Detailed Information on Hounds Town USA’s Initial Franchise Fee, Royalty Fee + 32 Other Fees (Items 5 and 6, 2022 FDD)

1.  Initial Franchise Fee:  $49,000 to $125,000

• Hounds Town USA offers three different Franchise packages depending on the number of Hounds Town USA Businesses you wish to purchase:

• Initial Franchise Fee – Single:  $49,000
• Initial Franchise Fee – Multi-2 (Up to 2):  $88,000
• Initial Franchise Fee – Multi-3 (Up to 3):  $125,000

• If you purchase a Multi-2 Franchise or a Multi-3 Franchise, you will sign the Multi-Franchise Addendum and you must open the Hounds Town USA Businesses in accordance with the schedule for development under the Multi-Franchise Addendum.

• To open additional Hounds Town USA Businesses under a Multi-2 Franchise or a Multi-3 Franchise, you will be required to sign the then-current Hounds Town USA Business Franchise Agreement, but you will not be required to pay an Initial Franchise Fee (all other fees will apply) and the Royalty will not exceed 6% of Gross Sales.

• The Initial Franchise Fee is uniform, payable when you sign your Franchise Agreement, and is non-refundable, even if you fail to open any Hounds Town USA Businesses.

• Active-duty military and honorably discharged veterans of the United States armed forces receive a 10% discount on Hounds Town USA’s Initial Franchise Fee for a single franchise.

2.  Launch Fee:  $25,000 to $30,000

• In addition to the Initial Franchise Fee, you must pay Hounds Town USA a “Launch Fee” as listed below:

• Launch Fee for 1st Hounds Town USA Being Developed:  $30,000
• Launch Fee for 2nd and Each Additional Hounds Town USA Being Developed:  the Launch Fee will be discounted by 10% from Hounds Town USA’s then-current fee

• The Launch Fee offsets Hounds Town USA’s costs in supporting your efforts to open the Hounds Town USA Business, design approval, and vetting of construction professionals, and in any advertising initiatives Hounds Town USA provides in your market. The Launch Fee also includes Hounds Town USA’s travel expenses if it travels to your Hounds Town USA Business to assist in site selection.

3.  Initial Training Fee for Additional Person(s)/Extended Training:  $1,500 per person, per trip/$500 plus any additional costs and expenses you or your attendees incur

• Your Launch Fee includes tuition for up to two people to attend Hounds Town USA’s initial training program and its immersion training program (provided they each attend at the same time). If you desire to send more than two people, you must pay Hounds Town USA a fee of $1,500 per person, per trip (you are responsible for the cost of travel, lodging, meals, and personal expenses for the additional person(s)).

• Hounds Town USA may extend any portion of the initial training program and immersion training program that you do not successfully complete and you will pay a fee of $500 plus any additional costs and expenses you or your attendees incur.

4.  Pre-Opening Marketing Package:  $15,000

• You are required to purchase a “Pre-Opening Marketing Package” from Hounds Town USA for $15,000 when you sign the Franchise Agreement. This fee covers the costs of digital and traditional marketing that Hounds Town USA manages prior to the opening of your Hounds Town USA Business.

• This payment is uniform and non-refundable.

5.  Microsite and Social Media Setup Fee:  $300

• You must pay Hounds Town USA a one-time fee of $300 to set up your microsite and social media accounts (“Microsite and Social Media Setup Fee”).

• This fee is uniform, due when you sign the lease for your Hounds Town USA Business, and is non-refundable.

6.  Royalty:  6% of Gross Sales

• Due Date:  Due on the 10th day of the month. If the 10th of any month is not a business day, the Royalty is due on the next business day.

7.  Brand Fund Contribution:  2% of Gross Sales

• Due Date:  Same as Royalty.

• This contribution will be used for a system-wide “Brand Fund” for Hounds Town USA’s use in promoting and building the Hounds Town USA brand.

• This fee can be changed to a maximum of 3% of Gross Sales on 30 days written notice.

8.  Local Advertising Requirement:  the difference between the amount you spent on local advertising each month and your required local advertising expenditure, which is based on number of months you have operated, as follows: 1-12 months in operation: $3,000 per month; 13-36 months in operation: $2,500 per month; 37+ months in operation: $1,500 per month

• Due Date:  Payable after receipt of invoice.

• If you fail to meet your minimum local advertising requirement during any rolling 3-month period, Hounds Town USA may require you to pay the difference between the amount you spent and the required advertising expenditure, which will be contributed to the Brand Fund.

9.  Advertising Cooperatives:  as determined by the cooperative members

• Due Date:  As determined by the cooperative members.

• Any amounts you contribute to an advertising cooperative will count toward your local advertising contributions.

10.  Unauthorized Advertising Fee:  $500 per occurrence

• Due Date:  Upon demand.

• This fee is payable to the Brand Fund or to Hounds Town USA if you use unauthorized advertising in violation of the terms of the Franchise Agreement.

11.  Additional Training or Assistance Fees:  then-current fee (currently $1,500 per additional person for initial training and approximately $600 per attendee per day for additional training)

• Due Date:  Payable in advance of the training or assistance.

• Hounds Town USA may charge you for training additional persons, newly-hired personnel, refresher training courses, advanced training courses, and additional or special assistance or training you need or request.

12.  Additional Opening Assistance:  $500 per day, plus travel and lodging expenses

• Due Date:  On demand.

• If you desire additional opening assistance, Hounds Town USA may charge $500 per day plus all travel and lodging expenses incurred by its staff.

13.  Technology Fee:  varies (currently $50 to $200 per month plus per-user fees)

• Due Date:  Same as Royalty.

• You must pay Hounds Town USA a technology fee in exchange for access to certain technology and tools it makes available to you (“Technology Fee”).

• The cost for additional users varies depending on the software. Currently, each additional cloud costs $7.00 per month and desktop versions of Microsoft Office cost an additional $23.00 per user.

14.  Local Advertising Management Fee:  varies (currently $200 per month)

• Due Date:  Same as Royalty.

• You must pay Hounds Town USA a “Local Advertising Management Fee” each month to cover various marketing-related management fees for social and digital media marketing and advertising.

• Hounds Town USA reserves the right to modify and add new vendors and services. You will be responsible for any increase in fees that result from any modifications or additions.

15.  Convention Fee:  then-current fee (currently estimated to be $750 per person)

• Due Date:  120 days before convention.

• This fee will be payable to Hounds Town USA to help defray the cost of your attendance at any annual convention that Hounds Town USA chooses to hold. This fee is due regardless of whether or not you attend Hounds Town USA’s annual convention in any given year.

16.  Customer Resolution Fee:  varies; reasonable costs Hounds Town USA incurs for responding to a customer complaint, which typically will be between $20 and $100

• Due Date:  On demand.

• Payable if a customer of Franchised Business contacts Hounds Town USA with a complaint and Hounds Town USA provides a gift card, refund, or other value to the customer as part of it addressing the issue.

17.  Supplier and Product Evaluation Fee:  costs of inspection (estimated to be approximately $100 to $500)

• Due Date:  As incurred.

• Payable if Hounds Town USA inspects a new product, service, or proposed supplier nominated by you.

18.  Replacement of Franchise Operations Manual:  $500

• Due Date:  On demand.

• Payable if your copy of the franchise operations manual is lost, stolen, destroyed, or significantly damaged.

19.  Payment Service Fee:  up to 4% of total charge

• Due Date:  As incurred.

• If payment is made to Hounds Town USA or its affiliates by credit card for any fee required, Hounds Town USA may charge a service charge of up to 4% of the total charge.

20.  Late Payment Fee:  $100 per occurrence, plus the lesser of the daily equivalent of 12% per year simple interest or the highest rate allowed by law

• Due Date:  As incurred.

• Payable if any payment due to Hounds Town USA or its affiliates is not made by the due date. Interest accrues from the original due date until payment is received in full.

21.  Insufficient Funds Fee:  the greater of $100 per occurrence, or the highest amount allowed by law

• Due Date:  As incurred.

• Payable if any check or electronic payment is not successful due to insufficient funds, stop payment, or any similar event.

22.  Failure to Submit Required Report Fee:  $100 per occurrence and $100 per week

• Due Date:  Your bank account will be debited for failure to submit any requested report within five days of request.

• Payable if you fail to submit any required report or financial statement when due.

• Fines collected are paid to the Brand Fund or Hounds Town USA.

• You will continue to incur this fee until you submit the required report.

23.  Audit Expenses:  cost of audit and inspection, any understated amounts, and any related accounting and legal expenses

• Due Date:  15 days after billing.

• You will be required to pay this if an audit reveals that you understated weekly Gross Sales by more than 2% or you fail to submit required reports.

24.  Indemnification:  will vary under circumstances

• Due Date:  As incurred.

• You must indemnify and reimburse Hounds Town USA for any expenses or losses that it or its representatives incur related in any way to your Hounds Town USA Business or Franchise.

25.  Management Fee:  commercially reasonable amount; currently $750 per day, plus costs and expenses

• Due Date:  As incurred.

• Payable if Hounds Town USA exercises its rights under the Franchise Agreement to step in and manage your Hounds Town USA Business.

• Hounds Town USA has the right to manage your Hounds Town USA Business in a few circumstances, including if you are in breach of the Franchise Agreement.

26.  Professional Fees and Expenses:  will vary under circumstances

• Due Date:  As incurred.

• You must reimburse Hounds Town USA for any legal or accounting fees that it incurs as a result of any breach or termination of your Franchise Agreement. You must reimburse Hounds Town USA if it is required to incur any expenses in enforcing its rights against you under the Franchise Agreement, or payable for any fees it incurs for any transfer that is not completed.

27.  Insurance:  reimbursement of Hounds Town USA’s costs, plus a $2,500 administration charge

• Due Date:  On demand.

• If you fail to obtain insurance, Hounds Town USA may obtain insurance for you, and you must reimburse it for the cost of insurance obtained plus $2,500 for an administrative cost of obtaining the insurance.

28.  Relocation Fee:  Hounds Town USA’s costs

• Due Date:  Upon relocation.

• You must reimburse Hounds Town USA for its reasonable expenses if it permits you to relocate your Hounds Town USA Business. Hounds Town USA will provide you with copies of its invoices for its expenses from any third-party providers upon request.

29.  Transfer Fee:  50% of the then-current Initial Franchise Fee, plus the costs of training

• Due Date:  $1,000 non-refundable deposit at time of transfer application submittal and the remaining balance of fee at time of the approved transfer.

• Payable in connection with the transfer of your Hounds Town USA Business, a transfer of ownership of your legal entity or the Franchise Agreement.

• If Hounds Town USA is not offering franchises at the time of the transfer, the transfer fee will be 50% of the initial franchise fee listed in the most recent Franchise Disclosure Document.

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

• Due Date:  At the time you sign the new Franchise Agreement.

• Payable if you qualify to renew your Franchise Agreement and choose to enter into a successor Franchise Agreement.

• If Hounds Town USA is not offering franchises at the time of your renewal, the successor franchise fee will be 25% of the initial franchise fee listed in Hounds Town USA’s most recent Franchise Disclosure Document.

31.  Successor Launch Fee:  then-current Launch Fee (currently $30,000)

• Due Date:  At the time you sign the new Franchise Agreement.

• Payable in addition to the successor franchise fee if you qualify to renew your Franchise Agreement and choose to enter into a successor franchise agreement.

• When you renew your Franchise Agreement, you may be required to update and renovate your Hounds Town USA Business. The Successor Launch Fee will cover Hounds Town USA’s expenses related to the renewal of your franchise and any related support it will provide, including approving new layouts, and support in permitting and bidding.

32.  Liquidated Damages:  will vary under the circumstances

• Due Date:  Within 15 days after termination of the Franchise Agreement.

• Due only if Hounds Town USA terminates the Franchise Agreement before the end of the term because of your material breach, or you terminate the Franchise Agreement without legal cause.

33.  Broker Fees: Hounds Town USA’s actual cost of the brokerage commissions, finder’s fees, or similar charges

• Due Date:  As incurred.

• If you transfer your Hounds Town USA Business to a third party or purchaser, you must reimburse all of Hounds Town USA’s actual costs for commissions, finder’s fees, and similar charges.

34.  Multi-Franchise Development Agreement Extension Fee:  $1,000 per extension

• Due Date:  As incurred.

• If you desire to extend the deadline(s) to open Hounds Town USA Businesses under a Multi-Franchise Addendum and Hounds Town USA agrees to extend your rights, you will pay Hounds Town USA a fee of $1,000.

• Each extension shall be 6 months and Hounds Town USA may accept or reject your request for each extension in its sole discretion.