Detailed Information on Restoration 1’s Initial Franchise Fee, Royalty Fee + 20 Other Fees (Items 5 and 6, 2022 FDD)

1.  Initial Franchise Fee:  for a Standard Franchise: $59,900 for a Territory that includes a population ranging from 200,000 people to 250,999 people, and an additional $175 per 1,000 people over 250,000 in your Territory. For a Micro Market Franchise: $35,000 for a Territory that includes a population ranging from 75,000 people to 125,999 people, and an additional $265 per 1,000 people over 125,000 in your Territory.

• If you acquire a Standard Franchise, you will pay Restoration 1 an initial franchise fee of $59,900 for a Territory that includes a population ranging from 200,000 people to 250,999 people. The initial franchisee fee increases by an additional $175 per 1,000 people over 250,000 in your Territory when you sign the Franchise Agreement.

• Most Standard Franchise Territories include between 250,000 and 275,000 people, which results in initial franchise fees ranging from $59,900 to $64,275.

• If you acquire a Micro Market Franchise, you will pay Restoration 1 an initial franchise fee of $35,000 for a Territory that includes a population ranging from 75,000 people to 125,999 people. The initial franchise fee increases by an additional $265 per 1,000 people over 125,000 in your Territory when you sign the Franchise Agreement.

• Most Micro Market Franchise Territories include between 75,000 and 150,000 people, which results in initial franchise fees ranging from $35,000 to $41,625.

• The franchise fee is due when you sign the Franchise Agreement. The initial franchise fee for a Standard or Micro Market Franchise is calculated uniformly for all franchisees (except for the Veterans Discount discussed below). The initial franchise fee is nonrefundable.

• Restoration 1 currently offers a discount off the initial franchise fee to veterans who have received an honorable discharge from any branch of the United States military at any time before applying to become a franchisee. The amount of the discount is $7,000 for a Standard Franchise or $4,500 for a Micro Market Franchise. The discount is only available for the first franchise purchased by the franchisee.

2.  Encircle Claims Management Software:  $2,500

• Prior to opening, you must purchase Restoration 1’s designated Encircle claims management software startup package.

• The cost of this purchase is $2,500, including (a) $1,500 that is paid to Restoration 1 as a one-time fee to set up your environment; and (b) $1,000 that is paid directly to the third-party software licensor and covers the first 100 claims and the licensor’s training program.

• The $1,500 component that is paid to Restoration 1 is uniformly imposed and nonrefundable.

3.  Royalty Fee:  greater of: (a) 7% of Collected Gross Revenue (excluding Reconstruction Services Gross Revenues); or (b) the minimum royalty fee

• Due Date:  7th day of month (or prior business day if 7th falls on a holiday or weekend).

• If you acquire a Standard Franchise, the “minimum royalty fee” is:

• Prior to 7th full month after opening:  $0
• 7th through 24th full month:  $500 per month
• 25th through 36th full month:  $1,500 per month
• Remainder of term:  $2,000 per month

• If you acquire a Micro Market Franchise, the “minimum royalty fee” is:

• Prior to 13th full month after opening:  $0
• 13th through 24th full month:  $500 per month
• Remainder of term:  $1,000 per month

• “Collected Gross Revenue” means all collected revenues from the Franchised Business, including proceeds from business interruption insurance and referral fees paid by third parties. Collected Gross Revenue does not include sales tax or use tax.

• If you acquire a Standard Franchise, the “minimum royalty fee” is: (i) $0 for the initial six full and/or partial month after opening; (ii) $500 per month for the seventh full month through the 24th full month after opening; (iii) $1,500 per month for the 25th full month after opening through the 36th full month after opening; and (iv) $2,000 per month for the remainder of the term.

• If you acquire a Micro Market Franchise, the “minimum royalty fee” is: (i) $0 for the initial 12 full and/or partial months after opening; (ii) $500 per month for the 13th full month through the 24th full month after opening; and (iii) $1,000 per month for the remainder of the term.

4.  Marketing Fund Contribution:  an amount Restoration 1 determines periodically, but not to exceed 2% of Collected Gross Revenue (excluding Reconstruction Services Gross Revenues); currently, 1% of Collected Gross Revenue

• Due Date:  Same as Royalty Fee.

• In addition to the Marketing Fund contribution, you must spend at least 2% of your Collected Gross Revenues on local advertising.

• Restoration 1 may require your expenditures be used in cooperative advertising.

5.  Local Advertising:  2% of Collected Gross Revenue

• Due Date:  Monthly.

6.  Technology Fee:  currently, $499 per month

• Due Date:  Same as Royalty Fee (or as otherwise specified by Restoration 1).

7.  Marketing in Another Protected Territory:  liquidated damages of up to $5,000

• Due Date:  At the time of occurrence.

8.  Audit Expenses:  all costs and expenses associated with audit, approximately $1,500 to $5,000

• Due Date:  Upon demand.

• Payable only if the audit shows you have not spent a minimum of 2% on local advertising or if you underreported amounts you owe Restoration 1 by 3% or more.

• Restoration 1 assumes costs vary depending on factors including prevailing auditor’s rates in your area, the business activity being audited, and how well you keep your books and records.

• You pay Restoration 1’s actual costs only. You should be able to investigate these costs by contacting auditors in your area.

9.  Interest Charges and Late Fees:  1.5% per month or the highest rate allowed by law, if less. For royalties, there is also a late fee of an additional 1.5 percentage points of Collected Gross Revenue

• Due Date:  Upon demand.

• Applies to all overdue fees you owe Restoration 1. Also applies to any understatement in amounts due revealed by an audit.

• Interest and late fees begin to accrue from the date payment was due but not received, or date of underpayment.

10.  Approval of Products or Suppliers:  all reasonable costs of evaluation, approximately $500 to $1,000

• Due Date:  Time of evaluation.

• Payable only if you request that Restoration 1 evaluate a new supplier.

11.  Insurance Policies:  amount of unpaid premiums, plus Restoration 1’s reasonable expenses in obtaining the policies

• Due Date:  Upon demand.

• Payable to Restoration 1 only if you fail to maintain required insurance coverage and it elects to obtain coverage for you.

12.  Transfer Fee:  $5,000

• Due Date:  At time of transfer.

• Payable to Restoration 1 at time of transfer.

• Does not apply to an assignment to a corporate entity for convenience.

13.  Additional Training Fee for a Substitute or New Manager or Principal:  $1,000 per day

• Due Date:  At time of training.

• Payable only if you have to repeat initial training, or if you replace your Designated Manager or bring new principals into your franchise.

14.  Conference Registration Fee:  up to $500 per person per conference

• Due Date:  Prior to conference.

• If you fail to attend any required conference, you must pay a $500 conference registration fee for the missed conference. However, if you demonstrate good cause for your inability to attend, Restoration 1 may waive the fee.

15.  Call Center Program:  reasonable set up and monthly fees imposed by the service provider; currently, $0 as the program has not yet been implemented

• Due Date:  Monthly or at such other time(s) as Restoration 1 specifies.

• Restoration 1 reserves the right to require you to use its preferred service provider to receive call center services.

• Restoration 1 may pay a portion of the fees to third parties, such as the call service provider, and it may in the future have a third party collect all or a portion of the fees.

16.  National Account Dispatch and Claims Management Fees:  amounts Restoration 1 designates; but the dispatch fee will not exceed $75 and the claims management fee will not exceed 10% of the invoiced amount for services

• Due Date:  At time of job.

• Payable only if you elect to provide services for a “National Account Client.”

• Restoration 1 will invoice and collect payment from the client, and remit to you your portion of the payment after deducting appropriate amounts.

17.  Additional Operations Assistance:  currently, $600 per day, plus Restoration 1’s expenses

• Due Date:  Time of assistance.

• Restoration 1 provides assistance around the beginning of operations. You pay for additional assistance if you request it.

18.  Cost of Enforcement:  all costs including reasonable attorneys’ fees

• Due Date:  Upon demand.

• You must reimburse Restoration 1 for all costs in enforcing obligations if it prevails.

19.  Indemnification:  all costs including reasonable attorneys’ fees

• Due Date:  Upon demand.

20.  Final Payment:  70% of your total accounts receivable, multiplied by 9%

• Due Date:  Within 30 days following expiration or termination of the Franchise Agreement.

• Payable in lieu of continuing Royalty Fee and Marketing Fund Contribution.

21.  Liquidated Damages:  present value of average Royalty Fees calculated through the end of the term but not to exceed 12 months

• Due Date:  Upon demand.

• Payable only if you prematurely cease operations or if Restoration 1 terminates the Franchise Agreement on account of your material breach.

22.  Construction Fees:  Royalty Fee of 2.0% of Reconstruction Services Gross Revenues; Marketing Fund Contribution of 0.5% of Reconstruction Services Gross Revenues

• Due Date:  Same as Royalty Fee.

• You have the option, but not the obligation, to offer and provide certain construction and reconstruction services in connection with mitigation and remediation projects.