What is the relationship between the Fly Fitness franchisee's initial investment (Item 7) and their potential for profitability, considering the ongoing royalty fees (Item 6)?

[Item 5: INITIAL FEES]

ITEM 5: INITIAL FEES

We will charge you an initial franchise fee ("Initial Franchise Fee") when you sign the Franchise Agreement. The Initial Franchise Fee is $50,000. This payment is fully earned by us and due in lump sum when you sign the Franchise Agreement. The Initial Franchise Fee is not refundable under any circumstance.

From time to time, we may offer special incentive programs as part of our franchise development activities. We reserve the right to offer, modify or withdraw any incentive program without notice to you. We currently offer a 20% discount from the Initial Franchise Fee for Fly Fitness franchisees in good standing who wish to open an additional unit.

We will charge you a development fee ("Development Fee") when you sign the Multi-Unit Development Agreement. The Development Fee is an amount equal to $50,000 for the first unit, plus 50% of the discounted initial franchise fee for each additional Fly Fitness outlet you commit to develop under the Multi-Unit Development Agreement. For a three-unit commitment, the Development Fee is $75,000 and is calculated as follows, $50,000 + ((50% x $25,000) x2) = $75,000. The remaining balance of $12,500 per outlet shall be payable as the developer's subsequent sites are approved and franchise agreements signed. The Development Fee is fully earned by us and due in lump sum when you sign the Development Agreement. The Development Fee is not refundable under any circumstance.

From time to time, we may offer special incentive programs as part of our franchise development activities. We reserve the right to offer, modify or withdraw any incentive program without notice to you. [Item 7: ESTIMATED INITIAL INVESTMENT]

Thereafter, you must spend a minimum of $500 per month on local advertising and marketing activities.

We reserve the right to increase the local advertising contribution by ten percent (10%) annually.

Upon our request, you must furnish us with a quarterly report and documentation of local advertising expenditures during the previous calendar quarter.

We reserve the right to collect local marketing contribution and

¹⁶ Before you open for business, you must purchase and maintain at your sole cost and expense the insurance coverage that we specify. Insurance costs and requirements may vary widely in different localities. The estimate is for the first quarterly premium for required minimum insurance coverage. We reserve the right to require additional types of insurance and coverage as provided in the Franchise Agreement.

¹⁷ This is an estimate of the amount of additional operating capital that you may need to operate your Franchised Business during the first three (3) months after commencing operations. We cannot guarantee that you will not incur additional expenses in starting the business that may exceed this estimate. This estimate includes such items as rent, utilities, internet service, initial payroll and payroll taxes, Royalties (as described in this disclosure document), Brand Fund Contributions, repairs and maintenance, bank charges, miscellaneous supplies and equipment, initial staff recruiting expenses, and other miscellaneous items. These estimates do not include any compensation to you, nor do they include debt service. These items are by no means all-inclusive of the extent of possible expenses.

We relied upon the experience of our affiliate-owned Fly Fitness outlets to compile these estimates. You should review these figures carefully with a business advisor before making any decision to invest in the franchise. These figures are estimates and we cannot guarantee that you will not have additional expenses starting your Franchised Business. Your additional costs will depend on factors such as how closely you follow our methods and procedures; your management skill, experience, and business acumen; local economic conditions; the local market for our service; competition; and the sales level reached during your initial period. We estimate that a franchisee can expect to put additional cash into the business during at least the first three to six months, and sometimes longer.

[Item 7: ESTIMATED INITIAL INVESTMENT]

⁴This estimate represents three (3) months of rent for a 3,000 – 3,500 square foot location for a Fly Fitness outlet. Real estate costs vary widely from place to place. This estimate is based on the experience of our affiliate-owned outlets. Rental rates may be more or less than this range depending on the location of your Franchised Business. In certain real estate markets, rents may be three times higher or more than the rents on which the estimates in the above table are based.

[Item 19: FINANCIAL PERFORMANCE REPRESENTATIONS]

Revenue

The principal source of revenue for a FLY FITNESS studio is membership fees. Monthly and annual fees are usually paid through electronic transfer of funds (EFT). Annual fees are billed to a member once per year, the time of which is dependent on their join date and membership type, as detailed in their membership agreement. A fitness facility will also earn additional revenue through prepaid class packages, prepaid Pilates sessions, beverage sales, boutique sales and cancellation fees.

Breakdown of revenue sources in 2023 from listed corporate outlets in the above chart includes:

• Memberships (contracts) 64%
• Credits (packages/intros) 23.7%
• Boutique 8%
• Penalty fees 2.4%
• Miscellaneous (Beverage, Shoe rentals, etc.) 1.8%

Unlimited monthly memberships make up a substantial portion of our existing corporate outlets. These contracts over recurring monthly revenue priced at $159 per month and require a 30-day cancellation notice, unless otherwise mandated by state or local law.

Notes regarding the above financial performance representation:

• 1. As a Franchisee you will face Royalty fees of 7% of Gross Revenue and a Brand Fund Contribution Fee of up to 2% of Gross Revenue.

Our affiliate outlets have earned this much. Your individual results may differ. There is no assurance that you'll earn as much.

• 6.1.2 Royalty Fee.

Franchisee agrees to pay Franchisor, weekly throughout the Term, a royalty fee equal to seven percent (7%) of the Gross Revenue, as hereinafter defined, realized from the Franchised Business and from any other revenues received using Franchisor's methods, operations and/or trade secrets (the "Royalty Fee").

The term "Gross Revenue" includes all revenues and income from any source derived or received by Franchisee from, through, by or on account of the operation of the Franchised Business or made pursuant to the rights granted hereunder, including but not limited, any and all other revenues received using Franchisor's methods, operations and/or trade secrets whether received in cash, in services, in kind, from barter and/or exchange, on credit (whether or not payment is actually received) or otherwise.