What is involved in setting up an Extreme Art Studio business?

providing you a refund.

Although we will consult with you on your site for your Studio, assist you in finding an acceptable location, and require that your site for your Studio be subject to our final authorization, you have the ultimate responsibility in choosing, obtaining, and developing the site for your Studio. You are responsible for conforming the premises to local ordinances and building codes, obtaining the required permits, and constructing, remodeling and decorating the premises. We will not provide assistance for any of these franchisee obligations.

Schedule for Opening

You must begin offering services from the Studio within 12 months of signing the Franchise Agreement. Factors that affect this length of time include securing any necessary financing; selecting the Studio site; negotiating the lease; obtaining necessary permits; completing leasehold improvements; delivery of equipment, inventory and supplies; completing our initial training program; and hiring and training employees, If you fail to open your Extreme Art Studio Business within 12 months of signing the Franchise Agreement or Extreme Art Rider, we may terminate your Franchise Agreement (without providing you a refund) or you will be required to pay us an "Opening Extension Fee" of $1,000 per month until you open or until the Franchise Agreement is terminated.

You may not open your Extreme Art Studio Business until: (1) we notify you in writing that all of your pre-opening obligations have been fulfilled; (2) you have completed the initial training program to our satisfaction and have commenced the on-site assistance program; (3) all amounts due to us have been paid; (4) we have been furnished with copies of all insurance policies and certificates required by the Franchise Agreement, or other documentation of insurance coverage and payment of premiums that we request; (5) you notify us that all approvals and conditions set forth in the Franchise Agreement have been met; (6) you have received all required permits and licenses; and (7) you have ordered, received and installed your equipment, supplies, inventory and computer system. You must be prepared to begin operating your Extreme Art Studio Business after we state that your Extreme Art Studio Business is ready for opening.

Continuing Obligations

During the operation of your Extreme Art Studio Business, we (or our designee(s)) will provide the following assistance and services to you:

1. Advise you regarding the Extreme Art Studio Business operation based on your reports and our inspections. We also will guide you on standards, specifications, and operating procedures and methods that Extreme Art Studio Businesses use; customer service standards and policies; amounts and types of classes to be offered; required purchases and authorized operating assets and other items and arranging for their distribution to you from us or the suppliers; advertising and marketing materials and programs; and administrative, bookkeeping, accounting, and inventory control procedures. We will guide you through the Franchise Operations Manual, in bulletins, or other written materials, through the use of

electronic media, telephone conferences, and/or meetings at our offices or at your Studio or other designated location in your territory (See Franchise Agreement – Sections 4.2 and 8).

• 1. Continue to loan to you or make available to you on our website or extranet, one copy of the Franchise Operations Manual (See Franchise Agreement – Section 4.3).
• 1. Issue and modify System Standards for Extreme Art Studio Businesses. We may periodically modify System Standards, and those modifications may require you to invest additional capital in the Extreme Art Studio Business and/or incur higher operating expenses (See Franchise Agreement – Section 8.9).
• 1. License to you for your use, confidential and proprietary information designed to assist you in the operation of the Extreme Art Studio Business (See Franchise Agreement – Sections 5 and 6).
• 1. Allow you to continue to use confidential materials, including the Franchise Operations Manual and the Marks (See Franchise Agreement – Sections 4.3, 5 and 6).
• 1. Maintain and administer one or more websites to advertise, market and promote Extreme Art Studio Businesses and the products and services offered (each a "System Website") (See Franchise Agreement – Section 9.5).
• 1. Review requests for approval of additional items, services and/or suppliers, and notify you of our decision (See Franchise Agreement – Section 8.3).
• 1. Review samples of all marketing materials and other materials bearing our Marks you submit to us for approval and notify you of our decision (See Franchise Agreement – Section 9.2).
• 1. Provide you with additional training at our corporate headquarters or other location we designate, if we determine that you require additional training, or if you request additional training. For your first Extreme Art Studio Business, we provide up to two days of Additional On-Site Assistance at your Studio at a time designated by us (approximately six months after you open your Extreme Art Studio Business) as part of our training. (See Franchise Agreement – Section 4.1).

Optional Assistance

During the term of the Franchise Agreement, we (or our designee(s)) may, but are not required to, provide the following assistance and services to you:

• 1. Modify, update, or change the System, including the adoption and use of new or modified trade names, trademarks, service marks, or copyrighted materials, new products, new equipment, or new techniques.
• 1. Make periodic visits to the Extreme Art Studio Business for the purpose of assisting in all aspects of the operation and management of the Extreme Art Studio Business, prepare written reports concerning these visits outlining any suggested changes or improvements in the operation of the Extreme Art Studio Business, and detailing any problems in the operations which become evident as a result of any visit. If provided at your request, you must reimburse our expenses and pay our then-current training charges.
• 1. Maintain and administer a Brand Fund. We may dissolve the Brand Fund upon written notice.

• 1. Hold periodic national or regional conferences to discuss business and operational issues affecting Extreme Art Studio franchisees.
• 1. Provide you with a newsletter that we may periodically publish in print or electronic format, at our sole discretion.
• 1. Reserve the right to establish minimum and maximum resale prices for use with multi-area marketing programs and special price promotions as allowed by law.

Advertising

Brand Fund

We have a Brand Fund for marketing, developing and promoting the System, the Marks and Extreme Art Studio Businesses. You must pay one percent (1%) of your Gross Sales for the Brand Fund ("Brand Fund Contribution"). Your contribution to the Brand Fund will be in addition to all other advertising requirements set out in this Item 11. Each franchisee will be required to contribute to the Brand Fund, but certain franchisees may contribute on a different basis, depending on when they signed their Franchise Agreement.

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