$175

Business Description

Miracle-Ear’s principal business address is 5000 Cheshire Parkway North, Plymouth, Minnesota 55446; telephone number is (763) 268-4000. Our corporate affiliate, Elite Hearing, LLC., sells third party brand products to independent audiologists and dispensers. Our corporate affiliate Miracle-Ear Canada, LTD sells hearing products to hearing impaired patients through 53 company-owned locations in Canada. Our corporate affiliate Amplifon Hearing Health Care Corp. is a benefit program that offers discounts on hearing aids and hearing services to its members, some of whom may be referred to Amplifon Hearing Health Care participating franchisees. Our corporate affiliates all have a principal business address of 5000 Cheshire Parkway North, Plymouth, Minnesota 55446. Our parent is Amplifon (USA), Inc. (“Amplifon USA”). Amplifon USA is a subsidiary of Amplifon S.p.A. (“Amplifon Italy”). Amplifon Italy’s principal business address is Via Ripamonti, 133, Milan, Italy. Amplifon USA’s principal business address is 5000 Cheshire Parkway North, Plymouth, Minnesota 55446. Miracle-Ear was incorporated under the laws of the State of Minnesota on August 24, 1972. Miracle-Ear conducts business only under the name “Miracle-Ear®.” Miracle-Ear has no predecessors for purposes of this Item 1.

Prior Experience

In October 2002, Amplifon USA acquired Sonus-USA, Inc. (“Sonus”). From 1996 to January 2014, Sonus sold private label and multi-brand products to hearing-impaired patients through company-owned and franchised retail stores and licensed network affiliates in the U.S. and Canada. In November 2013, Elite Hearing LLC, was split off from Sonus; it sells thirty-party branded products to network members in the United States. Sonus no longer sells franchises and has no franchised locations. In August 2003, Amplifon Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Amplifon USA, acquired substantially all of the assets of National Hearing Centers, Inc. (“National Missouri”), and subsequently changed its name to National Hearing Centers, Inc. (“National”). Other than National Missouri, National has no predecessors. National Missouri was incorporated on March 1, 1999 and commenced operations under the National Hearing Centers name at 9 locations. National previously conducted its business through franchised retail stores under the names “Amplifon?” and “Amplifon? Hearing Aid Centers.” National no longer sells franchises and has no franchised locations. Amplifon USA also sells third party branded hearing aid products to nonaffiliated resellers in the United States. Amplifon Italy currently operates a network of hearing aid centers in Europe, Asia-Pacific and Australia; however, as it pertains to operations within the United States, Amplifon Italy does not directly offer franchises nor does it operate a business of the type you will operate at your Center(s). Amplifon USA does not currently offer franchises for businesses of the type you will operate at your Center(s). None of the companies mentioned above have previously offered franchises in any other line of business.

Business Offered

We offer and grant Miracle-Ear? franchises to operate one or more hearing aid centers (sometimes referred to as a “Miracle-Ear? Center” or “Center”) in a specified territory under the terms of the Miracle-Ear? Franchise Agreement (a copy of which is attached to this FDD as Exhibit C) (the “Franchise Agreement”). A Center is a retail location from which you will sell a complete line of quality hearing aids which are manufactured for Miracle-Ear (including the Miracle-Ear? line), together with certain related products and Services. The Center location may be a freestanding store or located within an approved third-party retail environment with whom Miracle-Ear has established a relationship (“Third Party Retailer”). The Franchise Agreement will require you to develop, relocate, and/or operate certain types of Centers on a specified schedule, and within certain designated portions of the territory. Miracle-Ear has developed a comprehensive marketing and advertising program, a business strategy for getting and keeping customers, and a distribution method for its hearing aid products and services as part of its operating system (the “Operating System”) which you will receive the right to use. Miracle-Ear uses and licenses certain service marks and trademarks, logos, trade dress and other commercial symbols, including the service mark “Miracle-Ear” (collectively, the “Trademarks”). Miracle-Ear may, in the future, modify or enhance the Trademarks as well as add new trademarks, service marks, logos, trade dress and other commercial symbols.

Initial Fees

You must pay to Miracle-Ear an “Initial Franchise Fee,” which reflects the amounts you pay to Miracle-Ear before your Miracle-Ear? Center(s) opens. The total amount of your Initial Franchise Fee will depend on the size (population) of your Exclusive Territory, whether you are an existing Miracle-Ear? franchisee, whether your Exclusive Territory includes areas in which currently existing Centers have been recently operated by franchisees (“Pre-franchised Territory”) and whether you are an individual who has been selling hearing aids for at least 12 months. The Initial Franchise Fee includes the fees and payments described below. All of the following fees and payments are non-refundable except as noted. Initial Franchise Fee. The entire amount of the Initial Franchise Fee is due in a lump sum when you sign the Franchise Agreement. The amount of your Initial Franchise Fee will be based on the population in your Exclusive Territory, using the most current census data available. Your minimum Initial Franchise Fee will equal: (a) a License Fee of $20,000, plus (b) a Territory Fee of $4,000 per 100,000 population (prorated to a percent per 100,000 population) in your Exclusive Territory; provided, however, that the minimum Territory Fee required will be $10,000 for any Exclusive Territory with a population of up to 250,000 persons. For example, if your Exclusive Territory has a population of 750,000, the Initial Franchise Fee would be $50,000 (comprised of $20,000 for the License Fee plus $30,000 for the population-based Territory Fee). If you are (1) an existing Miracle-Ear? franchisee who acquires an additional franchise, (2) acquiring an Exclusive Territory which includes Pre-franchised Territory or (3) an individual who has been selling hearing aids for at least 12 months, Miracle-Ear reserves the right to waive all or part of the Initial Franchise Fee. Miracle-Ear is participating in the International Franchise Association’s Veterans Franchise Initiative known as “Vet Fran.” If you are an honorably discharged US veteran, you may qualify for a ten percent (10%) discount off your Initial Franchise Fee. Initial Inventory. If you are not converting an existing hearing aid business to a Miracle-Ear? Center or do not obtain initial inventory from the prior franchisee, you must purchase from MiracleEar an initial supply of hearing aid products and accessories. The amount of the initial inventory will vary, depending on the Exclusive Territory you will serve. Your cost for initial inventory may range from $5,000 to $10,000 per Center. Other than the Initial Franchise Fee and the Initial Inventory, there are no other fees or payments for services or goods required to be paid to an Affiliate or us before your business opens.

Financing

Miracle-Ear does not receive direct or indirect payments for placing financing. Miracle-Ear does not guarantee your obligations to third parties or offer direct or indirect financing except as described below. Miracle-Ear may, in its sole and absolute discretion, provide financing to qualified franchisees for acquisitions, start-up costs, working capital, relocations, renovations, expansion, and conversions. For new territory acquisitions and new location funding, Miracle-Ear may enter into a promissory note with you for up to 60 months of: (i) up to 100% of your Initial Franchise Fee or (ii) the purchase price to be paid for the assets acquired for the operation of your new Center or any additional Centers in your new territory (which may include startup costs such as equipment, fixtures, initial inventory and/or supplies). If you are a new Miracle-Ear franchisee experienced with hearing instruments (such as being a licensed hearing aid dispenser) and we determine that you meet our requirements, Miracle-Ear may loan you (i) an amount of up to four (4) months of working capital required to operate your new Center, or (ii) an amount to finance all or part of the renovation of existing hearing aid locations to Miracle-Ear Centers, all in amounts determined by Miracle-Ear. If you are an existing Miracle-Ear franchisee relocating an existing Center or opening a new Center and we determine that you meet our requirements, Miracle-Ear may provide you a loan to finance all or part of such relocation or expansion, in amounts determined by Miracle-Ear. If Miracle-Ear provides you with financing, you must sign a master Financial Assistance Agreement, and an installment note, a copy of which is included as Exhibit G to this disclosure document (“Promissory Note”). The Promissory Note bears interest at an annual percentage rate (“APR”) of 6% or such other interest rate designated by Miracle-Ear. The Promissory Note is payable in equal monthly payments of principal and interest over its 60 month term or such other term length mutually agreed upon by you and Miracle-Ear. You may prepay the Promissory Note in whole or in part without penalty over the term. (Promissory Note, Paragraph 2.) If your corporation or other entity is the franchisee, the owners of the entity must personally guarantee the Promissory Note. (Guaranty attached to Promissory Note.) You and each personal guarantor waive demand and presentment for payment, protest rights, and notice of failure to make payment. (Promissory Note, Paragraph 9.) If your corporation or other entity is the franchisee, upon the sale or transfer of any interest in Franchisee or the sale or transfer of substantially all of Franchisee’s assets, Miracle-Ear may declare the entire unpaid amount of the Note, including interest, immediately due and payable. We can demand immediate payment of the entire outstanding balance if (i) any required installment payment is not made when due, (ii) any amount payable to Miracle-Ear for products sold or services provided to you shall be greater than 60 days past due, (iii) you breach any other agreement or obligation with Miracle-Ear, (iv) you become insolvent or unable to pay your debts as they become due, (v) any bankruptcy, receivership, insolvency, reorganization, dissolution or liquidation proceedings are commenced by or against you, or (vi) you make an assignment for the benefit of creditors. (Promissory Note, Paragraph 5.) You are required to grant a security interest in all of the assets acquired to obtain this financing, as well as all of the other property held or leased by the Franchised Business, including any property acquired after the date of the original grant of the security interest. (Security Agreement attached to Promissory Note.) Failure to pay amounts due under the Promissory Note is a default under the Franchise Agreement (Franchise Agreement, Section 13) which could result in termination of the Franchise Agreement if left uncured. If you default under the terms of the Promissory Note, you will be required to pay all costs (including reasonable attorneys’ fees) incurred by the holder of the Promissory Note. It is not our current practice or intent to sell, assign or discount to any third party any note or other financing instrument that franchisees execute. We, however, reserve the right to do so in the future. We also may from time to time pledge our interest in financing instruments to third parties to secure various obligations of Miracle-Ear to third parties.

Franchisee Revenue and Profit

We do not make any representations about a franchisee's future financial performance or the past financial performance of company-owned or franchised outlets. 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 our Chief Financial Officer c/o Miracle-Ear, Inc., 5000 Cheshire Parkway North, Plymouth, MN 55446, (763) 268- 4000, the Federal Trade Commission, and the appropriate state regulatory agencies.