Detailed Information on School of Rock’s Initial Franchise Fee, Royalty Fee + 16 Other Fees (Items 5 and 6, 2022 FDD)

• Unless otherwise indicated, all of the fees listed are non-refundable, are uniformly imposed, and are imposed by, payable to, and collected by School of Rock.

1.  Initial Franchise Fee:  $49,900

• You must pay to School of Rock a $49,900 lump sum, non-refundable initial franchise fee for a single School of Rock franchise to be operated under an individual Franchise Agreement. You must pay the entire initial franchise fee no later than the date of your signing the Franchise Agreement.

• If you are a veteran (or an entity majority-owned by a veteran) of the U.S. military, you are eligible for a $5,000 discount on the initial franchise fee payable under the first School of Rock Franchise Agreement you sign. School of Rock reserves the right to modify or cancel this veterans’ discount at any time.

2.  Development Fee:  $24,950 for each school you are granted the right to open under the Development Agreement

• If you enter into a Development Agreement, you must pay to School of Rock a lump sum, non-refundable development fee equal to $24,950 for each School you are granted the right to open under the Development Agreement. In order to enter into a Development Agreement, you must agree to develop at least one School of Rock business.

• You must pay the entire development fee no later than the date of your signing the Development Agreement.

• The development fee will be credited towards the initial franchise fee due under each Franchise Agreement you sign on a pro rata basis. The development fee is deemed fully earned and non-refundable when you sign the Development Agreement in consideration of the administrative and other expenses incurred by School of Rock and for the development opportunities lost or deferred as a result of the development rights granted to you.

• School of Rock generally does not offer Development Agreements to first time franchisees.

3.  Change in Opening Date:  varies

• You must provide School of Rock at least 30 days’ notice of the date on which you propose to first open the School. If there is a change in the opening date, not caused by School of Rock, it can require you to reimburse it for the greater of (a) its actual out-of-pocket costs and expenses incurred by it due to this delay, including travel costs and expenses for its representative(s), or (b) $300 for each additional day that its representative(s) is in your area beyond the scheduled visit as a result of delay in opening the School. If imposed, these fees are non-refundable.

4.  Royalty:  8% of Gross Sales

• Due Date:  10th day of each month.

• “Gross Sales” means all revenues generated from sales of all products and services conducted at, from, or with respect to the School, including Live Performances and Professional Performances, the Little Wing Program, or Independent Facilities, whether the sales are evidenced by cash, check, credit, charge, account, barter, or exchange.

• Gross Sales does not include the sale of products or services for which refunds have been made in good faith to customers, the sale of equipment or furnishings used in the operation of the School, any sales taxes or other taxes collected from customers by you and paid directly to the appropriate taxing authority.

• Gross Sales also include any insurance proceeds you receive for loss of business due to a casualty to or similar event at the School.

5.  Brand Fund:  3% of Gross Sales

• Due Date:  10th day of each month.

• You must pay to the System’s advertising and brand promotion fund (the “Brand Fund”) a monthly fee in the amount of 3% of your Gross Sales for the preceding month.

6.  Advertising Cooperative:  up to 3% of Gross Sales

• Due Date:  As required by the Advertising Cooperative.

• If established, each School of Rock business participating in a Cooperative will have one vote on any matter requiring member approval, and each Cooperative will have the right to require its members to make contributions to the Cooperative in an amount determined by the Cooperative, up to a maximum of 3% of Gross Sales during any calendar year, unless two-thirds of the members of the Cooperative vote in favor of a greater contribution.

• Company-owned locations have no voting power on any fees imposed by the Cooperative, unless they are members of such Cooperative.

• Any payments you make to the Cooperative will be credited towards your required local advertising expenditure. There are no Cooperatives currently.

7.  Interest:  interest on overdue payments

• Due Date:  As incurred.

• All required royalty fees and advertising contributions must be paid by the 10th day of each month based on your Gross Sales in the preceding month, and must be submitted to School of Rock together with any reports or statements required by the Franchise Agreement.

• If any payment is overdue, you must pay School of Rock immediately upon demand, in addition to the overdue amount, interest on this amount from the date it was due until paid, at the rate of 18% per annum, or the maximum rate permitted by law, whichever is less.

8.  Insurance:  cost of insurance and, if not obtained by you, School of Rock’s procurement expense

• Due Date:  As required and as incurred.

• Before you open your School, you must purchase and maintain at your sole expense at all times during the term of the Franchise Agreement the insurance coverage required by the Franchise Agreement, including comprehensive general liability insurance (including coverages for medical expense, abuse and molestation, and special event liability), property insurance (including fire, vandalism, and malicious mischief insurance for the replacement value of the School and its contents), personal and advertising injury insurance, statutory workers’ compensation insurance (if not required in your state, you must obtain workers’ compensation insurance regardless), employer’s liability insurance, crime coverage for employee theft, and automobile insurance coverage for all vehicles used in connection with the operation of the School.

• If you fail to obtain or maintain the insurance required, School of Rock will have the right and authority (but not the obligation) to procure and maintain the required insurance in your name and to charge you for it, which charges, together with a reasonable fee for its expenses in so acting, will be payable by you immediately upon notice.

9.  Inspection/Audit:  cost of audit

• Due Date:  As incurred.

• School of Rock and its designated agents have the right at all reasonable times to examine, copy, and/or personally review, at its expense, your books, records, accounts, and tax returns. It has the right at all reasonable times to remove your books, records, accounts, and tax returns for copying. It also has the right, at any time, to have an independent audit made of your books and records.

• If an inspection or audit reveals that any income or sales have not been reported or have been understated in any report to School of Rock, then you must pay School of Rock the amount underpaid immediately upon demand, in addition to interest from the date the amount was due until paid, at the rate of 18% per annum, or the maximum rate permitted by law, whichever is less, plus all of School of Rock’s costs and expenses in connection with the inspection or audit, including travel costs, lodging and wage expenses, and reasonable accounting and legal fees and costs.

10.  Site Selection (including on-site evaluation):  amount of expenses

• Due Date:  As incurred.

• Under the Franchise Agreement and Development Agreement, School of Rock will conduct, if it deems necessary and appropriate, on-site evaluations of a properly submitted proposed site. For each on-site evaluation (if any), School of Rock may require you to reimburse it for all of its reasonable out-of-pocket costs and expenses.

11.  Transfer:  a certain percentage, or one-third, of the then-current initial franchise fee

• Due Date:  Time of transfer.

• If there is a transfer under the Franchise Agreement, you must pay to School of Rock a transfer fee as follows: if there is a proposed transfer of (i) less than 50% of the ownership interests in you (if you are a corporation, limited liability company, or a partnership), then you must pay to School of Rock a transfer fee which is equal to the greater of $2,500 or the mathematical product of the total ownership percentage in you being transferred multiplied by an amount equal to one-third of School of Rock’s then-current initial franchise fee; or (ii) 50% or more of the ownership interests in you (if you are a corporation, limited liability company, or a partnership), all your assets, or a transfer or assignment of the Franchise Agreement, then you must pay to School of Rock a transfer fee in an amount equal to one-third of its then-current initial franchise fee.

• In the event of a transfer to a corporation or limited liability company formed by you for the convenience of ownership, you will not have to pay a transfer fee.

12.  Renewal:  one-third of the then-current initial franchise fee

• Due Date:  Time of renewal.

• If you renew your rights under the Franchise Agreement, you must pay to School of Rock a renewal fee in an amount equal to one-third of its then-current initial franchise fee being charged to franchisees at the time of the renewal.

13.  Indemnification:  cost of liability

• Due Date:  As incurred.

• Under the Franchise Agreement and Development Agreement, you must indemnify and hold School of Rock, and its officers, directors, and employees harmless against any and all claims, losses, costs, expenses, liabilities, and damages arising directly or indirectly from, as a result of, or in connection with your operation of the School, as well as the costs, including attorneys’ fees, of the indemnified party in defending against them.

14.  Collection Costs and Attorneys’ Fees:  cost of collection and attorneys’ fees

• Due Date:  As incurred.

• Under the Franchise Agreement, you must pay to School of Rock all damages, costs, and expenses, including all court costs, arbitration costs, and reasonable attorneys’ fees, and all other expenses it incurs in enforcing any obligation or in defending against any claim, demand, action, or proceeding relating to the Franchise Agreement or Development Agreement, including the obtaining of injunctive relief.

15.  Information Technology Fee:  fixed and variable

• Due Date:  Monthly.

• You will pay School of Rock a monthly technology fee to cover website hosting, e-mail licenses, and certain other technology resources. Currently, the amount of this fee is $290 per month, but the fee may be increased depending on bandwidth or functionality changes in School of Rock’s website, the number of specific licenses you require, and changes in School of Rock’s technology vendors or requirements.

• You will also pay variable monthly fees to third-party providers as described in Item 11.

16.  PRO Licensing Fee:  $78 currently

• Due Date:  Monthly.

• School of Rock or its affiliates have negotiated and are negotiating license agreements with Performance Rights Organizations to allow schools to perform and playback copyrighted music used in the operations of the School and on the premises of the School.

• You must pay School of Rock a monthly licensing fee in the amount set forth in the Manuals to cover the cost of these licenses for your School. Currently, the fee is $78/month.

• However, School of Rock reserves the right to increase or decrease the fee as the cost of the licenses changes, or as it or its affiliates negotiate additional licenses.

17.  Method App Fee:  $5.40 per curriculum-eligible student

• Due Date:  Monthly.

• School of Rock’s parent and affiliate has developed a proprietary mobile device and desktop application called the School of Rock Method App that is used in the operations of the School to aid in the delivery and execution of the curriculum. School of Rock, LLC has negotiated agreements with application developers and copyright owners to include a library of copyrighted music notation to be contained within the Method App and be accessed by curriculum-eligible students and School of Rock staff as defined in the Manuals.

• To cover the cost of these agreements, you must pay School of a Rock, LLC a Method App Fee of $5.40 per month for each curriculum-eligible student in your School.

18.  School of Rock Online Hardware Kit:  $200 lump sum, plus $30/year

• Due Date:  Lump sum and annually.

• The School of Rock Online desktop/mobile application (the “School of Rock Online App”) facilitates online lessons or rehearsals for users in separate locations. Additional functionality allows users to perform together as an ensemble, online, in a synchronous fashion and provides a more seamless and integrated audio and video experience when using video conferencing to conduct group rehearsals and ensemble learning.

• For full functionality, the School of Rock Online App requires a special equipment and hardware package (the “School of Rock Online Hardware Kit”). School of Rock recommends (but does not require) that you and your students utilize the School of Rock Online App.

• In order to offer the additional functionality, at least one School of Rock Online Hardware Kit is required to be purchased by your School, from a third-party vendor, at a cost of approximately $200, in addition to an annual fee of $30/year beginning with the second year after purchase of your kit, also to be paid to a third-party vendor. Each student who chooses to use the additional functionality must also purchase the School of Rock Online Hardware Kit and pay the annual fee, starting in year two.

• Currently, franchisees do not pay School of Rock a separate fee to offer the School of Rock Online App functionality to students, but School of Rock reserves the right to collect such a fee in the future.