Detailed Information on Kiddie Academy’s Initial Franchise Fee, Royalty Fee + 20 Other Fees (Items 5 and 6, 2022 FDD)

1.  Initial Fee:  $145,000

• The Initial Fee is $145,000. The Initial Fee is payable in installments.

• The amount of $25,000 is due when you sign the Franchise Agreement.

• The amount of $50,000 is due when your site has been accepted by Kiddie Academy and you sign a lease or purchase agreement for the Franchised Business.

• The amount of $35,000 is due when the building permit or other certificate or permit authorizing construction of the Franchised Business is issued, the actual commencement of construction, or when your loan has been funded (if the loan is permitted to be used for this purpose), whichever occurs first.

• The amount of $35,000 is due when your loan has been funded (if the loan is permitted to be used for this purpose) or when you receive documentation permitting occupancy, whichever occurs first.

• Kiddie Academy offers multiple programs (the “Reduced Initial Fee Programs”) through which a prospective franchisee may qualify for a reduction of the Initial Fee that would otherwise be payable to Kiddie Academy (a “Reduced Initial Fee”).

• To qualify for any of the Reduced Initial Fee Programs described below, you must meet every requirement applicable to new franchisees, as well as all other criteria applicable to the relevant Reduced Initial Fee Program (including acceptance of proposed sites at Kiddie Academy’s discretion).

• The table below describes the Reduced Initial Fee available under each of the Reduced Initial Fee Programs:

• New Franchisee Purchasing Multiple Franchises:  $65,000
• Existing Franchisee Purchasing Second Franchise:  $80,000
• Existing Franchisee Purchasing Third and Subsequent Franchise:  $65,000
• Vet Fran Program:  $120,000
• First in Market Program:  $120,000
• Focused Development Credit:  $140,000

2.  Royalties:  7% of Gross Revenues

• Due Date:  On Monday each week, on revenues generated during the week that ended nine days earlier.

• “Gross Revenues” include all revenues generated from the provision of any and all services and/or the sale of any and all products and, whether by the franchisee or a third-party provider, that relate to or arise from the Franchised Business. It does not include taxes collected from customers.

• Royalty payments are sent by automatic electronic bank transfer from your bank to Kiddie Academy’s account at the bank Kiddie Academy designates.

• Royalty Reduction: Kiddie Academy offers to each new, qualified franchisee who signs a Franchise Agreement during the scheduled orientation meeting at Kiddie Academy’s headquarters a 50% reduction in the Royalty rate (3.5% of Gross Revenues instead of 7.0% of Gross Revenues) for the first six months after the Franchised Business opens. A franchisee is only eligible for this Royalty Reduction for the first Franchised Business the franchisee (or an affiliate) opens.

3.  Brand Building Fund:  2% of Gross Revenues

• Due Date:  On Monday each week, on revenues generated during the week that ended nine days earlier.

• Brand Building Fees are sent by automatic electronic bank transfer from your bank to an account at the bank Kiddie Academy designates, on a weekly basis, in the same manner as your Royalties.

4.  Right to Audit for Revenue Compliance:  if an audit reveals underpayments, you pay the amount of underpayments, plus interest on amounts owed to Kiddie Academy at 2% above the prime rate, or the maximum rate permitted by law, whichever is less. If underpayments of more than 3% are discovered, in addition to the amounts stated above, you pay the cost of the audit or $10,000, whichever is greater, plus an amount that is equal to 10% of the amount owed. If an audit is conducted as a result of franchisee’s failure to supply required records, after default, you pay the cost of the audit in addition to any amounts owed.

• Due Date:  Immediately upon receipt of audit report.

• All amounts are payable by you to Kiddie Academy via electronic bank transfer.

• Interest begins from date of the underpayment.

5.  Failure to Comply with Section 6 or Section 12 of the Franchise Agreement:  $500 for each failure to comply

• Due Date:  Payable immediately.

• All amounts are payable by you to Kiddie Academy via electronic bank transfer.

6.  Relocation of Kiddie Academy Franchise:  $30,000

• Due Date:  Payable on the date your Franchised Business opens at its new location.

• Payable to Kiddie Academy when you relocate your Franchised Business to another site.

7.  Transfer (sale of your assets or the Franchised Business from one or more individuals to an entity owned by the same individuals):  no fee

• Due Date:  Included.

8.  Administrative Fee from Transferee (sale of business):  $25,000 to $50,000

• Due Date:  Payable by the acquirer on the date of transfer.

• $50,000 payable to Kiddie Academy by the new franchisee/acquirer when you transfer your Franchised Business to a new Kiddie Academy franchisee. The Administrative Fee is reduced to $25,000 if the new franchisee/acquirer is a party to one or more Franchise Agreements with Kiddie Academy on the date of the transfer.

9.  Referral Fee (sale of business):  $10,000 to $75,000

• Due Date:  Payable on the date of transfer.

• Lesser of $75,000 or 5% of sales price of business (minimum of $10,000).

• Franchisee shall pay the Referral Fee if franchisee sells the Franchised Business to an existing or former Kiddie Academy franchisee, or Kiddie Academy franchise applicant, or a director of an existing academy.

10.  Interest on Late Payments:  maximum rate allowed by law (or, in the absence of such a rate, 1.5% per month)

• Due Date:  Payable simultaneously with all amounts that are late.

• Interest on late payments for all amounts due, until the obligation is paid in full.

11.  Franchisee Training (at Kiddie Academy’s corporate office):  one training session for up to two individuals for each franchisee is included

• Due Date:  Included.

• You will be responsible for all travel and living expenses you incur while attending Kiddie Academy’s training course.

12.  Director Training (at Kiddie Academy’s corporate office):  one training session per year is included

• Due Date:  Included.

• You will be responsible for all travel and living expenses incurred by your Academy’s Director while attending the training session.

• Kiddie Academy reserves the right to charge a fee, currently $2,500, for each additional Director attending the training program (in a given year) provided at Kiddie Academy’s corporate office.

13.  Background Check Fee:  no fee

• Due Date:  Included.

• You must authorize Kiddie Academy to conduct the criminal background and credit checks, but no additional fee is charged to you for these checks.

14.  Site Selection:  no fee

• Due Date:  Included.

• You are responsible for any costs you incur related to site selection.

15.  Franchise Renewal:  no fee

• You must sign Kiddie Academy’s then-current Franchise Agreement at the time of your renewal.

16.  Fees/Interest for Failure to Repair Academy:  repair costs plus 15% of Kiddie Academy’s total aggregate expenses, if it incurs an administrative fee

• Due Date:  Within seven days of Kiddie Academy’s invoice.

• Payable if Kiddie Academy performs repair or refurbishment of your Franchised Business. All amounts are payable by you to Kiddie Academy via electronic bank transfer.

17.  Late Charge on Late Payments:  10% of amount of each late payment, plus interest at the legal rate

• Due Date:  Payable simultaneously with late payment.

• A late charge will be applied to all sums that are not paid in full when due. Interest begins from the date of the payment is due.

18.  Annual Franchisee Conference (every other year):  $1,500 fee if you do not attend at least once every other year

• Due Date:  As billed.

• $1,500 per Academy if you do not attend at least once every other year.

19.  Replacement of Manuals:  $500 per volume replaced if replaced in hard copy by Kiddie Academy. No charge by Kiddie Academy if replaced by franchisee utilizing online access to Manuals.

• Due Date:  Payable upon replacement.

• All amounts are payable by you to Kiddie Academy via electronic bank transfer.

20.  Liquidated Damages:  156 weeks of Royalty fees and Brand Building Fund fees

• Due Date:  Payable upon termination.

• If the Franchise Agreement is terminated before the end of its term, you must pay Kiddie Academy liquidated damages for its lost future Royalty and Brand Building Fund fees, calculated as the average weekly amount of those fees multiplied by 156 weeks (or the number of weeks remaining in the term of your Franchise Agreement, if shorter).

21.  Enforcement Costs:  reasonable costs incurred by Kiddie Academy in enforcing your agreements

• Due Date:  As incurred.

• Payable if you violate a term or condition in your Franchise Agreement, and Kiddie Academy incurs costs to enforce it.

22.  Network Equipment:  Kiddie Academy’s cost to purchase and install the required Network Equipment, plus a 25% administrative fee

• Due Date:  As billed.

• If you do not purchase or install the required Network Equipment, Kiddie Academy may purchase and install it and charge you for the cost plus a 25% administrative fee paid to Kiddie Academy.