Does Body20 have the right to establish specifications for the Operating Assets that franchisees purchase?

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).

Technology System. You are required to purchase most of the components of the Technology System that we specify from suppliers that we approve or designate, including the software, hardware (e.g., computer, tablets, and security cameras), and related equipment required to connect to our technology platform. If we require you to use any proprietary software or to purchase any software from a designated vendor, you must execute any software license agreements that we or the licensor of the software require and any related software maintenance agreements.

Approval Process. If you would like to offer products or use any supplies, Operating Assets, or services that we have not approved or to purchase or lease from a supplier or service provider that we have not approved, you must submit a written request for approval and provide us with any information that we request. We have the right to inspect the proposed supplier's facilities and test samples of the proposed products and to evaluate the proposed service provider and the proposed service offerings. We may require the proposed supplier or service provider to visit our headquarters, currently, in Newport Beach, California, to evaluate the proposed supplier or service provider in person. You will pay us a charge that is equal to the greater of $1,000 or our and our affiliates' actual costs and expenses related to the inspection and/or testing the proposed product or evaluating the proposed service or service provider, including personnel and travel costs, whether or not the item, service, supplier, or service provider is approved. We have the right to grant, deny, or revoke approval of products, services, suppliers, or service providers based solely on our judgment. We will notify you in writing of our decision as soon as practicable following our evaluation. If you do not receive our approval within 30 days after submitting all of the information that we request, our failure to respond will be considered a disapproval of the request. The products and services that we approve for you to offer in your Studio may differ from those that we permit or require to be offered in other Studios.

To the extent that we establish specifications, require approval of suppliers or service providers, or designate specific suppliers or service providers for particular items or services, we will publish our requirements in the Manuals. We may, at any time, in our discretion, change, delete, or add to any of our specifications or quality standards. Such modifications, however, will generally be uniform for all franchisees. We will notify you of any changes to our Manuals, specifications, or standards in writing, which we may transmit to you electronically.

Proportion of Purchases Subject to Specifications. We estimate that the cost to purchase and lease all equipment, inventory and other items and services that we require you to obtain from us or our affiliates, from designated suppliers, or in accordance with our specifications ranges from 75% to 90% of the total cost to purchase and lease equipment, inventory, and other items necessary to establish a Studio and 30% to 45% of the total cost to purchase and lease equipment, inventory, and other items to operate a Studio.

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