Detailed Information on Image Studios’ Initial Franchise Fee, Royalty Fee + 36 Other Fees (Items 5 and 6, 2022 FDD)

1.  Franchise Fee:  $54,750

• The Initial Franchise Fee is $54,750 and is due and payable when you sign the Franchise Agreement (the “Franchise Fee”).

• If you currently own and operate an existing Image Studios franchise and you are now purchasing the rights to open and operate additional franchise(s), you may be eligible to pay a reduced Franchise Fee.

• The amount of the reduced Franchise Fee is determined as follows: if you currently own and operate a single Image Studios salon, you can purchase additional units at $35,000 each; if you currently own and operate between three and five Image Studios salons, you can purchase at $25,000 each; if you currently own and operate six or more Image Studios salons, you can purchase at $20,000 each.

2.  Site Development Administration Fee:  $6,500 per Unit

• In addition to the Initial Franchise Fee paid to Image Studios, you must pay Image Studios a “Site Development Administration Fee” of $6,500 for each Unit that you purchase. This fee offsets Image Studios’ costs in supporting your efforts to find and develop a permanent site, including initial site setup in all systems and software and ongoing support through opening.

• You will pay the Site Development Administration Fee at the same time as the Initial Franchise Fee for your first location. The Site Development Administration Fees for additional locations are paid at signing your commercial lease on subsequent properties.

3.  Additional Time to Open Fee:  $1,900

• Generally, you must lease, sublease, or purchase the premises for your salon within 180 days after signing the Franchise Agreement and open your salon for business within 300 days after signing the Franchise Agreement. You have the one-time option to extend the deadlines for up to an additional 200 days on payment of a $1,900 “Additional Time to Open Fee.”

4.  Development Fee:  $84,500 for the right to develop up to two Image Studios salons; $99,500 for the right to develop up to three Image Studios salons; $250,000 for the right to develop up to ten Image Studios salons

• At Image Studios’ discretion, it may offer to qualified candidates the rights to open and operate up to six salons within a certain territory and within a certain timeframe by signing the Development Agreement (“DA”). When you sign the DA, you must pay a development fee (the “Development Fee”) based on the number of Image Studios salons to be developed.

• The Development Fee for the right to develop up to two Image Studios salons is $84,500. The Development Fee for the right to develop up to three Image Studios salons is $99,500. The Development Fee for the right to develop up to ten Image Studios salons is $250,000.

5.  Royalty:  5.5% of gross revenue, or $250 per week minimum, whichever is greater

• Due Date:  Due every week on Friday, which is the same day that you process EFT payment collection from your salon professionals. Image Studios does not charge royalties until the second month of your business being open, or 12 months after signing the Franchise Agreement, whichever occurs first.

6.  Brand Development Fund:  up to 2% of gross revenue

• Due Date:  Same as Royalty Fee.

• Image Studios requires that you contribute to the Brand Development Fund and may change the contribution rate (up to 2% of your gross revenue) at any time and from time to time with 30 days’ prior notice.

7.  Local Marketing Requirement:  $2,000 each month minimum, until you reach greater than 70% occupancy. The minimum will reduce to $400 per month after you reach greater than 70% occupancy.

• Due Date:  Expenditure by franchisee.

• Franchisees will be required to actively network, recruit, and market their available salon studios, including social media campaigns and paid social media advertising.

8.  Grand Event:  $1,500 minimum

• Due Date:  As incurred.

• You must spend a minimum of $1,500 for your first annual event towards advertising and promotional programs for your Salon, which will be applied toward the Local Advertising Requirement expenditures.

• You must conduct your first annual event once your salon reaches 65% occupancy or within the first 8 months of opening for business, whichever occurs first.

9.  In-Person Assistance at Your Location:  $500/day, plus travel expenses

• Due Date:  As incurred.

• Charges are only for additional training and/or support at your location. Your initial training is included in your Franchise Fee.

10.  Site Selection Cost:  $500/day, plus travel expenses

• Due Date:  As incurred.

• Image Studios may send a representative to travel to any proposed location for the Image Studios business and provide an on-site evaluation of the premises.

11.  Lease Review:  $1,000 to $3,000

• Due Date:  As incurred.

• You must have an attorney review your commercial lease agreement and make recommendations on lease language and provisions.

12.  Preliminary Test Fit Floor Plan(s):  $350 per test fit

• Due Date:  Before your architect begins work on your plans.

• You pay this amount directly to Image Studios’ designated architect. This fee is for initial test fit plans for your proposed location. Your architect will use the preliminary test fit floor plan as the basis for your space.

13.  Initial Training for Additional People:  $250 per person, per module to attend Image Studios’ online training course

• Due Date:  As incurred.

• Training for 2 people is included in your Initial Franchise Fee; additional person(s) will be charged accordingly.

14.  Refresher Training:  $250 per person, per module to attend Image Studios’ refresher training courses

• Due Date:  As incurred.

• Image Studios has the right to require you and/or previously trained and experienced operations personnel to attend periodic refresher courses or additional training and support at the times and locations that it designates. Image Studios has the right to charge fees for refresher training courses.

15.  Accounting Software Fee:  $99 activation fee per location, plus $75 per month, per location

• Due Date:  The activation fee is billed up front. The monthly fee is billed by Image Studios.

• This fee is for your Property Management Software that will contain your salon professional and tenant database, accounting system, and payment processor.

16.  EFT Payment Processing Fee:  $1.00 per salon professional tenant, per week, for each transaction

• Due Date:  Every Friday for each salon professional tenant at your location(s).

• This EFT payment processing fee is collected through Image Studios’ accounting system and is paid by your salon professional tenants and collected in addition to their weekly payments and rent, which is deposited into your account.

• Image Studios will withdraw this fee via ACH from your bank account each week after your payment collection is completed.

17.  Periodic Regional or National Conference:  $500 to $2,500 per person, which includes travel, accommodations, and conference attendance fee ($500 per attendee). Image Studios will charge a $1,000 fee if you do not attend.

• Due Date:  As incurred.

• Image Studios may hold regional or systemwide conferences. You (or your designated representative that Image Studios approves), must attend these conferences at Image Studios’ request.

18.  Technology Fee:  the then-current fee (Image Studios does not currently charge for this)

• Due Date:  Same as Royalty Fee.

• Image Studios reserves the right to charge you a monthly fee for custom or proprietary software that it developed itself or through third-party partnerships or agreement.

19.  Audit or Inspection Fee:  then-current charge, estimated at $125 to $175/hour

• Due Date:  Due on demand.

• You must pay the cost of an audit if your books are audited and there is a discrepancy of 3% or more. Any discrepancies above 3% are billed at 10% interest on underpayment.

20.  Review Fee:  $350 per request

• Due Date:  Due on demand.

• Payable if you propose to offer or sell any service or product that is not then approved by Image Studios or to request a different vendor or supplier other than what Image Studios designates. This fee does not guarantee approval and is non-refundable.

21.  Insurance:  then-current charges, estimated at $500 to $2,500 annually, per location

• Due Date:  Due on demand.

• If you do not purchase and maintain the required insurance, Image Studios may purchase it on your behalf and you must reimburse it for the cost of insurance, plus 15% of the premium as an administrative cost for obtaining insurance for your salon.

22.  Franchise Renewal:  then-current renewal fee, currently $5,000 per renewal, per license

• Due Date:  Due 45 days prior to renewal date.

• Initial franchise term is 10 years. The renewal term is based on Image Studios’ then-current Franchise Agreement.

23.  Transfer Fee for Standard Franchise Agreement:  $5,000, plus any broker fees associated with the transfer or sale, per location

• Due Date:  $1,000 non-refundable deposit due at the time of application. The remaining balance is due at the time of approval of the transfer.

• This is payable before you sell your franchise.

24.  Transfer Fee for Development Agreement:  $5,000, plus any broker fees associated with the transfer or sale

• Due Date:  $1,000 non-refundable deposit due at the time of application. The remaining balance is due at the time of approval of the transfer.

• This fee is payable for each salon for which a Franchise Agreement has been signed under the Development Agreement.

25.  Service Fees:  up to 3.75% for payments made by credit card; $50 for failed funds transfer/insufficient funds

• Due Date:  Upon demand.

• Any amounts owed due to insufficient funds will also be subject to late fees and accrued interest outlined below and may be grounds for termination of the Franchise Agreement.

• Subject to applicable law.

26.  Late Fees:  $100

• Due Date:  On demand.

• There is a late fee on any royalty, Brand Development Fund payments, and any other payments that are 7 days or more late.

• This fee is charged per occurrence.

27.  Required Reporting Late Fees:  $50. There is an additional fee of $100 per week while reporting remains incomplete.

• Due Date:  On demand.

• Payable to Image Studios if you fail to submit any required reports or financial statement on the due date outlined in your Franchise Agreement.

• Image Studios will pull these late fees via ACH from your bank account as outlined in the Manuals (currently on Fridays).

28.  Interest Expense:  18%

• Due Date:  On demand.

• Interest expense that accrues on all late payments in addition to the $100 late fee.

29.  Insufficient Funds:  $40

• Due Date:  On demand.

• Due if any payment, by electronic transfer or check, is returned due to insufficient funds.

30.  Attorneys’ Fees:  then-current fee, currently estimated at $300-$400/hour

• Due Date:  On demand.

• Costs Image Studios incurs for attorneys’ fees if you do not comply with the Franchise Agreement.

31.  Indemnification:  actual costs

• Due Date:  On demand.

• You must reimburse Image Studios if it is held liable for any and all claims arising from or related to your salon’s construction or design or your operation of the business.

32.  Operating Software Account Fee:  then-current fee, currently $6/month per email account

• Due Date:  Billed monthly.

• Covers the cost to administer each account assigned to you within Image Studios’ operating software program.

33.  Music, Media, and Image Scent License Fee:  then-current fee, currently $150/month per location

• Due Date:  As incurred.

• You must pay your pro-rata share of any licensing or streaming fees for music, media, and Image scent for your salon.

• Payable to third party.

34.  Customer Relationship Management Software:  then-current fee, currently, $35/month per location

• Due Date:  Billed monthly.

• Payable to Image Studios.

35.  Image Smartphone App:  then-current fee, currently $150/month per location

• Due Date:  Billed monthly.

• Payable to Image Studios.

• This is the Image smartphone application to allow tenants to use the Image app at your location. The application is optional for tenants.

36.  Professional Video and Photography Services:  then-current fee, currently $1,200 to $1,800

• Due Date:  When you open for business.

• Payable to third-party vendor for on-site professional video and photography at your location for your ads and Image Studios’ website.

37.  Inbound Call Services:  then-current fee, currently estimated at $250/month

• Due Date:  On demand.

• Image Studios, an affiliate, or a third party Image Studios designates may provide a call center to assist in inbound inquiries, appointment setting, and leasing assistance.

• If required by Image Studios, you must participate in the call center and you agree to pay a pro-rata share of all reasonable fees imposed by the provider for those services.

38.  Salon Directory Software:  then-current fee, currently estimated at $50/month

• Due Date:  Billed monthly.

• Payable to Image Studios or third-party vendor for your in-store salon directory TV software.