2020 FDD (Excluding Exhibits)

How to Use This Franchise Disclosure Document

Here are some questions you may be asking about buying a franchise and tips on how to find more information:

What You Need To Know About Franchising Generally

THE FOLLOWING PROVISIONS APPLY ONLY TO TRANSACTIONS GOVERNED BY THE MICHIGAN FRANCHISE INVESTMENT LAW

THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.

(a)  A prohibition on the right of a franchisee to join an association of franchisees.

(b)  A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protections provided in this Act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.

(c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.

(d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee’s inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of franchisor’s intent not to renew the franchise.

(e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.

(f) A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.

(g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:

(i) The failure of the proposed transferee to meet the franchisor’s then current reasonable qualifications or standards.

(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.

(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.

(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.

(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).

(i) A provision which permits the franchisor to directly or indirectly convey, assign, or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.

If the franchisor’s most recent financial statements are unaudited and show a net worth of less than $100,000, the franchisor shall, at the request of a franchisee, arrange for the escrow of initial investment and other funds paid by the franchisee until the obligations to provide real estate, improvements, equipment, inventory, training, or other items included in the franchise offering are fulfilled. At the option of the franchisor, a surety bond may be provided in place of escrow.

THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENFORCEMENT BY THE ATTORNEY GENERAL.

Any questions regarding this notice should be directed to:

State of Michigan
Consumer Protection Division
Attn: Franchise
670 G. Mennen Williams Building
525 West Ottawa
Lansing, Michigan 48933
(517) 373-7117

Note: Despite paragraph (f) above, we intend, and we and you agree, to enforce fully the arbitration provision of our Franchise Agreement. We believe that paragraph (f) is unconstitutional and cannot preclude us from enforcing these arbitration provisions.

Item 1
THE FRANCHISOR AND ANY PARENTS, PREDECESSORS, AND AFFILIATES

Us and Our Related Companies

The franchisor is The Bar Method Franchising, LLC (called “we” or “us” in this disclosure document). “You” means the person or entity acquiring a franchise. If you are a corporation, limited liability company or other entity, your owners must sign the Guaranty and Assumption of Obligations attached to the Franchise Agreement (Exhibit B), which means that all provisions of the Franchise Agreement also will apply to your owners.

We originally organized as a California limited liability company called The Bar Method Franchising Company, LLC on January 16, 2008. We converted to a California corporation and changed our name to The Bar Method Franchising Inc. on February 16, 2010, but on December 31, 2019 we converted back to a California limited liability company and changed our name to The Bar Method Franchising, LLC. We do business under our company name and the name The Bar Method®. We have offered franchises for Bar Method Studios since January 2008 and have never operated a Bar Method Studio or offered franchises in any other line of business. However, we do sell certain supplies directly to our franchisees, such as mat covers, stretching straps, balls, videos, socks, apparel and other products. We have no other business activities except those described here. Our principal business address is 111 Weir Drive, Woodbury, Minnesota, 55125. If we have an agent for service of process in your state, we disclose that agent in Exhibit A.

Our parent company is BMI Holdings, LLC (“BMI”), whose principal business address is the same as our address. BMI has never operated a Bar Method Studio. One of our affiliates is The Bar Method LLC (“TBM”), whose principal business address is the same as our address. TBM has operated a Bar Method Studio in San Francisco, California since 2001. TBM offered rights for Bar Method Studios from June 2003 until October 2007 and assigned those agreements to us in January 2008. TBM has never offered franchises in any other line of business.

On September 10, 2019, as a result of a merger between BMI and a wholly-owned subsidiary of Self Esteem Brands, LLC (“SEB”), SEB became the majority owner of BMI. SEB is owned by Anytime Worldwide, LLC (“Anytime Worldwide”). Anytime Holdings, Inc. is the majority owner of Anytime Worldwide. The principal business address of each of these parent companies is 111 Weir Drive, Woodbury, Minnesota 55125. We do not have any other parent companies.

Our Affiliates

We have 3 affiliates that offer franchises in other lines of business as discussed below. None of these affiliates have conducted the type of business that a Bar Method Studio will operate nor have they offered franchises for the type of business a Bar Method Studio franchisee will operate. All of these affiliates have the same principal business address as we do.

We have an affiliate that offers franchises in the fitness industry, Anytime Fitness, LLC (“Anytime Fitness”). Anytime Fitness is a wholly-owned subsidiary of SEB. Anytime Fitness began offering franchises for the operation of fitness centers designed to operate with minimal overhead and labor costs under the trademark, “Anytime Fitness®” in October 2002, and “Anytime Fitness Express®” in October 2006. Anytime Fitness began operating its own Anytime Fitness centers in January 2005, and its own Anytime Fitness Express center in October 2006. (It no longer operates any Anytime Fitness Express centers). As of December 31, 2019, Anytime Fitness had 2,455 franchised centers in operation in the United States and 14 company- owned centers.

We also have another affiliate that is beginning to offer franchises in the fitness industry, Basecamp Fitness, LLC (“Basecamp Fitness”). Basecamp Fitness is a wholly-owned subsidiary of SEB. Basecamp Fitness operates and franchises the operation of boutique interval training studios that offer short, high-intensity guided workouts combining strength, cardio and core training in a fast-paced, high-energy environment. Basecamp Fitness began offering franchises to the general public in April 2020. As of December 31, 2019, Basecamp Fitness operated 6 company-owned locations located in California and Minnesota and had signed one Area Development Agreement for studios in Wisconsin.

We also have an affiliate, Waxing the City Worldwide, LLC (“Waxing the City Worldwide”), which offers franchises for sale in the boutique body waxing services industry. Waxing the City Worldwide is also a wholly-owned subsidiary of SEB. Waxing the City Worldwide began offering franchises for that business in April 2013 and as of December 31, 2019 had 107 franchisees operating in the United State and 9 company-owned locations.

We have one affiliate that may sell or offer goods or services to franchisees. ProVision Security Solutions, LLC (“ProVision”) offers information technology services, technology, and security systems, including computers, sound systems, software and other related components along with technology and software support, installation services, and security monitoring to franchisees. It also hosts websites for our franchisees. The principal business address of ProVision is the same as ours. It has never offered franchises in any line of business.

Franchise Opportunity

We grant franchises for fitness studios which are primarily identified by the Marks and use the Franchise System (defined below) (collectively, “Bar Method Studios”). Bar Method Studios currently feature barre-based exercise classes using proprietary and non-proprietary instructional techniques, formats and methods designed to provide fitness training in an attractive atmosphere (as we may periodically add to, remove and otherwise modify them, collectively, the “Classes”). The Bar Method system is designed to create a lean, firm, sculpted body by reshaping and elongating muscles while maintaining an intense pace that burns fat and increases stamina. The hour-long basic Classes provide 8 or 9 strengthening exercises followed by stretches. The strength work combines holding positions that use the body’s own weight with small, controlled moves that increase range of motion and stamina. Stretching is focused on the hips, chest and lower back to improve posture and body alignment. Students begin the class with free weights and push-ups, move to the ballet bar to work their legs and abdominals, and finish on mats for more core work and stretching. Bar Method Studios currently offer both basic Classes and our Bar Move® program, a faster, more aerobic exercise program for advanced Bar Method students. In addition to Classes, Bar Method Studios often provide other services, such as childcare, as well as selling fitness apparel and other items. In this disclosure document, we call your Bar Method Studio that you will operate under the Franchise Agreement your “Studio.” You must operate the Studio from a site we accept (the “Site”).

We also offer qualified people the right to develop multiple Bar Method Studios within a specific territory under the terms of an Area Development Agreement (“Area Development Agreement” or “ADA”). If you sign an Area Development Agreement, you will sign a separate Franchise Agreement for each Bar Method Studio you develop under your Area Development Agreement. You will sign the first Franchise Agreement when you sign the Area Development Agreement. The form of that agreement will be the form attached to this Disclosure Document. Later Franchise Agreements you sign will be in the form of agreement we use at the time you sign the agreement. The terms of those agreements may differ from the form attached to this Disclosure Document.

Bar Method Studios operate under certain trademarks, service marks and other commercial symbols that we specify, including “Bar Method®,” and we may periodically create, use and license or sublicense other trademarks, service marks and commercial symbols for use in operating Bar Method Studios, all of which we may periodically modify (collectively, the “Marks”). The “Franchise System” means our business system, business formats, proprietary instructional techniques and processes, methods, procedures, signs, designs, layouts, trade dress, standards, specifications and Marks, all of which we may periodically improve, further develop and otherwise modify. Bar Method Studios offer the Classes, products, services and amenities we authorize (and only the Classes, products, services and amenities we authorize) and operate under the mandatory and suggested specifications, standards, operating procedures and rules that we periodically specify for developing and/or operating a Bar Method Studio (collectively, the “System Standards”).

Market and Regulations

Bar Method Studios appeal primarily to women between the ages of 25 and 65, although men and women of different age groups participate in the program. The business is not seasonal. Bar Method Studios compete with other facilities offering a variety of fitness programs. The physical fitness market is well developed and includes traditional facilities such as health clubs, gymnasiums, yoga classes, Pilates studios and specialized fitness facilities such as cycling studios, but is growing with facilities using new concepts and training techniques.

In many states, health clubs and similar facilities are subject to various health and safety laws and rules, including laws requiring postings concerning steroids and other drug use, requiring certain medical equipment in the club, limiting the supplements that health clubs can sell, requiring bonds if a health club sells memberships valid for more than a specified time period, requiring club owners to deposit into escrow certain amounts collected from members before the club opens (so-called “presale” memberships), and imposing other restrictions on memberships that health clubs sell. Many states limit the length of your customer contracts, provide for specific provisions to be included in those contracts, prescribe the format or type size for the contract, and/or provide customers the right to terminate their contracts. Some of these laws might also cover Bar Method Studios. State and local laws also might regulate certifications that staff members must maintain. Because you will accept credit cards, you will also have to comply with any general laws and regulations relating to the acceptance of credit cards, including the Payment Card Industry (“PCI”) Data Security Standard (“DSS”). Compliance with the PCI DSS is your responsibility. You must also comply with personal information, data protection and data privacy laws that affect the safekeeping of member information, and regulations that apply to electronic marketing, like faxes, emails, text messaging and telemarketing. You should check your state and local laws to see whether any of these laws may apply to your Studio.

You also will need to comply with federal, state and local laws and regulations that govern businesses in general. For example, your business is subject to state and federal regulations that allow the government to restrict travel and/or require businesses to close during state or national emergencies. Because your business is operated from a destination to which your customers must travel, your business can be affected by such orders more than others. As of the date of this Disclosure Document, travel restrictions have been implemented by the federal government and most state governments in response to the novel strain of the coronavirus (COVID-19) a global pandemic, and several state governments have ordered business closures. You should investigate these laws.

Item 2
BUSINESS EXPERIENCE

President – Charles Runyon

Chuck Runyon has been our President since September 2019. He is also one of the founders of Anytime Fitness and has served as a Director of Anytime Fitness since February 2002, until he was appointed as a Governor, President and Chief Manager in December 2009. In January 2013, he transitioned from the role of President to Chief Executive Officer of Anytime Fitness. He has also served as Chief Executive Officer and Governor of Waxing the City Worldwide since September 2012 and the President and a Governor of Basecamp Fitness since August 2018.

Vice President – Dave Mortensen

Dave Mortensen has been our Vice President since September 2019. He is also one of the founders of Anytime Fitness and has served as the Secretary and a Governor of Anytime Fitness since December 2009 and as its President since January 2013. He has also served as President, Secretary and Governor of Waxing the City Worldwide since September 2012. Mr. Mortensen has been the Vice President and a Governor of Basecamp Fitness since August 2018. In August 2007, he was elected a Director of our affiliate, ProVision, and he was appointed as President, Chief Financial Officer/Treasurer and Secretary of ProVision in October 2009. In December 2009, he was appointed as Secretary and a Governor of ProVision.

Chief Financial Officer – R. John Pindred

John Pindred has been our Chief Financial Officer since September 2019. He has also served as the Chief Financial Officer/Treasurer for Anytime Fitness and Waxing the City Worldwide since November 2014 and of Basecamp Fitness since August 2018. From August 2004 until September 2014, he was Chief Financial Officer for Family Christian, LLC (f/k/a Family Christian Stores, Inc.), in Grand Rapids, Michigan. From August 2006 until September 2014, he was also the Chief Administrative Officer of that company.

Vice President of Operations: Frannie Wong

Frannie Wong has been our Vice President of Operations since September 2019. She was our Chief Operating Officer from September 2017 to September 2019 and our Chief Financial Officer from May 2017 to September 2019. From May 2003 until June 2016, Ms. Wong was the Chief Financial Officer of YogaWorks in Santa Monica, California.

Chief Technology Officer: Ryan Masanz

Ryan Masanz has been our Chief Technology Officer since September 2019. Mr. Masanz has been the Chief Technology Officer for Anytime Fitness since April 2007, for Waxing the City Worldwide since September 2012, and for Basecamp Fitness since August 2018.

Chief Information Officer: Tammylynne Jonas

Tammylynne Jonas has been our Chief Information Officer since September 2019. Ms. Jonas has been the Chief Information Officer for Anytime Fitness and Waxing the City Worldwide since May 2019 and for Basecamp Fitness since June 2019. From 2017 to 2019 she was the Chief Information Officer for Holiday Companies, and while in that role, from 2018 to 2019 she simultaneously served as Senior Director of the Global Technology Team for Couche- Tard. From 2012 to 2017 Ms. Jonas was Vice President for Technology: Vendor Management, Sourcing, Enterprise Services, and Application Development for Kohl’s.

Chief Marketing Officer: Amy Halford

Amy Halford has been our Chief Marketing Officer since September 2019. Ms. Halford has been the Chief Marketing Officer of Anytime Fitness, Basecamp Fitness, and Waxing the City Worldwide since June 2019. From March 2018 to June 2019 she was the Senior Director of Brand Strategy and Development for Anytime Fitness and Waxing the City Worldwide. From March 2017 to March 2018, Ms. Halford was the Vice President of Digital for Gomn.com and prior to that, from May 2014 to March 2017, she was the Director of Owned Media and Publishing for General Mills.

General Counsel and Secretary: James Goniea

Jim Goniea has been our General Counsel and Secretary since September 2019. Mr. Goniea has served as General Counsel for Anytime Fitness and Waxing the City Worldwide since October 2017 and for Basecamp Fitness since August 2018. From January 2016 to September 2017, he was a partner at Einbinder Dunn & Goniea LLP (now Einbinder & Dunn LLP) a law firm in New York, New York. Between September 2012 and December 2015, he was a partner at Wiggin and Dana LLP, a law firm in Philadelphia, Pennsylvania.

Chief Self Esteem Officer - Carol Grannis

Carol Grannis has been our Chief Self Esteem Officer since September 2019. She has served as Chief Self Esteem Officer for Anytime Fitness and Waxing the City Worldwide since August 2017 and for Basecamp Fitness since August 2018. She founded Leading Edge Talent Solutions in January 2003 based in Woodbury, Minnesota, and operated Leading Edge Talent Solutions through July 2017. Through Leading Edge Talent Solutions, she was a consultant for Self Esteem Brands from March 2010 to July 2017.

Executive Vice President of International Franchise Operations: Rajat Kumar

Rajat Kumar has served as our EVP of International Franchise Operations since September 2019. He has also served as the EVP of International Franchise Operations for Anytime Fitness and Waxing the City Worldwide since April 2018 and the Vice President of Franchise Administration for Basecamp Fitness since August 2018. From January 2016 to February 2018, Mr. Kumar was the Global Head of New Business Development at Tata Global Beverages in Singapore. From December 2013 to September 2015, he was the Business Development Director at General Mills in Geneva, Switzerland.

Chief Development Officer – Jedediah Schmidt

Jedidiah (Jed) Schmidt has been our Chief Development Officer since January 2020. He leads the Franchise Sales, Real Estate and Market Development teams. Mr. Schmidt joined SEB in June 2016 and served in various roles: from June 2016 to October 2018 he was President of ProVision and from October 2018 to January 2020 he was Brand President of Basecamp Fitness. From August 2013 to June 2016, Mr. Schmidt was Global Vice President of Sales and Marketing for Playerlync, LLC in Denver, Colorado.

Director of Financing – Timothy Smith

Timothy Smith has been our Director of Financing since September 2019. He has also served as the Director of Financing of Anytime Fitness since December 2009, and has served in the same role for Basecamp Fitness since August 2018, and for Waxing the City since October 2012. From February 2013 to present has been President of our affiliate Franchise Financial, LLC.

Studio Division President - Angela Jaskolski

Angela Jaskolski joined SEB in April 2016 as the Senior Vice President of Strategic Operations. In August 2016, she became the Brand President of Waxing the City. In September 2019 she became the Studio Division President; the Studio Division is comprised of us, Waxing the City and Basecamp Fitness. From April 2013 to April 2016 Ms. Jaskolski was the Vice President of Corporate Operations for Regis Corporation, based in Minneapolis, MN.

Vice President of Real Estate – Mark Norman

Mark Norman joined us in September 2019 as Vice President of Real Estate. He serves in the same capacity for Anytime Fitness, Basecamp Fitness and The Bar Method. From April 2017 to September 2019, Mr. Norman served as Vice President of Real Estate for Regis Corporation in Minneapolis, Minnesota. From September 2016 to April 2017 he was Associate Vice President of Real Estate at Regis Corporation in Minneapolis, Minnesota and was a Real Estate Director with Regis from November 2010 to September 2016.

Vice President of Franchise Administration – Jennifer Yiangou

Jennifer Yiangou has been our Vice President for Franchise Administration since September 2019. She has also served as the Vice President of Franchise Administration for Waxing the City Worldwide since October 2012, for Anytime Fitness since January 2008, and for Basecamp Fitness since August 2018.

Manager of Franchise Operations: Bradley Mack

Bradley Mack has been our Manager of Franchise Operations since March 2016. Prior to that, Mr. Mack was a Senior Analyst, Global Business Insights for Mattel, Inc. in El Segundo, California from September 2014 through March 2016.

Corporate Master Trainer: Kiesha Ramey-Presner

Kiesha Ramey-Presner has been our Corporate Master Trainer since March 2016. She is and has been our training Coach since March 2017 and a Teacher at our San Francisco (Marina), California studio since September 2010. Ms. Ramey-Presner was also our Vice President, Teacher Development from April 2016 to March 2017 and an Evaluator from January 2013 through April 2016.

Item 3
LITIGATION

Illinois v. The Bar Method Franchising Inc. and The Bar Method Inc. (Case No. 2009CH 0125, Seventh Judicial Circuit of Illinois, filed February 9, 2009). The Illinois Attorney General brought this action against us and our predecessor, alleging the agreement between TBM and an Illinois resident that TBM assigned to us in January 2008 constituted a franchise that was not registered, as the Illinois Franchise Disclosure Act required, and that TBM did not provide a franchise disclosure document to the operator as that statute requires. On February 9, 2009, the same day as the Complaint in the matter was filed, we and TBM agreed to the entry of a Final Judgment and Consent Decree in which, while not admitting any liability for any of the violations that the Illinois Attorney General alleged, we and TBM agreed to the entry of a permanent injunction prohibiting us and TBM from offering or selling franchises in Illinois without being registered as a franchisor or failing to provide the franchise disclosure document to residents of Illinois as the Illinois Franchise Disclosure Act requires. We also agreed to offer rescission of the agreement to our Illinois operator and to the payment of penalties and costs to the State of Illinois in the amount of $5,000. The Illinois operator did not accept the offer of rescission and its agreement continues in effect.

In the Matter of the Investigation by Andrew Cuomo, Attorney General of the State of New York, of The Bar Method Inc. and Carl Diehl (Assurance No. 08-108). On April 2, 2009, TBM and Mr. Diehl, as its Vice President, entered into an Assurance of Discontinuance (“AOD”) under which, without admitting any violation of the law, they agreed to offer rescission of an agreement that TBM signed in New York without being registered to sell franchises in that state. As part of the AOD, TBM and Mr. Diehl agreed to comply with the provisions of the New York Franchises Act and not to sell franchises in New York without a current registration. TBM also paid to the State of New York the sum of $2,500. The New York operator did not accept the offer of rescission and she continues to operate her studio under the agreement.

Other than these actions, no litigation is required to be disclosed in this Item.

Item 4
BANKRUPTCY

Except as set forth below, no bankruptcy information is required to be disclosed in this Item.

Our Chief Financial Officer, R. John Pindred, was an officer of Family Christian, LLC, 5300 Patterson Avenue Southeast, Grand Rapids, Michigan 49530, from August 2004 until September 2014. On February 11, 2015, about 5 months after Mr. Pindred left that company, Family Christian, LLC, filed for protection under Chapter 11 of the United States Bankruptcy Code, Case No. 15-00643, United States Bankruptcy Court, Western District of Michigan. The deadline for filing claims passed on June 9, 2015. On August 11, 2015, Family Christian, LLC’s Chapter 11 Plan of Liquidation, involving a sale of assets and continuity of operations, was confirmed. On August 1, 2016, the court issued a final decree closing the case.

Item 5
INITIAL FEES

Initial Franchise Fee

You will pay us an initial franchise fee in a lump sum when you sign the Franchise Agreement. In most cases, the initial franchise fee is $52,000. The initial franchise fee is not refundable under any circumstances.

However, we offer other pricing options for veterans, existing franchisees who are not in default under their existing Franchise Agreement(s) with us or our affiliates, and for people signing an Area Development Agreement to open and operate multiple Bar Method Studios. A schedule of the various pricing options and fees follows:

If you sign an ADA, the initial franchise fee is referred to as a Development Fee, and you pay it in full, for all the Bar Method Studios you commit to open, when you sign the ADA. All portions of the Development Fee are deemed fully earned by us once paid and are non- refundable.

The number of Bar Method Studios we will allow you to open under an ADA may be limited by various factors, including the capacity of the DMA in which you choose to develop. For example, we will not sell a 10 location ADA in a DMA that has a holding capacity of 5 Bar Method studios at the time you purchase. We may not allow a single franchisee to purchase more than 70% of the potential or existing locations within any given DMA.

Training Fees

Before your Studio opens at least 3 of your instructors must attend and complete to our satisfaction our Teacher Training. There is no charge for this training unless you have more than 3 instructors attend. In that case, the fee is $1,450 per instructor. In any event, if the training is held at a location outside of our corporate offices you must pay the travel and living expenses of our instructor who performs the training. Any fees for this training are due before the training and are nonrefundable.

The individual you select as your Teacher Manager must complete our Teacher Manager Training Program. This individual may be the principal owner, principal operator or an instructor but they must have successfully completed our Teacher Training or be taking it simultaneous with the Teacher Manager Training. This program is a 1-year program which must begin at least 90 days before your Studio opens. The cost of this training is $5,000, is nonrefundable and must be paid before the training begins.

Opening Purchases

Before you open your Studio, you must buy from us mat covers, stretching straps, balls, risers and other initial equipment. We expect your payments to us for this initial equipment to be approximately $12,000 but this may vary depending on the size of your Studio. In addition, you must also buy from us an initial opening retail inventory of socks, shirts, towels, water bottles, logoed apparel and/or other retail products that you will sell at your Studio. We call the opening initial retail inventory that you buy from us the “Retail Package.” We expect that your payments to us for the Retail Package will range from $1,500 to $3,500, depending on the types and amounts of inventory you decide to buy. These payments are not refundable.

You must purchase information technology services, technology, network hardware, and security systems, including tablet or mobile devices, computers, sound systems, software and other related components from our affiliate, ProVision. ProVision will provide you with technology support, monitoring, and installation services for your Studio. ProVision offers three packages, which range in cost between $8,495 and $12,495. The basic package, which costs $8,495, includes all of the technology components we require you to have to operate your Studio. The additional packages include optional components that you may choose to purchase and install, but which are not required by us. These package prices do not include taxes which we estimate will cost an additional 10% of the package cost or the cost of shipping or installation, which we estimate will cost an additional approximately 40% of the package cost. This cost may be financed through a third party. These payments are not refundable.

You will have 12 months from the date you sign the Franchise Agreement to open and begin operating your Bar Method Studio. If you want to extend that time for an additional 3 months, and we agree to allow you to do so, you must pay a $500 extension fee to us as a condition to our granting the extension. (However, we will waive this extension fee if you are actively working with our real estate team in locating a site.) The extension fee also applies if we agree to allow you to extend the date for opening of any Bar Method Studio that you agree to open under your Area Development Agreement. We are not, however, obligated to grant these extensions, and we have the right to condition our consent on other requirements. Extension fees are not refundable and are not credited against any other obligation you may have to us.

We may pay a fee to qualifying, existing franchisees who refer to us a new prospective franchisee (not already in the system) who ultimately signs a Franchise Agreement with us, pays the initial franchise fee in full, and opens a new Studio for business.

Compliance Drawing and Construction Documents

We create a specific studio layout/design (“Compliance Drawing”) of your Bar Method Studio using the as-built drawings, surveys, technical data, and site plans you provide. We provide one Compliance Drawing per Franchise Agreement. If additional Compliance Drawings are needed, you will pay us $250 per Compliance Drawing. The Compliance Drawing documents the design of your Bar Method Studio, but is not sufficient for construction and permitting.

You must retain an architectural vendor to create a complete set of detailed construction documents and to complete construction of your facility in compliance with the Compliance Drawing and our mandatory specifications (“Construction Documents”), and to obtain any required permits, and conform the premises to local ordinances or building codes. If you do not use our designated architectural vendor to create the Construction Documents, we will charge you a fee of $2,700 to review the Construction Documents created by another vendor. If this is your first Bar Method Studio, we may require you to obtain your Construction Documents from our designated architectural vendor.

Range of Initial Fees

Franchisees signing franchise agreements during 2019 paid us initial fees (as described in this Item 5) ranging from $0 to $52,000.

Item 6
OTHER FEES

Item 7
ESTIMATED INITIAL INVESTMENT YOUR ESTIMATED INITIAL INVESTMENT

Explanatory Notes.

(1) Type of Expenditures. The amounts provided in Item 7 include costs you will incur to start your business. These estimates are based on our experience with franchised studios. All fees and payments are non-refundable, unless otherwise stated or permitted by the payee. The low and high ranges in the table are based on average size studio premises, and does not include optional upgrades to equipment or studio design. The estimates provided in Item 7 assume you will rent your franchised location from a third-party landlord. It does not include costs associated with the acquisition of real estate if you decide to operate from a property you purchase. The costs for rent, equipment and leasehold improvements will vary and may be significantly higher than projected in this table, based on the square footage, condition of the property, location, market conditions, financing costs, and other physical characteristics of your franchised location.

(2) Initial franchise fee. We describe the initial franchise fee in Item 5. If you sign an Area Development Agreement, you must commit to opening more than one Bar Method Studio, and you will pay the Development Fee at the time you sign the Area Development Agreement. The Development Fee will be credited to the Initial Franchise Fee due under each Franchise Agreement you or your affiliate signs for each Bar Method Studio developed under the Area Development Agreement. The Development Fee is described in Item 5.

(3) Franchisee Training, Travel & Living Expenses. The person you designate as the “Principal Operator” of your Studio must attend our Initial Training Program at a location we designate. If your Principal Operator is not also a Principal Owner, then this individual must attend training, and along with your teachers must sign confidentiality and non-disclosure agreements that meet our requirements and you must provide a copy to us before they attend training. We will also provide Teacher Training to at least 3 of your instructors before you open your Studio. These estimates also include Teacher Training for 3 instructors and the Teacher Manager training fee.

These estimates do not include an amount for additional attendees, nor do they include an amount for additional training programs if you or any of your personnel cannot complete a training program to our satisfaction. We describe our training program in Item 11.

(4) Real Estate & Leasehold Improvements. Bar Method Studios typically occupy approximately 1,750 to 3,000 square feet of space, although some highly populated areas with appropriate demographics might justify larger spaces. Rent amounts can vary depending upon the area in which the Studio is located, its size, the condition of the premises, the landlord’s contribution to your leasehold improvements and other factors. You probably will also have to pay the landlord a first and last months’ rent deposit and possibly a lease security deposit when you sign the lease. These estimates include a security deposit and first month’s rent at $42.00 per square feet for a 1,750 square feet Studio; the high estimate assumes $171,535 for build-out and improvements. You will need to alter the interior space to meet our then-current specifications, before you open your Studio. These figures cover the costs related to demolition, repair, insulation, doors and hardware, partition walls, acoustical ceilings, flooring, painting, decoration, installation of fixtures, cabinets, plumbing, HVAC, electrical, fire and security systems, decorating, signage and similar costs for a facility up to approximately 3,000 square feet. The amounts vary depending primarily on the Studio’s size, location and condition. Some landlords may pay some or all of your tenant improvements as part of your lease negotiations. These estimate does not include construction of premises from the ground up.

You might choose to purchase, rather than rent, real estate on which a building suitable for the Studio already is constructed or could be constructed. Real estate costs depend on location, size, visibility, economic conditions, accessibility, competitive market conditions, and the type of ownership interest you are buying. Because of the numerous variables that affect the value of a particular parcel of real estate, this initial investment table does not reflect the potential purchase cost of real estate or the costs of constructing a building suitable for the Studio.

As described in Item 8, we offer a Construction Management Services program through our approved vendor to oversee the construction of your Studio. These estimates do not include the cost of Construction Management Services as we do not currently require you to participate in the Construction Management Services program, however we may transition this to a mandatory program. If this occurs, you must purchase Construction Management Services if you have not already signed a Franchise Agreement with us or have not commenced the construction of your Studio. As of the issuance date of this Disclosure Document, we anticipate that the cost of the Construction Management Services will be $8,500.

(5) Grand Opening Advertising. You must spend a minimum of $10,000 on your grand opening. This may include a grand opening party, advertising and social media budget according to the standards we require.

(6) Compliance Drawings. You must retain an architectural vendor to create a complete set of detailed Construction Documents. See Item 5. We will provide one Compliance Drawing for you at no charge, but you must pay us $250 for each additional Compliance Drawing as needed. You must pay a fee of $2,700 if you do not use our designated architectural vendor to create the Construction Documents. We do not construct, remodel or decorate your premises. The estimates assumes standard tenant improvements within a structure, designed for commercial use, and excludes items such as structural modifications, site work, energy studies, surveys and/or exterior improvements.

(7) Furniture, Fixtures & Equipment. These figures cover your other “Operating Assets,” which are the required furniture, fixtures and millwork, and equipment necessary to begin operations of the Studio as specified in our confidential manual. This includes the mat covers, stretching straps, balls, risers and other initial equipment that you must purchase from us. This range also includes office equipment and related supplies. We may change the selection of equipment and supplies you must provide at any time. The amount of required equipment will depend on the size of your Studio.

(8) Technology Expenses and Licenses. These figures cover the estimate cost for the Studio Management System hardware, related supplies, and a sound system. “Studio Management System” means the integrated, computer-based, web-based, and application systems and services (both hardware and software) that we periodically specify for administering the management and operation of your Studio, which might include any one or more of Class scheduling, point of sale, client management and progress tracking, prospect management, sales and marketing, billing and collections, accounting and payroll, and communications functions. You must purchase a telephone system, copy/print/scan machine, headsets, amplifier, mixer, speakers and wireless microphone system as specified in our confidential manual. This figure also may include any one or more of the software platforms, applications, class scheduling, point of sale, client management and progress tracking, prospect management, sales and marketing, billing and collections, accounting and payroll, and communications functions. We describe the Studio Management System in Item 11. You must purchase information technology services, technology, network hardware, and security systems, including tablet or mobile devices, computers, sound systems, software and other related components from our affiliate, ProVision. ProVision will provide you with technology support, monitoring, and installation services for your Studio. ProVision offers three packages, which range in cost between $8,495 and $12,495. The range above includes the basic package, which costs $8,495, plus shipping and installation. The basic package includes all of the technology components we require you to have to operate your Studio. The additional packages include optional components that you may choose to purchase and install, but which are not required by us. The range above does not include taxes which we estimate will cost an additional 10% of the package cost but does include the cost of shipping or installation, which we estimate will be an additional approximately 40% of the package cost.

(9) Initial Inventory. As we describe in Item 5, the Retail Package is the initial opening retail inventory that you will purchase from us. This includes socks, shirts, towels, water bottles, logoed apparel and/or other retail products. The amount you must pay for the Retail Package depends on the types and amounts of inventory you decide to buy.

(10) Insurance & Bonds. Some state laws also require the purchase of a bond. Because the requirements vary by state, and may depend on your net worth, we cannot estimate the amount you will need to obtain a bond, or the assets you may need to collateralize that bond. We have negotiated a base rate of $250 per year for bonds through our designated vendor, however your actual cost may vary based on your individual circumstances. Further, you will need to purchase and maintain in effect at all times during the term of the Franchise Agreement a policy or policies of insurance, naming us and our affiliates as additional insureds on the face of each policy. You must have and maintain general liability insurance with complete operations coverage, broad form contractual liability coverage, property damage all with current minimum limits of $1,000,000 per person and $1,000,000 per occurrence, $3,000,000 in the aggregate, and other insurance in the types and amounts as we may require or as required by law. The insurance policy must be written by a carrier who has a minimum rating acceptable to us. Our insurance estimate assumes that you will personally operate your Bar Method Studio and have no employees. Therefore, the estimates do not include premiums for worker’s compensation insurance, employer’s liability insurance or automobile liability insurance. Your insurance costs may be substantially higher if you have to buy employer’s liability insurance, automobile liability insurance, or any other insurance required by your landlord. Before you make a decision to purchase the franchise, you should confirm that insurance is available for a fitness center of the type you intend to operate, given that you will not staff the premises all of the time.

(11) Miscellaneous Expenses. This estimate includes estimated legal and accounting costs, permits and zoning approvals using our required Studio design, utility deposits, and uniforms.

(12) Additional Funds – 3 Months. These figures include estimates of your initial start-up expenses (other than the items identified separately in the table) for your Studio’s first 3 months of operation, including miscellaneous supplies, inventory, cleaning services, payroll costs (but not including any draw or salary for you or the Principal Owner or for the other owners of the Studio, any fees or other amounts you owe us, or any taxes or other permitting or licensing fees that you may pay), and other miscellaneous costs. These figures are estimates, and we cannot guarantee that you will not have additional expenses in starting to operate your Studio. Your costs depend on how closely you follow our methods and procedures; your management skill, experience, and business acumen; local economic conditions; the local market for your services; the prevailing wage rate; competition; and the sales level reached during the initial period.

(13) Total Estimated Initial Investment. We relied on our and our affiliates’ experience in developing, licensing and franchising Bar Method Studios since 2001 to compile the estimate for additional funds and other estimates in this Item 7. This is only an estimate of your initial investment and is based on our estimate of nationwide costs and market conditions prevailing as of the date of this Disclosure Document. It is possible to significantly exceed costs in any of the areas above. You must bear any deviation or escalation in costs from the estimates that we have given. You should review these figures carefully with a business and a legal advisor before making any decision to purchase a franchise. Many factors that are unique to your location can make a dramatic difference in the estimates provided. We do not offer financing for any part of the initial investment. The availability and terms of financing will depend on factors like the availability of financing generally, your credit worthiness, your relationship with local banks, your experience in the fitness industry, and any additional collateral you may offer to a lender to secure the loan. Our estimates do not include any finance charges or fees, interest or debt service obligations.

Item 8
RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

System Standards

You must operate the Studio according to our System Standards, which may regulate, among other things, the brands, types, and models of equipment and other products and services you use to operate your Studio; required or authorized products and services or product and service categories; designated or approved suppliers of these items (which might include or be limited to us and/or our affiliates); and standards and procedures for instructing Classes. To maintain the quality of the goods and services that Bar Method Studios offer and the reputation of the Bar Method Studio franchise network, you must purchase or lease all Operating Assets and other products and services for the Studio only according to our System Standards and, if we require, only from suppliers or distributors that we designate or approve (which may include or be limited to us or our affiliates). The Studio must contain all of the Operating Assets, and only the Operating Assets, that we periodically specify.

We issue and modify our System Standards based on our, our predecessor’s, our affiliates’ and our franchisees’ experience in licensing, franchising and/or operating Bar Method Studios. We will notify you in our Operations Manual (defined in Item 11) of our System Standards and names of designated and approved suppliers. We also provide our relevant standards and specifications to some approved suppliers. Currently, the purchases and leases that you must make from us or our affiliates, from approved suppliers, or according to our System Standards represent approximately 70% to 80% of your total purchases and leases in establishing, and approximately 30% to 50% of your total purchases and leases in operating, your Studio.

Suppliers

You currently must buy all of the mat covers and stretching straps needed to operate your Studio only from us. You currently may choose whether or not to use logoed balls or to sell branded socks, shirts, apparel, other branded products and/or exercise videos at retail from your Studio, but if you choose to use or sell any of these products, you currently must buy them only from us.

You must obtain a Compliance Drawing from us. We will provide one Compliance Drawing per Franchise Agreement. We anticipate this Compliance Drawing will be sufficient to provide to an architectural vendor to create your Construction Documents. If additional Compliance Drawings are needed, you will pay us $250 per Compliance Drawing.

ProVision, an affiliate of ours, is currently the sole supplier for certain technology services, technology, network hardware, and security systems, including tablet and mobile devices, computers, audio and video systems, software and other related components which you must purchase to operate your Studio. Except for these products and services, as of the issuance date of this Disclosure Document, neither we nor any of our affiliates currently are approved suppliers or the only approved suppliers for any products or services that Bar Method Studio franchisees use or sell. In the future, we may designate us and/or our affiliates as approved suppliers or the only approved supplier for certain products and services. We and/or our affiliates may derive revenue based on your purchases and leases, including from charging you for products and services we or our affiliates provide to you and from promotional allowances, volume discounts and other payments that suppliers and/or distributors that we designate or approve for some or all of our franchisees make to us. We and our affiliates may use all amounts received from suppliers and/or distributors, whether or not based on your or other franchisees’ actual or prospective dealings with them, without restriction for any purposes we or our affiliates deem appropriate. During 2019 we received approximately $1,015,733 in revenue from selling products to our Bar Method Studio franchisees, which is 17.5% of our total revenue of $5,818,108. We derive this figure from our audited financial statements.

We currently have a designated architectural vendor who provides the Construction Documents. If you choose to use a vendor other than our designated architectural vendor for the creation of your Construction Documents, you will pay us $2,700 to review your Construction Documents. See Item 5. The Construction Documents supplied by the alternate service provider must provide the same level of information and detail as the prototypical Construction Documents created by our designated architectural vendor and use the same format, style and structure. The service provider will be responsible for distribution and coordination of documents to all designated vendors that utilize the Construction Documents as part of the development process. If this is your first Bar Method Studio, we may require you to obtain your Construction Documents from our designated architectural vendor.

We currently offer construction management services through an approved third-party vendor, to assist franchisees with the build-out of their studios (“Construction Management Services”). Construction Management Services generally include consulting services regarding construction-related lease requirements, construction estimates, general contractor bidding and selection (you select the general contractor), the exterior sign review and approval process, utilities set up, obtaining building permits, site conditions and work progress, FF&E operation, maintenance and trouble-shooting; providing a punch list of open issues; construction warranty work; and obtaining occupancy approval. As of the issuance date of this Disclosure Document, the Construction Management Services are optional. However, we may transition the Construction Management Services program to a mandatory program. If this occurs, you must purchase Construction Management Services if you have not already signed a Franchise Agreement with us or have not commenced the construction of your Basecamp Studio. We anticipate that the cost of the program will be $8,500. You must pay our approved vendor for the Construction Management Services when you sign its Project/Construction Management Services Agreement. This payment is not refundable. While our vendor provides consulting services in these various areas if you sign its construction management agreement, you alone are responsible for all fees, costs, and expenses associated with your Studio’s build-out, including plans and specifications, permits, licenses, construction and materials, FF&E, installation and insurance.

You currently must acquire the Studio Management System software and related services (including any apps, future technologies and other software platforms) only from our designated suppliers, which may include us or one of our affiliates. At our option, you must use only the real estate services provider, architect, development company and/or other contractor(s) that we periodically designate or approve to design and/or develop the Studio. Except as described in this Item 8, there currently are no other goods, services, supplies, fixtures, equipment, inventory, computer hardware or software, real estate, or comparable items related to establishing or operating your Studio that you must purchase from us or designated or approved suppliers. Other than owning an interest in us or an affiliate, none of our officers owns an interest in any other current supplier to Bar Method Studio franchisees.

If you want to use any Operating Assets or other products or services for or at the Studio that we have not yet evaluated, or purchase or lease any Operating Assets or other products or services from a supplier or distributor that we have not yet approved (for Operating Assets or other products and services that we require you to purchase only from designated or approved suppliers or distributors), you first must submit sufficient information, specifications and samples for us to determine whether the product or service complies with our standards and specifications and/or the supplier or distributor meets our criteria. We may condition our approval of a supplier or distributor on requirements relating to product quality, prices, consistency, warranty, reliability, financial capability, labor relations, client relations, frequency of delivery, concentration of purchases, standards of service (including prompt attention to complaints) and/or other criteria. We may inspect the proposed supplier’s or distributor’s facilities and require the proposed supplier or distributor to deliver product or other samples, at our option, either directly to us or to any independent laboratory that we designate for testing. You need not pay us any fees for proposing new suppliers or distributors. We will use commercially reasonable efforts to notify you of our approval or disapproval within 30 days after receiving all information we require. We may periodically re-inspect the facilities, products and services of any approved supplier or distributor and revoke our approval of any supplier, distributor, product or service that does not continue to meet our criteria. Despite these rights, we may limit the number of approved suppliers with whom you may deal, designate sources that you must use, and/or refuse any of your requests for any reason, including if we have already designated an exclusive source (which might be us or our affiliate) for the applicable product or service or if we believe that doing so is in the best interests of the Bar Method Studio network.

We will not provide material benefits, like renewal or additional franchises, to franchisees based on their purchase of particular products or services or use of particular suppliers. We negotiate purchase arrangements with suppliers, including price terms. In doing so, we seek to promote the overall interests of our franchise network and our interests as franchisor. In the future, we may derive revenue from your purchases or leases of goods, services, supplies, fixtures, equipment, inventory and products from our mandatory, designated or preferred suppliers. This income may be in the form of percentage rebates on the purchases you make from the vendor or fixed amounts on supplies and services. There are no caps or limitations on the maximum amount of rebates we may receive from our suppliers as the result of franchisee purchases. There are no formal purchasing or distribution cooperatives in the Bar Method Studio franchise network.

Insurance

During the Franchise Agreement’s term, you must maintain in force at your sole expense the insurance coverage for the Studio in the amounts, covering the risks, and containing only the exceptions and exclusions that we periodically specify for similarly situated Bar Method Studios. All of your insurance carriers must be rated A or higher by A. M. Best and Company, Inc. (or similar criteria as we periodically specify). All coverage must be on an “occurrence” basis, except for the employment practices liability coverage, which is on a “claims made” basis. We may, upon at least 60 days’ notice to you, periodically increase the amounts of coverage required and/or require different or additional insurance coverage at any time to reflect inflation, identification of new risks, changes in law or standards of liability, higher damage awards or other relevant changes in circumstances. All insurance policies must name us and any affiliates we designate as an additional insured and provide for 30 days’ prior written notice to us of a policy’s material modification or cancellation.

Local Marketing

You must at your expense participate in the manner we periodically specify in all advertising, marketing, promotional, client relationship management, public relations and other brand-related programs that we periodically designate for the Studio, subject to the Marketing Spending Requirement. You must ensure that all of your advertising, marketing, promotional, client relationship management, public relations and other brand-related programs and materials that you or your agents or representatives develop or implement relating to the Studio (collectively, “Local Marketing”) is completely clear, factual and not misleading, complies with all applicable laws and regulations, and conforms to the highest ethical standards and the advertising and marketing policies that we periodically specify. Before using them, we may require you to send to us, for our approval, descriptions and samples of all proposed Local Marketing that we have not prepared or previously approved within the previous 6 months. If you do not receive written notice of approval from us within 15 business days after we receive the materials, they are deemed disapproved. You may not conduct or use any Local Marketing that we have not approved or have disapproved. At our option, you must contract with one or more suppliers that we designate or approve to develop and/or implement Local Marketing.

Studio Upgrades

In addition to your obligations to maintain the Studio according to System Standards, once during the Franchise Agreement’s term (at any time beginning on or after the 3rd anniversary of the Franchise Agreement’s effective date), we may require you to substantially alter the Studio’s and the Site’s appearance, branding, layout and/or design, and/or replace a material portion of your Operating Assets, in order to meet our then current requirements for new similarly situated Bar Method Studios. This obligation could result in your making extensive structural changes to, and significantly remodeling and renovating, the Studio, and/or in your spending substantial amounts for new Operating Assets. You must incur any capital expenditures required to comply with this obligation and our requirements, even if you cannot amortize those expenditures over the remaining Franchise Agreement term. Within 60 days after receiving written notice from us, you must have plans prepared according to the standards and specifications we specify and, if we require, using architects and contractors we designate or approve, and you must submit those plans to us for our approval. You must complete all work according to the plans we approve within the time period that we reasonably specify. However, this does not limit your obligation to comply with all mandatory System Standards we periodically specify.

Item 9
FRANCHISEE’S OBLIGATIONS

This table lists your principal obligations under the franchise and other agreements. It will help you find more detailed information about your obligations in these agreements and in other items of this disclosure document.

Notes:

(1) Each individual who is an owner of any business entity that is the franchisee, and their spouse, must sign a personal guarantee of all the obligations of the franchisee under the Franchise Agreement. This Guarantee also includes an agreement to be bound by the confidentiality and noncompete provisions of the Franchise Agreement.

Item 10
FINANCING

We do not offer, directly or indirectly, any financing to you to help you establish your business. We do not guarantee any note, lease or other obligation you incur. However, we do have an arrangement with a third-party equipment lender who will provide financing to our franchisees who meet this lender’s requirements.

Geneva Capital, LLC (“Geneva”) offers financing of up to $100,000 for a new location, including, among others, tangible equipment, security system, and signage (but excluding your initial franchise fee and working capital), based on credit approval. Financing is offered as a lease that typically requires 1 advance payment of up to 20%. Geneva also collects a security deposit equal to 1 month’s lease payment. Lease terms vary from 12 to 36 months. Geneva offers both true tax and capital leases. Fixed equivalent interest rates typically vary from 7.99%, to 11.99% per annum, based on your financial and credit worthiness. Geneva will not require you to pledge any other assets to secure the lease, but you must provide a personal guaranty. The amount of your lease payments will depend on the amount financed, the term of the lease, and the interest rate. You will have the right to purchase the equipment at the end of the lease at fair market value, typically capped at 10% of the original equipment cost, assuming you have not defaulted under the lease. The ability to prepay your obligations is negotiated on a case by case basis.

You will be in default under Geneva’s lease documents if you fail to pay amounts owed when due or you breach any other provision of the lease documents. If you commit a payment default, you must pay a late charge of 15% of the payment which is late or $25.00, whichever is greater or, if less, the maximum charge allowed by law. Regardless of the type of default, Geneva may retain your security deposit, elect not to renew any or all time-out controls programmed within the equipment, terminate or accelerate the lease and require that you pay the remaining balance of the lease (discounted at 3% per annum), and any purchase option due, and/or return the equipment to Geneva. Geneva may recover interest on the unpaid balance at the rate of 18% per annum or, if less, the highest rate permitted by law. It may also exercise any remedies available to it under the Minnesota Uniform Commercial Code or the law of its assignee’s principal place of business. It may also file criminal charges against you and prosecute you to the fullest extent of the law if any information supplied by you on your credit application or during the credit process is found to have been falsified or misrepresented. You must also pay Geneva’s reasonable attorneys’ fees and actual court costs. If Geneva has to take possession of the equipment, you must pay the cost of repossession including damage to the equipment or real property as a result of repossession.

Under the personal guaranty, which is contained in Geneva’s equipment lease agreement, you waive all notices. If you default under the lease agreement, Geneva may obtain and use consumer credit reports to determine acceptable means of remedies, and you waive any right or claim you may otherwise have under the Fair Credit Reporting Act (Equipment Lease Agreement – Section 12). Because the lease is a noncancelable net lease you are not entitled to any reduction of rent or any setoff for any reason, nor will the lease terminate or will your obligations be affected by any defect in, damage to or loss of possession or use of any of the equipment (Equipment Lease Agreement – Section 2). You waive any and all rights or remedies not in the lease (Equipment Lease Agreement – Section 14) and you and your guarantors, consent to personal jurisdiction in the state that Geneva or its assignee, as applicable, has its principal place of business and you and your guarantors waive trial by jury. If Geneva transfers the lease the transferee will not have to perform any of Geneva’s obligations and the rights of the transferee will not be subject to any claims you have against Geneva (Equipment Lease Agreement – Section 11). A copy of the current Geneva lease documents as of the date of this Disclosure Document is attached as Exhibit K.

We have signed a separate agreement with Geneva, under which we agreed to assume certain obligations if you default under your lease, including an obligation to assist Geneva in remarketing your equipment. Under that agreement, we also agreed to establish a pool to compensate Geneva for certain amounts of the losses it incurs, and to guaranty payment of certain amounts of those losses. This agreement also provides for a percentage of the lease amount to us as a referral fee and for a percentage of the lease amount added to the guaranty pool. There is no direct affiliation between Geneva Capital and us.

We and our affiliates have the right to sell, assign or discount to a third party all or part of any amounts you may owe to us or to our affiliates.

Item 11
FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING

Except as listed below, we are not required to provide you with any assistance.

Before you open the Studio, we will do the following:

(1) Designate a market area (a “Designated Market Area” or “DMA”) in which you may look for a site location for your Basecamp Studio. (Franchise Agreement – Section 2.A)

(2) Once you have chosen a site location for your Bar Method Studio, either approve or disapprove that location. (Franchise Agreement – Section 2.B)

(3) Once we approve a site location for your Bar Method Studio, provide you with a Protected Territory for your studio. (Franchise Agreement – Section 2.B)

(1) Create a specific studio layout/design for your Bar Method Studio (a “Compliance Drawing”) (Franchise Agreement – Section 2.F). If, however, you want to make changes in the Compliance Drawing, you will have to pay the vendor directly for the cost of those changes.

(4) Provide you mandatory and suggested specifications and layouts for a Bar Method Studio, which might include recommendations and/or requirements for dimensions, design, image, interior layout (including equipment placement), decor, Operating Assets, and color scheme. The Studio must contain all of the Operating Assets, and only the Operating Assets, that we periodically specify. At our option, you must use only the real estate services provider, architect, development company and/or other contractor(s) that we periodically designate or approve to design and/or develop the Studio. We do not provide any Operating Assets or other items for the Studio’s development directly or deliver or install items. However, we will sell to you your mat covers, stretching straps, balls, risers, and other initial equipment. We will also sell to you your initial Retail Package, which will include socks, shirts, towels, water bottles, logoed apparel and/or other retail products that you will sell at your Studio. We will provide the names of designated, approved or recommended suppliers for many items and, where appropriate, provide written specifications.

You must prepare all required construction plans and specifications to suit the Site and make sure that they comply with the Americans with Disabilities Act and similar rules governing public accommodations for persons with disabilities, other applicable ordinances, building codes, permit requirements, and lease requirements and restrictions. At our option, you must submit construction plans and specifications to us for approval before you begin constructing the Studio and all revised or “as built” plans and specifications during construction. Our review is limited to ensuring your compliance with our design requirements and the Franchise Agreement’s other requirements. Our review is not designed to assess compliance with federal, state, or local laws and regulations, including the Americans with Disabilities Act, as compliance with those laws and regulations is your responsibility. You must remedy, at your expense, any noncompliance or alleged noncompliance with those laws and regulations. We may periodically inspect the Site while you are developing the Studio. (Franchise Agreement – Section 2.C)

(5) Provide the training programs that must be completed by you and your personnel before your Studio opens. (Franchise Agreement - Sections 4.A to 4.D). See below for additional information on these training programs and certifications.

(6) Provide you access to, for use in operating the Studio during the Franchise Agreement’s term, 1 copy of our development manual, operating manual and/or other manuals (collectively, the “Operations Manual”), which might include written or intangible materials and which we may make available to you by various means. The Operations Manual contains System Standards and information on your other obligations under the Franchise Agreement. We may modify the Operations Manual periodically to reflect changes in System Standards. You must keep your copy of the Operations Manual current and communicate all updates to your employees in a timely manner. In addition, you must keep any paper copy of the Operations Manual you maintain in a secure location at the Studio. If there is a dispute over its contents, our master copy of the Operations Manual controls. The contents of the Operations Manual are confidential and you may not disclose the Operations Manual to any person other than Studio employees who need to know its contents. You may not at any time copy, duplicate, record or otherwise reproduce any part of the Operations Manual, except as we periodically authorize for training and operating purposes. Our Operations Manual is a total of 143 pages as of our most recent fiscal year end and its table of contents is included in Exhibit C.

At our option, we may post the Operations Manual on the System Website or another restricted website to which you will have access. If we do so, you must periodically monitor the website for any updates to the Operations Manual or System Standards. Any passwords or other digital identifications necessary to access the Operations Manual on such a website will be deemed to be part of our confidential information.

Any materials, guidance or assistance that we provide concerning the terms and conditions of employment for your employees, employee hiring, firing and discipline, and similar employment-related policies or procedures, whether in the Operations Manual or otherwise, are solely for your optional use. Those materials, guidance and assistance do not form part of the mandatory System Standards. You will determine to what extent, if any, these materials, guidance or assistance should apply to the Studio's employees. We do not dictate or control labor or employment matters for franchisees and their employees and are not responsible for the safety and security of Studio employees or patrons. You are solely responsible for determining the terms and conditions of employment for all teachers and other Studio employees, for all decisions concerning the hiring, firing and discipline of Studio employees, and for all other aspects of the Studio’s labor relations and employment practices. (Franchise Agreement – Sections 4.F and 6.H)

(7) Assist with the development of your grand opening marketing program. We describe our marketing programs and assistance below in this Item 11. (Franchise Agreement – Section 7.A)

During your operation of the Studio, we will do the following:

(1) Advise you periodically regarding the Studio’s operation based on your reports or our inspections. We will guide you on standards, specifications, operating procedures and methods that Bar Method Studios use, including methods and procedures for instructing Classes and evaluating teachers; purchasing required or recommended Operating Assets and other products; teacher training methods and procedures; and administrative, bookkeeping and accounting procedures. We will guide you in our Operations Manual, in bulletins or other written materials, by electronic media, by telephone consultation, and/or at our office or the Studio. If you request and we agree to provide additional or special guidance, assistance or training, you must pay our then applicable charges, including our personnel’s per diem charges and any travel and living expenses. Any specific ongoing training, conventions, advice or assistance that we provide does not create an obligation to continue providing that specific training, convention, advice or assistance, all of which we may discontinue and modify at any time. (Franchise Agreement – Section 4.E)

(2) At our option, hold various training courses and programs, at the times and locations we designate. Your personnel whom we periodically specify must attend and satisfactorily complete these mandatory training courses and programs and attend any conventions or other programs that we periodically specify for some or all Bar Method Studios. (Franchise Agreement – Sections 4.C and 4.D)

(3) Provide updates to the Operations Manual and System Standards as we implement them. Our periodic modification of our System Standards (including to accommodate changes to the Studio Management System and the Marks), which may accommodate regional and/or local variations, may obligate you to invest additional capital in the Studio and incur higher operating costs, and you must comply with those obligations within the time period we specify. Although we retain the right to establish and periodically modify the franchise system and System Standards that you have agreed to follow, you retain the responsibility for the day-to-day management and operation of the Studio and implementing and maintaining System Standards at the Studio. We may vary the franchise system and/or System Standards for any Bar Method Studio or group of Bar Method Studios based on the peculiarities of any conditions or factors that we consider important to its operations. You have no right to require us to grant you a similar variation or accommodation. (Franchise Agreement – Sections 4.F, 6.H and 6.I)

(4) Maintain and administer the Marketing Fund and System Website. (Franchise Agreement – Section 7) We describe the Marketing Fund and System Website below in this Item 11.

(5) At our option, periodically establish programs in which some or all Bar Method Studios will provide products and services to certain groups of clients and prospective clients (“Group Programs”). You must participate in, use, support and comply with all elements of any Group Programs that we periodically establish. You may not alter your pricing or other terms for, or withhold access to any Classes or other products, services or amenities from, any one or more Group Program participants or otherwise treat any Group Program participant differently from your Studio’s other clients, except as we specify or approve. You must provide products and services to all valid members of the Group Program according to the standards and other terms that we periodically specify. If those standards or other terms include maximum, minimum or other pricing requirements, you must comply with those requirements to the maximum extent the law allows. We and our affiliates have the right to receive payments from companies, organizations and other groups representing any Group Program participants, because of establishing the Group Program or otherwise because of their dealings with you and other Bar Method Studio owners, and to use all amounts we and they receive without restriction for any purposes. (Franchise Agreement – Section 6.E)

(6) Assist you in reselling your business. If you want to sell your business and we have a preferred vendor that offers brokerage services, we will refer you to that vendor. However, we also currently maintain a re-sale assistance program that creates an offering profile of your Studio, which we distribute to franchisees in the region and other targeted groups. We link this profile with several business listing websites and will provide to you our document library with forms you can use in the sale of your business. The program also offers workshops and personal assistance in listing and selling your business. (Re-Sale Assistance Agreement – Exhibit L.)

Advertising, Marketing, and Promotion

We need not spend any amount on advertising in your area or territory. However, as disclosed in Item 6, the “Marketing Spending Requirement” is the maximum amount that we can require you to spend on Marketing Fund contributions and approved Local Marketing for the Studio during each calendar quarter, and is 5% of the Studio’s Gross Revenue during the calendar quarter. Although we may not require you to spend more than the Marketing Spending Requirement on Marketing Fund contributions and approved Local Marketing for the Studio during any calendar quarter, you may choose to do so. We recommend you spend at least $1,500 on Local Marketing per month for your Studio.

Grand Opening Marketing Program

You must, at your expense, implement a grand opening marketing program for the Studio according to the requirements in the Operations Manual and other System Standards. At least 90 days before the Studio’s planned opening, you must prepare and submit to us for our approval a proposed grand opening marketing program that covers a period from 60 days before to 30 days after the Studio’s opening and contemplates spending at least the minimum amount that we reasonably specify, which must be at least $10,000. We recommend that you spend $15,000 to $20,000 on your Grand Opening Program. If you fail to spend the minimum required amount on the Grand Opening Program, you must pay us the difference between the amount you spent and the minimum required amount and we can either spend it in your market on your behalf or place the money in the Marketing Fund. In this case, you will be required to pay the Always On Marketing Program initial set up fee if you had not already done so, and aside from paying the difference of what you should have spent on the Grand Opening Program, you will not be required to pay the Always On Marketing Program’s then-current minimum monthly spend or participate in the Always On Marketing Program for the minimum 3-month commitment (unless you have otherwise elected to participate in the Always On Marketing Program). The amounts you spend on the Grand Opening Program are in addition to the Marketing Fund contributions that you must pay to us. Any amounts that you spend for the Grand Opening Program will not count towards your Marketing Spending Requirement. You must make the changes to the program that we specify and execute the program as we have approved it. (Franchise Agreement – Section 7.A). Upon request by us, you must provide us with a report itemizing the amounts you spent on the Grand Opening Program. We recommend that your work with us to tailor your Grand Opening marketing spend to match the needs of your individual market. Before opening you must complete a business plan, which will include a marketing plan, and you must review that plan with your franchise business consultant.

Marketing Fund

We established a marketing and brand fund (the “Marketing Fund”) on January 1, 2018 for the advertising, marketing, promotional, client relationship management, public relations and other brand-related programs and materials for all or a group of Bar Method Studios that we deem appropriate. You must pay us, via electronic funds transfer or another payment method we specify and together with each payment of the Royalty, a contribution to the Marketing Fund in an amount that we periodically specify, subject to the Marketing Spending Requirement. (Franchise Agreement – Sections 7.B and 7.D) We expect your initial Marketing Fund contributions will be 2% of the Studio’s Gross Revenue. Each Bar Method Studio that we or our affiliates operate contribute to the Marketing Fund at either the same rate as you or a rate similar to the rate at which other Bar Method Studio franchisees contribute. Some franchisees contribute to the Marketing Fund at different rates depending on the form of agreement they signed.

We designate and direct all programs that the Marketing Fund finances, with sole control over the creative and business concepts, materials and endorsements used and their geographic, market and media placement and allocation. The Marketing Fund may pay for preparing, producing and placing video, audio and written materials, electronic media and social media; developing, maintaining and administering one or more System Websites, including online sales and scheduling capabilities, lead management and client retention programs; administering national, regional, multi-regional and local marketing, advertising, promotional and client relationship management programs, including purchasing trade journal, direct mail, Internet and other media advertising and using advertising, promotion, and marketing agencies and other advisors to provide assistance; and supporting public and client relations, market research, and other advertising, promotion, marketing and brand-related activities. We may place advertising in any media, including print, radio, and television, on a regional or national basis. Our in-house staff and/or national or regional advertising agencies may produce advertising, marketing, and promotional materials. The Marketing Fund also may reimburse Bar Method Studio operators (including us and/or our affiliates) for expenditures consistent with the Marketing Fund’s purposes that we periodically specify. There currently are no advertising councils of franchisees that advise us on advertising policies and no advertising cooperatives in the Bar Method Studio network.

We account for the Marketing Fund separately from our other funds and do not use the Marketing Fund to pay any of our general operating expenses, except to compensate us and our affiliates for the reasonable salaries, administrative costs, travel expenses, overhead and other costs we and they incur in connection with activities performed for the Marketing Fund and its programs, including conducting market research, preparing advertising, promotion and marketing materials, maintaining and administering the System Website, collecting and accounting for Marketing Fund contributions, and paying taxes on contributions. We do not use any Marketing Fund contributions principally to solicit new franchise sales, although part of the System Website is devoted to franchise sales. The Marketing Fund is not a trust, and we do not owe you fiduciary obligations because of our maintaining, directing or administering the Marketing Fund or any other reason. The Marketing Fund may spend in any fiscal year more or less than the total Marketing Fund contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use. We use all interest earned on Marketing Fund contributions to pay costs before using the Marketing Fund’s other assets. We may incorporate the Marketing Fund or operate it through a separate entity whenever we deem appropriate. The successor entity will have all of the rights and duties specified here.

We prepare an annual, unaudited statement of Marketing Fund collections and expenses and we will give you the statement upon written request. During 2019, the Marketing Fund spent 30% on production, 22% on media placement, 21% on administrative expenses, and 27% on marketing technology platforms. We do not intend for the Marketing Fund to be audited, but we may have the Marketing Fund audited periodically at the Marketing Fund’s expense by an independent accountant we select.

We intend the Marketing Fund to maximize recognition of the Marks and patronage of Bar Method Studios. Although we will try to use the Marketing Fund to develop and/or implement advertising and marketing materials and programs and for other uses (consistent with these provisions) that will benefit all contributing Bar Method Studios, we need not ensure that Marketing Fund expenditures in or affecting any geographic area are proportionate or equivalent to the Marketing Fund contributions from Bar Method Studios operating in that geographic area, or that any Bar Method Studio benefits directly or in proportion to the Marketing Fund contributions that it makes. We have the right, but no obligation, to use collection agents and institute legal proceedings at the Marketing Fund’s expense to collect Marketing Fund contributions. We also may forgive, waive, settle and compromise all claims by or against the Marketing Fund. Except as expressly provided in the Franchise Agreement, we assume no direct or indirect liability or obligation to you for maintaining, directing or administering the Marketing Fund.

We may at any time defer or reduce a Bar Method Studio operator’s contributions to the Marketing Fund and, upon at least 30 days’ written notice to you, reduce or suspend Marketing Fund contributions and/or operations for one or more periods of any length and terminate (and, if terminated, reinstate) the Marketing Fund. If we terminate the Marketing Fund, we will (at our option) either spend the remaining Marketing Fund assets in accordance with these provisions or distribute the unspent assets to Bar Method Studio operators (including us and our affiliates, if applicable) then contributing to the Marketing Fund in proportion to their contributions during the previous 12-month period.

Always On Marketing Program

We recommend that you participate in our Always On Marketing Program in which we will create, purchase and place local digital advertising on your behalf to promote your Bar Method Studio in your local market for a monthly fee. Currently, fees for this optional program are the actual costs of media purchases, subject to a minimum of $350 per month, plus an administrative charge of 20%, plus an initial set up fee, currently, $300. A 3-month initial commitment is required. Additional services are available for additional monthly cost and those costs will vary based on the services and market rates. After the initial 3-month commitment, you may cancel your participation in the Always On Marketing Program with 30 days’ notice to us. Any amounts that you pay to us for the Always On Marketing Program will count towards your Marketing Spending Requirement. The amounts you spend on the Always On Marketing Program are in addition to the Marketing Fund contributions that you must pay to us.

Local Marketing

You must at your expense participate in the manner we periodically specify in all advertising, marketing, promotional, client relationship management, public relations and other brand-related programs that we periodically designate for the Studio, subject to the Marketing Spending Requirement. Before using them, you must send to us, for our approval, descriptions and samples of all proposed Local Marketing that we have not prepared or previously approved within the previous 6 months. If you do not receive written notice of approval from us within 15 business days after we receive the materials, they are deemed disapproved. You may not conduct or use any Local Marketing that we have not approved or have disapproved. (Franchise Agreement – Section 7.C)

If you fail to spend the Marketing Spending Requirement, we may require you to participate in our Always On Marketing Program and spend the difference between what you should have spent on Local Marketing and what you actually spent. In this case, you will be required to pay the Always On Marketing Program initial set up fee if you had not already done so, and aside from paying the difference of what you should have spent on Local Marketing, you will not be required to pay the Always On Marketing Program’s then-current minimum spend or participate in the Always On Marketing Program for the minimum 3-month commitment (unless you have otherwise elected to participate in the Always On Marketing Program). If you participate in the Always On Marketing Program, the fees you pay to us for that program will count towards this Marketing Spending Requirement. We reserve the right to audit your records upon request to determine compliance with this requirement.

Advertising Cooperatives

Although we currently do not, in the future we may establish local advertising cooperatives in market areas in which 2 or more Bar Method Studios are operating. If we establish a cooperative in your area, or there is an existing cooperative in your area when you become a franchisee, you must participate and contribute your share to the cooperative. These cooperatives will, with our approval, administer advertising programs and develop advertising, marketing and promotional materials for the area the cooperative covers. We may require the cooperative to use an advertising agency or other partner we chose. The amount of the contribution you must contribute will be determined at the time we establish the cooperative but you will not be required to spend more than your maximum Marketing Spend Requirement. All franchisees and company-owned Bar Method Studios in the market area will be expected to contribute at the same rate to the cooperative. Each Bar Method Studio contributing to a cooperative will have one vote on matters involving the activities of the cooperative. But the cooperative may not produce or use any advertising, marketing or promotional plans that have not be approved by us. The cooperative will operate from written governing documents. Each cooperative will prepare annual financial statements which will be available for review by a franchisee participating in the cooperative, upon request of that franchisee. We may change, dissolve or merge any cooperative at any time.

Marketing Resources, Pre-Approvals For Marketing Materials

You must order sales and marketing materials from our approved suppliers and per our standards and specifications. If you desire to use your own advertising materials for any marketing activity, you must obtain our prior approval, which may be granted or denied in our sole discretion. Use of logos, Marks and other name identification materials must be consistent with our approved standards. You may not use our logos, Marks and other name identification materials on items to be sold or services to be provided without our prior written approval. You must also obtain our approval before establishing, or having established on your behalf, any websites, profiles or accounts relating to us, your Bar Method Studio, or to the Bar Method system. You are ultimately responsible for ensuring that your advertising complies with all applicable laws before using it.

System Website

We or one or more of our designees may establish a website or series of websites or similar technologies, including mobile applications and other technological advances that perform functions similar to those performed on traditional websites, for the Bar Method Studio network to advertise, market and promote Bar Method Studios, the Classes and other products and services they offer, and the Bar Method Studio franchise opportunity; to facilitate the operations of Bar Method Studios (including, at our option, online Class scheduling and/or sales); and/or for any other purposes that we determine are appropriate for Bar Method Studios (those websites, applications other technological advances are collectively called the “System Website”). If we include information about the Studio on the System Website, then you must give us the information and materials that we periodically request concerning the Studio, its clients and its Classes and otherwise participate in the System Website in the manner that we periodically specify. We have the final decision concerning all information and functionality that appears on the System Website and will update or modify the System Website according to a schedule that we determine. By posting or submitting to us information or materials for the System Website, you are representing to us that the information and materials are accurate and not misleading and do not infringe any third party’s rights. You must notify us whenever any information about you or your Studio on the System Website changes or is not accurate.

We own all intellectual property and other rights in the System Website and all information it contains, including the domain name or URL for the System Website and all subsidiary websites, the log of “hits” by visitors, and any personal or business data that visitors (including you, your personnel and your clients) supply. We may use the Marketing Fund’s assets and your Marketing Fund contributions to develop, maintain, support and update the System Website. We may implement and periodically modify System Standards relating to the System Website and, at our option, may discontinue all or any part of the System Website, or any services offered through the System Website, at any time.

All Local Marketing that you develop for the Studio must contain notices of the System Website in the manner that we periodically designate. Except for using social media according to our System Standards, you may not develop, maintain or authorize any other website, other online presence or other electronic medium (such as mobile applications, kiosks and other interactive properties or technology-based programs) that mentions or describes you or the Studio or its Classes or displays any of the Marks. Except for the System Website and using social media according to our System Standards, you may not conduct commerce or directly or indirectly offer or sell any products or services using any website, another electronic means or medium, or otherwise over the Internet or using any other technology-based program without our approval. Nothing in the Franchise Agreement limits our right to maintain websites and technologies other than the System Website or to offer and sell products or services under the Marks from the System Website, another website or technology, or otherwise over the Internet (including to your Studio’s clients and prospective clients) without payment or obligation of any kind to you. (Franchise Agreement – Sections 7.E)

Computer System and Studio Management System

You must obtain, maintain and use in operating the Studio the Studio Management System that we periodically specify. The Studio Management System and other components of the Studio’s computer system will generate and store all data relating to the Studio’s operations, including Client Information (defined in Item 14), prospect information and financial and other operational data.

You must purchase from ProVision and use the POS system, computer and network hardware and software that we periodically designate for the operation of your Bar Method Studio. ProVision offers 3 technology packages which meet or exceed our minimum requirements. You are required to purchase at least the basic technology package from ProVision. Instead of the basic package, at your option, you may purchase either of the 2 additional packages offered, both of which exceed our required minimum technology standards. Each package generally includes the following components: network and rack equipment, an alarm system, and sound kit (including speakers and 1 tablet). The larger, optional packages also include additional tablets/computers and video surveillance equipment. If you use tablet or mobile devices you are required to purchase them through ProVision and you are required to purchase, install and maintain mobile device management services for those devices through ProVision. As of the date of this Disclosure Document, the technology package costs range from $8,495 for the basic (required) package to $12,495 for the largest (optional) package. Package prices do not include shipping or installation, which we estimate will cost an additional approximately 40% of the package cost. Package costs also do not include taxes. Equipment provided by ProVision typically has a warranty of 12 months on parts and labor from the date of installation on core hardware components only (excluding software).

You must acquire the Studio Management System software and other related services only from our designated supplier, but you may acquire the commonly available hardware and related equipment from any number of vendors. This software may include various applications, technologies and other platforms that we require you to use in managing your Studio. The various license and service agreements you sign with our vendor govern your use of and operations under the Studio Management System. The current Studio Management System offers the following services:

• processing, administering and collecting your Studio’s client receivables;

• client management and reporting;

• point-of-sale stations and cash drawer for Class sales, retail transactions and other transactions;

• inventory control and tracking;

• class scheduling;

• client tracking, prospecting and customer relations management; and

• back office organization and reporting.

The current annual subscription fee for the Studio Management System is $150-$200 per month and covers the cost of maintenance and support contracts, upgrades, and updates. As we mention in Item 8, we (or one of our affiliates or designees) may be your designated supplier for certain hardware, software applications, new technologies and other software platforms that we may require you to use to manage your Studio. You must use these applications, technologies and new software platforms as we require and you must pay us (or our affiliate or designee) for your use based on the number of Studios you operate.

We will have independent, unlimited access to all information and data in your computer system, including continuous independent access to all Client Information and other information in the Studio Management System. The Studio Management System must permit 24 hours per day, 7 days per week electronic communications between us and you. We may, at our option, periodically change the Studio Management System or components of the Studio Management System that we designate or approve for all similarly situated Bar Method Studios. If we do, you agree to acquire the components and other products and services required for the replacement Studio Management System and switch the Studio’s operations to the replacement Studio Management System in the manner we specify. No contract limits the frequency or cost of this obligation. (Franchise Agreement – Sections 2.C and 6.D)

Site Selection and Opening

You will be given the right to open a Bar Method Studio in a DMA that we agree on at the time you sign your Franchise Agreement. You will have 12 months from the date you sign the Franchise Agreement to secure a location we approve in the DMA and open and begin operating your Bar Method Studio. We will provide you with consulting services to assist you in evaluating and selecting a site for your Bar Method Studio in this DMA and may provide you recommendations on sites in this DMA. It is your obligation to select a site for your studio and obtain our approval of that site. While we will assist you, and we may identify various potential sites in your market area, we have no obligation to locate or select a site for you, or negotiate the purchase or lease of a site, and we do not own the premises and lease them to you. Before you acquire any site, you must submit to us information and materials we require and obtain our approval to your site. The factors we take into account in approving a site are the visibility of the site, the location of competitors, whether the site is easily accessible, surrounding businesses and various other factors. A Bar Method Studio should be between 1,750 to 3,000 square feet. We will generally tell you within 30 days whether or not we approve your proposed site. If you and we are unable to agree on a site for your Studio, the opening of your Studio may be delayed.

We estimate that the time between your signing the Franchise Agreement (which is when you will first pay us consideration for the franchise) and opening the Studio for Classes is about 9-12 months. The precise timing depends on the competition for sites in your DMA; the time it takes you to locate an accepted Site and sign an accepted lease; the Site’s location and condition; the work needed to develop the Studio according to our System Standards; completing training; obtaining financing; obtaining insurance; and complying with local laws and regulations.

You must open the Studio and begin providing Classes at the Studio on or before the date which is 12 months after the Franchise Agreement’s effective date. You may not open the Studio for Classes until: (1) you have properly developed and equipped the Studio according to our standards and specifications and in compliance with all applicable laws and regulations; (2) your personnel have completed all pre-opening training to our satisfaction; (3) you have paid all amounts then due to us; (4) you have given us copies of all required insurance policies or any other evidence of insurance coverage and payment of premiums as we request; (5) you have given us a copy of your fully-signed lease; and (6) if we (at our sole option) require, we have conducted a pre-opening inspection and/or have certified the Studio for opening. Our determination that you have met all of our pre-opening requirements will not constitute a waiver of your non-compliance or of our right to demand full compliance with those requirements. (Franchise Agreement – Section 2.D)

Under the Area Development Agreement, you will have the right to develop, open, and operate multiple Bar Method Studios. Each Studio must be developed and opened according to our then-current System Standards and other approval requirements. You or your affiliates must sign our then-current form of Franchise Agreement for each Bar Method Studio you develop and open under the Area Development Agreement, which may contain materially different terms and conditions than the Franchise Agreement attached to this Disclosure Document. We will determine or approve the location of future Bar Method Studios and any protected territories for those Studios based on our then-current System Standards for sites and protected territories.

Training

New Owner Operations Training

Before the opening of your Studio we provide an initial training program we refer to as our “New Owner Operations Training” to the person you designate as the “Principal Operator” of your Studio. (Franchise Agreement Section 4.A). You may also send one additional person to the same or separately scheduled New Owner Operations Training program, space permitting, at no additional charge. The New Owner Operations Training program currently includes classroom training and/or remote training (including via Internet access) but we may provide all or part of it online, by phone, on-site or by webinar. The Operations Manual, the Teacher Training Manual, and certain handouts that vendors prepare serve as our instructional materials. New Owner Operations Training is hosted on an as-needed basis in Woodbury, Minnesota or online as may we decide, or another location we designate. There is no charge to you for this training, but you are responsible for all travel and living expenses you and your personnel incur in attending the training. In addition, if your Principal Operator is not also a Principal Owner, then a Principal Owner of your business must also attend and complete this training to our satisfaction. You are expected to successfully complete this training program at least 30 days before you open your Studio. If we determine that you cannot complete the New Owner Operations Training program to our satisfaction, then in addition to our other rights, we may require you to attend additional training programs at your expense (for which we may charge reasonable fees).

The following chart describes our New Owner Operations Training program as of the date of this disclosure document:

TRAINING PROGRAM
(New Owner Operations Training)

The New Owner Operations Training will be provided by multiple facilitators, including Frannie Wong, our Vice President of Operations. Ms. Wong oversees our Initial Training Program. Additional people will be involved in this training program. These people will have at least one year of experience in the subject they teach. Other members of our training staff at our designated training center may conduct training as necessary, and we may delegate our duties and share our training responsibilities.

If you have more than one Franchise Agreement with us, we may, at our option, for additional locations waive the requirement that you undertake this training.

Teacher Training

Before your Studio opens at least 3 of your instructors must attend and complete to our satisfaction our Teacher Training. (Franchise Agreement Section 4.B). There is no charge for this training unless you have more than 3 instructors attend the initial Teacher Training or we provide this training to additional instructors after the initial Teacher Training. In either case, the fee is currently $1,450 per instructor. In any event, if the training is held at a location outside of our corporate offices you must pay the travel and living expenses of our instructor who performs the training. Each instructor at your Studio must successfully complete this training and they may not teach any classes until after they have successfully completed this training. As of the 1- year anniversary of the opening of your Studio you must have at least 4 instructors who have completed this training. We may provide all or part of this training online, by phone, on-site or by webinar. You are responsible for the costs and expenses of your instructors who attend this training.

Teacher Manager Training

The individual you select as your Teacher Manager must complete to our satisfaction our Teacher Manager Training Program. (Franchise Agreement Section 4.C). This individual may be your principal owner or principal operator or an instructor but they must have successfully completed our Teacher Training or be taking it simultaneous with the Teacher Manager Training. This program is a 1-year program and must begin at least 90 days before your Studio opens. This training is currently made up of on-line training, coaching calls, and in-person training at your Studio, but we may provide all or part of this training online, by phone, on-site or by webinar. The cost of this training is $5,000. If your Teacher Manager leaves your Studio your new Teacher Manager must complete this training.

Additional Training

If you require additional operations training beyond what is provided by us, you can request that we send a representative to provide further assistance to you. If we provide additional assistance at your request, we must agree in advance to the charges you will pay and the length of the visit. The cost of additional assistance will depend on your needs and the amount of assistance you desire. We may also require you to receive additional assistance for various reasons, including if you are not meeting our requirements, if we determine additional pre-opening or post-opening assistance is needed, or if we determine that it is necessary for us to provide additional assistance to you to keep the System competitive. (Franchise Agreement – Sections4.D.). Such additional training and assistance will be at your expense as described above. Our current published rate for additional assistance is $150 per hour plus the cost of travel and living expenses, but we can adjust that rate periodically in our Operations Manual. We may provide all or part of this training online, by phone, on-site or by webinar

Conference

We may hold a conference on a regular basis (likely, every other year) to discuss sales techniques, new programming and products, training techniques, bookkeeping, accounting, performance standards, advertising programs, merchandising procedures, and other topics. This conference may be live or a virtual event. You must pay the conference fee, if any and, if applicable, all travel and living expenses to attend. Your Principal Owner must attend these conferences. The conferences may be held at various locations that we will designate. (Franchise Agreement - Section 4.H).

Item 12
TERRITORY

When you sign a Franchise Agreement, you will receive the right to operate a single Bar Method Studio at a specific location that we must approve within the Designated Market Area we agree on at that time. DMAs represent market areas, that vary in size and we use the market areas that are established by The Nielsen Company, LLC, which is an independent, unaffiliated, third party to define our DMAs. The boundaries of a DMA will change if The Nielsen Company, LLC or its successor changes the applicable defined market area. In determining how many Bar Method Studios to place in a particular DMA, we consider various factors including, population density and growth trends, apparent degree of affluence of population, the density of residential and business entities, traffic generators, competition, availability or suitable real estate, other commercial considerations, and other criteria. The capacity of a DMA (the number of Bar Method Studios a particular DMA may hold) may change during the term of your agreements with us.

You may locate your Bar Method Studio at any site we approve within that DMA, so long as the site you select is not also within a territory of another Bar Method Studio. You must operate the Studio at that site. If the site becomes unavailable to you for any reason, it is your obligation to select a new location, and to obtain our approval of that location before you acquire the site, and before you obtain any rights in the location. Once the location for your Bar Method Studio has been approved, we will grant you a protected territory. You may not relocate your Bar Method Studio without our approval and satisfying our site selection conditions in effect when you relocate, and you must pay us a relocation fee. The new location must be within your protected territory, and it may not be located within any territory we grant to any other franchisee. You must upgrade the new space to comply with all of our current specifications.

If you identify a potential site in the DMA for your Bar Method Studio you must send us a complete site report containing demographic, commercial and other information and photographs that we may reasonably require. In approving or disapproving a proposed site we consider various factors including, density of population, growth trends of population, apparent degree of affluence of population, the density of residential and business entities, traffic generators, competition, proximity to other Bar Method Studios, size and other commercial considerations, appearance and other criteria. We do not have to accept a proposed location that does not meet our criteria. We or an affiliate can acquire the site or we can give other Bar Method franchisees searching for sites in the DMA the right to acquire the site if we approve it.

Your rights in the DMA are not exclusive and we, other franchisees and/or Area Developers may also be looking for sites in the same DMA at the same time. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. Proposed sites within the DMA will be emailed to all franchisees and/or Area Developers who have rights in the DMA at the time we approve the site. In deciding whether and to whom to award a proposed site we consider various factors including, how long a franchisee has been looking for a proposed site within the DMA (generally awarded to those who have been looking longest), length of time to the required opening date (generally awarded to those with closest required opening date), proximity to a franchisee’s existing studio if applicable, and a franchisee’s financial ability to support the Bar Method Studio. Given these factors, you may not be awarded a particular proposed site, even if you submitted it to us for approval. If we provide you a proposed site and you do not accept it within the time we specify or another franchisee accepts it before you do then you will not have any rights to the site. If you do not acquire a site that we have approved within the timeframe we have given you we or an affiliate can acquire the site or give another franchisee the right to acquire the site.

We currently intend to offer you the assistance of our real estate team to assist you in finding a proposed location for your Bar Method Studio within your designated DMA and to provide you with demographic and other information to which it has access regarding proposed locations within your designated DMA. However, we may be looking for our own sites or sites for other franchisees, we are not obligated to provide you such assistance and you are solely responsible for locating and securing an acceptable, proposed location that is approved by us in order to fulfill the development obligations in your Franchise Agreement(s). You are responsible if we terminate the ADA because you are unable to secure one or more acceptable, proposed locations to fulfill the development schedule in your ADA. If you fail to meet the terms of the development schedule in your ADA or you fail to develop a Bar Method Studio on or before the required opening date in your Franchise Agreement, we can terminate your ADA and/or Franchise Agreement(s) in their entirety and you are not entitled to a refund of any of the Development Fees or Initial Franchise Fees paid.

When you have found a location in the DMA that is approved by us, we will amend your Franchise Agreement to identify your location and the “protected territory” around your location. To identify your protected territory we will use mapping and demographic software. Under our current criteria, for most Bar Method Studios, the protected territory is typically a circle with a radius of 3 miles from the Studio’s main front entrance. However, the shape of your protected territory and the radius will depend on various market characteristics such as demographics, traffic flow, boundaries (both man-made and natural), location of competing businesses, neighborhoods covered and population density. For population density, we currently require a minimum population of 50,000 and minimum qualifying households of 7,500 in most cases. However, in certain instances we may grant a protected territory with less than these minimums in, for example, an urban market. By “qualifying household” we mean a household with an annual average income of more than $75,000 in an urban area. This threshold may be less in a rural or suburban area. In some more densely populated areas the protected territory might be smaller.

We may attach a map to your Franchise Agreement that will identify the protected territory or we may simply describe an area surrounding your location. The map or description may not be a specific radius from your Bar Method Studio, because it will take into account traffic patterns and natural boundaries. However, the territory will range from approximately one-half mile from your studio (in densely populated metropolitan areas) to as much as 3 miles (in small towns). Protected territories may overlap, but we will not approve anyone opening a Bar Method studio, or relocating a Bar Method Fitness studio, into a protected territory given to another studio. (By way of example, one person may have a Bar Method Studio in the center of City A, with a territory of 2 miles in all directions, while another person has a Bar Method Studio in the center of City B, located 3 miles away from the site of the first franchisee’s Bar Method Studio, and also with a territory of 2 miles. While the protected territories overlap, each franchisee’s studio is located outside the protected territory of the other franchisee, and it cannot be relocated within the other franchisee’s protected territory). We cannot unilaterally change your protected territory, and there are no minimum quotas required; as long as your Franchise Agreement is in effect, you will retain the rights described in this paragraph.

The criteria we use for determining the boundaries of the protected territory in your Franchise Agreement include density of population, growth trends of population, apparent degree of affluence of population, the density of residential and business entities, traffic generators, driving time, and natural boundaries. Your protected territory is exclusive. During the term of your Franchise Agreement, we will not place or license to anyone else the right to place a Bar Method Studio that is physically located in your protected territory. However, we and our affiliates can place Bar Method Studios, or grant others the right to do so, outside your protected territory, including studios operated under the Bar Method name, even if they compete for customers with your Studio, and even if the territorial boundaries for that franchise overlap with the boundaries for your territory. We and our affiliates also have the right to operate, and to grant franchises or licenses to others to operate, any fitness business and any other business from locations within this territory under trademarks other than “The Bar Method”, without compensation to you.

There are no restrictions on your soliciting and accepting clients from outside your territory or otherwise competing with other Bar Method Studios which are now, or in the future may be, located outside your territory. You may provide unpaid or “community” Classes designed to generate awareness for your Studio or the Marks from a location other than the Studio if we provide our prior written authorization and you comply with our directions and any System Standards applicable to those Classes. Except for this, without our express written permission, you may not use other channels of distribution, such as the Internet, catalog sales, telemarketing, and other direct marketing, to make sales (as opposed to advertising and marketing) because you may only make sales at the Studio. We and our affiliates may use other channels of distribution, such as the Internet, catalog sales, telemarketing, and other direct marketing, to solicit and make sales to clients in your territory using the Marks and other trademarks without compensating you. This includes our using the System Website to provide clients access to web-based fitness instruction.

Under the Franchise Agreement, you have no options, rights of first refusal, or similar rights to acquire additional franchises within your territory or contiguous territories. We may not alter your territory or modify your territorial rights before your Franchise Agreement expires or is terminated, although we may do so for a successor franchise. Continuation of your territorial rights does not depend on your achieving a certain sales volume, market penetration, or other contingency.

Upon signing the ADA you will acquire the right to develop the specified number of Bar Method Studios within the identified DMA and you will sign the Franchise Agreement for your first Bar Method Fitness Studio contemporaneously with signing the ADA. You will sign our then-current Franchise Agreement for each subsequent Bar Method Fitness Studio that you open according to the development schedule in the ADA. We will determine or approve the location of any future Bar Method Studios and any protected territories for those Bar Method Studios based on our then-current standards for sites and territories. We do not permit an ADA that would permit the development of Bar Method Studios in multiple DMAs.

As described in Item 1, we have 2 affiliates that offer franchises under different trademarks and sell goods and services that are similar to those offered by us. Our affiliate Anytime Fitness operates and franchises the operation of fitness centers designed to operate with minimal overhead and labor costs under the trademarks, “Anytime Fitness®” and “Anytime Fitness Express®” (although it no longer operates any Anytime Fitness Expresses). Anytime Fitness has the same principal business address as we do and would not maintain physically separate offices or training facilities. Our affiliate Basecamp Fitness operates and franchises the operation of studio fitness centers under the trademark “Basecamp® Fitness” which offer month-to-month memberships allowing members to take short, regularly scheduled group training classes designed using High Intensity Interval Training strategies. Basecamp Fitness has the same principal business address as we do and would not maintain physically separate offices or training facilities.

There may be now, or in the future, Anytime Fitness and/or Basecamp Fitness locations in the same market as current or future Bar Method franchisee territory(ies). If there is a conflict between us and an Anytime Fitness franchisee or a Basecamp Fitness franchisee or between a Bar Method franchisee and/or an Anytime Fitness franchisee and/or a Basecamp Fitness franchisee, in either case regarding territory, customers or franchisor support, our management team will attempt to resolve the conflict after taking into account the specific facts of each situation and what is in the best interest of the affected system or systems. However, we do not have a policy, and are not responsible for resolving conflicts between or among Anytime Fitness franchisees or Basecamp Fitness franchisees, but may develop a policy concerning this issue in the future.

Item 13
TRADEMARKS

We grant you the non-exclusive right under the Franchise Agreement to use and display the Marks in operating, marketing, and advertising your Studio. We own the following principal Marks registered on the principal register of the United States Patent and Trademark Office (the “PTO”):

We have filed all affidavits and renewed all registrations required to be renewed for the marks in the table above. No agreement currently in effect significantly limits our rights to use or license the Marks in a manner material to the franchise. You must follow our rules when you use the Marks.

There are no currently effective material determinations of the PTO, the Trademark Trial and Appeal Board, any state trademark administrator, or any court, and no pending infringement, opposition, or cancellation proceedings or material litigation, involving the Marks. We do not know of either superior prior rights or infringing uses that could materially affect your use of the Marks.

You must notify us immediately of any actual or apparent infringement of or challenge to your use of any Mark, or of any person’s claim of any rights in any Mark. You may not communicate with any person other than us, and our attorneys, and your attorneys, regarding any infringement, challenge or claim. We may take the action that we or it deems appropriate (including no action) and control exclusively any litigation, PTO proceeding or other proceeding relating to any infringement, challenge or claim or otherwise concerning any Mark. You must sign any documents and take any reasonable actions that, in the opinion of our attorneys, are necessary or advisable to protect and maintain our interests in any litigation or PTO or other proceeding or otherwise to protect and maintain our interests in the Marks. At our option, we may defend and control the defense of any litigation or proceeding relating to any Mark.

We will reimburse you for all damages and expenses you incur or for which you are liable in any proceeding challenging your right to use any Mark, but only if your use is consistent with the Franchise Agreement, the Operations Manual and System Standards and you have timely notified us of, and comply with our directions in responding to, the proceeding.

If we believe at any time that it is advisable for us and/or you to modify or discontinue using any Mark and/or use one or more additional or substitute trademarks or service marks, you must comply with our directions within a reasonable time after receiving notice. We need not reimburse you for your expenses in complying with these directions (such as costs you incur in changing the Studio’s signs or replacing supplies), for any loss of revenue due to any modified or discontinued Mark, or for your expenses of promoting a modified or substitute trademark or service mark.

You derive the right to use the Marks only under a franchise agreement.

Item 14
PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION

No patents or patent applications are material to the franchise. We claim copyrights in the Operations Manual, advertising, training and promotional materials, and similar items used in operating the franchise. We have not registered these copyrights with the U.S. Registrar of Copyrights but need not do so at this time to protect them. You may use these materials only as we specify while operating your Studio and must modify or discontinue using them as we direct.

There currently are no effective determinations of the PTO, United States Copyright Office or any court regarding any of the copyrighted materials. No agreement limits our right to use or license the copyrighted materials. We do not know of any superior prior rights or infringing uses that could materially affect your using the copyrighted materials. We need not protect or defend copyrights or take any action if notified of infringement, and you have no obligation to notify us of any infringement. We may take the action we deem appropriate (including no action) and exclusively control any proceeding involving the copyrights. No agreement requires us to participate in your defense or indemnify you for damages or expenses in a proceeding involving a copyright or claims arising from your use of copyrighted items.

We will disclose certain Confidential Information to you during the Franchise Agreement’s term. “Confidential Information” includes site selection criteria and methodologies; methods, formats, specifications, standards, systems, procedures, sales and marketing techniques, knowledge and experience used in developing and operating Bar Method Studios, including methods, techniques and processes for teaching Classes and evaluating teachers and clients, as well as other information in the Operations Manual and System Standards; marketing research and promotional, marketing, advertising, public relations, client relationship management and other brand-related materials and programs for Bar Method Studios; knowledge of specifications for and suppliers of, and methods of ordering, certain Operating Assets and other products that Bar Method Studios use and/or sell; knowledge of the operating results and financial performance of Bar Method Studios other than the Studio; client communication and retention programs, along with data used or generated in connection with those programs, including Client Information; and any other information we reasonably designate as confidential or proprietary. However, Confidential Information does not include information, knowledge or know-how that is or becomes generally known in the fitness industry (without violating an obligation to us or our affiliate) or that you knew from previous business experience before we provided it to you or before you began training or operating the Studio. If we include any matter in Confidential Information, anyone who claims that it is not Confidential Information must prove that this exclusion is fulfilled.

The Confidential Information is proprietary and includes our trade secrets. You and your owners (a) may not use any Confidential Information in any other business or capacity, whether during or after the Franchise Agreement’s term; (b) must keep the Confidential Information absolutely confidential, both during Franchise Agreement’s term and after for as long as the information is not in the public domain; (c) may not make unauthorized copies of any Confidential Information disclosed in written or other tangible or intangible form; (d) must adopt and implement all reasonable procedures that we periodically designate to prevent unauthorized use or disclosure of Confidential Information, including restricting its disclosure to Studio personnel and others needing to know the Confidential Information to operate the Studio, and using confidentiality and non-competition agreements with those having access to Confidential Information. We may regulate the form of agreement that you use and be a third party beneficiary of that agreement with independent enforcement rights; and (e) may not sell, trade or otherwise profit in any way from the Confidential Information, except during the Franchise Agreement’s term using methods we approve.

You must comply with our System Standards, other directions from us, prevailing industry standards, all contracts to which you are a party or otherwise bound, and all applicable laws and regulations regarding the organizational, physical, administrative and technical measures and security procedures to safeguard the confidentiality and security of Client Information on your Studio Management System or in your possession or control. You also must employ reasonable means to safeguard the confidentiality and security of Client Information. “Client Information” means names, contact information, financial information, activity-related information and other personal information of or relating to the Studio’s clients and prospective clients. If there is a suspected or actual breach of security or unauthorized access involving your Client Information, you must notify us immediately after becoming aware of it and specify the extent to which Client Information was compromised or disclosed.

We and our affiliates may, through the Studio Management System or other means, have access to Client Information. During and after the Franchise Agreement’s term, we and our affiliates may make all disclosures and use the Client Information in our and their business activities and in any manner that we or they deem necessary or appropriate. You must secure from your vendors, clients, prospective clients and others all consents and authorizations, and provide them all disclosures, that applicable law requires to transmit the Client Information to us and our affiliates and for us and our affiliates to use that Client Information in the manner that the Franchise Agreement contemplates.

You must promptly disclose to us all ideas, concepts, techniques or materials relating to a Bar Method Studio that you or your owners, employees or contractors create (“Innovations”). Innovations are our sole and exclusive property, part of the Franchise System, and works made- for-hire for us. If any Innovation does not qualify as a work made-for-hire for us, you assign ownership of that Innovation, and all related rights to that Innovation, to us and must sign (and cause your owners, employees and contractors to sign) whatever assignment or other documents we request to evidence our ownership or to help us obtain intellectual property rights in the Innovation. We and our affiliates have no obligation to make any payments to you or any other person for any Innovations. You may not use any Innovation in operating the Studio or in any other way without our prior approval.

Item 15
OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS

Only you are authorized to operate the Studio. You must at all times faithfully, honestly and diligently perform your obligations and fully exploit the rights granted under this Agreement. You must at all times have a “Principal Operator” serve as your on-premises manager. Your Principal Operator must complete our New Owner Operations Training program to our satisfaction. Your Principal Operator will also be our primary point of contact.

If you are an individual or group of individuals signing the Franchise Agreement, then no other individual or entity may direct or control the direction of the management of the Studio or its business or share in the revenue, profits or losses of, or any capital appreciation relating to, the Studio or its business.

If you are an entity signing the Franchise Agreement, then you must designate an individual as your Principal Owner. For an entity, the “Principal Owner” is an individual who owns more than 20% of your ownership interests. At our option, you must ensure that the Principal Operator and all of your Studio’s employees having access to Confidential Information sign agreements in a form we reasonably specify under which they agree to comply with the confidentiality, innovations, and non-compete restrictions in the Franchise Agreement.

If you are a corporation, limited liability company or other business entity, each of your owners must sign an agreement in the form we designate undertaking personally to be bound, jointly and severally, by all of the Franchise Agreement’s and any ancillary agreement’s provisions, the current version of which is attached to the Franchise Agreement.

Item 16
RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL

Your Studio must offer all Classes and other products, services and amenities that we periodically specify as being mandatory. You may not offer, sell, or provide at the Studio, the Site or any other location any Classes or other products, services or amenities that we have not authorized, including any Classes for which you and/or your teachers do not then maintain the Certifications that we then require. You must discontinue offering, selling or providing any Classes and other products, services or amenities that we at any time disapprove in writing. We may periodically change the types of Classes and other authorized services and products for your Studio. You must ensure that all Classes the Studio provides are led only by a teacher who has attained and then maintains Certification for those Classes and who uses the techniques, methods and procedures we periodically specify in the System Standards. You may not provide any Classes or any similar instruction or services, including unpaid or “community” Classes designed to generate awareness for your Studio or the Marks, from any location other than the Studio unless we provide our prior written authorization and you comply with our directions and any System Standards applicable to those Classes.

Our System Standards may regulate Class scheduling and minimum numbers of Classes; participation in and requirements for client loyalty programs, reciprocity programs, client transfer policies and programs, and similar programs for clients of Bar Method Studios; and the terms of Class offerings and maximum, minimum and other pricing requirements for Classes and other products and services that the Studio offers, including requirements for promotions, special offers and discounts in which some or all Bar Method Studios participate, in each case to the maximum extent the law allows (although you are solely responsible for ensuring that your Class offerings comply with applicable laws and regulations). You also must participate in the manner we specify in any Group Membership Programs that we periodically establish.

Item 17
RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP

This table lists certain important provisions of the franchise and related agreements. You should read these provisions in the agreements attached to this disclosure document.

Item 18
PUBLIC FIGURES

We do not use any public figure to promote our franchise.

Item 19
FINANCIAL PERFORMANCE REPRESENTATIONS

The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

Based on our experience, new Bar Method Studios open less than 24 months are still in their initial ramp-up period and have non-recurring revenue fluctuations that sometime result from the Studio’s grand opening. 119 Bar Method Studios operated in the United States as of January 1, 2020, of which franchisees owned 118 and our affiliates owned 1. 86 of the franchised Bar Method Studios operated for at least 24 full months as of January 1, 2020. Of the others, 32 had not been operated for at least 24 full months as of January 1, 2020. 4 of those Studios closed in the last 24 months. None of the Studios that closed operated for less than 12 full months.

The financial performance representation below lists the average Gross Revenues during 2019 for the 86 franchised Bar Method Studios in operation during the entire 24-month period from January 1, 2018 until December 31, 2019 (the “Covered Studios”). 1 of the Covered Studios has 3 rooms, 38 have 2 rooms, and 47 have 1 room. The sizes of the Covered Studios vary, but most of them range from 2,400 to 3,500 square feet. The Covered Studios are located across the country but are concentrated in the Eastern and Western parts of the U.S. 24 of the Covered Studios are located in urban markets, and 62 are located in suburban or rural markets. We define an urban market as one having 4,000+ households per square mile, and a suburban or rural market as one having less than 4,000 households per square mile. We grouped all the Covered Studios into one of these categories using estimated households per sq. mile. The calculation of households was taken from information provided by Synergos Technologies, Inc. (“STI”). STI uses 2010 U.S. Census information, and 2019 current year estimates data, to calculate these estimates, which are commonly used demographic tools for many different retail companies. All of the Covered Studios have some amount of retail sales forming part of their Gross Revenues, but in most cases retail sales typically represent about 7% on average of a Covered Studio’s Gross Revenues.

GROSS REVENUES OF LOCATIONS OPERATED FOR 24 MONTHS OR MORE AS OF JANUARY 1, 2020

FIRST YEAR RAMP UP INFORMATION

The information set forth below is based on all Bar Method Studios that opened on or after January 1, 2015, and were still open as of January 1, 2020. To help you better understand the historic first year results of Bar Method Studios, the information shows the Gross Revenues ramp up for the first full 12 months of operation of these Studios. Thus, for example, if a location opened during January, the Gross Revenues shown would be the Gross Revenues for its first full month, February, through its 12th month of operation, January of the following year. The expanded chart that follows the initial table and graph provides additional information concerning the first month of operation, including the number of Studios included, the Average Gross Revenues for those Studios (which would be the same as in the table and graph), the number and percentage of the Studios that exceeded the average, the median Gross Revenues of all the Studios, the lowest Gross Revenues achieved by any of the Studios in that month, and the highest Gross Revenues achieved by any of the Studios in that month.

Gross Revenues Ramp

Notes to the Financial Performance Representations.

1. We derived the figures for Covered Studios based solely on the information that the franchisees gave us. Prospective franchisees and sellers of franchises should be advised that no certified public accountant has audited these figures or expressed his or her opinion concerning their contents or form. We will provide written substantiation for the data we used to prepare this financial performance representation upon your reasonable request.

2. These financial performance representations report only the average Gross Revenues of the Covered Studios. Those figures do not reflect the costs of sales, operating expenses or other costs or expenses that must be deducted from the Gross Revenues figures to obtain your net income or profit. You should conduct an independent investigation of the costs and expenses you will incur in operating your Bar Method Studio. Franchisees or former franchisees, listed in this disclosure document, may be one source of this information.

3. We collected Gross Revenues information from the Studio Management Systems that franchisees use. They report “Gross Revenues” using a definition that is the same as the one in Item 6. These figures have not been audited, and we did not independently verify the information.

4. Many of the Covered Studios have operated for many years and have developed a significant base of recurring clients. The Bar Method® name has developed goodwill in these areas that benefit these studios that might not benefit newly-developed Bar Method Studios in new markets. The results among these Studios varied depending on many factors, some of which include the geographic market in which the Studio was located, the experience of the franchisee, the number of classes that the Studio offered, the number of rooms available, pricing and Class scheduling decisions, the quality of the teachers, competition, economic conditions, the franchisee’s advertising and marketing activities, and the franchisee’s skill in managing its business.

Some outlets have sold this much. Your individual results may differ. There is no assurance that you’ll sell as much.

Other than the preceding financial performance representation, we do not make any financial performance representations. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting James Goniea, our General Counsel and Secretary, at 111 Weir Drive, Woodbury, MN 55125, (651) 438-5000, the Federal Trade Commission, and the appropriate state regulatory agencies.

Item 20
OUTLETS AND FRANCHISEE INFORMATION

All numbers appearing in Tables 1 through 5 below are as of December 31 in each year. Our affiliate operates the Bar Method Studios listed as “company-owned.” The Bar Method Studios listed as “franchised” include those studios operating under license agreements that TBM assigned to us in January 2008.

Item 21
FINANCIAL STATEMENTS

Exhibit F is our audited financial statements as of December 31, 2019, December 31, 2018, and December 31, 2017 and our unaudited financial statements as of and for the 2-month period ending February 29, 2020. THE FINANCIAL STATEMENTS AS OF FEBRUARY 29, 2020 ARE PREPARED WITHOUT AN AUDIT. PROSPECTIVE FRANCHISEES SHOULD BE ADVISED THAT NO CERTIFIED PUBLIC ACCOUNTANT HAS AUDITED THESE FIGURES OR EXPRESSED HIS/HER OPINION WITH REGARD TO THE CONTENTS AND FORM.

Item 22
CONTRACTS

The following agreements are exhibits to this disclosure document:

1. Franchise Agreement – Exhibit B

2. Current form of Release signed on renewal/transfer – Exhibit G

3. State-Specific Riders to Franchise Agreement – Exhibit H

4. Area Development Agreement – Exhibit I

5. ProVision Services Agreement – Exhibit J

6. Equipment Loan Documents – Exhibit K

7. Resale Assistance Agreement – Exhibit L

8. Franchisee Questionnaire – Exhibit M

Item 23
RECEIPTS

Our and your copies of the Franchise Disclosure Document Receipt are the last pages of this disclosure document.