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Business Description

To simplify the language in this disclosure document “Smoothie King” or “we” means Smoothie King Franchises, Inc., the franchisor. “You” means the person(s) who signs the Franchise Agreement, including a corporation, partnership, limited liability company or other legal business entity (“business entity”). If you are a business entity, certain provisions of Smoothie King’s Franchise Agreement and Area Development Agreement will also apply to some of your owners. This disclosure document will indicate when your owners are also covered by a particular provision. The Smoothie King? concept and primary product were originated in 1973 by Stephen C. Kuhnau, Sr. Smoothie King is a Texas corporation that was originally incorporated in Louisiana on May 5, 1987, and redomesticated as a Texas corporation in 2018.

Prior Experience

Effective as of January 1, 1997, Smoothie King became a subsidiary of Smoothie King Systems, Inc. (“SKSI”). On July 6, 2012, SK USA Inc. (“SK USA”) purchased SKSI. SK USA is controlled by Smoothie King Holdings, Inc., formerly known as Smoothie King Korea, Inc., itself formerly known as Smoothies Korea, Inc. (“Smoothie King Holdings”). As a result, Smoothie King Holdings, SK USA and SKSI are our parent companies. Smoothie King’s affiliate, S K Nutritional Formulas, L.L.C. (“SKN”), may own, develop, license and/or distribute SMOOTHIE KING? private label and other retail products which all Smoothie King® units are required to sell. Smoothie King® units must purchase these items from our designated third party suppliers. SKN has not offered franchises for this or any other business. Smoothie King’s, SK USA’s, SKSI’s, and SKN’s principal business address is 9797 Rombauer Road, Dallas, Texas 75019. Smoothie King Holdings’ principal business address is 11 Dosan-daero 11- gil, Seoul, Korea 135-888. Smoothie King operates under its corporate name and under the service marks “SMOOTHIE KING?” and associated marks and logos. Smoothie King’s agent in this state for service of process, if applicable, is disclosed in Exhibit K. Except as described in this Item, Smoothie King has no predecessors, parents or affiliates. Smoothie King offers you a franchise whose primary business is the sale of products under the name and service mark “SMOOTHIE KING?.” The type of business that you will operate is referred to in this disclosure document as a “Unit” or “Smoothie King Business.” Smoothie King has been offering franchises since May 1988. Smoothie King does not currently operate any Smoothie King Businesses. Smoothie King’s affiliate, Smoothie King Co., Inc. (“SKCI”), currently owns and operates 26 Smoothie King Businesses under non-exclusive royalty-free licenses from Smoothie King. SKCI may own and operate more Smoothie King Businesses in the future. Smoothie King has not offered franchises in any other lines of business. Smoothie King does not have any other business activities. Neither Smoothie King Holdings, SK USA nor SKCI provide goods or services to franchisees or offer franchises in any line of business.

Business Offered

We offer Smoothie King® franchises for the operation of a Unit. You must enter into a Franchise Agreement for each Unit purchased. Units offer our original Smoothie King? smoothies consisting of blends of real fruits, fruit juices, and fruit and vegetable purees combined with nutritional supplements, other blended products, and meal replacement items that are custom made to order. Units also offer consumers the benefit of nutritional retail merchandise, which includes: vitamins, herbs, minerals, a myriad of supplements, and nutritious snack items, among many others. Smoothie King developed and owns a proprietary system (“System”) that you will use in operating your Unit. This System includes specialized hands-on training, marketing and advertising support, volume buying power, business synergy and on-going support. Smoothie King also provides you with certain confidential information and methods for managing a Smoothie King Business. You will use Smoothie King’s trademarks, logos, brand and overall developed intellectual property including “SMOOTHIE KING?,” the “CROWN” design and other product and service names and marks that Smoothie King may designate to identify the System. These names and marks are referred to in this disclosure document as “Proprietary Marks.” Smoothie King offers franchises for “Traditional” and “Non-Traditional” locations. Traditional locations are Units that typically operate in strip centers, drive-thru locations or other commercial shopping centers with general public access from the street and are not typically located in an enclosed environment or Captive Facility. You receive a Protected Territory if you operate your Unit in a Traditional location. Non-Traditional Units are typically located within another business or dependent upon one main business or organization as its primary trade generator, normally have limited access to the general public and a limited trade area, usually in relation to its primary trade generator (a “Captive Facility”). Examples of Non-Traditional locations include enclosed shopping malls, arenas, convention centers, airports, movie theaters, health clubs, hospitals, military bases, grocery stores and similar environments. Because of the factors described above, you will not receive a Protected Territory for a Non-Traditional location. The determination of what constitutes a Non-Traditional location and the decision to grant a Protected Territory is within Smoothie King’s sole discretion. Smoothie King considers each site a Traditional location unless Smoothie King approves the location, in writing, as a Non-Traditional location. All references to Units include both Traditional and Non-Traditional locations, unless otherwise specified. You must sign our Franchise Agreement, attached as Exhibit F. If you will operate from a Non-Traditional location, you also must sign the Non-Traditional Location Addendum, attached as Exhibit M. If you wish to have the right to open multiple Units in an area, you must enter into an area development agreement (the “Development Agreement”) with Smoothie King. Under the Development Agreement, you will receive the right to open a certain number of Units at Traditional locations over a defined period of time in a defined area, as Smoothie King determines in its sole discretion, on the basis of the market potential and the size of the designated area. The term of your Development Agreement generally will not be longer than 5 years and will require you to lease or purchase the approved location of the first Unit within 6 months from the date of your Development Agreement and open your first Unit within 12 months from the date of your Development Agreement and open each subsequent Unit within 6 to 12-month time periods after the first Unit. You must sign our then-current Franchise Agreement for each Unit to be developed under the Development Agreement, which may contain different terms and conditions than the Franchise Agreement attached to this disclosure document.

Initial Fees

INITIAL FRANCHISE FEE—TRADITIONAL LOCATION You will pay a $30,000 lump sum initial franchise fee when you sign the Franchise Agreement. If you are an existing franchisee in good standing and meet our qualifications, we may approve you to develop an additional Unit. If you are an existing franchisee in good standing and meet our qualifications, for the second Unit and each subsequent Unit, Smoothie King will offer you a reduced initial franchise fee equal to $25,000. The initial franchise fee is not refundable under any circumstances. Smoothie King is a member of the International Franchise Association’s Vet Fran program. If you are an active member of the United States Armed Forces or if you have been honorably discharged from the United States Armed Forces, you will be eligible for a discount of 20% off the initial franchise fee. Smoothie King also offers a first responders discount for law enforcement officers, firefighters, and emergency medical technicians who have at least 10 years of experience. Qualified first responders will be eligible for a discount of 20% off the initial franchise fee. INITIAL FRANCHISE FEE—NON-TRADITIONAL LOCATION You will pay a lump sum initial franchise fee of $15,000 when you sign the Franchise Agreement for a Non-Traditional location. The initial franchise fee is not refundable under any circumstances. DEVELOPMENT FEE You will pay a lump sum development fee when you sign the Development Agreement. The development fee is calculated at the rate of $12,500 for each Unit that you are authorized to develop after the first franchise. For example, if you enter into a development agreement to establish your first Unit and an additional four Units, your development fee will be $50,000. Development fees will be applied to the franchise fees for each Unit opened under your Development Agreement. The development fee is not refundable under any circumstances. In addition to the development fee, you must sign a Franchise Agreement and pay the initial franchise fee for your first Unit at the same time you sign the Development Agreement unless you are a current Smoothie King franchisee. If you are a current Smoothie King franchisee, you must sign a Franchise Agreement and pay the initial franchise fee at least four months before your Unit is scheduled to open or before the beginning of the site selection process, whichever occurs first. Under the Development Agreement, the initial franchise fee for the first Unit is $30,000. The initial franchise fee for the second Unit and each subsequent Unit is $25,000. Each initial franchise fee under the Development Agreement is for a Traditional location; the right to develop Units under a Development Agreement does not include Non-Traditional locations unless specifically agreed upon in writing by Smoothie King. OTHER INITIAL FEES BEFORE THE SMOOTHIE KING BUSINESS OPENS In addition to the initial franchise fee and, if applicable, the deposit described above, you must pay Smoothie King up to $2,500 for design fees for your Unit premises. These fees are not refundable under any circumstances. You also must purchase the hardware for the Brink POS System and Data Central Back Office System from Smoothie King. The hardware costs approximately $4,500 to $10,000. These costs are not refundable under any circumstances. If you fail to open your Unit for business within 18 months from the date your sign the Franchise Agreement; you may extend the date by which you need to open the Unit by up to 6 additional months if you pay Smoothie King a monthly extension fee of $1,000 at the beginning of each such month. For each month in which you pay a monthly extension fee, you do not have to pay a minimum Operation Fee.

Financing

We do not offer direct or indirect financing. We do not guarantee your note, lease or obligation.

Franchisee Revenue and Profit

Under Section A below, Smoothie King has provided unaudited statements of average annual Unit Gross Sales as of December 31, 2018, December 31, 2017, December 31, 2016, December 31, 2015 and December 31, 2014. Under Section B below, Smoothie King has provided information on the average annual Net Sales percentage increase for Units comparing the 2018 and 2017 calendar years, the 2017 and 2016 calendar years, the 2016 and 2015 calendar years, the 2015 and 2014 calendar years and the 2014 and 2013 calendar years. As defined in Item 1, a “Unit” is a Smoothie King® business. All Units offer substantially the same products and services to the public. New franchisees will receive substantially the same services as those offered to existing franchisees. Smoothie King obtained these historical financial results from the information submitted by our franchisees. Neither Smoothie King nor an independent certified public accountant has independently audited or verified the information. Written substantiation for the financial performance representation will be made available to the prospective franchisee upon reasonable request. A. Statement of Average Net Sales for 2018, 2017, 2016, 2015 and 2014 The below five tables provide information on average Net Sales of Units during each of the 12- month periods starting January 1, 2018, and ending December 31, 2018; January 1, 2017, and ending December 31, 2017; January 1, 2016, and ending December 31, 2016; January 1, 2015, and ending December 31, 2015; and starting January 1, 2014, and ending December 31, 2014. The term “Net Sales” is defined as all products and services sold in or from the Unit, including off premises catering and delivery, but excluding excise or sales taxes, as well as returns, allowances and discounts. The data below is a representation of average Net Sales for Units broken into 9 segments: top 10%, top 25%, top 50%, top 75%, bottom 10%, bottom 25%, bottom 50%, bottom 75% and total/all. Net Sales information is provided on Units open for the consecutive 13-month period ending on December 31st of the period presented, including those units closed for a period of less than 8 weeks for remodeling purposes. Units presented exclude those Units not scheduled to be open daily throughout the period (excluding holidays), such as Units within office buildings that close for the weekend and Units on college campuses that close for the summer period. As of December 31, 2018, there were 873 Units operated by franchisees and 29 Units operated by Smoothie King. Of the 901 Units, 760 Units operated by franchisees and 23 Units operated by Smoothie King had been open for the 13-month period ending December 31, 2018, meaning Units opened prior to December 1, 2017. Of those 760 franchised Units, 22 Units were excluded since they were not scheduled to be open daily during the reporting period, or were closed for more than an 8-week period during the calendar year 2018, including 15 Units that closed during the 2018 calendar year. Of the 738 franchised Units referenced in the below table, all reported sufficient financial performance information to be included in this financial performance representation. The information below does not include information from Units operated by Smoothie King. Some Units have attained the results described above in Sections A and B. Your individual results may differ. There is no assurance you will do as well. Other than what is included in this Item 19, we do not make any financial performance representations about a franchisee’s future financial performance or the past financial performance of company affiliate-owned or franchised Units. 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 revenue and/or income, you should report it to the franchisor’s management by contacting Smoothie King’s General Counsel, Michael Sukenik, at 9797 Rombauer Road, Dallas, TX 75019, (985) 635-6973, the Federal Trade Commission, and the appropriate state regulatory agencies.