Does Beauty Bungalows allow competition from other franchisees within a franchisee's territory?

You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.

Once you have secured the Site for your Beauty Bungalows franchise, we will provide you an area in which you will have protected rights (the "Protected Territory"). Your Protected Territory will typically be a twomile radius around your Business, unless your Business is located in a major metropolitan downtown area or similarly situated/populated central business district (a "Central Business District"). If your Business is located in a Central Business District, your Protected Territory may be limited to a geographic area comprised of anywhere from a radius of two blocks to two miles around your Business, as we deem appropriate in our discretion. The size of your Protected Territory may vary from the territory granted to other franchisees based on the location and demographics surrounding your Business.

We and our affiliates may sell products under the Marks within and outside your Protected Territory through any method of distribution other than a dedicated Beauty Bungalows location, including, sales through such channels of distribution as the Internet, catalog sales, telemarketing, or other direct marketing sales (together, "alternative distribution channels"). You may not use alternative distribution channels to make sales outside or inside your Protected Territory except as described in the following paragraph and you will receive no compensation for our sales through alternative distribution channels except as described in the following paragraph.

We and our affiliates can use alternative distribution channels to make sales within your Protected Territory of products or services under trademarks different from the Marks you will use under the Franchise Agreement.

The Protected Territory we grant you is an exclusive territory. However, because we reserve certain rights to operate or offer products and services through alternative channels of distribution in your Protected Territory, you may face competition from us, our affiliates, other franchisees, or others inside and outside of your Protected Territory.

We reserve the following rights, among others:

• 1. to own, franchise, or operate Beauty Bungalows Franchises at any location outside of the Protected Territory, regardless of the proximity to your Site;
• 1. to use the Marks and the System to sell any goods or services, including salon equipment or services, or beauty supplies similar to those which you will sell, through any alternative distribution channels within or outside of the Protected Territory. This includes, but is not limited to, other channels of distribution such as television, mail order, catalog sales, wholesale sale to unrelated franchises, or over the Internet. We exclusively reserve the Internet as a channel of distribution for us, and you may not independently market on the Internet or conduct e-commerce.
• 1. to purchase or be purchased by, or merge or combine with, any businesses, including a business that competes directly with your Beauty Bungalows Franchise, wherever located; and
• 1. to implement multi-area marketing programs which may allow us or others to solicit or sell to customers anywhere. We also reserve the right to issue mandatory policies to coordinate such multi-area marketing programs.
• 1. to use, license and franchise the use of trademarks or service marks that are not the same or similar to the Marks, whether in alternative channels of distribution or at any location including within the Protected Territory, in association with operations that are the same as, similar to, or different than Beauty Bungalows Franchises.

Source: Item 12 — TERRITORY (FDD pages 30–32)