What is the 'System' that C3 Wellness Spa licenses to franchisees?

We license a system (the "System") for the development and operation of a Franchised Business, also referred to as a Spa Location Franchise that, depending on your qualifications and applicable local, state and federal laws and regulations, involves either, as described below:

Spa – Your development and operation of a Spa Location Franchise that owns and operates a spa ("Spa") that provides skin care, cosmetic health and wellness med spa products and services that include facial treatment services, medical spa services, wellness programs, medical testing, bioidentical hormone replacement, IV vitamin therapy, massage therapy services, physical therapy, light and laser skin enhancement, cosmetic services, topical skin treatments, essential oils, and spa related services and retail products (the "Approved Spa Products and Services") under the C3 Wellness name and marks and such other trade-names, trademarks, and logos as we may designate, modify and adopt from time to time (collectively referred to as the "Licensed Marks"). If your Spa Location Franchise directly operates a Spa, the gross sales and revenues of your Spa Location Franchise will be generated from the sale of Approved Spa Products and Services to customers of the Spa. You may only enter into a Franchise Agreement to own and operate a Spa if: (i) you are a licensed medical professional; or (ii) you open the Franchised Business in a state that permits individuals who are not licensed medical professionals to own and operate businesses offering Approved Spa Products and Services. You must directly hire your own attorney to independently, evaluate, review, and advise you may or may not engage in respecting the operation and management of a Spa; or

Spa Management Business – Your development and operation of a Spa Location Franchise that owns and operates a management business ("Spa Management Business") that provides management, marketing, and spa facility based services (the "Spa Facility and Management Services") to medical practices, professional corporations, and licensed professionals authorized to offer and provide the Approved Spa Products and Services (referred to as "Authorized Care Providers") at a Spa that is directly operated, and potentially owned, by the Authorized Care Providers authorized to directly offer and provide the Approved Spa Products and Services. You will enter into a management agreement ("Management Agreement") with the Authorized Care Providers to provide them with the Spa Facility and Management Services and grant them a license to use the Licensed Marks at the location of your

Spa Location Franchise. If your Spa Location Franchise operates as a Spa Management Business, the gross sales and revenues of your Spa Location Franchise will be generated from management and other fees paid by Authorized Care Providers for Spa Facility and Management Services. Although your Management Agreement must be approved by us and although we provide a sample management agreement (Franchise Agreement, Exhibit 10), you must directly hire your own attorney to independently evaluate, review, and ensure that your Management Agreement complies with all applicable laws, rules and regulations. The Spa Management Business is only offered to franchisees who are not licensed medical professionals.

Spas shall offer and provide the Approved Spa Products and Services and shall include and use those products, supplies and equipment including, cosmetic injectables and fillers and specialized equipment and supplies for treatments involving skin care and body sculpting designated by us (collectively, the "System Supplies") and shall be managed using the point of sale and business management systems (collectively, the "Business Management System") designated by us.

Source: Item 1 — THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES (FDD pages 8–14)