contributions to the Fund in our previous fiscal year.

We may develop advertising internally, or contract with local, regional, or national agencies to develop advertising for the brand fund.

Regional Advertising Cooperative

We may establish a Marketing Cooperative in a geographic area in which two or more Beauty Bungalows are located. The Marketing Cooperative's members include all Beauty Bungalows franchises operating in the geographic area, including those operated by us and our affiliates, if applicable. We may require you to join a Marketing Cooperative existing or established in a geographic area encompassing your Beauty Bungalows franchise. We will determine how any Marketing Cooperative is organized and governed, but the Marketing Cooperative's members are responsible for its administration and determination of contribution levels, provided your required contribution to the Marketing Cooperative will not exceed 2% of your Beauty Bungalows Franchise's location's monthly Gross Revenue. Each Marketing Cooperative will operate under written governing documents prepared by us or our designee. Such documentation will be made available to members of the Marketing Cooperative upon reasonable request. Marketing Cooperatives will prepare an annual unaudited financial statement and make it available to members upon reasonable request. All material decisions of the Marketing Cooperative, including contribution levels, will require the affirmative vote of at least 51% of all Beauty Bungalows operating within the Marketing Cooperative's area (including those that we and our affiliates operate, if any), with each Beauty Bungalows franchisee group receiving one vote. We may form, modify, change, dissolve, or merge Marketing Cooperatives. Funds contributed to a Marketing Cooperative will not be utilized to solicit new franchise sales. Any fees you pay to a Marketing Cooperative will count towards your Local Area Marketing Requirement, though the fees imposed by the Marketing Cooperative may exceed your required Local Area Marketing Requirement obligation.

Advertising Council

Currently, we have not formed any council of Beauty Bungalows franchisees, but we may do so in the future. We have the right to form, change, dissolve, or merge franchisee advisory council(s). When established, the Beauty Bungalows Franchise Advisory Board ("BBFAB") will provide us with general input but will not have decision making authority or the ability to obligate us to any particular course of action outside of our obligations set forth in the Franchise Agreement. Council members may be selected for any characteristics, such as region and experience. We will give due consideration to all input from the council, but we retain the ultimate decision-making authority and responsibility for all matters. If we submit a matter for approval by the BBFAB and that matter is approved by a majority vote of the BBFAB, that approval will be fully binding on you.

We have no obligation to spend any amount on advertising and promotion in your Area or Territory.

Computer Systems, Proprietary Software, and Internet Access

We do not currently require you to purchase any particular brand of computer hardware to establish or operate the Business, but we do specify the standards for computer and communication equipment and Internet access. The minimum hardware requirement is a laptop or desktop computer with 4 GB RAM, a 128 GB Hard Drive, internet access, the ability to run the business management software we designate, and the ability to run basic business function software programs such as Microsoft Office and bookkeeping software. This hardware may be obtained from any computer reseller such as Staples, Office Depot or Best Buy and will cost from $500 to $1,000.

Beauty Bungalows Franchising, LLC You must provide us real-time internet access to the information contained in the computer system and/or the software utilized in the operation of your Beauty Bungalows Franchise. However, we will be restricted to the information relating only to your Beauty Bungalows Franchise. Beauty Bungalows has the

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contractual right to pull the necessary data from your computer, but as a practical matter would be unable to do so without your cooperation. Beauty Bungalows will not have the right to access other types of data on your computer and does not have the ability to access it independently. Neither we nor our affiliates have any obligation to provide ongoing maintenance, repair, upgrades or updates to any computer system or software.

We reserve the right to specify computer hardware or software standards in the future. You must have access to the Internet, have an electronic mail address and periodically check your electronic mailbox and the portion of our website devoted to franchise owners.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 23–30)