up a new business,

travel and accommodation for induction training etc. * Indicates one off payment

Your first 4 kiosks

While the kiosks themselves remain the property of Evolve Entertainment, you will enter into an equipment rental agreement and pay an equipment rental

charge on each kiosk deployed together with a one off initial territory fee for a 5 year term. The equipment rental charge on your first 4 DVD Play kiosks, with

all components (wings & topper), are to be paid upfront in a one off payment; this will assist in improving your operating cash flow in the first 12 months

while the kiosks develop in the field. All other kiosk expenses are an ongoing expense while trading as shown in the kiosk financial assumptions. Here is how

it looks;

Single Upfront Payment –

DVD Play kiosk (with 1 wing & topper) $13,200*

Kiosk Territory Fee from $ 2,500

TOTAL from $15,700* (ex GST) per kiosk

4 kiosks = $62,800 + getting started costs

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All figures are correct as @ 17 March 2015

Don’t sell yourself short . . .

Invest in your business from day one. The more movies, the better – give your kiosks the best range possible. Show off to everyone – promote your kiosks. Give

your kiosks a chance – some kiosks will jump out of the blocks, others will build to their best. Make sure you have a suitable operating budget available to

support your kiosks while they commence their ramp up.

Operating Budget (per kiosk)

Movie library (suggested initial outlay per kiosk) $2,500

Operating Cash flow $5,000

TOTAL $7,500 (ex GST) per kiosk

4 kiosks = $30,000 (ex GST)

The critical time for each new kiosk is the first 6 months. Our modeling shows that nearly all of the kiosks not relocated in their first 6 months will break even

financially in year 1. We also know that some kiosks will start off slow but the keepers will continue to increase their turnover month by month until they realise

their potential, Most kiosks will have their greatest revenue shortfall at some stage between months 3 and 6, so look out for that and be prepared.

Where to from here? If you choose to lodge your interest with Evolve Entertainment @ www.fegroup.com.au/franchising a state manager will be in contact and arrange a time to meet with you and provide additional business analysis and details.

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All figures are correct as @ 17 March 2015