FDD Talk 2013: Average Sales and Gross Profits for Elements Therapeutic Massage Studios (2013 FDD)

Highlights of Elements Therapeutic Massage’s Item 19 Financial Performance Representations (2013 FDD)

Explanatory Notes for Table 1 – Studios Open for 12 Months

• The table below describes 2012 average monthly revenue and average annual gross profit percentage for Studios in the Franchise System open as of December 31, 2012 and open for at least 12 months as of January 1, 2012; and Studios located in Massachusetts open as of December 31, 2012 and open for at least 12 months as of January 1, 2012. The Massachusetts market contains the largest number of Studios meeting this designated criteria.

• In 2012, 39% of the 69 Studios in the Franchise System meeting the designated criteria performed better than the average monthly revenue, and 61% performed below the average. In 2012, 58% of the 12 Studios located in Massachusetts meeting the designated criteria performed better than the average monthly revenue, and 42% performed below the average.

• In 2012, 54% of the 68 Studios reporting gross profit in the Franchise System meeting the designated criteria performed better than the average gross profit, and 46% performed below the average. In 2012, 50% of the 12 Studios located in Massachusetts meeting the designated criteria performed better than the average gross profit, and 50% performed below the average.

• The franchisor only included information for 68 Studios in calculating the 2012 average gross profit percentage for the Franchise System because it did not have wage information available from 1 Studio.

• The average monthly revenue amounts presented below are based upon actual data the franchisor requires its franchisees to submit on a monthly basis.

• The average gross profit percentage presented below are calculated by first subtracting the annual cost of wages paid to therapists and annual royalty payments from annual revenues reported and then dividing the result by total annual revenues.

• Royalties are calculated at 6% and wages paid to therapists are compiled from studio records available to the franchisor.

• Other than as described above, no other costs or expenses are considered in the calculation of gross profit reported in the tables below. However, you will incur other costs and expenses in connection with the operation of your Studio.

Explanatory Notes for Table 2 – Studios Opened During 2011 and 2012

• Between January 1, 2011 and December 31, 2012, Elements franchisees opened 53 new Studios at various times, and 42 of those Studios operated for 1 month or longer before December 31, 2012. The results of the 42 Studios that opened and operated for 1 month or longer between January 1, 2011 and December 31, 2012 (the “Designated Studios”) are summarized below.

• Each of the Designated Studios completed some or all of their year of operation before December 31, 2012, with an average of 7 months completed.

• “Membership Conversion Rate” means the percentage of new clients that sign-up for Elements’ wellness membership program.

Table 1 – Studios Open for 12 Months