DENT TENNIS ACADEMY Relocation and Expansion

Business Plan (Phase I)

COMPANY PRIVATE

“We didn’t invent the tennis academy, we just made it better.”

Dent Tennis Academy/The Birch Racquet and Lawn Club 660 Keller Smithfield Rd Keller, Texas 76248 MARCH 2017 Table of Contents

Executive Summary ...... 1 Overview ...... 2 Vision ...... 2 The Market ...... 2 Success Factors ...... 5 Location ...... 6 Supply and Demand ...... 7 Facilities and Amenities ...... 8 Management Team ...... 9 Staff ...... 11 Competition ...... COMPANY 12 Customer Service ...... PRIVATE 15 Marketing and Sales ...... 16 Business Model...... 18 Financial Projections ...... 19 Start-up Expenses ...... 20 Operating Expenses ...... 21 Financing ...... 21

Appendices Startup Fees ...... i Financial Projections ...... iv Notes ...... viii

Prepared by Ground Floor Partners www.groundfloorpartners.com Executive Summary

At the Dent Tennis Academy, our mission is to grow champions from all nations by providing the highest quality tennis instruction in the world. In other words, champions are not born. They are developed. So at Dent, we are working hard to grow players who love the game and have the skills they need to succeed at the highest level.

Dent Tennis Academy is one of the top tennis academies in the United States. Founded and managed by the Dent family, consisting of Phil (father), Taylor (son) and Jenny (daughter-in-law), the academy is widely respected and profitable. However, the current facility imposes severe limits of future growth, since the tennis courts are leased and the Dent family has no control over most facility operations. After several years of discussion, Jenny, Taylor, and Phil have decided to pull up stakes and move the entire academy to Keller, an underserved, upscale suburb of Dallas/ Fort Worth. Instead of leasing, they will build their own facility and gain control over their own destiny. The new facility, calledCOMPANY The Birch Racquet and Lawn Club, will be located on 27 acres of land, and will ultimately have 25 outdoor courts, 10 indoor courts, a clubhouse, boarding facilities, aPRIVATE large gym, swimming pool, and other amenities. The new location will allow the Dent family to continue the same emphasis on high quality tennis instruction for juniors, just with larger facilities and better amenities. The current location in Fountain Valley, California, is profitable, but Dent Tennis Academy only leases eight courts, so revenue has been limited. In 2015, revenue is projected at just over $500,000 with a profit margin in excess of 30%. The new facility in Keller, Texas, fondly known as The Birch, will start with 10 outdoor courts and 5 indoor courts, but will immediately have significantly more revenue potential from memberships. Revenue at the new facility is projected to start at $2.7 million in the first year, and then grow to over $3.4 million in the third year. But this is just Phase I. The next phase (beginning in 2022) will add 10 more outdoor courts and 5 more indoor courts, increase the size of the clubhouse to 12,000sqft, plus add boarding facilities and a restaurant. Second phase revenue is expected to exceed $6 million per year, with a profit margin between 20% and 30%. While this business plan outlines the long term vision for Dent Tennis Academy, the focus is on Phase I, from start-up through the first few years.

1 Overview

Phil Dent, his son Taylor, and his daughter-in-law Jenny, started Dent Tennis Academy in January 2011. The academy currently operates on leased facilities at Los Caballeros Racquet and Sports Club in Fountain Valley, California. The sports club has 24 courts, but Dent Tennis Academy only uses eight of these. While Dent Tennis Academy is profitable and could probably continue the same arrangement for some time, future growth and flexibility are severely constrained by the current arrangement. Phil, Taylor, and Jenny all agree that their best option is to gain control of their future, by purchasing land and building their own facilities. After extensive research they settled on relocating to Keller, Texas—an upscale suburb located north of Dallas/Fort Worth and just a few miles from the Dallas/ Fort Worth International Airport. They plan to develop the new academy project in three phases. In the first phase, they will purchase 26.99 acres and build 10 outdoor and 5 indoor tennis courts and a clubhouse to open the new academy club. In the second phase (approximately five years from now), they will build 5 additional outdoor and 5 additional indoor tennis courts, 5 outdoor clay courts, repurpose the existing arena building into a junior clubhouse, and incorporate more amenities such as a swimming pool and expanded gym area. They will also add 2COMPANY boarding facilities for national and international students, and expand the members’ main clubhouse. In phase 3 (approximately 2025) the Dents will complete the facilityPRIVATE when they add the remaining 5 outdoor courts, 4 family lodges, their own private residence in the northwest corner and a golf component. This business plan outlines the long term plan for Dent Tennis Academy, but focuses on the first phase development and operations (Phase I).

Vision

Jenny, Taylor, and Phil want to build on their extensive tennis management, playing, and coaching knowledge to provide members and students with the highest quality tennis experience possible. That means great amenities, superior customer service, and consistent professionalism, all at reasonable rates. The Birch Racquet and Lawn Club will be run like a four star hotel.

The Market According to Ibisworld, an international market research service, Gym, Health and Fitness Club industry revenue will reach $29.8 billion in 2015, with industry-wide profit of $2.7 billion. The industry grew at an annual rate of 2.2%

2 from 2010 through 2015, but is expected to accelerate to 3.6% from 2015 through 2020. Industry revenue breaks down as follows: Fitness and Recreational Sports Center Services 43.9% Membership Fees 41.9% Personal Training Services 5.7% Merchandise Sales 2.8% Spa Services 1.2% Other 4.5%

There are an estimated 80,106 businesses within the Gym, Health and Fitness Club industry in the United States, with average revenue of just over $370,000 per business. Tennis, the “sport of kings,” comprises roughly 20% of this industry (by revenue). According to the Tennis Industry Association (TIA), the “tennis economy” in the United States reached $5.73 billion in 2014, with 17.9 million players, 9.91 million “core” players (those who play 10 or more times per year), and approximately 5 million “frequent” players (those who play 21 times or more per year).COMPANY Core players account for over 90% of spending in the tennis economy. There are 14,664 tennis facilities in the United States, with a total of 100,759 tennis courts. PRIVATE As our population ages (due to lower birth rates and longer life spans) and Americans become more health conscious, the health benefits of tennis make it more attractive compared to other sports:

• Tennis builds strength in upper body, legs, hips, and abdomen and improves speed and overall flexibility.

• Since tennis requires alertness and tactical thinking, it may generate new connections between nerves in the brain and thus promote a lifetime of continuing development of the brain.

• Tennis outperforms all other sports in developing positive personality characteristics and physical fitness development.

3 • Competitive tennis burns more calories (528 to 610 for an hour of singles) than aerobics, inline skating, or cycling, according to studies on caloric expenditures.

• Tennis participation has tremendous physiological and psychological benefits for older individuals.

• Tennis players scored higher in vigor, optimism, and self-esteem while scoring lower in depression, anger, confusion, anxiety, and tension than other athletes or non-athletes.

Some other interesting facts: • Equipment Spending Breakdown for Core Players at retail for 2014:

o Shoes:COMPANY $227.8 million o Apparel: $188.4 millionPRIVATE o Racquets: $174.6 million o Balls: $88.5 million o Strings: $39.5 million o Other (bags, grips, accessories, etc.): $104.1 million o TOTAL Core Player spend: $822.9 million (about $83 per core player year)

• The average price for a private tennis lesson rose 10.2% in 2014 to $65.

• 50% of facilities saw an increase in total courts booked/used vs. 9% indicating a decrease.

• 33% of facilities saw an increase in league play vs. 13% noting a decrease.

4 • 28% of facilities indicated an increase in youth tournament play vs. 10% saying they saw a decrease.

• Youth participation is increasing:

o In 2014, there were 5,964 out-of-school tennis programs (USTA Kid’s Tennis Clubs & TGA programs) offered, which was a 53% increase from 2013. There were 266,990 kids who participated in out-of-school tennis programs in 2014.

o In 2014, there were 6,501 PE tennis programs offered, which was a 59% increase from 2013. There were 2,001,821 kids who participated in physical education programs in 2014.

• League participationCOMPANY is also growing.

o The USTA league programPRIVATE started in 1980 with 13,000 participants, and recently reached 868,000 participants.

o Texas has the fourth highest participation rate (62,000) out of 17 sections nationwide.

• The competition to become a tennis star has also increased as more and more people take up tennis, and top athletes land bigger and bigger payouts. According to Jeff Hoffman, CEO of Athletic Resource, a recruiting company that works with high school athletes, the cost for training, travel, and equipment for a serious high school tennis player can easily reach $2,000 to $5,000 per month.

Success Factors Ibisworld identifies six success factors for the Gym, Health and Fitness Club industry: Easy Access for Clients, Effective Product Promotion, Economies of Scale, Provision of Appropriate Facilities, Having a Good Technical Knowledge

5 of the Product, and Business Expertise of the Operators. Dent Tennis Academy does well with all of these factors, except Economies of Scale, which is not relevant for high level tennis academies such as DTA. Easy Access for Clients A high profile location offering easy access and parking can provide a competitive advantage for operators in this industry. The new location for Dent Tennis Academy is easy to get to and is close to schools, colleges, major highways, and airports.

Effective Product Promotion Being able to promote a business effectively increases awareness and attracts greater membership and local patronage. Jenny, Taylor, and Phil have been very successful in promoting Dent Tennis Academy through word of mouth, PR, Internet marketing, and other channels. However, the marketing budget for the new location will start at a much higher level than it has been over the past few years: $60,000 in Year 1 compared to just over $8,000 in 2015. Dent Tennis Academy will also hire a full-time Membership Director.

Provision of Appropriate Facilities Providing appropriateCOMPANY equipment and maintaining it regularly is essential to attracting and retaining customers. The new facility will allow much greater flexibility when it comes to provisioningPRIVATE and maintenance than the previous facility.

Good Technical Knowledge of the Product Skilled employees who can demonstrate the use of various types of equipment and assist participants are important to attract repeat customers. Jenny, Phil, and Taylor have over 60 years of experience in tennis and know the game as well as anyone in the industry.

Business Expertise of Operators The long-term success of an operator in this industry depends on the skill of the operator in running a business profitably over time. Jenny, Taylor, and Phil have five years of experience running Dent Tennis Academy, and Phil has 30 years of coaching and management experience. Few operators in the world have more experience.

Location Dent Tennis Academy will be relocated to the city of Keller, Texas. Keller is approximately 30 miles northwest of Dallas, and 18 miles northeast of Fort Worth. It is also only fifteen miles west of Dallas Fort Worth International

6 Airport (DFW). Residents of Keller are far above the Texas average, and even more so in the neighboring cities of Southlake and Westlake. Estimated household income in 2013 was $113,702 (Southlake’s median household income was $173,079 in 2013) as compared to the Texas average of $51,704. Median house value for the same year in Keller was $282,077, and Southlake’s $523,960 compared to the Texas average of $132,000. And total population within the Keller and Southlake boundaries reached a combined 71,349 in 2014. From 1990 to 2010 the population doubled. While that rate of growth is not likely to continue in the future, the area is still expected to grow faster than the United States average. There is also a large population within a short distance of Keller/Southlake: 281,875 people live within seven miles of Southlake (with average household income of $114,549). And 2,293,666 people live within a 30-minute drive of that same location in Southlake. The following radius analysis is from a recent analysis by CBRE based on a location in Southlake, near the Keller/Southlake border and the proposed Dent Tennis Academy site:COMPANY Description 3 MilesPRIVATE5 Miles 7 Miles 2014 Total 57,998 121,498 281,175 Population Daytime Population 78,807 143,240 277,218 2014 Avg. HH $130,733 $130,791 $114,549 Income HH% > $75,000 66.48% 67.93% 62.31%

Dent Tennis Academy has a major focus on students, so proximity to high quality schools is another important consideration. The location in Keller is ideal in this respect. There are four school districts within 15 miles: Keller (33,000 K-12 students), Carroll (7,800 K-12 students), Northwest (17,752 K-12 students), and Grapevine-Colleyville (13,266 K-12 students). The Texas Education Association uses a metric called the Student Achievement Index to rank school districts. By this measure, Carroll is ranked #1 in the Dallas/ Fort Worth (DFW) area, followed by Keller at #7, Northwest at #10, and Grapevine- Colleyville at #13, out of a total of 53 independent school districts.

7 There are also four Montessori schools and 20 universities within 40 miles, including University of North Texas, University of Texas at Arlington, University of Texas at Dallas, Southern Methodist University, Texas Women’s University, and others. Texas has four men’s college tennis teams ranked in the top 10 NCAA Division: Baylor (#3), Texas Christian University (#4), Texas A&M (#5) and University of Texas (#9). This is a win-win for both Dent Tennis Academy and the local colleges, since students can train at Dent Tennis Academy and pursue scholarships at these universities. Dent Tennis Academy already has relationships with many of the tennis coaches at these universities.

Supply and Demand In order to estimate the ratio of supply to demand, we need to first ask the question: How many members can a court support? The answer depends on a number of factors, including the type of court and the type of member. Serious (“core”) players want better courts, but they also want fewer members per court so they have more playing time, and they want to avoid crowds. Tennis Planning ConsultantsCOMPANY estimates the ratio of tennis players to courts is somewhere between 175 and 250. This is probably appropriate for a low end facility where membership feesPRIVATE are minimal, but seems high for a professional facility where members pay much higher fees and expect more selectivity. According to studies by Tennis Planning Consultants and Nielsen, the average tennis player in the United States will drive a maximum of 15-18 minutes to play in friendly, non-tournament tennis games on a regular basis. However, serious tennis players, who participate in leagues and tournaments, are generally willing to drive longer distances. This suggests that Dent Tennis Academy—which already has an international reputation among serious tennis players—should be able to draw from a larger geographic range than most local tennis clubs. This would tend to raise the number of members per court. On the other hand, Phil Dent, who has over 30 years of coaching and management experience, estimates that a healthy club in Newport Beach, California has at least 50 members per court. Based on more aggressive marketing, superior customer service, better facilities, and better demographics associated with the new Keller facility, the Dent Tennis Academy management team is confident they can reach 60 plus members per court within three years. According to the statistics reported earlier, approximately 281,875 people live within a seven-mile radius of Keller. Very roughly, out of the entire United States population just 3.0% are serious, or “core,” tennis players. Multiplying 3.0% times 281,875 gives 8,456 core tennis players within a seven-mile radius.

8 If each of these core tennis players prefers to have no more than 70 members per court, this suggests the Dent Tennis Academy and Birch Racquet and Lawn Club service area can support 120 courts (8,456 divided by 70). But research shows that there are only 71 tennis courts (63 outdoor and 8 indoor) within this area1, which suggests the current supply of tennis courts is insufficient to meet the demand. Furthermore, even in Phase II, when Dent Tennis Academy expands to a total of 20 courts, demand for high quality tennis courts will still exceed supply. The supply and demand estimates are summarized in the following table.

Period Supply Demand Today 71 courts 120 courts After Phase I 81 courts 120 courts After Phase II 96 courts 120 courts After Phase III 106 courts 120 courts COMPANY Facilities and AmenitiesPRIVATE In Phase I, The Birch Racquet and Lawn Club will focus on delivering the highest quality service at moderate prices. There will be 10 outdoor tennis courts, 5 indoor climate controlled tennis courts and clubhouse amenities including gym, changing rooms, showers, relaxing furniture, and flat panel screens for watching sports and instructional tennis videos, as well as a small bistro/bar selling prepackaged foods and drinks, alcohol and some limited complimentary beverages and snacks. Phase I will not include a full service restaurant, swimming pool, or other features. Phase II will more than double both the space and the revenue potential. Phase II will add a swimming pool, sauna, additional indoor tennis facilities, an expanded gym space, boarding facilities, a restaurant (located on a new second story above the existing clubhouse), and more. In Phase II The Birch Racquet and Lawn Club will add more tennis pros, and add more wellness services (potentially including an on-site nutritionist, physiotherapist, chiropractor, and masseuses).

1 This only includes tennis courts from direct competitors listed above.

9 The amenities and timeline are summarized in the following table.

Phase I II

Timeframe 2017 - 2020 2021 - 2024 2025 and beyond

Two Story, 7200 sq Two Story, 12,000 Clubhouse 2 clubhouses ft sq ft Outdoor Tennis Yes (10) Yes (15) Yes (25) Courts Indoor Tennis Yes (5) Yes (10) Yes (10) Courts Boarding No Yes Yes Facilities

Restaurant No Yes Yes Full Gym COMPANYYes Yes Yes Swimming Pool NoPRIVATEYes Yes Lodges No No Yes

Golf No No Yes

Management Team

Jenny, Taylor and Phil have over 60 years of experience in tennis, including seven years on tour for Jenny and 13 years on tour for Taylor. Phil has 14 years of tour experience plus over 30 years coaching, directing and managing clubs and programs in the Newport Beach area. The three family members will together manage all operations at Dent Tennis Academy. Taylor Dent --- Chief Executive Officer Famous for his crushing serve and volley play, Taylor Dent reached a career-high ranking of 21 in the world and gained recognition as one of America's best tennis talents. In January 2011, Taylor retired from the ATP tour, leaving behind legendary success, which includes four ATP singles titles, three Grand Slam serving records and wins over some

10 of the biggest names in tennis. Taylor won over $2.5 million in professional tennis tournaments and owns the record for the fastest serve in Wimbledon history, at 148 miles per hour. Because of his love for the game and passion for competitive play, Taylor teamed up with his dad and wife to build Dent Tennis Academy. Taylor is responsible for all aspects of Dent Tennis Academy’s programs, including coaching, training, and player development (private and semi-private workouts before and after academy practice). As Club Manager and Director of Tennis, Taylor

• Holds daily meetings with staff to coordinate day-to-day operations • Prepares practice plans and drills • Prepares match strategies • Does advance scouting and video breakdown for upcoming opponents • Provides tournament coaching • Recruits nationally at the high school and junior high levels • Appears and speaks at numerous events on behalf of Dent Tennis Academy • Provides skill work and video breakdown by stroke • Prepares collegeCOMPANY videos and assists in communicating with college coaches for prospective athletes • Consults regularly with tennisPRIVATE pros regarding on and off court conditioning for individual players

Jenny Dent --- Club Manager With seven years on the WTA tour and six International Tennis Federation Women's Singles circuit titles, Jenny knows what it takes to make it as a competitive female tennis player. She achieved a career-high ranking of 52 in the world. In 2005, she partnered with Martina Hingis for an undefeated WIT season and was awarded MVP Doubles Team. Jenny also manages business operations and administration. Her responsibilities include: • Managing Human Resources --- along with Taylor, Jenny is in charge of hiring, firing, performance evaluations, employee record keeping, payroll, and insurance coverage • Supervising all customer service --- making/answering phone calls and emails, resolving customer issues • Marketing --- managing website updates, blogging, social media, apparel, print and direct mail campaigns

11 • Budgeting and expense control --- together with Taylor, evaluating the academy’s financial performance and monitoring expenses • Social event planning --- arranging social events for the students and the parents.

Phil Dent --- Director of Tennis With over 30 years of coaching success, Phil Dent knows this game inside and out. He holds two singles titles in the Open Era and 25 doubles titles, and he reached a career- high ranking of 12 in the world. He is known as the "serve doctor" throughout both the ATP and WTA tours and has coached such tennis greats as: Michael Chang, Justin Gimelstob, Maria Sharapova and Melinda Czink. Phil is a big part of the Dent Tennis Academy brand, not just because of his industry clout, but also because of his knowledge and experience teaching serve mechanics. Phil is a big reason people come to Dent Tennis Academy. Phil also appeals to the league playing ladies, due to his expertCOMPANY knowledge and achievements in the game of doubles. His humorous, laid back style also makes him quite popular with group lessons. Phil also: PRIVATE • Collaborates closely with Jenny on social event planning. • Directs all tournaments. Based on his many years of experience running clubs in Newport Beach, Phil knows what tournament, contest, and competition formats work best. He knows how to run these events so they are the most fun for the players. • Manages Program Development. Phil assists Taylor in creating programs for juniors as well as for adults. Phil has run weekend-long fantasy boot camps at the academy as well (Will Ferrell was a student!). • Coaches. Because of his experience at the highest level playing and coaching, Phil is highly sought after by advanced players and professionals and is often asked to provide his services on the road at the bigger, more important tournaments. • Assists with customer relations. Phil's 30+ years of experience dealing with adults to teenagers, elementary age to 55+, and from members to parents, has made him very good at handling any sort of situation that comes his way.

12 Ken Harrison --- Chief Operating Officer

After meeting and interviewing fellow Keller resident and Golden Triangle Rotarian, Ken Harrison, the Birch Team was pleased to announce the addition of its new Chief Operating Officer to the all-star tennis lineup. Ken has immense experience in managing and growing start-up companies and is ready to make The Birch Racquet andCOMPANY Lawn Club an efficient and successful business. His last venture at Fluidic Techniques, Inc., resulted in the sale of the company to a major international concern in aPRIVATE transaction valued at $12MM. Some of Ken’s professional history: • 2008 to 2014: Chief Operating Officer/Member of the Board of Directors Fluidic Techniques, Inc., Mansfield, TX -lead all vision, strategy, and execution for operations at this $15MM custom designer and producer of flow meters for the Oil & Gas, Power, Petro Chemical, and Pulp & Paper Industries, with authority over all facets of Manufacturing, Human Resources, Finance, Engineering, Quality and Supply Chain; Exercised supervisory authority over a high performing team of 10 managers supervising a staff of 70. • 1989-2007: Senior Partner Thomas Group Inc. -independent consulting group coaching and mentoring CEOs and their C-level staff to process and profit improvement; primarily a ‘rent-an-Exec’; consistently demonstrated the ability to lead teams both nationally and internationally to results and improvements such as… o US Navy Torpedo Enterprise (multi-site) o Cree, major LED manufacturer o UMC, semiconductor foundry, Hsin-Chu, Taiwan o LG, semiconductor manufacturer, Cheong-Ju, Korea

13 o Cypress Semiconductor, major IC and PV manufacturer o IBM, international semiconductor and computer manufacturer • 1988-1989: President/CEO HG Engineering • 1985-1988: GM, Co-founder, Corporate Director Gebex Corporation

Staff Academy staff will include a Membership Director, a “Reservationist,” an assistant, and tennis pros. All staff will be on salary. The Membership Director, Reservationist and assistant will all report to Jenny Dent. The Membership Director will be responsible for attracting and retaining members. The Reservationist will handle tennis court scheduling, social event scheduling, private individual and group lesson scheduling, and more. The assistant will provide administrative and other support to Jenny’s team. Tennis pros will be hired as needed. COMPANY Competition PRIVATE Although Dent Tennis Academy may draw some students from other areas, most students and members will come from within a 10-15 mile radius around the facility. The following list of competing facilities is divided into three groups: within 15 minutes of Keller, between 15 and 30 minutes from Keller, and between 30 and 60 minutes from Keller. I. Within 15 Minutes of Keller

CLUB The Birch Southlake Tennis Center Lifetime Fitness Trophy Club Country Club

Location Keller Southlake Colleyville Trophy Club

Travel Time from Keller 5-10 minutes 5-10 minutes 10-15 minutes 15 minutes

Brand NATIONAL/INTERNATIONAL NO LOCAL LOCAL

Tennis Focus YES YES NO NO

Social Events YES NO NO LIMITED

Full-time Academy YES NO NO NO

Indoor Courts YES NO NO NO

Facility 19 courts, small clubhouse, fitness, nursery, pools, cafe, spa, P I = 7200sqft, PII = 12,000sqft+ pro shop tennis 8 courts, pool, restaurant, gym

cardio, weights, studio, Fitness Center basketball, rock climbing, squash, Phase I NO pilates LIMITED

Pool/s Phase II NO indoor, outdoor, leisure pool Jr. Olympic

Boarding Phase II NO NO NO

14 Southlake Tennis Center is a public tennis club with 19 outdoor courts, a pro shop, and very limited amenities. The club does not have any dues. Interviews with local players suggest the facility is poorly managed and Southlake Tennis Center has trouble keeping staff. Nevertheless, Southlake Tennis Center is the largest tennis facility in Northeast Tarrant County and has won several awards, including the USTA Tennis Facility of the Year in 2011. Southlake Tennis Center is located in Southlake and is just a few minutes away from Dent Tennis Academy. Lifetime Fitness is a private gym in nearby Colleyville. It is part of a large national chain. The private facility in Colleyville has a large gym, swimming pool, café and nursery, as well as eight outdoor tennis courts and several tennis pros. The facility and grounds are nice, but this is a gym with tennis, not a tennis club with a gym. Membership is $77 per month for a single, with a $189 initiation fee. Reviews on Yelp are mostly positive, but the reviews rarely mention anything about tennis, and many people complain about how crowded the facilities are. Trophy Club is a country club. The club offers golf, tennis, swimming, dining and fitness. MembershipCOMPANY fees average about $400 - $500 per month and initiation fees are around $3,500. The club has won several awards, including Best Country Club award by Avid Golfer magazine (in 2011, 2013, 2014, and 2015). However, tennisPRIVATE is more of an afterthought than a focus at Trophy Club. Tennis programs are minimal, and the club is not rated highly within the tennis community.

II. Between 15 and 30 Minutes from Keller

CLUB Hackberry Creek Country Club Las Colinas Country Club The Sports Club at Four Seasons

Location Irving Irving Irving

Travel Time from Keller 15-25 minutes 20-30 minutes 20-30 minutes

Brand LOCAL LOCAL LOCAL

Tennis Focus NO NO NO

Social Events YES YES YES

Full-time Academy NO NO NO

Indoor Courts NO 4 Indoor 4 Indoor

Facility golf, tennis, fitness, restaurant, pool, golf, tennis, pool, restaurant, fitness golf, tennis, pool, restaurant, fitness spa, child care

Fitness Center EXTENSIVE $8M RENOVATION, nutrition, LIMITED cardio, weights acupuncture

Pool/s Jr. Olympic, 2 kid pools Jr. Olympic 4 pools, whirlpool

Boarding NO NO NO

15 Las Colinas Country Club is considered a mid-priced country club by Avid Golfer magazine, which means annual fees are between $10,000 and $20,000. This award winning, amenity rich, full service club has eight outdoor tennis courts, four indoor courts, a great facility, excellent customer service, and USPTA certified tennis pros. The Sports Club (Four Seasons Resort) is considered one of the top country clubs in the United States. A golf club membership in 2013 was $55,000 per year. Tennis memberships are less expensive, but still priced far above anything Dent Tennis Academy would consider. This full service club has eight outdoor tennis courts, four indoor courts, a great facility, excellent customer service, USPTA certified tennis pros, and great amenities. Hackberry Creek Country Club is another ClubCorp country club, with excellent amenities. Hackberry Creek Country Club has a stronger tennis program than many other clubs, but does not have a strong reputation among top tennis circles in the Dallas/ Fort Worth area. Hackberry Creek Country Club is located about 11 miles east-southeast of Southlake, a 20-30 minute drive, depending on traffic. Hackberry Creek has 12 lighted tennis courts and emphasizesCOMPANY ladies and junior tennis. Initiation and membership fees are in the same range as Brookhaven and the Trophy Club, much higher than the fees at Dent TennisPRIVATE Academy.

III. Between 30 and 60 Minutes from Keller

CLUB T Bar M Brookhaven Country Club Lakes Tennis Academy

Location Dallas Dallas Frisco

Travel Time from Keller 30-60 minutes 30-60 minutes 30-60 minutes

Brand LOCAL/REGIONAL LOCAL LOCAL

Tennis Focus YES YES YES

Social Events YES YES YES

Full-time Academy NOT REALLY (practice times offered NOT REALLY (practice times offered during the during the day but no boarding) YES (hybrid of afterschool program) day but no boarding)

Indoor Courts 8 Indoor 8 Indoor, 8 covered NO

Facility tennis, pool, restaurant, indoor golf, tennis, pool, restaurant, fitness 15,000sqft, fitness, tennis, pools, boutique

Fitness Center weights, studio, cardio, bball court cardio, weights, studio cardio, weights, studio

Pool/s Jr. Olympic Jr. Olympic, kiddie pool

Boarding NO NO NO

T Bar M is an older established club with slightly outdated facilities but excellent programming and staff. T Bar M has tennis, a swimming pool, café and extensive fitness facilities (weights, Pilates, yoga, spinning, wellness). T

16 Bar M has a total of 30 tennis courts, (eight indoor courts, eight outdoor clay courts and 14 outdoor hard courts). It is a USTA Regional Training Center for Junior Development and the largest competitor to Dent Tennis Academy in the area. Membership fees range from $110 to $225 per month, and initiation fees are $500 to $1,000 per month. T Bar M is about 30 miles away from Keller. Brookhaven Country Club is another high quality country club, with excellent facilities including swimming pools, tennis, golf, fitness, restaurants, and more. Brookhaven has 40 tennis courts. Tennis Industry magazine named Brookhaven as the best country club tennis program in the United States. Brookhaven’s fees are similar to Trophy Club. Brookhaven Country Club is approximately 30 miles east of Keller. Lakes Tennis Academy is probably the closest competitor to Dent Tennis Academy in terms of focus, amenities, and pricing. Lakes Tennis Academy has 15,000 square feet of indoor facility space, 12 outdoor tennis courts, fitness program, swimming pool, and a boutique clothing store. The tennis programs are excellent and nine tennis pros are on staff (apparently paid on commission, notCOMPANY salary). Membership fees are $110 for a tennis and pool membership, with an initiation fee of $600. However, Lakes Tennis Academy is located in Frisco, approximatelyPRIVATE 34 miles northeast of Keller.

Customer Service Beyond the number of courts, the quality of the management team, the suitability of the location, the strength of the brand and other factors, there is one other area where The Birch Racquet and Lawn Club will outshine all the other competition: customer service. Specific points of differentiation are: Salaried Pros. Most tennis and sports clubs pay coaches and trainers on a commission basis--they build their own client base and split fees with the club. The Birch Racquet and Lawn Club takes a different approach. All tennis pros will be full-time employees on salary. This model has several advantages: • All revenue goes directly to The Birch Racquet and Lawn Club (instead of being split between the pro and the academy). • Pros do not compete for commissions, so they are more loyal to their employer. • By paying above average compensation, Dent Tennis Academy will attract and retain the best tennis pros in the Dallas/Fort Worth area.

17 Performance Based Compensation. Tennis pros will also receive bonuses based on customer satisfaction, not revenue. Dent Tennis Academy will monitor customer satisfaction through regular surveys and interviews. High Standards. All staff will be encouraged to greet members by name at the door, and pros will be expected to have court assignments, balls, towels, and water bottles ready for members when they go out to the courts. Complimentary Services. Many tennis and fitness clubs have a reputation for ‘nickel and diming' members. They charge for water bottles, snacks, and many other relatively inexpensive items. The Birch Racquet and Lawn Club will provide limited quantities of these items at no cost. Special complimentary services will also be offered, such as occasional free car wash days, free ball days, a free stroke analysis for new members, and occasional free adult clinics. Social Events. The Birch Racquet and Lawn Club will offer a lively calendar of social events, including tournaments, mixers, holiday themed parties, exhibitions, camps, and more. While some of these will be free, others will be priced at or slightly above cost. School Pickups. TheCOMPANY Birch Racquet and Lawn Club will further encourage student participation by offering free school pick-ups from the local intermediate and middle schools.PRIVATE Maintenance. The tennis courts, clubhouse and all other facilities will be well maintained and kept scrupulously clean. All staff will be encouraged to report any maintenance or cleanliness issues. Jenny, Taylor, and Phil each personally take great pride in the quality of Dent Tennis Academy.

Marketing and Sales

Over the past few years Dent Tennis Academy has grown primarily by word of mouth. While this should still hold true for the new location, management has wisely decided to drive memberships and other sales through a more formal marketing and sales approach. Marketing will include direct mail campaigns, email newsletters, social media (Facebook, Twitter, etc.), print advertising, and PR. The pre-launch marketing budget of $50,000 includes all of these plus signage, website updates, video development, and professional photography. The first year marketing budget has been set at $60,000. This compares with actual 2014 marketing expenditures of just $8,063.09.

18 In addition, a team--consisting of Jenny, the Membership Director, and the Reservationist--will drive sales. They will make outbound phone calls, respond to inbound calls, give presentations at local schools and other organizations, and network regularly with members, students, and their families. The pre-launch (start-up) and first year marketing budgets are summarized here:

Channel Start-up Year 1

Website Design $2,000 ---

Photography $1,500 ---

Videos $5,000 ---

Street SignageCOMPANY$15,000 --- Direct Mail PRIVATE$1,440 $18,500 Internet Marketing (social media, email, 1,500 $12,000 etc.)

Print Advertising --- $15,000

PR --- $12,000

Other (collateral $2,500 $2,500 materials, etc.)

Tot al $17,340 $60,000

19 The breakdown of the first year marketing budget is illustrated in the following chart.

Breakdown of First Year Marketing Budget Miscellaneous 4%

PR 20% Direct Mail 31%

COMPANY Print Advertising 25% Internet Marketing PRIVATE20%

20 Business Model

The Birch Racquet and Lawn Club has multiple revenue streams, including one- time membership initiation fees, ongoing membership fees, part-time after- school students, full-time students, individual and group private lessons, and pro-shop sales. Note that the academy does not rent courts by the hour or allow people who are not members or students to use the facilities.

Membership Fees Most tennis clubs have membership fees. Membership conveys a certain level of status, and provides benefits such as full use of the clubhouse, tennis courts, and other amenities. Membership also tends to reduce the risk of theft or vandalism, since members go through a modest vetting process and become part of the tennis club community. Membership fees vary widely from club to club, from a low of $10 or $20 per month at very low end clubs, to $300 to $500 (or even higher) at the most exclusive clubs. The Birch Racquet and Lawn Club membership feesCOMPANY will average $225 per month in the first year. Initiation or Application Fees PRIVATE Most tennis clubs also charge initiation fees for new members. The initiation fee typically covers some administrative expenses, weeds out people who are not serious about tennis, and also helps clubs with retention, since members feel like they have “invested” in the club. Initiation fees vary even more widely than membership fees, from zero at lower end clubs to $800 or higher at exclusive clubs. The Birch Racquet and Lawn Club will seek to attract new members initially by waiving the initiation fee for the first 200 members, and just $225 initiation fee for memberships generated in year 1. After that, initiation fees will start at $250 and increase over time. Total membership is estimated at 880 by the end of the first year, and increasing to over 1,000 members by the end of the third year through the addition of new tennis playing individuals and families from the local area.

After School Programs The after school program is designed for students at nearby schools. The after school program will run from about 4:30PM to 7PM on weekdays, and will include students at different age and skill levels. The cost of the program averages $45 per day per student. Total enrollment in the after school program is estimated at 60 students by the end of the first year.

21 Full-time Student Program The full-time student program is designed for the most talented and serious local students. This is an intense program, with activities and instruction six days a week. The full-time student program fee averages $70 per day (across all ages and levels). Total enrollment is expected to start at 20 students (as the Dent Tennis Academy is already operating in Keller and has 16 students on just 4 courts being rented), reach 32 by the end of the first year, and holding strong at 35 students by the end of the third year, again monitoring the maximum number of students allowed to keep the quality of the program high.

Private Lessons All members will be able to take private lessons from The Birch Racquet and Lawn Club’s tennis professionals. Compensation and hourly rates will vary somewhat from person to person, with the highest rated pros receiving the higher pay levels. Average compensation is estimated at $60,000 per year, plus benefits. Average lessonCOMPANY rates (charged to the members) are expected to start at $60 per hour in the first year, increasing to $70 by the third year. As membership grows and the academyPRIVATE gains recognition, the number of tennis pros (not including Jenny, Taylor, and Phil) will increase. The average number of hours of lessons per day per teaching pro is expected to grow to four by Year 3.

Pro Shop The Birch Racquet and Lawn Club will also have a small pro shop, featuring Club brand apparel and merchandise, Wilson tennis supplies, equipment, and emergency type items (strings, grips, shoes). Total sales are expected to be very modest, typically in the range of 1.5% to 2.5% of total revenue. This is typical at most tennis clubs.

Financial Projections Revenue is projected at $3,365,625 in the first year, over half of which will come from membership fees. These membership fees will be driven mostly by ladies who already play at neighboring clubs/tennis centers, but who are either looking to relocate for better service, join new teams and leagues, or play closer to home. We have learned that in addition to the USTA leagues, there

22 are thousands of women in the DFW metroplex who participate in TCD, Tennis Competitors of Dallas (a ladies doubles ONLY league), NETT (Northeast Tarrant Tennis), and KATCH (Keller Alliance Tennis Charter). Over 50 private clubs and parks sponsor ladies’ teams, each team consisting of 8-14 players, depending on the league. For example, Royal Oaks Country Club in Dallas, has 16 TCD teams, PLUS a waitlist. That is equivalent to more than 224 memberships. These teams practice together and pay upwards of $120-$150 each month for training at least one day each week and their matches on one day each week. Many of these ladies join multiple leagues in the same season. To further entice these ladies, our membership will include entry into club sponsored TCD, NETT, KATCH and USTA teams, and for “Founding Members”, a special monthly credit that can be applied toward a complimentary team training session one day each week. Attracting just these women could account for potentially much more than our first 200 memberships alone. Based on the hard membership numbers of NETT (1,209 current members) and KATCH (60+ current members) - the two nearest CTA’s (Community Tennis Association), we feel that obtaining even just half of these women will provide the roughly 580 members needed to drive revenue for year 1. We know that these ladies currently play their leagues at local public facilities and high schools out of lack of better venues.COMPANY Many of them have said they would much prefer to play at a serviced club. Additional memberships for Year 1 will be driven by local families and after school studentsPRIVATE looking to get more involved in the game and use the gym facilities, as well as mandatory memberships for all full-time students. We recently moved the Dent Tennis Academy to Keller, Texas, as of October 1, 2016, to begin accepting new students to our temporary location at the old Shelingham Tennis and Swim Club just 5 minutes away from our proposed site. We believe that this strategic move will afford us a head start in recruiting and marketing to new students (full-time, after school, and adults) our future programs at the Birch Racquet and Lawn Club and translate into even more memberships at the beginning of Year 1. Additional revenue will also be generated from private lessons. Both Taylor and Phil Dent, as part of the Dent Tennis Academy, have consistently taught 3-4hours of private lessons priced at $150/hr and scheduled around academy times (before 12:30p and after 4:30p), every weekday in California. Research shows that most high level teaching pros (but not similarly credentialed to Taylor and Phil) around DFW charge roughly $100/hr. We anticipate that even at higher prices, both Taylor and Phil will be in high demand for lessons by junior full-time students as well as ladies groups. Both coaches will be teaching at least 2hrs each per day by the middle of the first year. Expenses are projected at $2,015,816 for Year 1 and cash on hand at the end of the first year is projected at $1,444,730. Please note that I’ve been given a 3-6 month build-out estimate by the project manager for the tennis

23 courts and new indoor building so I have accounted for 6 months interest only loan payments prior to opening on day 1, and 6 more months of interest only payments after that. Second year revenue is projected to be $4,323,225, leading to a pre-tax profit margin of 51%. We plan to increase the initiation fee in the second and third year, based on a much fuller membership. With additional coaches being hired, we will be able to expand the after school program as well as provide additional specialty programs catered to younger students, “10andUnder’s”. This accounts for the continued program development of after school students. The Full-Time program is also expected to grow, as the Dent Tennis Academy makes its mark on Texas tennis. Regardless, these students will be contributing to the increasing number of private lessons as well. In the third year revenue is expected to grow to $4,552,950, with a pre-tax profit margin of 53%. These results are shown in the following chart, where Blue is Year 1, Red is Year 2, and Green is Year 3. COMPANY Annual Revenues, Expenses and Profits $5,000,000 PRIVATE

$3,750,000

$2,500,000

$1,250,000

$- Revenue Expenses "Profit"

24 Start-up Expenses

Phase I start-up expenses are estimated at $6.35 million. This includes all expenses expected to be paid between now and opening day:

Category Budget Engineering, Design and Construction $4,341,777 Equipment and Furniture $72,606 Marketing, Miscellaneous $45,205 Land Purchase $899,124 7a Loan Project Costs $1,009,133 Tot al $6,350,505

Operating ExpensesCOMPANY The single largest operating expense is staffing. The first year staff positions and salaries are given in the followingPRIVATE table:

Management and Staff FTEs Salary Per Person Chief Executive Officer (Taylor) 1 $100,000 Chief Operating Officer (Ken) 1 $ 80,000 Director of Tennis (Phil) 1 $ 96,000 Club Manager (Jenny) 1 $ 75,000 Membership Director (Josh) 1 $ 70,000 Reservationist 1 $ 40,000 Assistant 1 $ 31,220 Tennis Pros 6 $ 65,000

25 The next largest expense is loan payments (principal and interest) based on a 25-year term at WSJ Prime + 2.75% adjusted quarterly. The total initial loan principal is estimated at $4,369,100, and monthly principal and interest payments are $30,880. Other expenses include property taxes, janitorial/cleaning, security, marketing, utilities (lighting, heating, air conditioning, etc.), travel and entertainment, insurance, etc. Property taxes are fixed at 2.5% of the total appraised value of the land and buildings. Utility costs are expected to be fairly low due to the use of natural lighting and ventilation in the clubhouse, and use of LED lighting within the clubhouse and on the tennis courts.

Financing See Attached Pro FormaCOMPANY PRIVATE

26 APPENDICES

COMPANY PRIVATE

27 NOTES Revenue calculations are based on net new members, so they generally underestimate revenue. For example, if 30 members leave and 40 members join, the net change in membership is 10. The 40 new members would each pay $250 in initiation fees, or $10,000. However, our method yields just $2,500 in new revenue from initiation fees.

Profits are estimated using cash flow only. Actual profits will depend on detailed accounting (such as including depreciation and other factors). Cash projections are pre-tax --- they do not include income taxes.

Note that unlike most other academies and tennis centers, the tennis pros are not a direct profit center, even in Year 3. At Dent Tennis Academy, the pros are not an afterthought --- they are integral to the academy. COMPANY PRIVATE

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