Detailed Information on Elements Massage’s Initial Franchise Fee, Royalty Fee + 35 Other Fees (Items 5 and 6, 2023 FDD)

1.  Initial Franchise Fee:  $40,000

• Unless you are signing a Franchise Agreement under an Area Development Agreement, when you sign a Franchise Agreement to develop a single Studio, you must pay Elements Massage an initial franchise fee (the “Initial Franchise Fee”) of $40,000.

• You must pay the Initial Franchise Fee as a lump sum by wire transfer. The Initial Franchise Fee is fully earned by Elements Massage when paid by you, and is not refundable.

• Elements Massage offers a 20% discount on the Initial Franchise Fee for veterans and active-duty members of the United States armed forces who will hold at least a 51% ownership interest in the Studio to be developed and operated under a Franchise Agreement.

2.  Development Fee:  depends on the number of Studios Elements Massage grants you the right to develop within the Development Area (typically, $75,000 to $125,000)

• If Elements Massage grants you the right to develop two or more Studios under an Area Development Agreement, you must pay Elements Massage a one-time development fee (the “Development Fee”) upon executing your Area Development Agreement.

• Your Development Fee will depend on the number of Studios Elements Massage grants you the right to develop within the Development Area and is calculated as follows:

• $80,000 if you sign an Area Development Agreement in which you agree to develop two Studios;

• $25,000 multiplied by each Studio you agree to develop if you sign an Area Development Agreement in which you agree to develop three to five Studios;

• $20,000 multiplied by each Studio you agree to develop if you sign an Area Development Agreement in which you agree to develop six to nine Studios; and

• $15,000 multiplied by each Studio you agree to develop if you sign an Area Development Agreement in which you agree to develop 10 or more Studios.

• Typically, an area developer is expected to develop three to five Studios and the range of the Development Fee in that case would be $75,000 to $125,000.

• You will be required to enter into Elements Massage’s then-current form of Franchise Agreement for each Studio you wish to develop under your Area Development Agreement, but you will not be required to pay an Initial Franchise Fee at the time you execute each of these Franchise Agreements.

• If you enter into an Area Development Agreement, you must execute Elements Massage’s then-current form of Franchise Agreement for the first Studio Elements Massage grants you the right to open within the Development Area concurrently with the Area Development Agreement.

• The Development Fee is due in a lump sum when you sign your Area Development Agreement. The Development Fee is fully earned by Elements Massage upon your execution of the Area Development Agreement, and is not refundable.

3.  Initial Service & Retail Supplies Inventory:  $15,045 to $28,305

• Before opening your Studio, you must purchase certain massage equipment and your initial inventory and supplies, including but not limited to all products used in connection with providing services at your Studio, from Elements Massage’s affiliate WAVE.

• The estimated cost of this initial studio inventory and supplies from WAVE will range from $15,045 to $28,305, depending on the size of your particular Studio. This amount is payable in one lump sum payment and is fully earned and nonrefundable upon receipt.

4.  Furniture, Décor, Lighting, and Other Equipment:  $2,236 to $14,586

• Before opening your Studio, you must purchase certain furniture, interior signage, and décor items for your Studio from Elements Massage’s affiliate WAVE.

• The estimated cost will range from $2,236 to $14,586, depending on the size of your particular Studio, the brands purchased, the quality of the items purchased, and other factors. This amount is payable in one lump sum payment and is fully earned and nonrefundable upon receipt.

5.  Additional Attendees for Training Program:  currently, $500 per attendee, plus costs

• Elements Massage currently requires only you or your Operating Partner and your Designated Manager (if applicable) to attend the Training Program before opening your Studio. You may invite additional employees to attend the Training Program if space allows, but Elements Massage may charge you its then-current training fee (currently, $500 per attendee, plus costs).

• Elements Massage does not expect or require you to send additional persons to the Training Program, and it may limit the number of attendees, so it currently estimates your cost for additional attendees will be $0.

6.  Massage Session During Training Program:  $207 to $297

• Part of the Training Program includes the requirement that you (or your owners) and other Training Program attendees experience a massage session, and you will be required to pay for that massage session.

• If such massage session is at a Studio owned by Elements Massage or an affiliate, you and your trainees will pay Elements Massage or an affiliate approximately $69 to $99 per trainee. Elements Massage anticipates most franchisees will send up to three trainees, and in that case the fee payable to Elements Massage or its affiliate would be $207 to $297.

7.  Initial Software Set-Up and Technology Fees:  $499 + $75 + $1,200

• You are required to pay Elements Massage a $499 set-up fee for the set-up of certain required software programs. You are also required to pay Elements Massage a $75 fee for gift card program set-up and the technology fee for the two months before opening ($600 per month).

8.  Grand Opening Spend Requirement:  $15,000

• No later than 10 days after the date that you sign an approved lease for the Premises (or 10 days after the date you purchase and take possession of an existing Studio), you must pay Elements Massage, by ACH, $15,000 as a non-refundable grand opening spend fee (the “Grand Opening Spend Requirement”).

• However, if you are signing the Franchise Agreement in connection with the renewal of an existing Studio, Elements Massage does not charge a Grand Opening Spend Requirement.

9.  Manager Training Program:  $500 per day per attendee, plus costs

• Before you open your Studio, based on the factors Elements Massage determines, Elements Massage may offer you (or your Operating Partner) and any applicable Designated Manager the opportunity to attend a manager training program. If Elements Massage offers such training and you elect to attend such training, you may be required to pay Elements Massage its then-current fee (currently, $500 per day per attendee, plus costs).

10.  Royalty:  6% of Gross Receipts

• Due Date:  5th day of each calendar month.

11.  Brand Marketing Fund:  2% of Gross Receipts (subject to Elements Massage’s right to increase)

• Due Date:  5th day of each calendar month.

12.  Local Advertising Fee:  $2,000 per month (subject to Elements Massage’s right to increase)

• Due Date:  15th day of each calendar month.

13.  Local Spend Amount:  2% of Gross Receipts (subject to Elements Massage’s right to increase)

• Due Date:  As incurred.

• Payable to the designated supplier, which may be Elements Massage.

14.  Default Fee:  $250 to $2,500

• Due Date:  Upon receipt of statement.

15.  Dishonored Check or Insufficient Funds Fee:  $150

• Due Date:  Upon receipt of statement.

16.  Interest on Late Payments:  1.5% per month or highest commercial rate

• Due Date:  Upon receipt of statement.

17.  Monthly Management Fee (in event of your abandonment, default, or termination):  up to $7,500 per month, plus direct out-of-pocket expenses

• Due Date:  1st day of each month upon occurrence.

18.  Replacement or Remedial Training Program Fee:  then-current fee, currently $500 per attendee, plus costs and expenses

• Due Date:  Before replacement or remedial training.

19.  Additional or Special Training:  then-current fee, currently $500 per day per trainer or attendee (as applicable to the training program), plus costs and expenses

• Due Date:  Before additional training.

20.  Annual Conference Registration Fees:  then-current annual conference registration fees for at least one attendee (currently, $500 per person), plus costs and expenses. Default fee applies for nonattendance.

• Due Date:  Before annual conference.

21.  Manager Training Program:  then-current fee, currently $500 per day per attendee, plus costs and expenses

• Due Date:  Before you attend training program.

22.  Technology Fee:  currently, $600 per month

• Due Date:  1st day of each calendar month.

23.  Marketing Cooperatives:  as established (existing marketing cooperatives charge between $500 and $1,500 per month)

• Due Date:  As established.

24.  Successor Franchise Fee:  25% of the then-current Initial Franchise Fee

• Due Date:  Upon renewal.

25.  Transfer Fee – Franchise Agreement:  50% of the then-current Initial Franchise Fee; reduced to $2,500 for select ownership interest transfers

• Due Date:  Upon signing the consent to transfer.

26.  Transfer Fee – Area Development Agreement:  $2,500 for administrative costs and expenses in connection with ownership interest transfers. Development rights cannot be transferred.

• Due Date:  Upon signing the consent to transfer.

27.  Transfer Fee Deposit:  $5,000

• Due Date:  Upon signing the consent to transfer.

28.  Inventory:  varies according to products purchased

• Due Date:  At the time of purchase.

29.  Royalty Underpayments (audit):  varies. Difference between amount reported and correct amount, plus applicable interest (and if understated amount is more than 2%, plus Elements Massage’s costs, including attorneys’ and accountants’ fees).

• Due Date:  Time of audit.

30.  Defense or Enforcement Costs:  all costs, including attorneys’ fees (variable)

• Due Date:  Upon settlement or conclusion of a claim or other legal action.

31.  Indemnification:  all costs, including attorneys’ fees (variable)

• Due Date:  Upon settlement or conclusion of a claim or other legal action.

32.  Collection Costs:  actual costs and expenses to collect past due or other amounts

• Due Date:  Upon settlement or conclusion of a claim or other legal action.

33.  Arbitration and Proceeding Costs:  Elements Massage’s arbitration or other court costs, plus attorneys’ fees and costs if Elements Massage prevails in the arbitration or proceeding

• Due Date:  Upon conclusion of arbitration or proceeding.

34.  Liquidated Damages:  an amount equal to the combined monthly average of Royalties, Brand Marketing Fund contributions, and any other fees under the Franchise Agreement (without regard to any fee waivers or other reductions) payable during the 36 months preceding the date of early termination, multiplied by the lesser of (i) 36 or (ii) the number of full months remaining in the Term. The present value of the total calculated at a discount rate of 8%, assuming payment at the end of each month, will be Elements Massage’s Liquidated Damages.

• Due Date:  Upon termination of Franchise Agreement by you without cause or because of your default.

35.  Alternative Supplier Evaluation:  varies according to administrative expenses in evaluating the request and its complexity

• Due Date:  On demand.

36.  Relocation Fee:  $10,000, plus costs and fees associated with migrating clients to nearby Studios

• Due Date:  Upon Elements Massage’s approval of relocation request.

37.  Quality Assurance Inspections:  actual costs and expenses

• Due Date:  As incurred.