Form G Commonwealth of Australia

Competition and Consumer Act 2 010 — subsection 93 (1) NOTIFICATION OF EXCLUSIVE DEALING

To the Australian Competition and Consumer Commission: Notice is hereby given, in accordance with subsection 93 (1) of the Competition and Consumer Act 2010, of particulars of conduct or of proposed conduct of a kind referred to subsections 47 (2), (3), (4), (5), (6), (7), (8) or (9) of that Act in which the person giving notice engages or proposes to engage.

PLEASE FOLLOW DIRECTIONS ON BACK OF THIS FORM

1.Applicant

(a) Name ofperson giving notice: Lift Brands (Australia) Pty Ltd ACN 138 481 919 ("Lift Brands")

(b) Short description of business carried on by that person: Lift Brands is a franchisor that owns or licenses all the intellectual property relating to the conduct of-

(i) Snap Fitness fitness clubs which are 24 hour fitness and athletic clubs that offer cardio, strength and selectorised equipment throughout Australia; and

(ii) 9Round gyms offering a service-based boxing and kick boxing fitness program combining strength, cardiovascular exercises and circuit training for the entire body to achieve results;

Lift Brands grants franchises to franchisees to operate Snap Fitness Clubs and/or 9Round gyms ("Franchised Businesses").

Franchisees of Snap Fitness franchisees ("Snap Fitness Franchisees") and 9Round franchisees ("9Round Franchisees") (collectively "Franchisees") are required to operate their respective franchised businesses ("Franchised Businesses") in accordance with the systems, methods, procedures and controls specified by Lift Brands ("the System"). Compliance with the System is essential to protect the integrity of the Snap Fitness and 9Round franchise networks and brands and to ensure high quality products and services are supplied by Franchisees to members.

In Australia as at the date of this Notification there are approximately 170 Franchised Businesses.

(c) Address in Australia .for service of documents on that person: c/- Louise Wolf, MST Lawyers, 315 Ferntree Gully Road, Mount Waverley, Victoria, 3149.

2. Notified arrangement

(a) Description qf the goods or services in relation to the supply or acquisition qf m,hich ihis notice relates:

Page I of 6 sna pfit n_1402 194005. doc

The acquisition by Franchisees of certain products to be used by them in the operation of their respective Franchised Businesses, including: •gym equipment and other equipment, fixtures and signs to be used in the

operation of the Franchised Businesses;

• the technology system consisting of all hardware and software, including (i) all computer hardware and related accessories and peripheral equipment, door access, digital media and telephone systems and (ii) the billing, electronic point-of-sale systems and management and back office programs ("Technology System");

•other miscellaneous equipment such as advertising materials, other supplies, products and materials;

•uniforms, merchandise, printing services for advertising materials and the GoFast Kit/Start Up Kit;

•participation in any insurance plan established for the benefit of the System.

(h) Description of the conduct or proposed conduct:

Lift Brands enters into Franchise Agreements on the condition that Franchisees purchase approved goods and services, including those mentioned above, (collectively (the "Products and Services"), from suppliers that have been approved by Lift Brands including:

(i) only using the proprietary or non-proprietary equipment specified by Lift Brands in the operations manuals or other written directives of Lift Brands;

(ii) using approved equipment, products, fixtures, signs, advertising materials, trademarked items and other items (collectively, "approved supplies) in the gym or club as are listed in the approved supplies and approved suppliers lists, and which may be amended by Lift Brands from time to time;

(iii) purchasing and using of the Technology System developed or selected for Lift Brands, including all future updates, supplements and modifications;

(iv) purchasing all items contained in the Go Fast Kit/Start-up kit; and (v) participating in any insurance plan established for the benefit of the

System.

The Franchise Agreement gives Franchisees the ability to seek approval of alternative suppliers.

3.Persons, or classes of persons, affected or likely to be affected by the notified conduct

(a) Class or classes qfpersons to which the conduct relates:

All Snap Fitness Franchisees and 9Round Franchisees that operate Franchised Businesses throughout Australia, in accordance with the terms of the Snap Fitness Franchise Agreement and Wound Franchise Agreement.

Page 2 of 6 sna pfit n_1402 194005. doc

(b) Number of those persons: (i) At the present time -

170 Franchised Businesses (ii) Estimated within the next year -

200 Franchised Businesses

(c) Where number ofpersons stated in item 3 (b) (i) is less than 50, their names and addresses: Not applicable.

4.Public benefit claims

(a) Arguments in support of notification: The notified conduct will benefit Snap Fitness Franchisees or 9Round Franchisees and the public in the following manner:

(i) Lift Brands will be able to ensure that all Snap Fitness Franchisees or 9Round Franchisees will have high quality Products and Services which will provide a safer environment for members;

(ii) Snap Fitness Franchisees and 9Round Franchisees will offer a consistent range of Products and Services which will ensure that all members will receive a consistent experience in any Snap Fitness or 9Round Franchised Business they attend. This will lead to a better member experience.

(iii) the use of the Technology System by Franchisees will be compatible and integrated to enable various software products to work together more efficiently in their Franchised Businesses, including the point of sale system. This is necessary for the proper ftinctioning of the membership reciprocity programs between locations;

(iv) a uniform Technology System (including the door access, club management and payment processing software) across all Franchised Businesses will deliver consistency in the quality and predictability of the Technology System for Franchisees, which will translate into benefits for gym and club members, including by improving the customer service experience for members and facilitating membership reciprocity between locations;

(v) the use of the Technology System by all Franchisees will enable Lifl Brands to identify technical issues efficiently, reduce the time required to identify and resolve issues, thereby reducing the downtime of Franchisees' computer systems and interruptions to the Franchisees' businesses. This will also allow all Franchisees to focus on their businesses and thereby deliver higher quality service to club and gym members;

(vi) Lift Brands will manage the relationship with the nominated suppliers, which will relieve individual Franchisees of the responsibility of negotiating supply arrangements. This fosters business efficiency and allows Franchisees to focus on operating their businesses, delivering quality products and service to gym and club members;

(vii) the approved suppliers will be bound to meet stringent service levels

Page 3 of 6 sna pfit n_140 2 194_005. doc

imposed by Lift Brands, which individual Snap Fitness Franchisees or

9Round Franchisees would not otherwise be able to impose, monitor or

enforce;

(viii) As a result of Lift Brands' negotiating power and technological expertise,

the prices payable by Franchisees for the Technology and other Products

and Services is likely to be lower than an individual franchisee would

otherwise pay for similar products and services with the same

specifications. This may result in Snap Fitness Franchisees or 9Round

Franchisees being able to pass on the cost savings to the public, and if so,

is likely to increase competition for the services offered by the Franchisees

in the fitness centres market.

(b) Facts and evidence relied upon in support qf these claims:

Lift Brands has extensive experience in sourcing the Products and Services and

in negotiating supply arrangements with a variety of suppliers.

Lift Brands has particular experience in the procurement, delivery, support and

enhancement of gymnasium equipment, computer hardware and software

systems and other products and services.

Lift Brands has invested significant resources into assessing the options for

various products and services available which are suitable for use in the fitness

industry and is uniquely placed to assess the suitability of the Technology

System and the other Products and Services for its Franchisees on both a

functional and economical basis.

Member feedback indicates that members of Snap Fitness value reliable and

consistent gyn-inasium equipment including various elements of the Technology

System.

The proposed conduct will assist Snap Fitness Franchisees and 9Round

Franchisees to efficiently and innovatively deliver quality products and service

to members by relieving Franchisees of the responsibility of negotiating supply

arrangements with the approved suppliers, making it easier to service members,

which will, in turn, benefit the public.

The public benefits listed above will also allow Franchisees to be more

competitive in the fitness industry, which will in turn increase competition in the

fitness industry and ultimately benefit consumers.

Based on its experience and a comprehensive assessment of various suppliers,

Lift Brands submits that both Snap Fitness Franchisees and Wound Franchisees

and the public will benefit from the notified conduct.

5. Market definition

Provide a description qf the market(s) in ii ,hich the goods or services described

at 2 (a) are supplied or acquired and other qf ,Pcted markets including:

sign^ficant suppliers and acquirers: subslilutes available fior ihe relevant goods

or services: any restriction on the supply or acquisition of'the relevant goods or

services (for example geographic or legal restrictions):

Lift Brands has not undertaken an extensive market analysis. However, it would

Page 4 of 6 snapfitn_1402194_005.doc

be appropriate to consider the proposed conduct in the context of the following markets:

•the market for franchised businesses in Australia;

•the market for franchised gymnasiums and fitness centres;

("the Markets").

Each of these Markets are characterised by strong competition, with numerous competitors, including:

• in relation to the market for franchised businesses: the Franchise Council of Australia survey in 2010, estimated there were in excess of 1000 franchise systems available in Australia;

• in relation to the market for franchised gymnasiums and fitness centres: Jetts, Stepz Fitness, Anytime Fitness, Contours, Curves, Fernwood, Fitness First, Fitness Enhancement Personal Training, Step Into Life, Plus Fitness 24/7, Bodies 24/7 and EnVie Fitness, Genesis Fitness Clubs; Virgin Active, GoodLife HealthClubs, YMCA Australia.

6.Public detriments

(a) Detriments to the public resulting or likely to resull .from the notification, in particular the likely effect of the notified conduct on the prices of the goods or services described at 2(a) above and the prices qf goods or services in other affected markets:

Lift Brands submits that there will be very little or no public detriments resulting from the proposed conduct.

The likely effect of the proposed conduct will be:

(i) it will prevent Snap Fitness Franchisees and 9Round Franchisees from being able to choose between computer hardware and software products and fitness equipment, merchant services and suppliers; and

(ii) it will prevent other suppliers from being able to supply to Snap Fitness Franchisees and 9Round Franchisees.

There is no impact on end consumers as they can choose from the numerous gymnasiums or fitness centres available. On the contrary, end consumers are likely to benefit as Snap Fitness Franchisees and 9Round Franchisees will be able to provide higher quality equipment, better standards and safety, more efficient and better service standards. This can lead to better consumer experience and may also lead to decreased prices and increased competition for the services of fitness centres.

(b) Facts and evidence relevant to these detriments.,

The proposed conduct will not lessen competition in the Market because:

(i) the Markets are highly competitive; and

(ii) Lift Brands does not have a substantial degree of power in any of the relevant Markets and there are a numerous competitors in Australia to which suppliers may sell their products and services.

Page 5 of 6 snapfitn_1402194 005.doc

Lift Brands submits that the benefits of the proposed conduct will outweigh any

possible detriment arising from the proposed conduct.

Any detrimental impact will be far outweighed by the overall benefits to Snap

Fitness Franchisees and customers.

7.Further information

Name, postal address and contact telephone details of the person authorised to provide additional information in relation to this notification.,

Louise Wolf

Senior Associate

MST Lawyers

315 Ferntree Gully Road

Mount Waverley, Victoria, 3149

T: (03) 8540 0264

Dated: 13 May 2015

Sio&O,^y uise Wolf on behalf of the applicant:

(hi ' 44'a ure

Louise Wolf

Senior AssociMST Lawyers

315 Ferntree Gully Road

Mount Waverley, Victoria, 3149

T: (03) 8540 0273

E: louise.wolf(!.i)mst.corn.au

Page 6 of 6 sna pfit n_140 2 194_005. doc