Can Body20 require franchisees to lease specific services for their studio?

provide financing to franchisees either directly or indirectly in connection with their initial investment requirements.

ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

Authorized Products and Services. We have the right to require that all furniture, fixtures, signs, and equipment (collectively, the "Operating Assets") and products, supplies, and services that you purchase for resale or purchase or lease for use in your Studio: (i) meet specifications that we establish from time to time; (ii) be a specific brand, kind, or model; (iii) be purchased or leased only from suppliers or service providers that we have expressly approved;

and/or (iv) be purchased or leased only from a single source that we designate (which may include us or our affiliates or a buying cooperative organized by us or our affiliates).

You must offer to customers only the products, services, and Sessions we approve in writing. In addition, you must offer the specific products, services, and Sessions that we require in the Manuals or otherwise in writing. We may change these specifications periodically, and we may designate specific products or services as optional or mandatory. You must offer all products or services that we designate as mandatory. You may sell products and services only in the varieties, forms, and packages that we have approved in accordance with our System Standards. You must maintain a sufficient supply of required products to meet the inventory standards we prescribe in the Manuals (or to meet reasonably anticipated customer demand, if we have not prescribed specific standards).

We may require you to purchase merchant processing services from us, our affiliates or an approved or designated vendor. The payment processor may process all credit card payments related to your Studio and remit payment to you of all monies owed, after withholding any Operating Fees (i.e., Royalty Fees, Brand Fund Fees, Technology Fees, and Music Licensing Fees) payable to us and any payment processing fees payable to the processor.

You must conduct all Sessions in accordance with the System. You must offer at the Studio any Sessions that we deem to be mandatory. Any Sessions that you or your fitness coaches develop must be consistent with the System Standards that we specify from time to time. If we disapprove of any Sessions that you offer, you must immediately discontinue offering the Session or modify the Session in accordance with our instructions.

Currently, we require you to purchase from us or our affiliates (i) the Initial FF&E Package, (ii) the Presale Kit, (iii) the Initial Retail Inventory Kit, (iv) certain ongoing equipment purchases, and (v) replacement inventory and sales materials and accessories. We reserve the right to designate us or our affiliates as approved or required suppliers of other goods or services in the future.

Currently, we require you to purchase from suppliers or service providers that we have designated or approved (i) certain other equipment and supplies, (ii) interior graphics and exterior signage, (iii) the Technology System, (iv) music licenses, and (v) payment processing services. We may require you to purchase other goods or services from approved or designated supplies or services providers in the future.

When you develop and construct your Studio, we have the right to require you to obtain our prior written approval of any project managers, architects, engineers, or designers that you would like to use before you engage them.

One of Sequel Brands' officers owns an interest in us and our affiliates, and we are a supplier with whom you are required to do business. None of our or Sequel Brands' officers own an interest in any unaffiliated suppliers with whom you are required or recommended to do business.

Insurance. You must obtain before you begin construction and/or development of the Studio and must maintain at all times the types of insurance and the minimum policy limits specified in the Manuals. Currently, we require you to obtain and maintain:

Comprehensive General Liability and Professional Liability Insurance. You must maintain comprehensive general liability and professional liability insurance with the following minimum limits:

• 1. Each Occurrence: $1,000,000
• 1. General Aggregate: $5,000,000 (per Studio)
• 1. Products Completed Operations Aggregate: $5,000,000
• 1. Personal and Advertising Injury: $1,000,000
• 1. Participant Legal Liability: $1,000,000
• 1. Professional Liability: $1,000,000
• 1. Damage to Premises Rented to You: $1,000,000
• 1. Employee Benefits Liability (each employee): $1,000,000
• 1. Employee Benefits Liability (aggregate): $2,000,000
• 1. Medical Expense (any one person): $5,000
• 1. Sexual Abuse and Molestation: included (not excluded)

Such insurance will include coverage for contractual liability (for liability assumed under an "insured contract"), products-completed operations, personal and advertising injury, premises liability, third party property damage and bodily injury liability (including death).

Automobile Liability Insurance. You must maintain automobile liability insurance covering liability arising from the use, operation, or maintenance of any vehicle (including owned, leased, hired, or non-owned vehicles) used in connection with the ownership or operation of the Studio. This requirement applies only if such vehicles are used in the course of operating the Studio. Coverage limits must meet or exceed the minimum compulsory requirements in your state; however, it is strongly recommended that you maintain coverage of at least $1,000,000 per occurrence as a combined single limit for bodily injury and property damage.

Workers' Compensation Insurance**.** You must maintain workers' compensation insurance for all employees as required by applicable state law, providing statutory benefits in accordance with such laws. This insurance must also include employer's liability coverage with limits of not less than $500,000 per accident for bodily injury, $500,000 per employee for bodily injury by disease, and $500,000 policy limit for bodily injury by disease.

Property Insurance. You must maintain property insurance written on a special causes of loss form with limits equal to the current replacement cost of all business personal property located at the Studio, including furniture, fixtures, equipment, and leasehold (tenant) improvements. Coverage must also include: (a) plate glass coverage with limits of no less than $25,000; (b) signage coverage with limits of no less than $10,000;

Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 32–37)