Detailed Information on Farrell’s eXtreme Bodyshaping’s Initial Franchise Fee, Royalty Fee + 18 Other Fees (Items 5 and 6, 2022 FDD)

1.  Initial Franchise Fee:  $59,900

• You must pay Farrell’s an initial franchise fee amounting to $59,900 (the “Initial Franchise Fee”) at the time you execute a Franchise Agreement for the right to open a single Franchised Business.

• The Initial Franchise Fee is deemed fully earned upon execution of the Franchise Agreement and is not refundable.

2.  Development Fee:  depends on the number of Franchised Businesses Farrell’s grants you the right to develop within the Development Area

• If Farrell’s awards you the right to develop 2 or more Franchised Businesses within a given Development Area, you must pay Farrell’s a one-time Development Fee upon execution of your Development Agreement.

• Your Development Fee will depend on the number of Franchised Businesses Farrell’s grants you the right to develop within the Development Area, and is calculated as follows: (i) $110,000 for the right to develop two Franchised Businesses; (ii) $45,000 per Franchised Business if you agree to develop between three and five Franchised Businesses; (iii) $40,000 per Franchised Business if you agree to develop between six and nine Franchised Businesses; and (iv) $35,000 per Franchised Business if you agree to develop 10 or more Franchised Businesses.

• You will be required to enter into Farrell’s then-current form of Franchise Agreement for each Franchised Business you wish to develop under your Development Agreement, but you will not be required to pay any additional Initial Franchise Fee at the time you execute each of these Franchise Agreements.

• If you enter into a Development Agreement, you must execute Farrell’s then-current form of Franchise Agreement for the initial Franchised Business Farrell’s grants you the right to develop within your Development Area concurrently with the Development Agreement.

• Your Development Fee will be deemed fully earned upon payment and is not refundable under any circumstances.

3.  Royalty:  an amount of (a) 7.5% of Gross Sales provided you timely pay such amounts under the Franchise Agreement, or (b) Farrell’s then-current minimum royalty (the “Minimum Royalty”). If you fail to timely pay your Royalty Fees, then Farrell’s may, in addition to late fees and interest, increase your Royalty Fee by 1% (resulting in a Royalty Fee amounting to 8.5%) of the Gross Sales of your Franchised Business throughout the balance of your Franchise Agreement with Farrell’s.

• Due Date:  Monthly.

• Your Royalty Fee obligations will commence on the date you open and commence operating your Franchised Business.

4.  Brand Development (“Fund”) Contribution:  currently, you must contribute to the Fund in an amount equal up to 3% of the Gross Sales generated by your Franchised Business (your “Fund Contribution”)

• Due Date:  Monthly starting as soon as the business commences operation.

5.  Local Advertising Requirement (“LAR”):  you must expend a minimum amount on the local advertising, marketing, and promotion of the Franchised Business within your Designated Territory. As of the Issue Date, your LAR amounts to 1% of the Gross Sales generated by your Franchised Business.

• Due Date:  Monthly commencing upon your opening or required opening date.

6.  Technology Fee:  then-current amount charged by Farrell’s Approved Supplier(s) for certain System-required software. Currently, the licensing fees associated with Farrell’s current required software is approximately $599/month.

• Due Date:  Monthly, due on or around the 20th of each month.

7.  Required Software:  then-current software license fees associated with any third-party software that is not covered or associated with the Technology Fee. Currently, the ongoing license fees in connection with such Required Software includes $150/per month for the fitness monitoring equipment purchased from Approved Supplier.

• Due Date:  As arranged with the Approved Supplier or other provider.

• You must acquire or license the software designated for use in connection with your POS system, Computer System, and/or Franchised Business generally (each, a “Required Software”), as set forth in the Manuals or otherwise in writing.

• Farrell’s may require that you license or otherwise source any Required Software from one of Farrell’s Approved Suppliers.

8.  Cooperative Contributions:  amount the Cooperative determines, subject to the Proprietary Marketing Spending Requirement

• Due Date:  As Cooperative specifies.

• Any amounts contributed to Farrell’s Fund and any amounts you are required to contribute to an Advertising Cooperative will be credited towards your LAR.

9.  Renewal Fee:  $7,500

• Due Date:  Prior to Farrell’s approving your request to renew.

• There are other conditions that you must meet for Farrell’s to approve your renewal request.

• This amount will help defray certain costs Farrell’s incurs in connection with your renewal and any refresher training Farrell’s might require you to complete as a condition to your renewal.

10.  Transfer Fee:  Franchise Agreement: $10,000; Development Agreement: $10,000 per undeveloped franchise right being awarded

• Due Date:  Upon transfer.

• There are other conditions that you and the proposed transferee must meet for Farrell’s to approve any proposed transfer/assignment, and you and/or your assignee will be solely responsible for any third-party broker costs associated with any assignment you propose.

11.  Ongoing Training and Special Assistance:   then-current training fee (the “Training Fee”). Currently, $750 per day plus out-of-pocket costs and expenses, but could increase if Farrell’s costs increase.

• Due Date:  As incurred.

• You will also be responsible for any costs and expenses associated with you and/or your owners and other trainees attending or otherwise participating in any training Farrell’s requires in connection with the Franchised Business, regardless of whether or not Farrell’s collects any kind of training fee.

12.  Alternate or New Product and/or Supplier/Provider Evaluation and Testing:  costs of testing or evaluation

• Due Date:  When billed.

• Covers costs of testing new products or inspecting new suppliers that you propose.

13.  Relocation Fee:  reasonable costs Farrell’s incurs

• Due Date:  As incurred.

• Due only if you ask to relocate your franchised Studio.

14.  Costs to Maintain Studio:  reasonable costs Farrell’s incurs

• Due Date:  Five days after billing.

• Due only if you do not maintain or upgrade the Studio as required, and Farrell’s chooses to do so.

15.  Administrative Fee:  $250 per enforcement effort (i.e., written or verbal notification and follow up), and $250 per week for each week that the issue remains unresolved

• Due Date:  On demand.

• Farrell’s may assess an administrative fee to compensate it for its time.

16.  Audit:  cost of inspection or audit

• Due Date:  As incurred

• Due only if you fail to report or understate Royalty by 2% or more.

17.  Interest:  lesser of 1.5% per month or highest commercial contract interest rate law allows

• Due Date:  15 days after billing.

• Due on all overdue amounts more than seven days late.

18.  Management Fee:  20% of all Gross Sales generated by the Franchised Business (in addition to the other amounts due to Farrell’s under your Franchise Agreement)

• Due Date:  As incurred.

• Payable only if Farrell’s or its designee manages your Studio after your (or your managing owner’s) death or disability, after your default or abandonment, or after termination.

19.  Costs and Attorneys’ Fees:  will vary under circumstances

• Due Date:  As incurred.

• You must reimburse Farrell’s for its attorneys’ fees and any court costs that it is forced to incur in connection with enforcing or protecting its rights under your Franchise Agreement, including the costs associated with a collection action for amounts that are past due.

20.  Indemnification:  will vary under circumstances

• Due Date:  As incurred.

• You must reimburse Farrell’s if it is held liable for claims from your Studio’s operation, your business, breach of agreement, or noncompliance with any law or regulation.