Detailed Information on Annex Brands’ Initial Franchise Fee, Royalty Fee + 43 Other Fees (Items 5 and 6, 2022 FDD)

1.  Initial Franchise Fee:  $11,980 to $29,950

• The initial franchise fee is $29,950 and is uniform for all standard and flex retail centers.

• If you are an honorably-discharged veteran of the U.S. armed forces and meet Annex Brands’ requirements, under its participation in the International Franchise Association’s VetFran Program, Annex Brands will discount the initial franchise fee by 20% ($5,990), and you will pay Annex Brands a $23,960 initial franchise fee.

• If you already own and operate one of Annex Brands’ retail centers or one of its Commercial Logistics Centers, Annex Brands will discount the initial franchise fee by 50% ($14,975), and you will pay Annex Brands a $14,975 initial franchise fee for your 2nd or further additional retail center.

• If an existing business qualifies to convert to one of Annex Brands’ retail centers, Annex Brands will discount the initial franchise fee by 50% ($14,975), and you will pay Annex Brands a $14,975 initial franchise fee and a $3,000 conversion training fee.

• For an express retail center, you must pay Annex Brands a $14,975 initial franchise fee when you sign the Franchise Agreement. If you are an honorably-discharged veteran of the U.S. armed forces and meet Annex Brands’ requirements, under its participation in the International Franchise Association’s VetFran Program, Annex Brands will discount the initial franchise fee by 20% ($2,995), and you will pay Annex Brands an $11,980 initial franchise fee.

2.  Retail Center Package Cost:  $57,000 to $72,000 for a new standard or flex retail center, $5,500 to $57,000 for a conversion standard or flex retail center, or $30,000 to $44,000 for a new express retail center

• You must purchase a retail center package from Annex Brands for about $57,000 to $72,000 for a new standard or flex retail center, $5,500 to $57,000 for a conversion standard or flex retail center, or $30,000 to $44,000 for a new express retail center.

3.  Construction Consultation Fee:  $2,500

• Annex Brands designates a contractor for you to use to build-out your retail center. However, if you want to use, and Annex Brands approves, a substitute contractor, you must pay Annex Brands a construction consultation fee of $2,500 before construction begins.

4.  Architect Fee:  for a standard retail center, flex retail center, and express retail center, the architect fee ranges from $4,000 to $6,000

• You must pay an architect that Annex Brands designates to design the premises of your retail center according to Annex Brands’ specifications, and to prepare architectural plans that meet local structural, electrical, plumbing, and other construction-related requirements. You must pay Annex Brands an architect fee before preparation of the plans.

• For a standard retail center, flex retail center, and express retail center, the architect fee ranges from $4,000 to $6,000 based on the condition of the site.

5.  New Center/New Owner Marketing Program Deposit:  $5,500

• You must deposit with Annex Brands $5,500 before or at initial training. Annex Brands will use the deposit to advertise your retail center before, and for about 90 days after, you (i) open your retail center, (ii) assume the operation of an existing retail center by transfer, or (iii) convert an existing business to a retail center.

6.  Shipping Deposit:  $7,500 to $8,500

• You must deposit with Annex Brands, before or at initial training, $7,500 to $8,500 for a new standard, flex, or express retail center.

7.  Building Permit Deposit:  $3,000

• You must deposit with Annex Brands, before or at initial training, $3,000 for a standard, flex, or express retail center. Annex Brands will use this deposit to pay the cost of building permits for your retail center.

8.  Conversion Training Fee:  $3,000

• If you convert an existing business to a standard or flex retail center, you must pay Annex Brands a $3,000 conversion training fee when you sign the Franchise Agreement, unless you already own and operate one of Annex Brands’ retail centers or one of its Commercial Logistics Centers.

9.  Transfer Training and Processing Fee:  $3,000

• If you acquire an existing retail center, you must pay Annex Brands a $3,000 training and processing fee, before initial training or before transfer, whichever occurs first.

10.  On-Site Initial Training:  $250 per person per day, plus Annex Brands’ costs for transportation, lodging, and meals

• At a time when Annex Brands’ personnel are available, Annex Brands will provide on-site initial training at your retail center for up to 4 days for new franchisees, or 1 day for transfers or existing franchisees, at no charge to you.

• At your request, and at a time when Annex Brands’ personnel are available, if you require additional training after this initial on-site training, Annex Brands may require you to pay its daily fee (currently $250 per person), and its costs for transportation, lodging, and meals. Salaries and other charges for its personnel’s time will be at Annex Brands’ expense.

11.  Royalty Fee:  5% of Gross Receipts

• Due Date:  Each Wednesday, after the close of business, for the previous week ending Saturday.

12.  Marketing Fee:  2% of Gross Receipts

• Due Date:  Each Wednesday, after the close of business, for the previous week ending Saturday.

13.  Advertising Association Fee:  monthly, the greater of $150 or 1% of Gross Receipts

• Due Date:  10 days after the end of each calendar month or as otherwise provided by local or regional association by-laws.

• You must participate in a local or regional association. The board of directors of your association may also periodically impose a special assessment fee on its members. You pay fees by automatic bank draft, either to the association or directly to Annex Brands, at Annex Brands’ option.

14.  Transit Insurance:  generally, $0.50 to $1.65 per $100 of property valuation (typically, this expense is passed through to the customer after being marked up by you)

• Due Date:  Payable weekly with royalty fee and marketing fee payments.

• You must participate in any group-wide or other insurance program that Annex Brands designates regarding small parcel, freight, or transit damage and related risks.

• Premiums typically are billed to the customer at the time of shipment, and are based on the carrier used, whether the shipment is domestic or international, and the declared value of the items tendered for shipping.

• In its sole discretion, Annex Brands may increase the rate if you have a high number of claims due to improper packaging and shipping standards (generally, $0.65 to $2.15 per $100 of property valuation) after at least 15 days’ notice to you.

15.  Retail Center PostalMate POS Network Software End User License Fee:  currently, $30 annually

• Due Date:  30 days before annual due date (1st of the month).

16.  Retail Center PostalMate POS Network Software Maintenance Fee:  currently, $90 monthly

• Due Date:  1st of the month.

17.  Retail Center PostalMate POS Network Software License Transfer Fee:  currently, $0, but Annex Brands may charge a transfer fee in the future

• Due Date:  Before transfer.

18.  Software Upgrade Fee:  fee that Annex Brands determines at the time (it has no current plans to discontinue use of the current software)

• Due Date:  When Annex Brands determines to adopt new or updated software system-wide.

• The retail center PostalMate POS network software maintenance fee covers updates for the PostalMate POS network software.

19.  Technology Services Fee:  currently, $10 per week

• Due Date:  Each Tuesday, after the close of business, for the previous week ending Saturday, beginning after the opening of your retail center or after you assume operation of an existing retail center after a transfer or conversion.

• Currently, for support of the system Internet, Intranet communications, website and sales tracking and reporting system, retail center email addresses (up to 2), remote support login agent, and other business features.

20.  Customized Web Pages or Website, Additional Retail Center Email Addresses, and Ecommerce Services:  current fee

• Due Date:  10 days after invoice for customized web pages or website and e-commerce, and each Wednesday for additional retail center email addresses.

• If Annex Brands has a corporate-managed website, you may receive standard web pages included in the technology services fee. If available, you may request to customize portions of your web pages or create a customized website with Annex Brands’ approval and for a fee, and you may purchase ecommerce services, with Annex Brands’ approval and for a fee.

• If Annex Brands provides retail center email addresses, you may use up to 2 email addresses included in the technology services fee. Currently, there is a $7 charge per week for each additional email address. Annex Brands’ fee is subject to change on 15 days’ notice to you.

21.  In-Center TV Marketing Program Fee:  currently, $15 per month

• Due Date:  10 days after end of each calendar month.

• Annex Brands may, but is not required to, establish an In-Center TV marketing program and you must participate in the program.

22.  Special Field Assistance:  currently, $250 per day per person, plus expenses

• Due Date:  10 days after invoice.

• If required, you must pay Annex Brands’ then-current daily fee and its out-of-pocket expenses.

23.  Management:  currently, $250 per day per person, plus expenses

• Due Date:  10 days after invoice.

• If Annex Brands manages your retail center because of your illness, incapacity, death, or failure to timely cure a default, or because the franchise expires, terminates, or is not renewed, you must pay Annex Brands’ then-current daily fee and its out-of-pocket expenses.

24.  National Convention Registration Fee (per person):  currently, estimated proportionate share of Annex Brands’ out-of-pocket costs for hosting, meals, and convention activities

• Due Date:  Before convention.

• Annex Brands may hold a national convention about every 10 to 18 months. You and/or your designated personnel must attend the full program of, and stay at the designated hotel of, each national convention.

• The registration fee is assessed per person attending a national convention. You must pay travel and incidental expenses for yourself and/or your personnel who attend.

25.  National Convention Hotel Fee:  currently, room charge, taxes, and fees for 1 room at the convention hotel during the convention dates

• Due Date:  Before convention.

• The hotel fee is for 1 room during the convention dates. You must pay for any additional rooms, and for travel and incidental expenses for yourself and/or your personnel that are not covered by the hotel.

26.  National Convention Participation Deposits:  currently, $25 per week

• Due Date:  Each Tuesday, after the close of business, for the week ending on the previous Saturday, beginning after the opening of your retail center or after you assume operation of an existing retail center after a transfer or conversion.

27.  Regional Meetings:  currently, there is no registration fee for any regional meeting, but Annex Brands may in the future charge a fee, estimated to be a proportionate share of its out-of-pocket costs for hosting the meeting

• Annex Brands may organize and periodically hold regional meetings. You and/or your designated personnel must attend any regional meetings held in your geographic area. You must pay travel, lodging, and meal expenses for yourself and/or your personnel who attend.

28.  Fee for Required Refresher Courses or Optional Training Programs:  currently, not to exceed $250 per day

• Due Date:  Before or at the time training is provided.

29.  Sales Consultant Fee:  $12,000 to $36,000

• Due Date:  On or before the closing of a transfer.

• If you use the services of any of Annex Brands’ sales consultants (including outside agencies and brokers) to complete the transfer of your retail center, then, on or before transfer, you or the transferee must reimburse Annex Brands an amount equal to any commission or other sales compensation that Annex Brands must pay to the consultant(s).

30.  Transfer of Franchise:  15% of then-current non-discounted initial franchise fee

• Due Date:  Before transfer.

• If you or the selling franchisee qualifies for the VetFran Program, a 20% VetFran discount will be applied to the transfer fee.

• No more than 1 VetFran discount will be applied to the transfer fee.

31.  Transfer of Franchise to Family Member:  currently, $750

• Due Date:  Before transfer.

• If you transfer controlling ownership interest in the franchise to an immediate family member as defined by Annex Brands.

32.  Transfer of Franchise to Your Legal Entity:  currently, $350

• Due Date:  Before transfer.

• If you as an individual transfers to a legal entity (corporation, limited liability corporation, partnership, trust, etc.).

33.  Entity Name Change (non-transfer):  currently, $350

• Due Date:  Before change.

• If you (a corporation, limited liability corporation, partnership, trust, etc.) change the name of your legal entity.

34.  Ownership Change (non-transfer):  currently, $350

• Due Date:  Before change.

• If you change less than a controlling ownership interest in the franchise.

35.  Renewal:  $5,000

• Due Date:  Before renewal.

• Depending on the type of retail center that you operate, if you are in good standing and meet Annex Brands’ then-current qualifications for new franchisees and Annex Brands is offering a renewal package for that type of center at the time that you renew, you may be eligible for certain benefits and/or facility upgrades.

36.  Audit:  cost of audit ($475 minimum), plus 1.5% per month interest or the highest rate allowed by law on underpayment. In addition, you must pay Annex Brands a late fee of $25 per week.

• Due Date:  10 days after invoice.

• Payable to Annex Brands if an inspection or audit is made necessary due to your failure to furnish reports, records, or other information to Annex Brands on a timely basis, or if audit shows that you have understated any amount owed to Annex Brands by more than 5% for any accounting period, or Annex Brands discovers a history of similar underreporting offenses.

37.  Failure to Provide Audit Documents:  $500 per type of document not supplied on auditor’s request, but in no event an amount greater than $2,500 per occurrence, and cost of audit, including reasonable expenses incurred by auditor if rescheduled

• Due Date:  10 days after invoice.

38.  Failure to Provide Annual Reports:  $500 per type of document not supplied, but in no event an amount greater than $1,500 per occurrence

• Due Date:  10 days after invoice.

• Payable to Annex Brands if you do not supply, within 90 days after the end of the calendar year, annual financial statements, including income statement, balance sheet, and income tax return for that calendar year.

39.  Retail Center Maintenance:  Annex Brands’ actual cost

• Due Date:  10 days after invoice.

• If you do not maintain the condition and appearance of the retail center as required by the Franchise Agreement, Annex Brands may: 1) arrange for the necessary cleaning, repair, remodeling, upgrading, decorating, or painting; and 2) replace the necessary fixtures, displays, signs, graphics, equipment, leasehold improvements, or furnishings.

40.  Late Fee:  greater of $25 or 10% of amount due, or highest amount allowed by law

• Due Date:  10 days after invoice.

• 1-time penalty on each overdue payment.

41.  Interest:  lesser of 1.5% per month or highest rate allowed by law (in California, the highest lawful rate of interest is 10% per annum.)

• Due Date:  10 days after invoice.

• Payable on outstanding overdue amounts.

42.  Attorneys’ Fees and Costs:  Annex Brands’ actual cost

• Due Date:  As incurred.

• Payable if your default causes Annex Brands to incur legal expenses.

43.  Indemnification:  Annex Brands’ actual cost

• Due Date:  As incurred.

• You must reimburse Annex Brands for its expenses and damages in certain circumstances.

44.  Strategic Marketing Alliance Fees:  reasonable specified fees

• Due Date:  As specified.

• Payable if Annex Brands negotiates or forms strategic marketing alliances with other companies.

45.  Co-branding Fees:  reasonable specified fees

• Due Date:  As specified.

• Payable if Annex Brands establishes co-branding programs with other companies.