Extreme_Art_Studio 2024 Franchise FAQ - FDD Ninja

Question 1

What conditions must I meet to be eligible to acquire a successor franchise for my Extreme Art Studio?

Accepted Answer

- 13.1.1 Upon expiration of this Franchise Agreement, if you meet certain conditions, and subject to the terms and conditions of this Section 13, and subject to the terms and conditions of this Franchise Agreement, then you will have the option to acquire a successor franchise to operate the Franchised Business as an Extreme Art Studio Business for an additional term of ten years. If you are signing this franchise agreement as a successor agreement, the references to "term" shall mean the applicable renewal term of the successor agreement. The qualifications and conditions for the successor franchise term are described below.
- 13.1.2 When this Franchise Agreement expires you have the option to acquire a successor franchise commencing immediately upon the expiration of this Franchise Agreement, if:
  - (a) you (and each of your owners) have substantially complied with this Franchise Agreement during its term;
  - (b) you (and each of your owners) are, both on the date you give us written notice of your election to acquire a successor franchise (as provided in Section 13.2 below) and on the date on which the term of the successor franchise would commence, in full compliance with this Franchise Agreement and all System Standards;
    - (c) you add, update, or replace Operating Assets (if necessary) at our request;
  - (d) you pay us a successor franchise fee for each successor Extreme Art Studio Business being renewed, in the amount of ten percent (10%) of our then-current Initial Franchise Fee for new franchises (or if we are not offering Franchises at the time of your renewal, the successor franchise fee shall be ten percent (10%) of the initial franchise fee listed in our most recent franchise disclosure document); and
  - (e) you: (a) retain the right to use the Studio(s) and agree to renew your lease agreements; or (b) at your option, secure rights to use one or more substitute Studio(s) that

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we approve, and you enter into lease agreements with such Studios according to System Standards then-applicable for Extreme Art Studio Businesses;

(f) you agree to sign the franchise agreement we then use to grant franchises for Extreme Art Studio Businesses (modified as necessary to reflect the fact that it is for a successor franchise), which may contain provisions that differ materially from any and all of those contained in this Franchise Agreement. You also agree to complete any additional training programs to meet our then-current standards at your expense.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 2

What is the total number of new franchised Extreme Art Studio outlets projected to open in the next fiscal year across all states listed in the table?

Accepted Answer

| State | Franchise Agreements Signed But Outlet Not Opened | Projected New Franchised | Projected New Company- Owned Outlets in the Next Fiscal Year |
|---|---|---|---|
|  |  | Outlets in the Next Fiscal Year |  |
| Florida | 0 | 1 | 0 |
| Georgia | 0 | 1 | 0 |
| Minnesota | 0 | 0 | 2 |
| Virginia | 0 | 1 | 0 |
| Total | 0 | 4 | 0 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 47–49)

Question 3

What was the total number of Extreme Art Studio outlets opened in 2023?

Accepted Answer

3 Status of Franchised Outlets For Years 2021 to 2023

|  |  |  |  | Termina- tions |  |  | Ceased |  |
|---|---|---|---|---|---|---|---|---|
|  |  | Outlets at |  |  |  |  |  | Outlets at |
|  |  |  | Outlets |  | Non- | Reacquired by | Opera- |  |
| State | Year | Star of |  |  |  |  |  | End of |
|  |  |  | Opened |  | Renewals | Franchisor | tions-Other |  |
|  |  | the Year |  |  |  |  |  | the Year |
|  |  |  |  |  |  |  | Reasons |  |
|  |  |  |  |  |  |  |  |  |
| Totals | 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
|  | 2022 | 0 | 0 | 0 | 0 | 0 | 0 | 0

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 47–49)

Question 4

Besides Extreme Art Studio, what other company is Mike Conlon the Chief Operating Officer of?

Accepted Answer

Mr. Conlon has served as our Chief Operating Officer since July 2023 in Boynton Beach, Florida. He is also the Chief Operating Officer of KSF since October 2019 in Boynton Beach, Florida. Mr. Conlon served as Chief Operating Officer for British Swim School Franchising, LLC in Fort Lauderdale, Florida from April 2019 to October 2019. Mr. Conlon was the Chief Operating Officer for British Swim Centers Franchising, LLC in Fort Lauderdale, Florida from January 2017 to April 2019.

Source: Item 2 — BUSINESS EXPERIENCE (FDD pages 10–11)

Question 5

Considering the initial franchise fee for an Extreme Art Studio in Item 5, what other fees must a franchisee pay, as detailed in Item 6, and when are they due?

Accepted Answer

ces.

#### *Opening Inventory*

You must purchase certain branded opening supplies and inventory items from us or designated vendors prior to opening your Extreme Art Studio Business. We estimate that your costs for these items will range from \$4,500 to \$5,500. If you purchase a Standard 2 Franchise or Standard 3 Franchise package, you will purchase the opening inventory for the additional Extreme Art Studio Businesses when you sign each Extreme Art Rider. These payments are uniform and non-refundable.

#### *Uniforms*

We recommend having employees to wear an Extreme Art-branded shirt or top or apron ("Uniforms"), but you are not required to do so. You may also purchase Extreme Art-branded shirts for customers to purchase. These may be purchased at any time from us or an approved vendor. We estimate the costs of the Uniforms to be between \$100 and \$200.

#### *Implementation Fees*

Prior to opening your Extreme Art Studio Business, you must purchase a license for database management software ("DB Software") from suppliers we designate. You must also pay us the following implementation fees for us to implement the DB Software and class registration software ("CR Software") for you: (a) \$500 for your CR Software; and (b) \$1,500 for your DB Software. These fees are payable for each Extreme Art Studio Business you have the right to open, are payable upon execution of the Franchise Agreement, and are non-refundable. If you purchase a Standard 2 Franchise or Standard 3 Franchise package, you will pay these implementation fees for the additional Extreme Art Studio Businesses when you sign each Extreme Art Rider. These payments are uniform and non-refundable.

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#### *Technology Fee*

You must pay us a monthly technology fee of \$400 ("Technology Fee") beginning the first day of the second month after you sign the Franchise Agreement. The Technology Fee is uniform and nonrefundable.

#### *Opening Extension Fee*

If you fail to open the Extreme Art Business within 15 months effective date of your Franchise Agreement we may charge you an "Opening Extension Fee" of \$1,000 per month until the Extreme Art Business or the termination of your Franchise Agreement. These payments are uniform and non-refundable under any circumstances.

#### **ITEM 6 OTHER FEES**

| Type of Fee(1)                   | Amount                                                                                                                                                                                                                     | Due Date                                                            | Remarks                                                                                                                                                                                                                                                                                                                                                                                                                             |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Royalty(2)                       | The greater of 8% of Gross Sales ("Royalty") or \$500 per month ("Minimum Royalty")                                                                                                                         | Within five days after the end of the calendar month | The Royalty is based on "Gross Sales" during the previous month. Gross Sales are defined in Note 2. You must pay your Royalty via electronic funds transfer ("EFT"), or such other manner we may prescribe. The Minimum Royalty begins six months after you open your first Extreme Art Studio Business and immediately after you open additional Extreme Art Studio Businesses. |
| Brand Fund Contribution(2) | 1% of Gross Sales                                                                                                                                                                                                          | Same as Royalty                                                     | This contribution will be used for a system-wide "Brand Fund" for our use in promoting and building the Extreme Art brand.                                                                                                                                                                                                                                                                                                 |
| Local Advertising Payment  | The difference between the amount you spent on local advertising each month and your required local advertising expenditure (\$500 per month per Extreme Art Studio Business) | Payable after receipt of invoice                                 | If you fail to meet your required local advertising requirement on local advertising, you must pay us the difference between the amount you spent and the required advertising expenditure, which will be contributed to the Brand Fund or to us.                                                                                                                                                     |

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| Type of Fee(1)

Question 6

Considering the initial franchise fee for an Extreme Art Studio in Item 5, what other fees must a franchisee pay, as detailed in Item 6, and what is the total financial burden in the first year?

Accepted Answer

his period. - 1. Initial Franchise Fee. The Initial Franchise Fee is \$45,000 for the purchase of a single Extreme Art Studio Business. - 2. Furniture, Fixtures, and Equipment. This estimate involves the furniture, fixtures, and equipment you will need to open an Extreme Art Studio Business. Some of these expenses will depend on the size of the Studio (as applicable), shipping distances, supplier chosen, and your credit history. - 3. Initial Inventory and Supplies. You must have opening inventory and supply items on hand before you open your Extreme Art Studio Business. You will purchase branded opening supplies and ![](_page_19_Picture_7.jpeg) ![](_page_20_Picture_0.jpeg) - inventory from us. The remainder of the purchases will be made from approved suppliers and/or in accordance with our standards and specifications. - 4. Insurance. You must obtain and maintain, at your own expense, the insurance coverage we require, and satisfy other insurance-related obligations. If you have had prior issues or claims from previous operations unrelated to the operation of an Extreme Art Studio Business, your rates may be significantly higher than those estimated above. - 5. Business Licenses and Permits. You must obtain all necessary permits and licenses required by applicable law before you begin operation of your Extreme Art Studio Business. - 6. Professional Fees. We strongly recommend that you hire a lawyer, accountant, or other professional to advise you on this Franchise offering. Rates for professionals can vary significantly based on area and experience. - 7. Signage. The estimate is the cost of the interior and exterior sign packages you will need for your Extreme Art Studio Business. The estimate for our standard Studio exterior sign package includes one exterior sign. Your signage costs may vary if you choose to add additional signs or are required to do so per the terms of your lease. - 8. Computers and Hardware. You must purchase approved computers and tablets, and certain other related items necessary to operate and manage an Extreme Art Studio Business. You must purchase a minimum of one laptop computer that has the ability to access the Internet and operate multiple cloud-based CRM programs and other operating systems to operate and manage an Extreme Art Studio Business. The low range reflects your use of computers and tablets that you own prior to purchasing an Extreme Art Studio Business. - 9. Implementation Fees. You will pay us implementation fees for the set-up and launch of the DB Software and the CR Software. - 10. Grand Opening Promotion. You must spend at least \$5,000 to \$10,000 on an approved grand opening advertising campaign for an Extreme Art Studio Business. - 11. Uniforms.

Question 7

Considering the initial franchise fee for an Extreme Art Studio in Item 5, what other fees must a franchisee pay, as detailed in Item 6, and what is the total cost of starting the franchise?

Accepted Answer

[Item 5: INITIAL FEES] If you choose to purchase the Modules, you will be required to pay the initial fees for each Extreme Art Business you wish to use the Module curriculum and sign the Module Amendment attached to this Franchise Disclosure Document as Exhibit H-9. Kidcreate Franchises may also offer the Modules. The Modules fees are uniform, earned by us when paid, and are not refundable under any circumstances. If you choose to purchase the Modules, you must pay us a monthly module technology fee of $250 ("Module Technology Fee") beginning the first day of the second month after you sign the Franchise Agreement. The Module Technology Fee is uniform and non-refundable under any circumstances. #### *Opening Inventory* You must purchase certain branded opening supplies and inventory items from us or designated vendors prior to opening your Extreme Art Studio Business. We estimate that your costs for these items will range from $4,500 to $5,500. If you purchase a Standard 2 Franchise or Standard 3 Franchise package, you will purchase the opening inventory for the additional Extreme Art Studio Businesses when you sign each Extreme Art Rider. These payments are uniform and non-refundable. #### *Uniforms* We recommend having employees to wear an Extreme Art-branded shirt or top or apron ("Uniforms"), but you are not required to do so. You may also purchase Extreme Art-branded shirts for customers to purchase. These may be purchased at any time from us or an approved vendor. We estimate the costs of the Uniforms to be between $100 and $200. #### *Implementation Fees* Prior to opening your Extreme Art Studio Business, you must purchase a license for database management software ("DB Software") from suppliers we designate. You must also pay us the following implementation fees for us to implement the DB Software and class registration software ("CR Software") for you: (a) $500 for your CR Software; and (b) $1,500 for your DB Software. These fees are payable for each Extreme Art Studio Business you have the right to open, are payable upon execution of the Franchise Agreement, and are non-refundable. If you purchase a Standard 2 Franchise or Standard 3 Franchise package, you will pay these implementation fees for the additional Extreme Art Studio Businesses when you sign each Extreme Art Rider. These payments are uniform and non-refundable. [Item 7: ESTIMATED INITIAL INVESTMENT] | Type of Expenditure (1) | Amount | | Method of Payment | When Due | To Whom Payment is to be Paid(1) | |---|---|---|---|---|---| | | Low | High | | | | | Architect(19) | $5,000 | $12,000 | As Incurred | As Incurred | Approved Suppliers | | Liquor License(20) | $0 | $15,000 | As Incurred | As Incurred | Third Parties, Government Agencies | | TOTAL | $119,030 | $355,455 | | | | | ESTIMATED | | | | | | | INITIAL | | | | | | | INVESTMENT(21) | | | | | | [Item 7: ESTIMATED INITIAL INVESTMENT] #### General Notes These estimated initial expenses are our best estimate of the costs you may incur in establishing and operating an Extreme Art Studio Business. Because neither we do nor our affiliates operate Extreme Art Studio Businesses and because we have not sold any franchised Extreme Art Studio Businesses, we are relying on our affiliate's experience in offering Kidcreate franchises in compiling these estimates. We do not offer direct or indirect financing for these items. All expenditures paid to us or our affiliates are uniform and non-refundable under any circumstances once paid. All expenses payable to third parties are non-refundable, except as you may arrange with such third parties. The availability and terms of financing depend on many factors, including the availability of financing generally, your creditworthiness, and collateral and lending policies of financial institutions from which you request a loan. These figures are estimates only, and it is possible that you may have additional or greater expenses during this period. - 1. Initial Franchise Fee. The Initial Franchise Fee is $45,000 for the purchase of a single Extreme Art Studio Business.

Question 8

What are all the fees an Extreme Art Studio franchisee must pay, combining the initial franchise fee from Item 5 and the other fees listed in Item 6?

Accepted Answer

[Item 5: INITIAL FEES]

If you choose to purchase the Modules, you will be required to pay the initial fees for each Extreme Art Business you wish to use the Module curriculum and sign the Module Amendment attached to this Franchise Disclosure Document as Exhibit H-9. Kidcreate Franchises may also offer the Modules. The Modules fees are uniform, earned by us when paid, and are not refundable under any circumstances. If you choose to purchase the Modules, you must pay us a monthly module technology fee of $250 ("Module Technology Fee") beginning the first day of the second month after you sign the Franchise Agreement. The Module Technology Fee is uniform and non-refundable under any circumstances.

#### *Implementation Fees*

Prior to opening your Extreme Art Studio Business, you must purchase a license for database management software ("DB Software") from suppliers we designate. You must also pay us the following implementation fees for us to implement the DB Software and class registration software ("CR Software") for you: (a) $500 for your CR Software; and (b) $1,500 for your DB Software. These fees are payable for each Extreme Art Studio Business you have the right to open, are payable upon execution of the Franchise Agreement, and are non-refundable. If you purchase a Standard 2 Franchise or Standard 3 Franchise package, you will pay these implementation fees for the additional Extreme Art Studio Businesses when you sign each Extreme Art Rider. These payments are uniform and non-refundable.

[Item 22: CONTRACTS]

#### **3.1 INITIAL FRANCHISE FEE**. When you sign this Franchise Agreement, you will pay us a nonrecurring, nonrefundable initial franchise fee in the amount as set forth in **Attachment A** ("**Initial Franchise Fee**"). If you purchase a Standard Franchise, you will not be required to pay a separate Initial Franchise Fee when you sign the Extreme Art Rider (all other fees will apply). The Initial Franchise Fee is uniform, earned by us when paid, and is not refundable. The Initial Franchise Fee is in consideration of all of our pre-opening assistance that we provide to allow you to open your Franchised Businesses and our loss of deferred opportunity to enter into this Franchise Agreement with others, and it also offsets some of our expenses for franchisee recruitment.

#### **3.2 ROYALTY FEE.**

- 3.2.1 You agree to pay us a recurring royalty fee ("**Royalty**") for each calendar month (or other accounting period that we may designate from time to time). The amount of the Royalty will be equal to the greater of: (i) eight percent (8%) of your Gross Sales from all of your Extreme Art Studio Businesses for the previous calendar month (or other accounting period we designate); or (ii) $500 per month for each Extreme Art Studio Business you operate under this Franchise Agreement ("**Minimum Royalty**"). The Minimum Royalty shall begin being charged by us 6 months after you open your first Extreme Art Studio Business under this Franchise Agreement and immediately upon opening each subsequent Extreme Art Studio Business under a Standard Franchise (if applicable).

- **3.4 TECHNOLOGY FEES**.

You agree to pay us or our affiliate the then-current monthly technology fee ("**Technology Fee**"), currently $400 per month for your initial Extreme Art Studio Business and $300 per month for each additional Extreme Art Studio Business under a Standard Franchise, for use of our online systems, website, applications, email, data sharing, integration and maintenance of DB Software (as defined in Section 3.6), learning management software, search engine optimization for lead generation, and other Internet-related functions.

Question 9

How does the initial franchise fee for an Extreme Art Studio, as stated in Item 5, compare to the estimated initial investment range in Item 7, and what does this suggest about financing needs?

Accepted Answer

[Item 7: ESTIMATED INITIAL INVESTMENT] | Type of Expenditure (1) | Amount | | Method of Payment | When Due | To Whom Payment is to be Paid(1) | |---|---|---|---|---|---| | | Low | High | | | | | Architect(19) | $5,000 | $12,000 | As Incurred | As Incurred | Approved Suppliers | | Liquor License(20) | $0 | $15,000 | As Incurred | As Incurred | Third Parties, Government Agencies | | TOTAL | $119,030 | $355,455 | | | | | ESTIMATED | | | | | | | INITIAL | | | | | | | INVESTMENT(21) | | | | | | - 1. Initial Franchise Fee. The Initial Franchise Fee is $45,000 for the purchase of a single Extreme Art Studio Business. These estimated initial expenses are our best estimate of the costs you may incur in establishing and operating an Extreme Art Studio Business. Because neither we do nor our affiliates operate Extreme Art Studio Businesses and because we have not sold any franchised Extreme Art Studio Businesses, we are relying on our affiliate's experience in offering Kidcreate franchises in compiling these estimates. We do not offer direct or indirect financing for these items. All expenditures paid to us or our affiliates are uniform and non-refundable under any circumstances once paid. All expenses payable to third parties are non-refundable, except as you may arrange with such third parties. The availability and terms of financing depend on many factors, including the availability of financing generally, your creditworthiness, and collateral and lending policies of financial institutions from which you request a loan. These figures are estimates only, and it is possible that you may have additional or greater expenses during this period. 21. This is an estimate of your initial startup expenses for one Extreme Art Studio Business. You should review these figures carefully with a business advisor before making any decision to purchase the Franchise.

Question 10

What are the ongoing fees that an Extreme Art Studio franchisee must pay, as detailed in Item 6, and how do these fees compare to the initial franchise fee outlined in Item 5?

Accepted Answer

eferred opportunity to enter into this Franchise Agreement with others, and it also offsets some of our expenses for franchisee recruitment.

#### **3.2 ROYALTY FEE.**

- 3.2.1 You agree to pay us a recurring royalty fee ("**Royalty**") for each calendar month (or other accounting period that we may designate from time to time). The amount of the Royalty will be equal to the greater of: (i) eight percent (8%) of your Gross Sales from all of your Extreme Art Studio Businesses for the previous calendar month (or other accounting period we designate); or (ii) \$500 per month for each Extreme Art Studio Business you operate under this Franchise Agreement ("**Minimum Royalty**"). The Minimum Royalty shall begin being charged by us 6 months after you open your first Extreme Art Studio Business under this Franchise Agreement and immediately upon opening each subsequent Extreme Art Studio Business under a Standard Franchise (if applicable).
- 3.2.2 For purposes of this Franchise Agreement, "**Gross Sales**" means all revenue that you receive from operating the Franchised Business (including any modules), including, but not limited to, all amounts or other consideration that you receive, directly or indirectly, at or away

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from the Extreme Art Studio Business, and in the form of cash, check, credit and debit card, barter exchange, trade credit, or other credit transactions, and including all proceeds from any business interruption insurance. For example, Gross Sales includes, without limitation, the following:

- (a) all monies you receive from customers, including, but not limited to, monies received from the sale of products and services;
  - (b) the amount of gift card redemptions;
- (c) the proceeds of any business loss or interruption insurance or similar insurance; and
  - (d) any other revenue you derive.
- 3.2.3 Gross Sales does not include any federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, any bona fide customer refunds or customer tips.

Question 11

What is the relationship between the initial franchise fee for an Extreme Art Studio, as detailed in Item 5, and the total estimated initial investment range provided in Item 7?

Accepted Answer

| Type of Expenditure (1) | Amount | | Method of Payment | When Due | To Whom Payment is to be Paid(1) | |---|---|---|---|---|---| | | Low | High | | | | | Architect(19) | $5,000 | $12,000 | As Incurred | As Incurred | Approved Suppliers | | Liquor License(20) | $0 | $15,000 | As Incurred | As Incurred | Third Parties, Government Agencies | | TOTAL | $119,030 | $355,455 | | | | | ESTIMATED | | | | | | | INITIAL | | | | | | | INVESTMENT(21) | | | | | | | Standard 2 Franchise | If you purchase a Standard 2 Franchise under the Multi-Franchise Addendum, you will incur all of the costs listed above for each Extreme Art Studio Business you open except that the Initial Franchise Fee will total $80,000 and allow you to open up to two Extreme Art Studio Businesses. If you were to open two Extreme Art Studio Businesses using the same estimated initial expenses above, we estimate this total cost to range between $227,860 to $701,210. These costs may increase in the future depending on when you open the additional Extreme Art Studio Businesses. | | Standard 3 Franchise | If you purchase a Standard 3 Franchise under the Multi-Franchise Addendum, you will incur all of the costs listed above for each Extreme Art Studio Business you open except that the Initial Franchise Fee will total $110,000 and allow you to open up to three Extreme Art Studio Businesses. If you were to open three Extreme Art Studio Businesses using the same estimated initial expenses above, we estimate this total cost to range between $331,690 to $1,040,165. These costs may increase in the future depending on when you open the additional Extreme Art Studio Businesses | - 1. Initial Franchise Fee. The Initial Franchise Fee is $45,000 for the purchase of a single Extreme Art Studio Business.

Question 12

What is the relationship between the initial franchise fee for an Extreme Art Studio in Item 5 and the ongoing fees listed in Item 6?

Accepted Answer

| Franchise Type                     | Number of Extreme Art Studio Businesses | Initial Franchise Fee |
|------------------------------------|--------------------------------------------|-----------------------|
| Single Extreme Art Studio Business | 1                                          | $45,000              |

- 3.2.1 You agree to pay us a recurring royalty fee ("**Royalty**") for each calendar month (or other accounting period that we may designate from time to time). The amount of the Royalty will be equal to the greater of: (i) eight percent (8%) of your Gross Sales from all of your Extreme Art Studio Businesses for the previous calendar month (or other accounting period we designate); or (ii) $500 per month for each Extreme Art Studio Business you operate under this Franchise Agreement ("**Minimum Royalty**"). The Minimum Royalty shall begin being charged by us 6 months after you open your first Extreme Art Studio Business under this Franchise Agreement and immediately upon opening each subsequent Extreme Art Studio Business under a Standard Franchise (if applicable).
If you choose to purchase the Modules, you must pay us a monthly module technology fee of $250 ("Module Technology Fee") beginning the first day of the second month after you sign the Franchise Agreement.

Question 13

What is the relationship between the initial franchise fee for an Extreme Art Studio in Item 5 and the ongoing fees listed in Item 6, and how does this affect the franchisee's long-term financial planning?

Accepted Answer

us the Opening Extension Fee (defined below) until you open or until the Franchise Agreement (or, in our discretion, Extreme Art Rider) is terminated.

#### **3. FEES.**

**3.1 INITIAL FRANCHISE FEE**. When you sign this Franchise Agreement, you will pay us a nonrecurring, nonrefundable initial franchise fee in the amount as set forth in **Attachment A** ("**Initial Franchise Fee**"). If you purchase a Standard Franchise, you will not be required to pay a separate Initial Franchise Fee when you sign the Extreme Art Rider (all other fees will apply). The Initial Franchise Fee is uniform, earned by us when paid, and is not refundable. The Initial Franchise Fee is in consideration of all of our pre-opening assistance that we provide to allow you to open your Franchised Businesses and our loss of deferred opportunity to enter into this Franchise Agreement with others, and it also offsets some of our expenses for franchisee recruitment.

#### **3.2 ROYALTY FEE.**

- 3.2.1 You agree to pay us a recurring royalty fee ("**Royalty**") for each calendar month (or other accounting period that we may designate from time to time). The amount of the Royalty will be equal to the greater of: (i) eight percent (8%) of your Gross Sales from all of your Extreme Art Studio Businesses for the previous calendar month (or other accounting period we designate); or (ii) \$500 per month for each Extreme Art Studio Business you operate under this Franchise Agreement ("**Minimum Royalty**"). The Minimum Royalty shall begin being charged by us 6 months after you open your first Extreme Art Studio Business under this Franchise Agreement and immediately upon opening each subsequent Extreme Art Studio Business under a Standard Franchise (if applicable).

Question 14

What is the relationship between the initial franchise fee for an Extreme Art Studio in Item 5 and the ongoing fees listed in Item 6, and how does this impact the franchisee's profitability?

Accepted Answer

- 1. Initial Franchise Fee. The Initial Franchise Fee is $45,000 for the purchase of a single Extreme Art Studio Business. #### **3.2 ROYALTY FEE.** - 3.2.1 You agree to pay us a recurring royalty fee ("**Royalty**") for each calendar month (or other accounting period that we may designate from time to time). The amount of the Royalty will be equal to the greater of: (i) eight percent (8%) of your Gross Sales from all of your Extreme Art Studio Businesses for the previous calendar month (or other accounting period we designate); or (ii) $500 per month for each Extreme Art Studio Business you operate under this Franchise Agreement ("**Minimum Royalty**"). The Minimum Royalty shall begin being charged by us 6 months after you open your first Extreme Art Studio Business under this Franchise Agreement and immediately upon opening each subsequent Extreme Art Studio Business under a Standard Franchise (if applicable). - 3.2.2 For purposes of this Franchise Agreement, "**Gross Sales**" means all revenue that you receive from operating the Franchised Business (including any modules), including, but not limited to, all amounts or other consideration that you receive, directly or indirectly, at or away

Question 15

What is the relationship between the initial franchise fee for an Extreme Art Studio in Item 5 and the total estimated initial investment range provided in Item 7?

Accepted Answer

| Type of Expenditure (1) | Amount | | Method of Payment | When Due | To Whom Payment is to be Paid(1) | |---|---|---|---|---|---| | | Low | High | | | | | Architect(19) | $5,000 | $12,000 | As Incurred | As Incurred | Approved Suppliers | | Liquor License(20) | $0 | $15,000 | As Incurred | As Incurred | Third Parties, Government Agencies | | TOTAL | $119,030 | $355,455 | | | | | ESTIMATED | | | | | | | INITIAL | | | | | | | INVESTMENT(21) | | | | | | - 1. Initial Franchise Fee. The Initial Franchise Fee is $45,000 for the purchase of a single Extreme Art Studio Business. Standard 2 Franchise | If you purchase a Standard 2 Franchise under the Multi-Franchise Addendum, you will incur all of the costs listed above for each Extreme Art Studio Business you open except that the Initial Franchise Fee will total $80,000 and allow you to open up to two Extreme Art Studio Businesses. If you were to open two Extreme Art Studio Businesses using the same estimated initial expenses above, we estimate this total cost to range between $227,860 to $701,210. These costs may increase in the future depending on when you open the additional Extreme Art Studio Businesses | | Standard 3 Franchise | If you purchase a Standard 3 Franchise under the Multi-Franchise Addendum, you will incur all of the costs listed above for each Extreme Art Studio Business you open except that the Initial Franchise Fee will total $110,000 and allow you to open up to three Extreme Art Studio Businesses. If you were to open three Extreme Art Studio Businesses using the same estimated initial expenses above, we estimate this total cost to range between $331,690 to $1,040,165. These costs may increase in the future depending on when you open the additional Extreme Art Studio Businesses

Question 16

What is the relationship between the initial franchise fee for an Extreme Art Studio in Item 5 and the total estimated initial investment range provided in Item 7, and how does this affect the franchisee's financing options?

Accepted Answer

es | | | | |#### General Notes These estimated initial expenses are our best estimate of the costs you may incur in establishing and operating an Extreme Art Studio Business. Because neither we do nor our affiliates operate Extreme Art Studio Businesses and because we have not sold any franchised Extreme Art Studio Businesses, we are relying on our affiliate's experience in offering Kidcreate franchises in compiling these estimates. We do not offer direct or indirect financing for these items. All expenditures paid to us or our affiliates are uniform and non-refundable under any circumstances once paid. All expenses payable to third parties are non-refundable, except as you may arrange with such third parties. The availability and terms of financing depend on many factors, including the availability of financing generally, your creditworthiness, and collateral and lending policies of financial institutions from which you request a loan. These figures are estimates only, and it is possible that you may have additional or greater expenses during this period. - 1. Initial Franchise Fee. The Initial Franchise Fee is \$45,000 for the purchase of a single Extreme Art Studio Business. - 2. Furniture, Fixtures, and Equipment. This estimate involves the furniture, fixtures, and equipment you will need to open an Extreme Art Studio Business. Some of these expenses will depend on the size of the Studio (as applicable), shipping distances, supplier chosen, and your credit history. - 3. Initial Inventory and Supplies. You must have opening inventory and supply items on hand before you open your Extreme Art Studio Business. You will purchase branded opening supplies and ![](_page_19_Picture_7.jpeg) ![](_page_20_Picture_0.jpeg) - inventory from us.

Question 17

What is the relationship between the initial franchise fee for an Extreme Art Studio in Item 5 and the total estimated initial investment range provided in Item 7, and how does this impact the franchisee's return on investment?

Accepted Answer

| Type of Expenditure (1) | Amount | | Method of Payment | When Due | To Whom Payment is to be Paid(1) | |---|---|---|---|---|---| | | Low | High | | | | | Architect(19) | $5,000 | $12,000 | As Incurred | As Incurred | Approved Suppliers | | Liquor License(20) | $0 | $15,000 | As Incurred | As Incurred | Third Parties, Government Agencies | | TOTAL | $119,030 | $355,455 | | | | | ESTIMATED | | | | | | | INITIAL | | | | | | | INVESTMENT(21) | | | | | | - 1. Initial Franchise Fee. The Initial Franchise Fee is $45,000 for the purchase of a single Extreme Art Studio Business. You must spend at least $5,000 to $10,000 on an approved grand opening advertising campaign for an Extreme Art Studio Business. We estimate the costs of the Uniforms to be between $100 and $200.

Question 18

What is the total estimated initial investment for an Extreme Art Studio, as detailed in Item 7, and how does this compare to the initial franchise fee outlined in Item 5?

Accepted Answer

| Type of Expenditure (1) | Amount | | Method of Payment | When Due | To Whom Payment is to be Paid(1) | |---|---|---|---|---|---| | | Low | High | | | | | Architect(19) | $5,000 | $12,000 | As Incurred | As Incurred | Approved Suppliers | | Liquor License(20) | $0 | $15,000 | As Incurred | As Incurred | Third Parties, Government Agencies | | TOTAL | $119,030 | $355,455 | | | | | ESTIMATED | | | | | | | INITIAL | | | | | | | INVESTMENT(21) | | | | | | | Standard 2 Franchise | If you purchase a Standard 2 Franchise under the Multi-Franchise Addendum, you will incur all of the costs listed above for each Extreme Art Studio Business you open except that the Initial Franchise Fee will total $80,000 and allow you to open up to two Extreme Art Studio Businesses. If you were to open two Extreme Art Studio Businesses using the same estimated initial expenses above, we estimate this total cost to range between $227,860 to $701,210. These costs may increase in the future depending on when you open the additional Extreme Art Studio Businesses. | | Standard 3 Franchise | If you purchase a Standard 3 Franchise under the Multi-Franchise Addendum, you will incur all of the costs listed above for each Extreme Art Studio Business you open except that the Initial Franchise Fee will total $110,000 and allow you to open up to three Extreme Art Studio Businesses. If you were to open three Extreme Art Studio Businesses using the same estimated initial expenses above, we estimate this total cost to range between $331,690 to $1,040,165. These costs may increase in the future depending on when you open the additional Extreme Art Studio Businesses | - 1. Initial Franchise Fee. The Initial Franchise Fee is $45,000 for the purchase of a single Extreme Art Studio Business. 21. This is an estimate of your initial startup expenses for one Extreme Art Studio Business. You should review these figures carefully with a business advisor before making any decision to purchase the Franchise.

Question 19

What types of businesses compete with an Extreme Art Studio?

Accepted Answer

Extreme Art Studio Businesses service the needs of the general public. Our services are not seasonal in nature. The market for the goods and services offered by Extreme Art Studio Businesses is developed and competitive. Extreme Art Studio Businesses compete with other businesses including franchised operations, national chains, and independently owned companies offering art activities, events, classes, and birthday parties. Before signing a franchise agreement, you are encouraged to research your local market to determine the number of competitors, the numbers and types of facilities and people they are likely servicing, and the perceived quality of their programs and materials.

Source: Item 1 — THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES (FDD pages 9–10)

Question 20

When must an Extreme Art Studio franchisee reimburse the franchisor for Professional Fees and Expenses?

Accepted Answer

| Type of Fee(1)                               | Amount                                                                                                                                                                                                                                                                    | Due Date    | Remarks                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Professional Fees and Expenses | Will vary under circumstances | As incurred | You must reimburse us for any legal or accounting fees that we incur as a result of any breach or termination of your Franchise Agreement or any Extreme Art Rider. You must reimburse us if we are required to incur any expenses in enforcing our rights against you under the Franchise Agreement or any Extreme Art Rider. |

Source: Item 6 — OTHER FEES (FDD pages 13–18)

Question 21

When is the Insufficient Funds Fee charged to an Extreme Art Studio franchisee, and how much is it?

Accepted Answer

| Type of Fee(1) | Amount                                                                                                                                                                                                                                                                    | Due Date    | Remarks                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Insufficient Funds Fee | $100 per occurrence | As incurred | Payable if any check or EFT payment is not successful due to insufficient funds, stop payment or any similar event. |

Source: Item 6 — OTHER FEES (FDD pages 13–18)

Question 22

Under what circumstances must an Extreme Art Studio franchisee reimburse the franchisor for taxes?

Accepted Answer

- 3.2.3 Gross Sales does not include any federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, any bona fide customer refunds or customer tips.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 23

According to the Extreme Art Studio FDD, does the ability to terminate the agreement on any grounds available by law supersede any other termination clauses in the Extreme Art Studio franchise agreement?

Accepted Answer

sor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

#### **VIRGINIA**

Item 17(h). The following is added to Item 17(h):

"Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for a franchisor to use undue influence to induce a franchisee to surrender any right given to him under the franchise. If any provision of the Franchise Agreement or Supplemental Agreements involve the use of undue influence by the Franchisor to induce a franchisee to surrender any rights given to franchisee under the Franchise, that provision may not be enforceable."

In recognition of the restrictions contained in Section 13.1-564 of the Virginia Retail Franchising Act, the FDD for Extreme Art Studio Franchising, LLC for use in the Commonwealth of Virginia shall be amended as follows:

Additional Disclosure. The following statements are added to Item 8 and Item 17.h.

Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for a franchisor to cancel a franchise without reasonable cause. If any grounds for default or termination stated in the Franchise Agreement does not constitute "reasonable cause," as that term may be defined in the Virginia Retail Franchising Act or the laws of Virginia, that provision may not be enforceable.

No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

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#### **WASHINGTON**

WASHINGTON ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT, FRANCHISE AGREEMENT AND RELATED AGREEMENTS

In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW will prevail.

RCW 19.100.180 may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise.

Source: Item 23 — RECEIPTS (FDD pages 49–214)

Question 24

According to the Extreme Art Studio Franchise Agreement, what happens if there are changes to the information contained in Attachment C?

Accepted Answer

Owner ceases to own at least a fifty-one percent (51%) ownership interest in you, you must deliver to us a revised **Attachment C** to accurately identify the Operating Owner for our review and approval, as otherwise required by this Franchise Agreement; and

1.3.6 The Operating Owner is authorized to deal with us on your behalf in respect of all matters whatsoever which may arise in respect of this Franchise Agreement, and any decision made by the Operating Owner will be final and binding upon you. We will be entitled to rely solely upon the decision of the Operating Owner in any such dealings without the necessity of any discussions with any other party named in this Franchise Agreement, and we will not be held liable for any actions taken by you or otherwise, based upon any decision or actions of the Operating Owner.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 25

According to the FTC's Franchise Rule, what must be true if Extreme Art Studio provides financial performance information?

Accepted Answer

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchise and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

Extreme Art Studio Franchising, LLC does not make any financial performance representations. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor's management by contacting Lara Olson at Extreme Art

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 46–47)

Question 26

According to the FTC's Franchise Rule, under what condition is Extreme Art Studio permitted to provide information about potential financial performance?

Accepted Answer

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchise and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

Extreme Art Studio Franchising, LLC does not make any financial performance representations. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor's management by contacting Lara Olson at Extreme Art

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 46–47)

Question 27

According to the Multi-Franchise Addendum, what happens if there is a conflict between the addendum and the Franchise Agreement for Extreme Art Studio?

Accepted Answer

| THIS ADDENDUM ("Addendum") is entered into and made effe | ective as of the date set forth on | |-----------------------------------------------------------------------------|----------------------------------------| | the signature page hereof, by and between Extreme Art Studio Franchising | g, LLC (" Franchisor ") and the | | franchisee named on the signature page of this Addendum ("Franchisee"). | This Addendum relates to that | | certain Extreme Art franchise agreement dated, 20_ | ("Franchise Agreement") | | and supplements the terms of the Franchise Agreement in relation to the ope | ening of additional Extreme Art | | franchises. All capitalized terms not otherwise defined in this Addendum s | shall have the meaning set forth | | in the Franchise Agreement. To the extent this Addendum conflicts wi | ith the terms of the Franchise | | Agreement, the terms of this Addendum shall control. | | Source: Item 22 — CONTRACTS (FDD page 49)

Question 28

According to the Extreme Art Studio System Protection Agreement, what is the definition of 'Restricted Period' if a court determines the standard definition is too long?

Accepted Answer

"Restricted Period" means the two-year period after you cease to be a manager or officer of Franchisee's Extreme Art Studio Business; provided, however, that if a court of competent jurisdiction

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determines that this period of time is too long to be enforceable, then the "Restricted Period" means the one-year period after you cease to be a manager or officer of Franchisee's Extreme Art Studio Business.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 29

According to the Extreme Art Studio System Protection Agreement, what is the definition of 'Restricted Territory' if a court determines the standard definition is too broad?

Accepted Answer

"Restricted Territory" means the geographic area: (i) within a 25-mile radius of each Extreme Art Studio Business that you operate under this Franchise Agreement; and (ii) within a 25-mile radius of any other Extreme Art Studio Business that is either open or under development as of the date of termination or expiration of this Franchise Agreement; provided, however, that if a court of competent jurisdiction determines that the foregoing Restricted Territory is too broad to be enforceable, then the "Restricted Territory" means the geographic area within a 13-mile radius from Franchisee's Extreme Art Studio Business (and including the premises of the approved location of Franchisee).

Source: Item 22 — CONTRACTS (FDD page 49)

Question 30

What action should a prospective franchisee take if Extreme Art Studio Franchising, LLC does not deliver the disclosure document on time?

Accepted Answer

If Extreme Art Studio Franchising, LLC does not deliver this disclosure document on time or if it contains a false or misleading statement or a material omission, a violation of federal law and state law may have occurred and should be reported to the Federal Trade Commission, Washington, DC 20580, and the appropriate state agency identified on Exhibit A. Extreme Art Studio Franchising, LLC authorizes the respective state agencies identified on Exhibit A to receive service of process for it in the particular state.

Source: Item 23 — RECEIPTS (FDD pages 49–214)

Question 31

What advance notice must Extreme Art Studio give of its intent not to renew the Franchise to avoid compensation?

Accepted Answer

- (d) A provision that permits us to refuse to renew your Franchise without fairly compensating you by repurchase or other means for the fair market value at the time of expiration of your inventory, supplies, equipment, fixtures, and furnishings.

Personalized materials which have no value to us and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the Franchise business are not subject to compensation.

This subsection applies only if: (i) the term of the Franchise is less than five (5) years; and (ii) you are prohibited by the Franchise Agreement or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the Franchise or you do not receive at least six (6) months' advance notice of our intent not to renew the Franchise.

Source: Item 23 — RECEIPTS (FDD pages 49–214)

Question 32

What agreement must the Former Franchisee execute for Extreme Art Studio, unless precluded by state law?

Accepted Answer

Former Franchisee and the undersigned Owners agree to comply with all of the covenants in the Former Franchise Agreement that expressly or by implication survive the termination, expiration, or transfer of the Former Franchise Agreement. Unless otherwise precluded by state law, Former Franchisee shall execute Franchisor's current form of General Release Agreement.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 33

Does the amendment allow an Extreme Art Studio franchisee to bring a lawsuit in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law, even if the franchise agreement states otherwise?

Accepted Answer

Item 17 of the FDD and sections of the Franchise Agreement are amended to state that you may bring a lawsuit in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law. Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within three (3) years after the grant of the Franchise.

The Franchise Agreement and Franchise Disclosure Questionnaire are amended to state that all representations requiring prospective franchisees to assent to a release, estoppel, or waiver of liability are not intended to, nor shall they act as, a release, estoppel, or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.

Source: Item 23 — RECEIPTS (FDD pages 49–214)

Question 34

What is the condition for Extreme Art Studio Franchising, LLC to consent to the Requested Assignment of the Franchised Business?

Accepted Answer

3. Consent to Requested Assignment of Franchised Business. Franchisor hereby consents to the Requested Assignment of the Franchised Business from Former Franchisee to New Franchisee upon receipt of the Franchisor's Assignment Fee from Former Franchisee and the mutual execution of this Agreement by all parties. Franchisor waives its right of first refusal set forth in the Former Franchise Agreement.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 35

What conditions must be met for the Extreme Art Rider to be considered 'effective' for Extreme Art Studio?

Accepted Answer

| THIS EXTREME ART RIDER ("Extreme Art Rider") is entered into and made effective as of | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | the date set forth on the signature page hereof ("Rider Effective Date"), by and between EXTREME AR STUDIO FRANCHISING, LLC ("we", "us" or "our") and the franchisee named on the signature page | | of this Extreme Art Rider (" Franchisee ", "you" or "your"). This Extreme Art Rider relates to that certain | | Extreme Art Studio Business Franchise Agreement dated | | ("Franchise Agreement"), and supplements the terms of the Franchise Agreement in relation to the | | Extreme Art Studio Business addressed herein. To the extent this Extreme Art Rider conflicts with the | | terms of the Franchise Agreement, the terms of this Extreme Art Rider shall control. Source: Item 22 — CONTRACTS (FDD page 49)

Question 36

Can current and former Extreme Art Studio franchisees be restricted from speaking openly about their experiences with the System?

Accepted Answer

In some instances, current and former franchisees may sign provisions restricting their ability to speak openly about their experiences with the System. You may wish to speak with current and former franchisees but know that not all such franchisees can communicate with you. During the last three fiscal years, certain current and former franchisees have signed confidentiality provisions that would restrict their ability to speak openly about their experience with the System. If you buy this Franchise, your contact information may be disclosed to other buyers when you leave the Franchise System.

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 47–49)

Question 37

What is the deadline for reaching an agreement on an Approved Location for an Extreme Art Studio, and what is the consequence of missing this deadline?

Accepted Answer

You and we must reach agreement on an Approved Location for your Studio within four months after you sign this Franchise Agreement, or we have the option to terminate this Franchise Agreement.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 38

What is the default length of the Restricted Period for Extreme Art Studio, and what is the alternative length if a court finds the default too long?

Accepted Answer

"Restricted Period" means the two-year period after you cease to be a manager or officer of Franchisee's Extreme Art Studio Business; provided, however, that if a court of competent jurisdiction

determines that this period of time is too long to be enforceable, then the "Restricted Period" means the one-year period after you cease to be a manager or officer of Franchisee's Extreme Art Studio Business.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 39

What is the dependency between compliance and the ability to acquire a successor Extreme Art Studio franchise?

Accepted Answer

If you (and each of your owners) are not, both on the date you give us written notice of your election to acquire a successor franchise and on the date on which the term of the successor franchise commences, in full compliance with this Franchise Agreement and all System Standards, you acknowledge that we need not grant you a successor franchise, whether or not we had, or chose to exercise, the right to terminate this Franchise Agreement during its term under Section 14.2.

#### **13.2 GRANT OF A SUCCESSOR FRANCHISE**.

- 13.2.1 You agree to give us written notice ("**Your Notice**") of your election to acquire a successor franchise no more than 12 months and no less than six months before this Franchise Agreement expires. We agree to give you written notice ("**Our Notice**") not more than three months after we receive your notice, of our decision:
  - (a) to grant you a successor franchise;
  - (b) to grant you a successor franchise on the condition that you correct existing deficiencies of the Franchised Business or in your operation of the Franchised Business;
  - (c) not to grant you a successor franchise based on our determination that you and your owners have not substantially complied with this Franchise Agreement during its term or were not in full compliance with this Franchise Agreement and all System Standards on the date you gave us written notice of your election to acquire a successor franchise; or
  - (d) not to grant you a successor franchise if we are no longer offering franchises for Extreme Art Studio Businesses.

#### 13.2.2 If applicable, Our Notice will:

- (a) describe the improvements, technology upgrades, trade dress updates, and/or modifications required to bring the Operating Assets of the Franchised Business into compliance with then-applicable System Standards for new Extreme Art Studio Businesses; and
- (b) state the actions you must take to correct operating deficiencies and the time period in which you must correct these deficiencies.
- 13.2.3 If we elect not to grant you a successor franchise, Our Notice will describe the reasons for our decision. If we elect to grant you a successor franchise, your right to acquire a successor franchise is subject to your full compliance with all of the terms and conditions of this

Source: Item 22 — CONTRACTS (FDD page 49)

Question 40

What is the dependency between Extreme Art Studio entering into a Franchise Agreement with the Franchisee and the Owners entering into the Owners Agreement?

Accepted Answer

#### **ATTACHMENT D**

#### **TO THE FRANCHISE AGREEMENT**

#### **OWNERS AGREEMENT**

| As a condition to the execution by Extreme Art Studio Franchising, LLC ("we" or "us") of a                  |  |
|-------------------------------------------------------------------------------------------------------------|--|
| Franchise Agreement with ("Franchisee"), each of the                                                        |  |
| undersigned individuals ("Owners"), who constitute all of the owners of a direct or indirect beneficial     |  |
| interest in Franchisee, as well as their respective spouses , covenant and agree to be bound by this Owners |  |
| Agreement ("Owners Agreement").                                                                             |  |
|                                                                                                             |  |
| 1. |  |
| Acknowledgments. |  |
|                                                                                                             |  |
| (a) |  |
| Franchise Agreement. Franchisee entered into a franchise agreement with us effective as |  |
| of, 20 ("Franchise Agreement"). Capitalized words not defined                                               |  |
| in this Owners Agreement will have the same meanings ascribed to them in the Franchise Agreement.           |  |
|                                                                                                             |  |
| (b) |  |
| Role of Owners. Owners are the beneficial owners or spouses of the beneficial owners of |  |
| all of the equity interest, membership interest, or other equity controlling interest in Franchisee and     |  |
| acknowledge there are benefits received and to be received by each Owner, jointly and severally, and for    |  |
| themselves, their heirs, legal representatives and assigns. Franchisee's obligations under the Franchise    |  |
| Agreement, including the confidentiality and non-compete obligations, would be of little value to us if     |  |
| Franchisee's owners were not bound by the same requirements.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 41

What is the dependency for Extreme Art Studio to protect a franchisee's rights to use the Marks in Minnesota?

Accepted Answer

Item 13 of the FDD is hereby amended to state that we will protect your rights under the Franchise Agreement to use the Marks, or indemnify you from any loss, costs, or expenses arising out of any third-party claim, suit or demand regarding your use of the Marks, if your use of the Marks is in compliance with the provisions of the Franchise Agreement and our System standards.

Source: Item 23 — RECEIPTS (FDD pages 49–214)

Question 42

Does the effectiveness of the Extreme Art Rider depend on any other agreements or conditions for Extreme Art Studio?

Accepted Answer

st sign our Multi-Franchise Addendum the form of which is attached to the Franchise Disclosure Document in Exhibit H. Prior to opening the second and each subsequent Extreme Art Studio Business under a Standard Franchise, you and we will execute the then-current form of Extreme Art Rider ("**Extreme Art Rider**"), the current form of which is attached to this Franchise Agreement in **Attachment E** but which may vary materially and substantially from the form attached to this Franchise Agreement. If you operate multiple Extreme Art Studio Businesses, each reference to the "**Franchised Business**" herein shall refer to each individual Extreme Art Studio Business that you operate under this Franchise Agreement, unless otherwise specified. All obligations under this Franchise Agreement shall apply individually to each Extreme Art Studio Business you operate.
- 1.4.2 We must authorize the specific location for your Studio (each an "**Approved Location**"). The Approved Location for your initial Extreme Art Studio Business will be designated in **Attachment B**, and the Approved Location for any additional Extreme Art Studio Businesses will be specified in the Extreme Art Rider applicable thereto.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 43

What is the estimated total cost range if I open two Extreme Art Studio businesses under the Standard 2 Franchise option?

Accepted Answer

| Type of Expenditure (1) | Amount |  | Method of Payment | When Due | To Whom Payment is to be Paid(1) |
|---|---|---|---|---|---|
|  | Low | High |  |  |  |
| Architect(19) | $5,000 | $12,000 | As Incurred | As Incurred | Approved Suppliers |
| Liquor License(20) | $0 | $15,000 | As Incurred | As Incurred | Third Parties, Government Agencies |
| TOTAL | $119,030 | $355,455 |  |  |  |
| ESTIMATED |  |  |  |  |  |
| INITIAL |  |  |  |  |  |
| INVESTMENT(21) |  |  |  |  |  |
| Standard 2 Franchise | If you purchase a Standard 2 Franchise under the Multi-Franchise Addendum, you will incur all of the costs listed above for each Extreme Art Studio Business you open except that the Initial Franchise Fee will total $80,000 and allow you to open up to two Extreme Art Studio Businesses. If you were to open two Extreme Art Studio Businesses using the same estimated initial expenses above, we estimate this total cost to range between $227,860 to $701,210. These costs may increase in the future depending on when you open the additional Extreme Art Studio Businesses. |  |  |  |  |

Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 18–23)

Question 44

What factors might cause insurance rates to be significantly higher than estimated for an Extreme Art Studio franchise?

Accepted Answer

If you have had prior issues or claims from previous operations unrelated to the operation of an Extreme Art Studio Business, your rates may be significantly higher than those estimated above.

Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 18–23)

Question 45

Does the FDD specify any exceptions to the 90-day notice requirement for termination of an Extreme Art Studio franchise in Minnesota?

Accepted Answer

With respect to Franchises governed by Minnesota law, we will comply with Minnesota Statute Section 80C.14, Subds. 3, 4 and 5, which require, except in certain specified cases, that you be given 90 days' notice of termination (with 60 days to cure) and 180 days' notice for non-renewal of the Franchise Agreement; and that consent to the transfer of the Franchise will not be unreasonably withheld.

Source: Item 23 — RECEIPTS (FDD pages 49–214)

Question 46

Does the Extreme Art Studio Franchise Agreement allow for negotiation of the terms of the renewal agreement?

Accepted Answer

| Provision                                                | Section in Franchise Agreement and Multi-Franchise Addendum                                      | Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) Renewal or extension of the term               | Section 13.1                                                                                              | One additional ten-year term, if you meet the requirements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (c) Requirements for franchisee to renew or extend | Section 13                                                                                                | The term "renewal" refers to extending our franchise relationship at the end of your initial term and any other renewal or extension of the initial term. Your successor franchise rights permit you to remain as a Franchise after the initial term of your Franchise Agreement expires. You must provide written notice; full compliance; sign then-current form of franchise agreement; sign release; maintain possession of Studio location; complete refurbishing; pay successor franchise fee; and others. You must sign our then-current Franchise Agreement and ancillary documents for the successor term, and this new franchise agreement may have materially different terms and conditions (including, e.g., higher Royalty and advertising contributions) from the Franchise Agreement that covered your original term. The boundaries of your Territory may change, and the fees on renewal will not be greater than the fees that we then impose on similarly situated renewing franchisees.

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–46)

Question 47

Does the Extreme Art Studio Franchise Agreement specify any performance criteria that must be met to qualify for renewal?

Accepted Answer

| Provision                                                | Section in Franchise Agreement and Multi-Franchise Addendum                                      | Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) Renewal or extension of the term               | Section 13.1                                                                                              | One additional ten-year term, if you meet the requirements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (c) Requirements for franchisee to renew or extend | Section 13                                                                                                | The term "renewal" refers to extending our franchise relationship at the end of your initial term and any other renewal or extension of the initial term. Your successor franchise rights permit you to remain as a Franchise after the initial term of your Franchise Agreement expires. You must provide written notice; full compliance; sign then-current form of franchise agreement; sign release; maintain possession of Studio location; complete refurbishing; pay successor franchise fee; and others. You must sign our then-current Franchise Agreement and ancillary documents for the successor term, and this new franchise agreement may have materially different terms and conditions (including, e.g., higher Royalty and advertising contributions) from the Franchise Agreement that covered your original term. The boundaries of your Territory may change, and the fees on renewal will not be greater than the fees that we then impose on similarly situated renewing franchisees.

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–46)

Question 48

Does the Extreme Art Studio Franchise Agreement's choice of law provision always govern, or are there exceptions based on Indiana law?

Accepted Answer

The "Summary" column in Item 17.w. of the FDD is deleted and the following is inserted in its place:

Indiana law applies to disputes covered by Indiana franchise laws; otherwise Franchisor's Choice of Law State law applies.

Despite anything to the contrary in the Franchise Agreement, the following provisions will supersede and apply to all Franchises offered and sold in the State of Indiana:

- 1. The laws of the State of Indiana supersede any provisions of the FDD, the Franchise Agreement, or Franchisor's Choice of Law State law, if such provisions are in conflict with Indiana law.
- 2. The prohibition by Indiana Code 23-2-2.7-1(7) against unilateral termination of the Franchise without good cause or in bad faith, good cause being defined under law as including any material breach of the Franchise Agreement, will supersede the provisions of the Franchise Agreement relating to termination for cause, to the extent those provisions may be inconsistent with such prohibition.
- 3. Any provision in the Franchise Agreement that would require you to prospectively assent to a release, assignment, novation, waiver or estoppel which purports to relieve any person from liability imposed by the Indiana Deceptive Franchise Practices Law is void to the extent that such provision violates such law.

Source: Item 23 — RECEIPTS (FDD pages 49–214)

Question 49

Is an Extreme Art Studio franchisee allowed to use the brand's Marks in advertising the transfer of the franchised business, and if so, under what conditions?

Accepted Answer

- (l) you and your transferring owners will not directly or indirectly, at any time or in any manner (except with respect to other Extreme Art Studio Businesses you own and

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operate), identify yourself or themselves or any business as a current or former Extreme Art Studio Business or as one of our franchise owners; use any Mark, any colorable imitation of a Mark, or other indicia of an Extreme Art Studio Business in any manner or for any purpose; or utilize for any purpose any trade name, trade or service mark, or other commercial symbol that suggests or indicates a connection or association with us;

- (m) you and your transferring owners comply with the non-compete obligations under Section 15.4 of this Franchise Agreement; and
- (n) you and your transferring owners reimburse us our costs upon receipt for our invoice for any attorney fees, broker commissions, finder fees, or other placement fees we incur as a result of the transfer.

We may review all information regarding the Franchised Business that you give the transferee, correct any information that we believe is inaccurate, and give the transferee copies of any reports that you have given us or we have made regarding the Franchised Business.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 50

What is the Franchisee required to do in order to add a Module to their Extreme Art Studio franchise?

Accepted Answer

- **3.7 MODULES**.

You may also, at your option purchase the right to add modules of certain additional services to be offered at your Extreme Art Business, which are currently Craft Academy, Kidscientific and Little Hands Discovery.

In order to add any module, you will enter into our then-current form of Module Amendment with us, the current form of which is attached to the Franchise Disclosure Document in Exhibit H.

You acknowledge and agree that the services and curriculum offered under the modules are also offered by our affiliate's franchisees, and may be offered by competitive brands that we and our affiliates control and franchise, both within and outside of the Territory, regardless of whether you elect to add any or all modules to your Extreme Art Business.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 51

When will an Extreme Art Studio franchisee sign the State Addendum?

Accepted Answer

Certain states have laws governing the franchise relationship and franchise documents. Certain states require modifications to the FDD, Franchise Agreement and other documents related to the sale of a franchise. This State Specific Addendum ("**State Addendum**") will modify these agreements to comply with the state's laws. The terms of this State Addendum will only apply if you meet the requirements of the applicable state independently of your signing of this State Addendum. The terms of this State Addendum will override any inconsistent provision of the FDD, Franchise Agreement or any Supplemental Documents. This State Addendum only applies to the following states: California, Hawaii, Illinois, Iowa, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Ohio, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin.

If your state requires these modifications, you will sign this State Addendum along with the Franchise Agreement and any Supplemental Agreements.

Source: Item 23 — RECEIPTS (FDD pages 49–214)

Question 52

Can an Extreme Art Studio franchisee use the Extreme Art Studio Mark in any username, screen name, or profile in connection with any social networking sites?

Accepted Answer

f the System Website's domain name in the manner we designate.
- 9.5.5 You agree that you will not sell any Extreme Art Studio Business products or services to customers on a website through the Internet or through any alternative channels of distribution, except as approved by us. You may not, without our prior written approval, develop, maintain or authorize any website, social media account, crowdfunding campaigns or blogs that mention or describes you, your Extreme Art Studio Business, or displays any of the Marks. If we approve your use of a website, social media or other account, we will reserve the right to require you to obtain our written approval of its initial content and as it is updated or modified from time to time. We have the right to review and remove all online content on social media sites, blogs, in electronic communications, and on other online sites on which our trademarks are used, to protect the reputation and high quality associated with our trademarks and to maintain consistency within the System. We may remove or require you to remove any questionable usage or content involving our Marks. We may also require you to cease using our Marks at all such sites or discontinue all use of such sites.
- 9.5.6 If you wish to advertise online, you must follow our online policy, which is contained in our Franchise Operations Manual. Our online policy may change as technology and the Internet changes.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 53

For Extreme Art Studio franchises in Indiana, what is the effect of a provision in the Franchise Agreement that limits litigation brought for breach of the agreement?

Accepted Answer

- 5. The following provision will be added to the Franchise Agreement:

No Limitation on Litigation. Despite the foregoing provisions of this Agreement, any provision in the Agreement which limits in any manner whatsoever litigation brought for breach of the Agreement will be void to the extent that any such contractual provision violates the Indiana Deceptive Franchise Practices Law.

No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

Source: Item 23 — RECEIPTS (FDD pages 49–214)

Question 54

What happens to customer information if an Extreme Art Studio franchise is transferred or terminated?

Accepted Answer

We own the current and future lists of your Extreme Art Studio Business's customers, including all information on students and their parents, such as addresses, telephone numbers, class records, child's date of birth, and other data. At our request, you must send us the customer information we shall request, in the manner and form we designate. You acknowledge and agree that all such customer information comprises part of the Confidential Information, and that we may use such customer information in any way we determine, and irrespective of any transfer, termination, expiration, repurchase, or otherwise.

Source: Item 14 — PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION (FDD pages 40–41)

Question 55

What happens if Extreme Art Studio decides to modify or discontinue using any mark?

Accepted Answer

If it becomes advisable at any time for us and/or you to modify or discontinue using any Mark and/or use one or more additional or substitute trade or service marks, you must comply with our directions within a reasonable time after receiving notice. We do not have to reimburse you for your costs, loss of revenue, or other expenses of promoting a modified and/or substitute trademark or service mark.

Source: Item 13 — TRADEMARKS (FDD pages 39–40)

Question 56

What happens if I don't open my Extreme Art Studio Business within 12 months of signing the Franchise Agreement or Extreme Art Rider?

Accepted Answer

at all times; and (3) any and all consequences if the Computer System is not properly operated, maintained, and upgraded.

#### **2.4 OPENING REQUIREMENTS.**

2.4.1 If you will operate an Extreme Art Studio Business, you must begin operating your Extreme Art Studio Business at your Approved Location within twelve months of signing this Franchise Agreement (or 12 months after signing the Extreme Art Rider for subsequent Extreme Art Studio Business(es)). If you do not open and operate your Extreme Art Studio Business within the timeframes as set forth above, you shall pay us the Opening Extension Fee (defined below) until you open or until the Franchise Agreement (or, in our discretion, Extreme Art Rider) is terminated.

#### **3. FEES.**

**3.1 INITIAL FRANCHISE FEE**. When you sign this Franchise Agreement, you will pay us a nonrecurring, nonrefundable initial franchise fee in the amount as set forth in **Attachment A** ("**Initial Franchise Fee**"). If you purchase a Standard Franchise, you will not be required to pay a separate Initial Franchise Fee when you sign the Extreme Art Rider (all other fees will apply). The Initial Franchise Fee is uniform, earned by us when paid, and is not refundable.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 57

What happens if an Extreme Art Studio franchisee fails to meet the minimum local advertising requirement in a given month?

Accepted Answer

consultation in connection with the grand opening marketing program for your Extreme Art Studio Business. Upon our request, you agree to send us, in the manner we prescribe, an accounting of your grand opening marketing program expenditures.

#### **9.2 LOCAL ADVERTISING.**

- 9.2.1 For each Extreme Art Studio Business you operate, you agree to spend \$500 each calendar month to advertise and promote the Franchised Business (which may include the costs of online advertising) ("**Local Advertising Requirement**"). Upon our request, you agree to send us, in the manner we prescribe, an accounting of your Local Advertising Requirement during the preceding months.

Source: Item 22 — CONTRACTS (FDD page 49)

Question 58

What happens if an Extreme Art Studio franchisee violates the policy regarding online promotion?

Accepted Answer

We may allow you to promote your Extreme Art Studio Business to customers in your Territory via alternate online strategies consistent with our online policy as contained in our Franchise Operations Manual. You may offer and sell approved products and services only in the manner we have prescribed and via methods and channels we permit. You will not receive exclusive territory. You may face competition from other Extreme Art Studio Businesses located outside the Territory or from other channels of distribution or competitive brands that we or affiliates control.

Source: Item 12 — TERRITORY (FDD pages 37–39)

Question 59

What happens if any item created by an Extreme Art Studio franchisee does not qualify as a 'work made-for-hire'?

Accepted Answer

All ideas, concepts, techniques, or materials concerning an Extreme Art Studio Business, whether or not protectable intellectual property, and whether created by or for you or your owners or employees, must be promptly disclosed to us and will be deemed to be our sole and exclusive property, part of the System, and works made-for-hire for us. To the extent any item does not qualify as a "work made-for-hire" for us, you assign ownership of that item and all related rights to that item, to us and must take whatever action (including signing assignment or other documents) we request to show our ownership or to help us obtain intellectual property rights in the item.

Source: Item 14 — PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION (FDD pages 40–41)

Question 60

What happens if the operating owner for an Extreme Art Studio franchise fails to successfully complete the Initial Training Program?

Accepted Answer

Before you begin operating your Extreme Art Studio Business, you (or your operating owner if you are an entity) and your Designated Manager if you have one, must attend and successfully complete to our satisfaction our Initial Training Program. If you (or your operating owner if you are an entity) or your Designated Manager, if you have one, fail(s) to successfully complete the Initial Training Program to our satisfaction, we may require the failing attendee to attend additional training programs that we designate, at your sole expense, or we may require you to appoint a new operating owner and to send that individual to the next available Initial Training Program, at your sole expense. If the Initial Training Program is not completed to our satisfaction after two attempts, we may terminate the Franchise Agreement.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 27–37)

Question 61

What happens if the purchase price and payment terms of a transfer adversely affect the transferee's operation of the Extreme Art Studio Franchised Business?

Accepted Answer

- (j) we have determined that the purchase price and payment terms will not adversely affect the transferee's operation of the Franchised Business;

Source: Item 22 — CONTRACTS (FDD page 49)

Question 62

What happens if Extreme Art Studio's right to use the trademark is challenged?

Accepted Answer

We do not have a federal registration for our principal trademarks listed above. Therefore, these trademarks do not have as many legal benefits and rights as a federally-registered trademark. If our right to use the trademark is challenged, you may have to change to an alternative trademark, which may increase your expenses.

You must notify us immediately of any apparent infringement or challenge to your use of any Mark, or of any person's claim of any rights in any Mark, and you may not communicate with any person other than us and our and our affiliates' attorneys regarding any infringement, challenge or claim. We and/or LSO may take the action we deem appropriate and control exclusively any litigation, USPTO proceeding, or other administrative proceeding from the infringement, challenge, or claim, or otherwise concerning any Mark. You must sign the documents and take the actions that, in the opinion of our attorneys, are necessary or advisable to protect and maintain our interests in the Mark. We will reimburse you for your reasonable costs of taking any action that we have asked you to take.

If it becomes advisable at any time for us and/or you to modify or discontinue using any Mark and/or use one or more additional or substitute trade or service marks, you must comply with our directions within a reasonable time after receiving notice. We do not have to reimburse you for your costs, loss of revenue, or other expenses of promoting a modified and/or substitute trademark or service mark.

Under the Franchise Agreement, we will indemnify you against, and reimburse you for, all damages for which you are held liable in any proceeding in which your use of any Mark in compliance with the Franchise Agreement is held to constitute trademark infringement, and for all reasonable costs you incur in the defense of any claim brought against you or in any proceeding in which you are named as a party, only if you have timely notified us of the claim or proceeding and comply with our directions in responding to the proceeding. At our option, we and/or LSO may defend and control the defense of any proceeding arising from your use of any Mark under the Franchise Agreement.

Source: Item 13 — TRADEMARKS (FDD pages 39–40)

Question 63

What happens if a term is not defined within the Extreme Art Rider for the Extreme Art Studio franchise?

Accepted Answer

"Manual" means our confidential Franchise Operations Manual for the operation of an Extreme Art Studio Business, which may be periodically modified by us.

"Marks" means the logotypes, service marks, and trademarks now or hereafter involved in the operation of an Extreme Art Studio Business, including "EXTREME ART," and any other trademarks, service marks, or trade names that we designate for use by an Extreme Art Studio Business. The term "Marks" also includes any distinctive trade dress used to identify an Extreme Art Studio Business, whether now in existence or hereafter created.

"Prohibited Activities" means any or all of the following: (i) owning, operating, or having any other interest (as an owner, partner, director, officer, employee, manager, consultant, shareholder, creditor, representative, agent, or in any similar capacity) in a Competitive Business (other than owning an interest of five percent (5%) or less in a publicly-traded company that is a Competitive Business); and/or (ii) diverting or attempting to divert any business from us (or one of our affiliates or franchisees).

"Restricted Period" means the two-year period after you cease to be a manager or officer of Franchisee's Extreme Art Studio Business; provided, however, that if a court of competent jurisdiction

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determines that this period of time is too long to be enforceable, then the "Restricted Period" means the one-year period after you cease to be a manager or officer of Franchisee's Extreme Art Studio Business.

"Restricted Territory" means the geographic area: (i) within a 25-mile radius of each Extreme Art Studio Business that you operate under this Franchise Agreement; and (ii) within a 25-mile radius of any other Extreme Art Studio Business that is either open or under development as of the date of termination or expiration of this Franchise Agreement; provided, however, that if a court of competent jurisdiction determines that the foregoing Restricted Territory is too broad to be enforceable, then the "Restricted Territory" means the geographic area within a 13-mile radius from Franchisee's Extreme Art Studio Business (and including the premises of the approved location of Franchisee).

Source: Item 22 — CONTRACTS (FDD page 49)

Question 64

What happens if there is a material change in the terms of the sale of an Extreme Art Studio franchise?

Accepted Answer

or indirect) in or perform services for a Competitive Business;
- (d) the transferee's representatives satisfactorily complete our then-current Initial Training Program;
- (e) the owner of the facility in which each Studio is located allows you to transfer the corresponding lease agreement to the transferee;
- (f) the transferee shall (if the transfer is of this Franchise Agreement), or you shall (if the transfer is of a controlling ownership interest in you or one of your owners), sign our then-current form of franchise agreement and related documents, (including, but not limited to, our then-current form of Owners Agreement) any and all of the provisions of which may differ materially from any and all of those contained in this Franchise Agreement, including the Royalty and the Marketing Fees; provided, however, that the term of the new franchise agreement signed will equal the remainder of the then-remaining term of this Franchise Agreement;
- (g) you pay us a transfer fee for each Extreme Art Studio Business to be transferred equal to \$10,000 per Extreme Art Studio Business, and the cost of any applicable broker fees and any training required. You will pay us a nonrefundable deposit of \$1,000 per Extreme Art Studio Business when you request approval of a transfer and pay, in certain funds, the remaining amount when you execute the transfer documents;
- (h) you (and your transferring owners) sign a general release, in a form satisfactory to us, of any and all known or unknown claims against us, our affiliates and subsidiaries, and their respective shareholders, members, officers, directors, employees, and agents arising before or contemporaneously with the transfer;
- (i) all individuals and entities who will be direct or indirect owners must execute or have executed a guarantee in the form we prescribe;
- (j) we have determined that the purchase price and payment terms will not adversely affect the transferee's operation of the Franchised Business;
- (k) if you or your owners finance any part of the purchase price, you and/or your owners agree that all of the transferee's obligations under promissory notes, agreements, or security interests reserved in the Franchised Business are subordinate to the transferee's obligation to pay the Royalty, Marketing Fees, and other amounts due to us, our affiliates, and third-party vendors, and otherwise to comply with this Franchise Agreement;

Source: Item 22 — CONTRACTS (FDD page 49)

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