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Business Description

911 Restoration Franchise Inc. (referred to in this Disclosure Document as “911 Restoration” “we,” “us,” or “our”) was formed as a California corporation on March 15, 2007. Our principal place of business is 7721 Densmore Avenue, Van Nuys, California 91406, and we do business under our corporate name and the Marks as described below. We do not do business or intend to do business under any other name. In this Disclosure Document, we refer to the person or entity that will be signing the Franchise Agreement (defined below) as “you,” “your,” or “franchisee,” and includes all franchise owners and partners, if you are a corporation, partnership or other entity. Our agents for service of process are disclosed in Exhibit A. We have not offered franchises in any other line of business, and we do not engage in any other business activity, other than that we are the designated supplier for logoed shirts and promotional materials for our franchisees. We do not own or operate a business of the type being franchised. We began offering franchises in 2007.

Prior Experience

We have no parents or predecessors. We have 3 affiliates: Milestone SEO, Inc., (“Milestone”), 911 Restoration Enterprises, Inc. (“911 Enterprises”), and 911 Restoration, Inc. (“911 Dallas”). Milestone is a California corporation that was incorporated on November 19, 2008 and is headquartered at our principal place of business. Milestone supplies internet advertising services to our franchisees. Milestone has never offered franchises in this or any other line of business. 911 Enterprises is a California corporation that was incorporated on March 13, 2003 and is headquartered at our principal place of business. 911 Enterprises owned one business of the type being franchised from March 2003 until December 2012 when it sold the business to a franchisee. 911 Dallas is a Texas corporation that was incorporated on May 13, 2008. 911 Dallas owned one business of the type being franchised in Dallas, Texas from May 2008 until May 2013. Neither Milestone, 911 Enterprises nor 911 Dallas have offered franchises in this or any other line of business.

Business Offered

The “Franchised Business,” as described below, is established and operated under a comprehensive and unique system (the “System”). Our System includes programs for sales promotion, advertising programs, franchisee training, business administration, business operations methods, standards, product specifications, proprietary products, proprietary marks, confidential information, and other procedures and methods related to the operation of the Franchised Business, all of which may be changed, improved and further developed by us. Certain aspects of the System are more fully described in this Disclosure Document and in the Confidential Operations Manual (the “Manual”), which you should expect to evolve over time and to which you are granted access when you become our franchisee. The Franchised Business provides emergency clean-up of fire damage, water damage, mold damage and mold inspections, carpet cleaning, duct cleaning and crawl space cleaning under the name and mark “911 Restoration”. The System is identified by certain trade names, service marks, trademarks, logos, emblems and indicia of origin, including the mark “911 Restoration”, together with other trade names, service marks, trademarks, logos, emblems and indicia of origin which are now designated and may in the future be designated by us in writing for use with the System (the “Marks” or “Proprietary Marks”), as further described in Item 13. Our franchisees will generally be people or businesses that are already in similar businesses who will convert their existing businesses to Franchised Businesses. We estimate that you will need approximately 1,000 square feet of warehouse space and 300 square feet of office space for your Franchised Business. You will be called upon to provide the services that our System offers and you must respond accordingly. Your clients will include homeowners, property managers, insurance companies, or others that are responsible for real property maintenance. We offer 3 separate franchises in this Disclosure Document, although we may not necessarily grant you the opportunity to purchase under any of these programs. “Traditional Franchises” are offered to qualified candidates who are not currently operating a business similar or related to a Franchised Business. If you purchase a Traditional Franchise, you will sign our Franchise Agreement (“Exhibit B”) to own and operate a Franchised Business in an assigned territory (a “Territory”). Traditional Franchises have the option to obtain conditional rights to obtain franchises for additional geographic territories (each, an “Additional Franchised Territory”) for reduced initial franchise fees payable over 2 years in consideration for the payment of a $5,000 deposit (the “Deposit”) to us, in advance, for each Additional Franchised Territory. Qualified candidates who desire to obtain Additional Franchise Territory will sign our Multi-Territory Deposit Amendment (the “Deposit Amendment”) to the Franchise Agreement for your first and (if applicable) second Additional Franchised Territory when you sign your Franchise Agreement for your first Territory, and will subsequently sign individual Franchise Agreements for each Additional Franchised Territory. You are not required to develop and open any Additional Franchised Territory. However, if you choose to acquire an Additional Franchised Territory, each Additional Franchised Territory must be opened by the deadline stated in your Multi-Territory Deposit Agreement. An Additional Franchised Territory will be considered to have been “opened” after the then-current Franchise Agreement for the Additional Franchised Territory is executed and business operations actually begin in the Additional Franchised Territory. “Conversion Franchises” are offered to qualified candidates who are currently operating a business similar or related to a Franchised Business and who wish to convert their existing business into a Franchised Business for an assigned Territory. If you purchase a Conversion Franchise, you will sign our Franchise Agreement and our Conversion Addendum in the form attached as Exhibit J to the Franchise Agreement. Your existing business's average annual gross revenue for the 3 prior years must exceed $300,000 to qualify to purchase a Conversion Franchise. “Micro-Market Franchises” are offered to qualified candidates who desire to operate a Franchised Business in a smaller Territory than the Territories for Traditional Franchises and Conversion Franchises. If you purchase a Micro-Market Franchise, you will sign our Franchise Agreement for your Territory. “Multiple Franchise Owner” are offered to qualified candidates who desire to operate more than one Franchised Business. The number of franchises that can be operated by any one Franchise Owner varies and is determine by the Franchisor. As a Multiple Franchise Owner, the Franchisor allows consolidation of certain operating fees when the individual franchise territories are operated from one office and the territories are contiguous geographically. The number of franchises that can be operated under one branch office vary according to market and will be determined by the Franchisor.

Initial Fees

Initial Franchise Fee You must pay us a non-refundable initial franchise fee (an “Initial Franchise Fee”) when you sign our Franchise Agreement. Traditional Franchise: You must pay us a non-refundable Initial Franchise Fee of $49,000 when you sign a Franchise Agreement for a Traditional Franchise. The population in your Territory will range from approximately 250,000 to 350,000 people. We will assign your Territory when you sign your Franchise Agreement. Conversion Franchise: You must pay us a non-refundable Initial Franchise Fee of $49,000 when you sign a Franchise Agreement for a Conversion Franchise. The population in your Territory will range from approximately 250,000 to 350,000 people. We will assign your Territory when you sign your Franchise Agreement. Micro-Market Franchise: You must pay us a non-refundable Initial Franchise Fee of $29,000 when you sign a Franchise Agreement for a Micro-Market Franchise. The population in your Territory will range from approximately 100,000 to 249,999 people. We will assign your Territory when you sign your Franchise Agreement. We generally determine the population in your Territory from the latest population estimates prepared by the U.S. Census Bureau; however, we may use a substitute or successor source of population information. Initial Training Fee You must pay us a non-refundable initial training fee of $2,500 (an “Initial Training Fee”) for 2 trainees when you register for our initial training program (the “Initial Training Program”). You must pay us a non-refundable Initial Training Fee of $500 for each additional trainee. If you are an existing franchisee acquiring an additional Territory, you will not be required to attend or pay for our Initial Training Program. Business Launch Fee You must pay us a non-refundable business launch fee of $1,500 (a “Business Launch Fee”) when you register for our Initial Training Program. The Business Launch Fee is payment for our guidance and assistance in the opening of your Franchised Business. Reduced Initial Fees for Purchase of Franchises for Multiple Individual Territories In our discretion, we may award up to 3 franchises to qualified candidates for reduced Initial Franchise Fees. As of the issuance date of this Disclosure Document, the Initial Franchise Fee currently charged for a second franchise is $44,000 and the Initial Franchise Fee currently charged for a third franchise is $39,000. These reduced Initial Franchise Fees do not include any other fees that may apply at the time the multiple franchises are awarded. You must sign a separate Franchise Agreement for each franchise. We will determine the actual Initial Franchise Fee payable for a second and third franchises when those franchises are awarded. In addition to the reduced franchise fees, franchise owners will also receive reduced per unit operating fees with regard to the technology fee, marketing investment requirements, and other expenses outlined in Item 7. Deposit Amendment to Franchise Agreement : You must pay us a $5,000 Deposit (‘the Deposit”), in advance, for each Additional Franchised Territory when you sign your Franchise Agreement for your first Territory and your Deposit Amendment in the form attached as Exhibit K to our Franchise Agreement. You will sign an individual Franchise Agreement for each Additional Franchised Territory. Your Initial Franchise Fees will be in the amounts stated in your Deposit Amendment, which are, as of the issuance date of this Disclosure Document, $44,000 for your first Additional Franchised Territory if you were granted the rights to open only one Additional Franchised Territory, or $44,000 for your first Additional Franchised Territory and $39,000 for your second Additional Franchised Territory if you were granted the rights to open 2 Additional Franchised Territories. You may pay the applicable Initial Franchise Fee with a 10% down payment and with equal monthly payments over a 2 year period for the remaining balance, with interest at the prime rate of interest plus 2 points. If and when we enter into a Franchise Agreement for a first and, if applicable, a second Additional Franchised Territory, the $5,000 Deposit for each Additional Franchised Territory will be applied as a credit against the Initial Franchise Fee due for each Additional Franchised Territory. You are not required to develop and open any Additional Franchised Territory. However, if you choose to acquire an Additional Franchised Territory, each Additional Franchised Territory must be opened by the deadline stated in your Deposit Amendment. If you fail to do so, we will refund to 20% of the Deposit we receive for each Additional Franchised Territory, not to exceed $1,000 for any Additional Franchised Territory. With this exception, the Deposit is non-refundable in whole or in part. Purchases of Materials: Before you attend New Franchise Owner training, you must purchase from our approved supplier logoed uniform apparel for you and your employees and promotional materials and printed marketing materials. We estimate the initial cost of these items will be $200 to $1,200 depending on the number of employees on your initial staff. Veteran's Discount: We may reduce our initial franchise fee by 15% for the first Franchised Business purchased by a qualified veteran of the United States Armed Services if he or she (i) purchases the Franchised Business franchise individually or (ii) will own a majority interest in the entity that signs the Franchise Agreement as franchisee. Refunds, Different Fees and Financing: We may reduce, defer or waive the Initial Franchise Fee or Deposit if and when we determine, it is warranted by a unique or compelling situation. Except as specified in Item 10 of this Disclosure Document, we generally do not provide financing for the initial franchise fee. There are no other purchases from or payments to us that you must make before you open for business.

Financing

Except as provided below, we do not offer direct or indirect financing. We do not guarantee your note, lease or obligation. In our discretion and if you meet our criteria, we may offer to finance up to 50% of the actual Initial Franchise Fee. The amount financed must be paid over 12 to 36 months with interest at the prime rate of interest plus 5%. We will determine the amortization schedule based upon on your particular circumstances and your creditworthiness, among other factors. If you qualify for and choose to accept this financing, you will sign our form of Promissory Note and Personal Guaranty, which are attached as Exhibit H to the Franchise Agreement and our form of Security Agreement, attached as Exhibit I to the Franchise Agreement. If you default in any payment under the Promissory Note, and fail to cure the default in the time prescribed under the Promissory Note and the notice of default, will may terminate your Franchise Agreement. If we terminate your Franchise Agreement for cause, any amount you still owe us under the Promissory Note will become immediately due and payable, and will be in addition to any money you may owe us under the Franchise Agreement. You agree that we may debit your bank account or charge your credit card for your monthly payments. The Promissory Note must be signed by you, or an authorized officer, if you are an entity. The Personal Guaranty must be signed by each shareholder, officer, director, general partner, manager and member of Franchisee, as the case may be, to jointly and severally guarantee your payment of the Promissory Note in favor of us. Under the Promissory Note you waive your right to a jury trial in any action on or related to the enforcement of the Promissory Note and you waive presentment, demand, protest, dishonor and all other notices and demands in connection with the delivery, acceptance, performance default or endorsement of the Promissory Note. Under the Personal Guaranty, you waive the notice of acceptance; the right to a jury trial; presentment, demand and protest of any notice, including a notice of default; all other notices or formalities to which you would be entitled to by law or otherwise; and all rights of set- off. You are not required to waive any of your other legal rights under the Promissory Note and Personal Guaranty. Under the Security Agreement, you will grant us a security interest in the assets of your Franchised Business. If an “Event of Default” occurs under the Promissory Note, we will have the right to declare all unpaid amounts under the Promissory Note to be immediately due and payable, and we may require you pay interest on any unpaid amount at the maximum contract rate permitted by applicable law. You are responsible for all costs and expenses we incur, including attorneys' fees, to enforce our rights under the Promissory Note, and we may terminate your Franchise Agreement. An “Event of Default” includes (a) your failure to make any payment of principal of or interest on the Note on its due date; (b) if any judgment, attachment, levy or execution against you is not fully paid and/or discharged or released within 30 days; (c) you become insolvent and unable to pay your debts; (d) you make an assignment for the benefit of creditors, declare bankruptcy or permit a trustee or receiver to be appointed for you and this continues undischarged for 30 days; or (e) you breach any representation, warranty or covenant contained in the Franchise Agreement. If you desire to obtain conditional rights to obtain franchises for Additional Franchised Territory, you must pay us a $5,000 Deposit, in advance, for each Additional Franchised Territory when you sign your Franchise Agreement for your first Territory and your Deposit Amendment. You will sign an individual Franchise Agreement for each Additional Franchised Territory. Your Initial Franchise Fees will be in the amounts stated in your Deposit Amendment, which are, as of the issuance date of this Disclosure Document, $44,000 for your first Additional Franchised Territory if you were granted the rights to open only one Additional Franchised Territory, or $44,000 for your first Additional Franchised Territory and $39,000 for your second Additional Franchised Territory if you were granted the rights to open 2 Additional Franchised Territories. You may pay the applicable Initial Franchise Fee with a 10% down payment and with equal monthly payments over a 2 year period for the remaining balance, with interest at the prime rate of interest plus 2 points. We do not intend to sell, assign or discount to a third party all or any part of a financing arrangement we provide to you.

Franchisee Revenue and Profit

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. The following Table 1 includes actual historical information we have accumulated for 45 Franchised Business that were owned and operated by our franchisees in 2016. All of these Franchised Businesses are operations similar to the franchise offered in this Disclosure Document. The figures in Table 1 are taken from reports submitted to us by certain franchisees on their Gross Revenue (as defined in Note 1) in 2016. 45 Franchised Business are included in Table 1, which is 70.3% of the 64 Franchised Businesses in operation on December 31, 2016, The 45 Franchised Businesses included in Table 1 were selected because the information was available to us and believed to be complete, accurate and reliable. Similar information for the remaining 19 Franchised Businesses was either unavailable to us or believed to be incomplete, inaccurate or unreliable. All information is unaudited. The following Tables 2 through 7 include actual historical information we have gathered for 15 Franchised Businesses that were owned and operated by our franchisees in 2016. Data used for the following Tables was collected in February 2017 from a survey sent to all 64 Franchised Businesses in our system as February 2017. We received responses from 21 of our 64 Franchised Businesses or 32.8% of our Franchised Businesses, but excluded the responses from 6 Franchised Businesses because they were not open and operating for more than one year as of December 31, 2016. Consequently, the data used for the following Tables are responses from 15 of our 64 Franchised Businesses, or 23.4% of the Franchised Businesses that were open and operating for more than one year as of December 31, 2016. All information is unaudited.