$352

Business Description

Keller Williams Realty, Inc. was incorporated in Texas on December 21, 1994 and maintains its principal place of business at 1221 South Mopac Expressway, Suite 400, Austin, Texas 78746. We only conduct business under our corporate name and under the trade names “KELLER WILLIAMS®,” “KW REALTY,” “KELLER WILLIAMS REALTY,” “KW LUXURY,” “KELLER WILLIAMS LUXURY,” “KELLER WILLIAMS LUXURY INTERNATIONAL,” “KW LUXURY INTERNATIONAL,” “KW COMMERCIAL,” “KW LAND,” and “KELLER WILLIAMS REALTY INTERNATIONAL.” In this Disclosure Document we refer to Keller Williams Realty, Inc. as “Licensor” or by use of the first person plural pronoun (i.e., we, our and us); we refer to the entity that will sign a Market Center License Agreement as “you,” “your,” and “licensee.”

Prior Experience

On November 22, 1995, Keller Williams, Inc. Realtors (our “Predecessor”) transferred to us all its existing Market Center license agreements and Regional Representative agreements, as well as ownership of the Trademarks and System and certain other assets described in the financial statements presented in Exhibit A to this Disclosure Document. From October 1987 to November 22, 1995, our Predecessor offered licenses for Market Centers and the Regional Representative program described below. Our Predecessor directly or indirectly has operated a real estate brokerage business since October 1987; it has not offered franchises in any other line of business. We have no parent company.

Business Offered

We have offered and sold licenses to develop and operate KELLER WILLIAMS® market centers (“Market Centers”) since November 22, 1995. Our business system (the “System”) is characterized by our distinctive real estate brokerage methods and techniques; associate recruitment methods; financial accountability techniques; uniform standards and specifications; quality and uniformity of products and services; procedures for training, consulting and assistance; Keller Williams University; profit sharing program; culture; associate leadership council structure; and the advertising and promotional programs described in Item 11. The principal trademarks and service marks (“Trademarks”) we use to describe and identify the System, are listed in Item 13. Except for the Market Center and Regional Representative programs described below, we have not offered franchises in any other line of business in the United States and Canada. Currently, we do not own or operate real estate brokerage businesses, but the Colorado, Mid-American, North Central, Northwest, Southwest, and Carolinas Regions are owned by entities affiliated with us and we serve as Regional Representative in the South Texas Region. Specifically, the Colorado Region is owned by a limited partnership affiliated with us named The Republic of Colorado, Ltd. The 1% General Partner of the limited partnership is KW Colorado Management, LLC, which is 100% owned by us. The remaining limited partnership interests in The Republic of Colorado, Ltd. are indirectly owned by individuals named in Item 2. The Mid-American Region is owned by a limited partnership affiliated with us named KW MidAmerican Region, Ltd. The 1% General Partner of the limited partnership is KW Mid-American Management, LLC which is 100% owned by us. The remaining limited partnership interests in KW MidAmerican Region, Ltd. are indirectly owned by individuals named in Item 2. The North Central Region is owned by a limited partnership affiliated with us named KW North Central Region, Ltd. The 1% General Partner of the limited partnership is KW North Central Region GP, LLC, which is 100% owned by us. The remaining limited partnership interests in KW North Central Region, Ltd. are indirectly owned by individuals named in Item 2 and third parties. The Northwest Region is owned by a limited partnership affiliated with us named KW Northwest Region, Ltd. The 1% General Partner of the limited partnership is KW Northwest Management, LLC, which is 100% owned by us. The remaining limited partnership interests in KW Northwest Region, Ltd. are indirectly owned by individuals named in Item 2. The Southwest Region is owned by a limited partnership affiliated with us named KW Southwest Region, Ltd. The 1% General Partner of the limited partnership is 100% owned by Region Investco, Ltd. Region Investco, Ltd. is the 99% limited partner and is owned by Region Investco GP, LLC (1%) and indirectly owned by individuals named in Item 2. The Carolinas Region is owned by a limited partnership affiliated with us named KW Carolinas Region, Ltd. The 1% General Partner of the limited partnership is 100% owned by Region Investco, Ltd. Region Investco, Ltd. is the 99% limited partner and is owned by Region Investco GP, LLC (1%) and indirectly owned by individuals named in Item 2. Certain of our directors and officers own or operate real estate brokerage businesses under the System and the Trademarks. See Items 2 and 20. Our agents for service of process are listed in Exhibit J.

Initial Fees

ise, which includes $7,400 allocated to a subscription plan allowing certain of your personnel to participate in our required training and coaching programs. See Item 11. You must pay the full initial license fee in a lump sum when you submit your application for a Market Center license, and we will deposit this money in an interest-bearing account that will accrue to our benefit. If we approve your application and award you a franchise, the initial license fee is fully earned and nonrefundable. If you withdraw your application or we decide that you do not qualify to operate a Market Center, we will refund your initial license fee, less the reasonable out-of-pocket expenses we incurred in evaluating your application. We will retain any interest that may have accrued while your application was being considered. We are not obligated to refund or return any fees you paid if the License Agreement is terminated for any reason. If the pre-paid training fee subscription is not used in full within 18 months from the date you sign your License Agreement, any unused portion will be forfeited to us. MLS Research Fee: Unless you provide reliable third-party verification of your analysis of the commission revenue potential of the market you request as your Awarded Area, you must pay a MLS Research Fee when you submit your franchise application. We will use this fee to obtain an independent analysis of the commission revenue potential that you submit to us for the market you request as your Awarded Area. The MLS Research Fee is based upon the reasonable costs we incur, and is not refundable. FSO Registration Fees: We require your Operating Principal, Team Leader and Market Center Administrator to attend Franchise Systems Orientation and we charge each of them a non-refundable registration fee of $399 for Franchise Systems Orientation. We also require that each of your Licensee's Principals and other members of your Licensee's Group we designate in the Brand Standards Manuals or otherwise in writing attend Franchise Systems Orientation and Investor Workshop before you open your Market Center and once every three years, and we charge each of them a non-refundable registration fee of $399 for Franchise Systems Orientation. If your Operating Principal, Team Leader and/or Market Center Administrator pays a registration fee to attend Franchise Systems Orientation before our approval of a Market Center application or finalization of a Market Center License Agreement, these registration fees will not be reimbursed following final execution of a Market Center License Agreement or return of an unapproved Market Center application. Technology Fee: On signing the License Agreement you must pay a $250 fee to be connected to our file transfer and electronic mail system (see Item 11). Business Center Fee: We currently charge an initial Business Center fee of $5,000 for the rights to operate a Business Center. You must pay the initial Business Center fee in a lump sum when you submit your application for a Business Center, and we will deposit this money in an interest-bearing account that will accrue to our benefit. If we approve your application and sign a Business Center Addendum to the Market Center License Agreement, the initial Business Center fee is fully earned and nonrefundable. If you withdraw your application or we decide that you do not qualify to operate a Business Center, we will refund your initial Business Center fee, less the reasonable out-of-pocket expenses we incurred in evaluating your application. We will retain any interest that may have accrued while your application was being considered. We are not obligated to refund or return any fees you paid if the Business Center Addendum or the host Market Center's License Agreement is terminated for any reason. Commercial Addendum Fees: We may authorize you to perform commercial real estate brokerage services and to list and sell commercial real estate properties (“Commercial Real Estate Activities”), in addition to the residential real estate brokerage services contemplated under the License Agreement. Currently, we do not charge our Market Centers for the right to conduct Commercial Real Estate Activities, although we may charge you for the right to conduct these activities in the future. We do currently charge individual Keller Williams Associates who choose to participate in our Commercial programs. We reserve the right to deduct amounts directly from your bank account (via electronic funds transfer) to cover all fees, costs and expenses (including the costs of electronic funds transfer). You must sign all authorizations required and adequately fund your bank account. We impose the fees described in this Item uniformly on all licensees who acquire a Market Center franchise under this Disclosure Document

Financing

We do not offer direct or indirect financing. We do not guarantee any of your notes, leases or obligations

Franchisee Revenue and Profit

The FTC's Franchise Rule permits a fianchisor to provide information about the actual or potential.financial performance of its fimichised and/or fianchisor-owned outlets, if tiiere is a reasonable basis: for the information, and if the information is included in the disclosure dtwumenti Financial performance information that differs fiom that included in ITEM 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considermg buying; or (2) a franchisor supplements tire infonmtion provided in this ITEM l9,.for extunple, by'providing information about possible performance at a particular location or under particiilar circumstances.