Is an Extreme Art Studio franchisee granted an exclusive territory?

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ITEM 12 TERRITORY

When you sign the Franchise Agreement or Extreme Art Rider, we will grant you a territory based on the geographic area and population density within that territory and other relevant demographic characteristics ("Territory"). The scope of the area will likely differ among franchisees. The Territory will be defined by an approximate four-mile radius surrounding the specific site location of your Extreme Art Studio Business. Once we establish your Territory, we will not change or modify it without your consent. You may only advertise, solicit, offer or provide services to customers of your Extreme Art Studio Business within your Territory. Currently, neither we nor any affiliate of ours intends to operate or franchise another business under a different trademark that sells products or services similar to the products or services offered at Extreme Art Studio Businesses, but we reserve the right to do so in the future. You must operate the Extreme Art Studio Business in the Territory. You may not relocate your Extreme Art Studio Business without our approval. Our approval will be based on our then-current standards for demographics and location requirements such as traffic, suitability, and competition as well as those for build out, design, floorplan and décor. During the term of your Franchise Agreement, except as provided below, we will not establish or operate, or franchise any entity to establish or operate, a business using the Marks and System at any location within the Territory. Kidcreate Franchises offer the same curriculum under the Modules. If there is a Kidcreate Franchise in your Territory, they may offer identical curriculum under the Modules that you will offer under the Modules.

You may not solicit, offer or provide services to customers outside your Territory, including by any alternative channel including the Internet, wholesale, catalog sales, telemarketing, or other direct marketing of distribution. 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.

Your rights in the Territory and the continuation of your Franchise do not depend on your achieving a certain sales volume, market penetration, or other contingency, and there are no other circumstances that permit us to modify your rights in the Territory during the term of the Franchise Agreement.

We and our affiliates retain all territory rights not expressly granted to you. These rights include:

• (1) the right to establish and operate, and allow others to establish and operate, other Extreme Art Businesses and other art studio businesses using the Marks and the System, holding classes or activities at any location outside the Territory of your Extreme Art Studio Businesses and on such terms and conditions we deem appropriate;
• (2) the right to establish and operate businesses similar to your Extreme Art Studio Business anywhere under other trade names, trademarks, service marks and commercial symbols different from the Marks;
• (3) the right to use the Marks and the System to sell any products or services the same as or similar to those that you will sell through any alternative channels of distribution within or outside of the Territory including retail locations and other channels of distribution such as television, mail order, catalog sales, wholesale to unrelated retail outlets, or over the Internet;
• (4) the right to develop or acquire, or be acquired by (whether through acquisition of assets, ownership interests, or otherwise, regardless of the form of transaction), one or more additional concepts or businesses: (i) providing products and services similar to those provided at Extreme Art Studio Businesses; and/or (ii) creating or maintaining franchises, licenses, or similar arrangements with respect to these businesses, wherever these businesses (or the franchise owners or licensees of these businesses) are located or operating (including in the Territory of any of your Extreme Art Studio Businesses);
• (5) the right to offer products and services offered by Extreme Art Studio Businesses under the Marks or any other trade names, trademarks, service marks, or commercial symbols that are the same as or different from Extreme Art Studio Businesses, at any special event, conference, exhibition, or temporary venue (including in the Territory of any of your Extreme Businesses);
• (6) the right to advertise, solicit, accept orders and offer and sell products and services to customers located outside the Territory of your Extreme Art Studio Businesses, including via the System Website, and the right to allow other Extreme Art Studio Businesses to do the same;
• (7) the right to engage in all other activities not expressly prohibited by the Franchise Agreement. We have no present plans to establish other related franchises or companyowned businesses offering similar products or services under a name or trademark that is different from Extreme Art, although we reserve the right to do so; and
• (8) the right for our affiliate to sell Kidcreate Studio businesses in the Territory included those that offer the Modules that your Extreme Art Business may offer.

We are not required to pay you if we exercise any of the rights specified above inside or outside your Territory including for our soliciting or accepting orders. We do not pay compensation for soliciting or accepting orders inside your Territory.

You do not receive the right to acquire additional Extreme Art Studio Businesses unless you have purchased a Standard 2 or Standard 3 Franchise. If you wish to purchase an additional Extreme Art Franchise (and have not purchased a Standard 2 or Standard 3 Franchise), you must apply for each additional Extreme Art Business. We consider a variety of factors when determining whether to grant additional Extreme Art Businesses.

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