What is the purpose of the Module Amendment for an Extreme Art Studio franchise?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
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IN WITNESS WHEREOF, the parties have executed and delivered this Extreme Art Rider, to be effective as of the Rider Effective Date.
EXTREME ART STUDIO FRANCHISING, LLC,
a Texas limited liability company
DATED: FRANCHISE OWNER FRANCHISE OWNER (IF YOU ARE A CORPORATION, (IF YOU ARE AN INDIVIDUAL AND NOT A LEGAL ENTITY): LIMITED LIABILITY COMPANY, OR PARTNERSHIP): (Entity Name) (Signature) (Print Name) DATED: DATED:
EXHIBIT H-9
MODULE AMENDMENT TO FRANCHISE AGREEMENT
| This Module Amendment to the Franchise Agreement (the "Module Amendment") is made and entered into this between Extreme Art Studio Franchising, LLC, a Minnesota limited liability company ("Franchisor"), and [franchisee name], a [state and entity type] (referred to herein as "Franchisee"). |
|---|
| RECITALS |
| WHEREAS, on [date], Franchisor and Franchisee entered into a franchise agreement (the "Franchise Agreement") pursuant to which Franchisee is granted the right, and undertook the obligation, to open and operate a Extreme Art Studio franchised business using either: (i) an in-studio format operated from a location; (ii) a mobile unit location; or (iii) a remote format that does not have a physical location as indicated in the Franchise Agreement (the "Extreme Art Business"); |
| WHEREAS, Franchisee desires to add one or more additional service modules (each a "Module") to the Extreme Art Business as indicated below. |
| WHEREAS, Franchisee and Franchisor are entering into this Module Amendment in order to add the Module(s) indicated below to the Franchise Agreement. Capitalized terms not defined herein shall have the meaning set forth in the Franchise Agreement. |
| NOW THEREFORE, in consideration of the mutual agreements, covenants and promises contained in this Module Amendment and for mutual consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: |
| 1. RECITALS . The Recitals set forth above are hereby incorporated into the terms of this Module Amendment as if fully restated herein. |
| 2. MODULE SELECTION AND INITIAL MODULE FEE . Franchisee wishes to add the services and offer the Module(s) through the Extreme Art Business in accordance with the terms of this Module Amendment. The Module(s) that Franchisee desires to add to the Extreme Art Business are as follows (check all that apply): |
| Craft Academy ($15,000 initial module fee) |
| Kidscientific ($20,000 initial module fee) |
| Little Hands Discovery ($10,000 initial module fee) |
| Total initial module fee: $ Franchisee shall pay the total initial module fee to Franchisor upon entering into this Module Amendment. Franchisee acknowledges and agrees that the initial module fee payment is not refundable under any circumstances. |
| 3. REPORTING REQUIREMENTS . In addition to information that Franchisee must |
EXTREME
provide under the Franchise Agreement, Franchisee will maintain detailed records of all cost information, sales information, and other sales data associated with the Module(s) that it operates ("Module Data").
Franchisee agrees to provide the Module Data to Franchisor at Franchisor's request and in accordance with the recordkeeping and reporting requirements of the Franchise Agreement and the Franchise Agreement is hereby amended accordingly. Franchisee further agrees that the Module Data is owned by Franchisor and that Franchisor may use the Module Data in any way it chooses.
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- NO TERRITORIAL RIGHTS FOR MODULES. Franchisee agrees and acknowledges that it will not receive any territorial rights whatsoever in connection with the Module(s). Franchisor's affiliate, Kidcreate Studio Franchising, LLC offers each of its franchisees identical rights to each of the Modules and the same curriculum. Accordingly, none of the territorial rights granted to Franchisee under the Franchise Agreement shall apply to the Module(s) selected. Further, Franchisee understands and agrees that other brands that Franchisor and its affiliates license, franchise and operate, including Kidcreate franchisees, may offer identical curriculum using the same names as the Module(s) that Franchisee offers and that Franchisee may face competition from such parties. Franchisee agrees that the presence of Kidcreate franchisees and other parties operating under brands other than Extreme Art are free to offer the Module(s) in Franchisee's Territory and that doing so shall not be considered a violation of the Franchise Agreement. Franchisee agrees that it will not raise any claims against Franchisor regarding competition or territorial encroachment related to the Module(s).
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- MODULE TECHNOLOGY FEE. Franchisee acknowledges and agrees that, in connection with the Module Franchisee shall pay Franchisor an additional monthly "Module Technology Fee" of $250. The Module Technology Fee is in addition to all other fees owed under the Franchise Agreement, which shall be paid at the same time and manner as the Technology Fee. The Module Technology Fee is not refundable under any circumstances. The Franchise Agreement is hereby amended accordingly.
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- GROSS SALES, ROYALTIES AND BRAND FUND CONTRIBUTIONS. For the avoidance of doubt, the definition of "Gross Sales" in the Franchise Agreement shall include revenues from the Module(s) and Franchisee agrees to pay the standard applicable Royalties and Brand Fund Contributions under the Franchise Agreement on all such amounts.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, the Module Amendment to the Franchise Agreement allows a franchisee to add one or more additional service modules to their Extreme Art Studio business. These modules can include options like Craft Academy, Kidscientific, or Little Hands Discovery, each with its own initial module fee. The Module Amendment modifies the original Franchise Agreement to incorporate these new services.
By entering into a Module Amendment, the Extreme Art Studio franchisee agrees to pay an initial module fee, which is non-refundable. For example, the Craft Academy module has a $15,000 initial module fee, Kidscientific is $20,000, and Little Hands Discovery is $10,000. The franchisee will also be required to pay an additional monthly Module Technology Fee of $250. Furthermore, the franchisee is responsible for increased expenses related to operating the module, such as inventory, equipment, staff training, and signage, some of which must be purchased from approved vendors.
The Module Amendment also stipulates that revenues from the added module(s) are included in the definition of "Gross Sales" under the original Franchise Agreement, meaning that the franchisee will pay standard royalties and brand fund contributions on those revenues. Extreme Art Studio makes no guarantees regarding the viability, potential revenues, or success of the modules. The franchisee also acknowledges that they will not receive any territorial rights in connection with the modules and may face competition from other franchisees or brands offering identical curriculum, such as Kidcreate Studio franchisees.
In summary, the Module Amendment allows Extreme Art Studio franchisees to expand their service offerings, but it also requires them to incur additional costs, adhere to specific reporting requirements, and accept the risk of competition, all while continuing to meet their obligations under the original Franchise Agreement. Prospective franchisees should carefully consider these factors before adding any modules to their business.