Does Management Recruiters require franchisees to use specific suppliers?

ES OF PRODUCTS AND SERVICES

We may identify various "required suppliers" that your franchised business would be required to use. These required suppliers will meet our standards and requirements. We maintain a list of recommended suppliers, and we will update these lists periodically and reserve the right to change suppliers. If we have not identified a required supplier for a specific service or product, you may use any supplier you choose.

No franchisor officer owns an interest in any required supplier. Mr. Hermanns, our CEO, does own a portion of BNW Payrolling, LLC, a professional employment organization, which provides payrolling, human resources, and risk management services to some franchisees of Franchisor or its affiliates. But you are under no obligation to utilize their services.

We have developed computer software to be used with the management and operation of our Franchise Business. We are the only approved supplier of this management and operations software for our franchised businesses. We will sublicense this software to you on the same terms and conditions as offered to all of our Franchisees similarly situated and you will be required to utilize the software in the operation of your Franchise Business in accordance with the specifications in the Brand Standards Materials. A form of the Computer Services Agreement is attached as Exhibit B to the Franchise Agreement. If you assign the Franchise Agreement, the Computer Services Agreement must be assigned to the new franchisee. In addition, you must pay for the actual cost of all software and published updates. At your expense, before you begin operations of the Franchise Business, you must purchase from us or a vendor approved by us the computer hardware and related equipment required for the operation and use of the software. During our last fiscal year ended December 31, 2023, we and our affiliates had zero revenues from franchisees purchasing from us software, computer equipment, or any other items for their businesses. All hardware and related equipment must meet the specifications provided in the Brand Standards Manual. Also, during the term of the Franchise Agreement, you must allow us access via telephone modem to your computer system to enable us to periodically upload and download data to facilitate our performance of automated payroll and related services.

You have an ongoing required expense for business insurance premiums. The premiums vary depending on revenue in your business, your credit rating, and the type of payment schedule you choose. We do not require members to provide us with expense information and cannot determine what percentage this will be of your ongoing costs, but the average annual costs for $0 to $500,000 in revenue is $1,750, $500,000 to $1,000,000 is $2,250, $1,000,000 to $2,000,000 is $3,000. Anything above $2,000,000 in revenue must be determined by an underwriting review. You are required to have the following insurance coverage:

• COMMERCIAL GENERAL LIABILITY including bodily injury and property damage liability for premises and operations, contractual liability, personal injury liability and, if applicable, stop gap coverage in the amount of $1,000,000.00 each occurrence and $2,000,000.00 annual aggregate;
• BUSINESS AUTOMOBILE LIABILITY if Franchisee is a corporate entity that owns a vehicle: including bodily injury and property damage liability for owned, leased, non-owned, and hired autos used in the Franchise Business in the amount of $1,000,000.00 each accident;
• WORKERS' COMPENSATION with the statutory minimum limits set by applicable Law, unless the Laws of Franchisee's state do not require this coverage for sole proprietors;
• EMPLOYER'S LIABILITY in the amount of $500,000.00 or statutory minimum limits, whichever is greater;
• PROPERTY including "all-risk" coverage on all real and personal property owned, leased, or rented by Franchisee as well as business income and extra expense coverage. This insurance

shall be written for the replacement cost of Franchisee's real and personal property and on an actual loss sustained basis for the business income and extra expense;

• ERRORS AND OMISSIONS in the amount of $1,000,000.00 per claim and annual aggregate;
• EMPLOYMENT PRACTICES LIABILITY in the amount of $1,000,000.00 per claim and annual aggregate. This insurance is required regardless of whether or not Franchisee has employees;
• COMMERCIAL BLANKET EMPLOYEE DISHONESTY BOND including coverage for any ERISA plans in the amount of $100,000.00 or 10% of the ERISA plan assets, whichever is greater, if Franchisee has employees;
• LICENSE BOND if required by applicable Law;
• UNEMPLOYMENT COMPENSATION with the statutory minimum limits set by applicable Law unless Franchisee is a sole proprietor and the state Law in Franchisee's state does not require this for sole proprietors.
• Any and all other types and limits of insurance that may be required, from time to time, by Franchisor or applicable Law.

Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 26–29)