What standards must a Kidokinetics franchisee use to maintain their business?

such representations, warranties and covenants.

11. FRANCHISEE'S OPERATIONS

• 11.1. Operation of Kidokinetics Business. In order to maintain the highest degree of quality and service on a uniform System-wide basis, Franchisee shall operate the Kidokinetics Business in conformity with the methods, standards, specifications and operating procedures prescribed by Franchisor. Franchisee agrees to comply with the Franchise Operations Manual, as it is modified from time to time, and all directives, rules and procedures specified by Franchisor, and will, among other things:
  • 11.1.1. Use only such supplies, equipment and vehicles which comply with Franchisor's specifications;
  • 11.1.2. Maintain and operate the Kidokinetics Business in good condition and repair and in a proper and businesslike manner, using Franchisee's best efforts to maintain the Kidokinetics Business in accordance with current System standards, the Franchise Operations Manual and all other directives and requirements of Franchisor, as they may be amended from time to time, and do such repairing, refurbishing and restoration as from time to time may be reasonably required to meet System standards and Franchisor's requirements as they may be modified from time to time;
  • 11.1.3. Comply with all applicable governmental laws, ordinances, rules and regulations, including prompt payment of taxes when due;
  • 11.1.4. Adhere to the highest standards of honesty, integrity, fair dealing and ethical conduct in all dealings with customers, suppliers, and Franchisor;
  • 11.1.5. Require all employees of the Kidokinetics Business to wear uniforms or clothes conforming to Franchisor's specifications as to style, color, and design, as Franchisor may, from time to time, reasonably designate so as to maintain the goodwill and reputation of Franchisor, the System and the Marks;

• 11.1.6. Employ only qualified individuals who are trained in accordance with Franchisor's standards and who will at all times conduct themselves in a competent and courteous manner in accordance with this Agreement and the image and reputation of the System. Franchisee shall use its best efforts to insure that Franchisee's employees maintain a neat and clean appearance and render competent and courteous service to patrons of the Kidokinetics Business. Franchisee acknowledges and agrees that poorly trained employees, sloppy or unclean appearances and incompetent or discourteous service are extremely damaging to the goodwill of the System and the Marks and are a default of this Agreement;
• 11.1.7. Obtain and use only equipment, vehicles, products, supplies, business forms, signs, stationery, and services that conform to the current standards and specifications for the System as required by Franchisor and obtained from Franchisor's previously approved suppliers. Franchisor has the right to terminate this Agreement if Franchisee uses any equipment, vehicles or products that do not conform to such standards and specifications, if Franchisee fails to obtain any equipment required by Franchisor, or if Franchisee purchases from suppliers that have not been previously approved in writing by Franchisor. Franchisee agrees to maintain an adequate inventory of all items in accordance with the Franchise Operations Manual;
• 11.1.8. Prominently display signs in and upon the Kidokinetics Business Location and service vehicles using the Marks and/or other advertising of such nature, form, color, number, location and size, and containing such material, as Franchisor may from time to time reasonably direct or approve in writing; and to not display in or upon the Kidokinetics Business Location or elsewhere any sign or advertising media of any kind to which Franchisor reasonably objects, including signs and advertising media which have been outdated. Upon giving Franchisee notice of its objection to same or upon termination of this Agreement, Franchisor may at any time enter upon the Kidokinetics Business Location or elsewhere and remove any objectionable or non-approved signs or advertising media and keep or destroy same without reimbursing Franchisee or without being deemed guilty of trespass or any other tort;
• 11.1.9. Conduct all advertising programs in a dignified manner that will not detract from the reputation of the System or the Marks;
• 11.1.10. Submit all advertising, print materials (including, but not limited to, signs, brochures, websites, etc.), press releases, media packets and media information and any other information to be released for publication relating to the Kidokinetics Business, to Franchisor for written approval, prior to their being printed or published;
• 11.1.11. Offer all and only such services as may from time to time be previously approved and required by Franchisor and only using the equipment approved by Franchisor;
• 11.1.12. Devote Franchisee's full time, energy and best efforts to the efficient and effective management and operation of the Kidokinetics Business and avoid any activities that would conflict or interfere with or be detrimental to such purposes;
• 11.1.13. Not use the Marks except as they relate to the System, and then only as previously approved by Franchisor in writing;
• 11.1.14. Have at all times a Manager who has been properly trained as required herein;
• 11.1.15. Operate Franchisee's Kidokinetics Business for at least those hours, days, and months that Franchisor specifies in the Franchise Operations Manual;

• 11.1.16. At all times, maintain such working capital as may be reasonably necessary to enable Franchisee to properly and fully carry out and perform all of Franchisee's duties, obligations and responsibilities hereunder and to operate the Kidokinetics Business in a businesslike, proper and efficient manner; and
• 11.1.17. Employ the number of staff and offer the services described in Schedule 1 to this Agreement.

11.2. Bookkeeping and Reports.

• 11.2.1. Franchisee agrees to keep and maintain complete and accurate books and records of its transactions and business operations utilizing the accounting procedures specified by Franchisor. Franchisee agrees to: (i) purchase the computer systems in accordance with the requirements of this Agreement; and (ii) maintain the records and accounts of the Franchisee to the standards of the Franchisor. Franchisor reserves the right to require Franchisee hire an outside accounting or bookkeeping firm to maintain the records and accounts of the Franchisee should it find, in its sole discretion, that Franchisee is not maintaining the records and accounts in accordance with the standards of the Franchisor. Franchisee is required to use the bookkeeping service that Franchisor chooses.
• 11.2.2. Franchisee must maintain, for at least five fiscal years from their preparation, complete financial records for the operation of the Kidokinetics Business in accordance with the then current Internal Revenue Service Publication and must provide Franchisor, at Franchisor's request, with: (i) a weekly Sales Report signed by Franchisee and in the form Franchisor specifies that contains the sales information pertaining to the preceding week including, without limitation, a summary of all monies received during the relevant period, any other additional information which Franchisor deems necessary to properly evaluate Franchisee's progress; (ii) a quarterly income statement and profit and loss statement, reflective of the three individual months in the quarter, in a format specified by Franchisor, including a standard chart of accounts, within 20 days after the end of each quarter; (iii) annual financial reports and operating statements in the form Franchisor specifies within 50 days after the close of each of Franchisee's fiscal years; (iv) state and local sales tax returns or reports and federal, state and local income tax returns for each year in which Franchisee's Kidokinetics Business is operated, within 30 days after their timely completion; and (v) such other reports as Franchisor may from time to time require, in the form and at the time Franchisor prescribes. Franchisee's fiscal year must be on a calendar year basis. To assist Franchisee in recording and keeping accurate and detailed financial records for reports and tax returns, Franchisor, at Franchisor's discretion, may specify the form in which the business records are to be maintained and provide a uniform set of business records for Franchisee to use. Franchisor will have full access to all of Franchisee's data, system, and related information by means of direct access, whether in person, or by telephone/modem installed and maintained at Franchisee's sole expense.
• 11.2.3. The financial statements required hereunder are in such form and contain such information as Franchisor may from time to time reasonably designate.
• 11.2.4. Franchisor has the right, at all reasonable times, to examine or audit, at its expense, Franchisee's books, records, and tax returns. If Franchisor's examination finds that any Gross Sales Report was understated by more than 3%, or Franchisee fails to submit required reports, Franchisee shall reimburse Franchisor for the cost of such examination, any understated amounts, and any related accounting, legal and travel expenses. Franchisee shall pay the Franchisor any amounts due, together with interest thereon, at the rate provided herein, upon finding of any understated Gross Sales. Understatement of Gross Sales of more than 3% may be considered an incurable default and thereby subject to immediate termination. Three understatements of any amount during the

term of this Agreement may, at the option of Franchisor, be considered an incurable default and thereby subject to termination as provided herein.

11.3. Computer Systems.

Kidokinetics

• 11.3.1. Franchisee, at Franchisee's sole expense, shall install and maintain the management software, required applications and a computer system that complies with Franchisor's standards and specifications, including: (i) an office computer, a tablet computer, a telephone, a fax machine, and a smartphone;

Source: Item 22 — CONTRACTS (FDD page 59)