School of Rock Franchise Costs: Estimated Initial Investment (Item 7, 2022 FDD)

• Except as otherwise described in the notes below, the table provides an estimate of your initial investment for a new, single School of Rock Business and the costs necessary to begin operation of your School.

• All costs listed in the table are estimates only. Actual costs will vary for each franchisee and each location depending upon a number of factors.

• All fees and payments described in this Item 7 are non-refundable, unless otherwise stated or permitted by the payee.

1.  Initial Franchise Fee:  $49,900

• The initial franchise fee is not refundable.

2.  Initial Rent Outlays:  $6,000 to $15,500

• If you do not own or purchase a site for your School, you must lease or acquire a site for your School for the term of the Franchise Agreement.

• In the event that you lease the premises for the School, School of Rock has provided an estimated cost, which estimate includes one month’s rent plus one month’s rent as security deposit. Your lease must contain certain provisions as required under the Franchise Agreement.

• School of Rock has not provided an estimate of costs incurred for purchasing the premises for the School, as it anticipates you will lease the premises.

• The School will ideally be located in a freestanding building or flex space (convertible retail or office) or Class B, C, or D commercial real estate. The approximate size of the premises and the building for your School will likely be a minimum of approximately 2,500 feet at an approximate cost of $24 to $35 per square foot per year, net of common area charges. Common area charges (CAM) can range between $5 to $11 per square foot per year.

3.  Site Selection and Leasehold Improvements:  $237,000 to $275,000

• You must renovate or construct your School according to School of Rock’s standards and specifications. Depending on the building leased or purchased by you, no renovation or construction may be necessary.

• The estimate in the table includes the costs of construction and fixtures and assumes that basic plumbing, electricity, and heat or air conditioning exist on the premises.

• Before you begin any renovation or construction of the School, you must, at your expense, employ a qualified, licensed architect or engineer to prepare preliminary and final architectural drawings and specifications of the Premises in accordance with the standard specifications for a School of Rock Business. These preliminary and final drawings and specifications must be submitted to School of Rock for written approval.

• These costs are based on an average school size of approximately 2,500 square feet and are based on an average construction cost between $95 to $110 per square foot. Please note that costs may be higher or lower depending on your local market.

4.  Furnishings and Finishings:  $12,000 to $26,000

• This estimate includes the costs of basic furniture that complies with School of Rock’s standards and specifications, as well as artwork, ornamental lighting, wall coverings, and other decorative items.

5.  Equipment:  $20,000 to $30,000

• This estimate reflects the cost of purchasing the basic equipment necessary to operate your School and incidental office equipment. The estimate includes the cost of music equipment, office equipment and furniture, telephones, and other equipment.

• If you choose to offer students access to the School of Rock Online App with full functionality, you will need to purchase the School of Rock Online Hardware Kit at a cost of approximately $200 for the first year, plus an annual fee of $30/year beginning with the second year after purchase of your hardware kit.

6.  Security Camera:  $7,500 to $16,500

• Camera hardware and installation will range from approximately $7,500 for a 12-camera configuration to $16,500 for a 24-camera configuration. Monthly access charges for cameras are approximately $6 per camera.

7.  Signage:  $7,000 to $14,000

• All signage must be approved by School of Rock and it will provide specifications for approved signage. The figures in the chart reflect the estimated cost of interior and exterior signage and other signage that meet School of Rock’s standards, specifications, and requirements.

• The cost of signs depends on the size and location of your School, the particular requirements of the landlord, and local and state ordinances and zoning requirements.

8.  Supplies:  $500 to $1,000

• You must purchase supplies for the School. This estimate includes the cost of cleaning products and supplies, basic office supplies, and computer supplies.

9.  Pre-Opening Training:  $1,800 to $3,000

• During the second half of 2022, School of Rock expects to resume in-person training, with the initial training program then being provided through a combination of virtual and in-person instruction.

• The estimate in the chart includes training expenses for travel (by car or air), food, lodging, and payroll expenses for you and your employees who must attend the initial training program before your School opens.

• The estimate does not include the training fees that you must pay for individuals who attend the initial training program beyond the number for which School of Rock has agreed to pay, or any training fees you may be required to pay under any revised initial training program School of Rock may develop and implement.

10.  Advertising:  $10,000

• Beginning 60 days before the grand opening of the School, and within 30 days after the opening, you must spend at least $10,000 on an initial, grand opening advertising, marketing, and promotional program in the form and manner School of Rock prescribes.

• Included in this $10,000 is your obligation to purchase a “Kick It Open Kit” from School of Rock’s designated supplier that includes a number of elements critical to your Grand Opening Marketing campaign.

• You are also required to spend 3% of your annualized Gross Sales on local advertising during each year of the term of the Franchise Agreement.

11.  Opening Inventory:  $2,500 to $3,500

• You must stock your School with an initial inventory of products, accessories, and supplies as prescribed by School of Rock in the Manual or otherwise in writing. School of Rock will provide you with a list of equipment needed to open the School in the Manual or otherwise in writing.

• The above estimated cost covers a supply of inventory for sales for approximately three months. Your cost will be based upon the amount purchased. Your actual amount purchased will depend on your anticipated sales, which will depend on a variety of factors such as the size and location of your School and overall anticipated demand.

12.  Computer/Software:  $4,000 to $8,500

• This estimate reflects the cost of your computer hardware and software, which includes the cost of your Computer System and the Required Software, and the cost of the typical equipment package required for live streaming, along with three months of the basic service plan from the recommended live streaming software vendor (StreamYard).

13.  Permits and Licenses:  $2,000 to $3,500

• Before the opening of your School, you must obtain all necessary government approvals, permits, and licenses. The above estimate includes building permits, certificates of occupancy, and certificates of health.

14.  Architectural Fees:  $10,000 to $15,000

• You must retain a qualified, licensed architect or engineer to prepare preliminary and final architectural drawings and specifications of the premises of your School in accordance with the standard specifications for a School of Rock Business.

• To assist franchisees in the preparation of these drawings and specifications, School of Rock has negotiated a reduced pricing arrangement with a preferred provider of architectural design services. You are encouraged, but not required, to make use of this preferred provider.

15.  Prepaid Insurance Premiums:  $500 to $3,000

• Before you open your School, you must purchase the insurance coverage required by the Franchise Agreement. The cost of the business insurance coverage will vary from state to state and will depend on your prior loss experience, if any, and/or the prior loss experience of your insurance carrier in the state or locale in which you operate, and national or local market conditions.

• School of Rock anticipates that you will have to pay your insurance carrier or agent 25% of an annual premium in advance. The estimate provided in the chart is for 25% of an annual premium covering general liability and workers’ compensation.

16.  Utility Costs and Deposits:  $600 to $1,500

• This estimate includes the costs of deposits necessary to begin services for gas, electricity, telephone, and water that you will need to operate your School.

17.  Miscellaneous Opening Expenses:  $3,500 to $7,500

• This category includes the costs of legal and accounting services, as well as office supplies and other expenses typically incurred to begin the operation of any franchised business.

• These expenses will vary depending on your decisions about how to equip your School within the standards specified by School of Rock.

18.  Additional Funds for 3 Months:  $21,000 to $54,000

• The estimates in the chart, including the amount of additional funds, are based on the actual opening experience of School of Rock’s parent and affiliate in operating company-owned School of Rock Businesses.

• School of Rock estimates the monies described in the chart will be necessary during the first three months that your School is open and operating. During the first three months of operation, controllable expenses, such as labor, supplies, and direct operating costs, are typically above average for a School of Rock business due to the need for additional staff training to ensure exceptional service and promoting the School.

• The actual amount of additional funds you will need will depend on a variety of factors, such as the number of paid employees you hire and their rate of pay, your own management and operational skill, economic conditions, and competition.

19.  Total:  $395,800 to $537,400

• School of Rock does not offer financing for any part of the initial investment.