LABC Application Kit – 1. Let’s Review Introduction Letter: Dear Interested Candidate: Thank you for your interest in one of Avon’s newest and most exciting career opportunities, Licensed Avon Beauty Centers (LABCs). Enclosed please find our Licensing Opportunity Kit, containing all of the information you need to assist you during your decision-making process. To make this process as easy as possible, we have divided the Licensing Opportunity Kit into the following four distinct sections: 1. Let’s Review 2. Let’s Qualify 3. Let’s Apply 4. Once Approved Let’s Review contains valuable information that will help you to determine if opening a Beauty Center is right for you, and it includes the following documents: • Q & A’s • Best Practices • Specialty Lease Agreement • Support Provided by Avon • Licensee Testimonials Revised April 2006 Licensed Avon Beauty Centers LABC Application Kit – 1. Let’s Review Q & A: Let’s Talk: Avon Earning Opportunity Questions and Answers Question Answer 1. Why are we offering Our vision in the U.S. has always been to test our retail Beauty Center Representatives a chance to concept, gain critical learning, and extend this earning opportunity to qualified license beauty centers? Representatives. Today, Avon U.S. is in a better position to implement licensing as an incremental earning opportunity for our Representatives. 2. Other Avon markets have In the U.S., franchising is a very complex distribution strategy because of franchises for Representatives. Federal and State laws. Due to this complexity, Avon has chosen licensing. Why not in the U.S.? *Licensing is available in all states, with the exception of Washington state 3. Will there be preferential treatment Representatives operating Licensed Beauty Centers may not display products for licensed Beauty Center licensed to Avon for Direct Sell Organization (DSO) - (i.e. Mattel, Disney, etc.) Representatives? Will they receive product before other Representatives who license Beauty Centers will receive their shipments with Representatives? their normal orders. They can request separate shipments and pay for that request just as any other Representative. They will have a unique credit extension for their opening order. Half must be paid within 60 days, with the balance in the next 60 days. Units ordered for the Beauty Center will be recorded on a separate account. Licensed Representatives will be guaranteed 50% earnings. Licensees may receive special offers, exclusive to Licensees. 4. What strategies are in place to Avon.com will continue to provide offers to Customers that may be different ensure that Licensed Beauty but of equal value from those in the brochure. Centers and Avon.com shopping do not provide offers that We will provide Licensees of Licensed Beauty Centers special offers in order Representatives cannot match? to allow higher profit margin at retail due to investment made by Licensees. 5. What retail locations will qualify? Representatives may submit retail location of choice to Avon Division Sales Will there be opportunities for Managers. Avon will consider all requests and must approve of retail Division Sales Managers to selection prior to opening of Licensed Beauty Center. expand Licensed Beauty Centers in other areas? Revised April 2006 Licensed Avon Beauty Centers LABC Application Kit – 1. Let’s Review Q & A cont’d.: Question Answer 6. Who is eligible for Licensed Beauty Representatives in good standing with Avon and who have been Centers? recommended to license a Beauty Center by their Division and District Managers and approved by their Regional Vice Presidents. They also must receive “credit card acceptance” through Paymentech, a Merchants’ Services Company. Due to the start-up costs, a credit review and an application form is required. It is also strongly suggested that Licensee complete Phase I and II of Beauty Advisor Program. This training will assist in enhancing product knowledge and selling skills to assist in promoting success in a competitive retail environment. 7. How does a Licensed Beauty There are four ways a Representative can earn from a Licensed Beauty Center enhance the earnings Center: 1) Retail sales from new Customers; 2) Brochure sales to Licensed opportunity of a Representative? Beauty Center Customers; 3) Recruiting; 4) Halo effect of retail visibility and consumer awareness on overall direct selling business. 8. Who selects the Licensed Beauty Avon will determine which retail locations are suitable for our Licensed Beauty Center locations and negotiates Center opportunity. Following approval of the retail location requested, the the leases with the retail Representative should negotiate lease rate with local leasing agent. Avon is developer? available to assist with inquiries regarding the process; however, it is suggested that Representative consult an attorney for legal advice, if necessary 9. Which products will be offered at It is suggested to display the top selling beauty products in each category, Licensed Beauty Centers? such as skincare, color, fragrance, bath, and personal care, as well as beauty-related Customer Order Builders (COBO’s). 10. Will Licensed Beauty Centers offer No. Licensed trademarks, corporate symbols or the solicitation of competitive non-Avon products? products will not be allowed at Licensed Beauty Centers. 11. How does the Licensed Beauty Based on a minimum three month lease, the opening order will have special Center Representative pay for her credit arrangements in which half of the order amount is due in 60 days and orders? the remaining balance must be paid within the next 60 days. Subsequent orders will be paid within 2 campaigns (approx. 30 days) on the regular Campaign cycle. 12. Will a Leadership licensee’s up-line Leadership licensee’s Beauty Center account will be entered into the system get credit for the Beauty Center’s at the same generation in which their up-line account was established. Their sales? up-line will get first generation earnings off the Beauty Center’s sales. Future plans will be determined once we assess the impact on our value chain. Revised April 2006 Licensed Avon Beauty Centers LABC Application Kit – 1. Let’s Review Q & A cont’d.: Question Answer 13. How will Avon distinguish between Licensed Beauty Center Representatives will have two accounts. The sales from the Licensed Beauty “Representative Account” is the initial account established when the Center and the Representative Representative was appointed. The LABC Account is used to processing Account sales? LABC orders – the opening order will be established with a 120-day Payment Plan and the replenishment orders on the LABC Account will be established with a 30-day [2 campaigns] payment plan. Sales from both accounts count in the Representative’s home district, unless outside of the division where region approval applies. 14. Will Licensed Beauty Center No. Licensed Beauty Center Representatives will process and receive their Representative receive products orders like all traditional Representatives. before other Representatives? 15. What is the discount to Licensed Licensed Beauty Center Representatives are guaranteed 50% discount on Beauty Center Representatives? orders billed to the LABC Account. The exception to the 50% discount would be on all merchandise with a fixed commission rate. 16. What is the start-up cost for a Start-up costs, including the first month’s rent, legal certificates, insurance, Representative to invest in a cash register, credit card processing equipment, telephone and Licensed Beauty Center? miscellaneous supplies range from $3,000 to $10,000 depending on the lease rent. In addition, the suggested opening order for kiosks is $15,000 customer price and up to $30,000 customer price for inline stores. The special credit arrangement for of 60/120 days minimizes the up-front start-up costs, for leases three months or more. 17. Will Avon provide start-up Avon will provide on-counter signage, visual merchandising unit, testers, support? samples, sales aids, training manuals and video, and other start-up supplies. Avon will also provide a Customer Care Contact at each branch location. 18. What is a Representative’s ongoing Monthly expenses, excluding rent, will be approximately $3,300, which can expense at the Licensed Beauty include the following: telephone, testers, brochures, credit card fees, Center? samples, shopping bags and incentives. The two largest expenses each month will be the lease payments and staffing costs. Rent rates vary depending upon retail location and adjust upward during October through December. Advertising may be an additional cost. 19. What is the “License” Agreement? The License Agreement outlines the terms and conditions in which Avon authorizes a Representative to run a Beauty Center in the common area of a retail environment. This agreement is between Avon and Licensee. Avon and the Licensee sign this agreement. There are no fees for licensing. This is subject to change. Revised April 2006 Licensed Avon Beauty Centers LABC Application Kit – 1. Let’s Review Q & A cont’d.: Question Answer 20. What is “Lease” Agreement? The Lease Agreement outlines the terms and conditions in which the retail developer authorizes the licensee to operate in their common area. The developer and the Licensee sign the agreement. 21. Will Avon open two Licensed Avon will establish only one Avon-operated or Licensed Beauty Center, per Beauty Centers in the same retail retail location. location? 22. Who is responsible for setting up The LABC Operator is responsible for setting up the space. Avon supports the Licensed Beauty Center? the set-up of the Licensed Beauty Center locations with the assistance of a “how to” video, training manual, and operations manual, and/or field assistance, where possible. 23. Can Licensed Beauty Center Licensed Beauty Centers cannot transfer interest to someone else without Representatives sub-lease to Avon’s prior, written approval. If the Licensed Beauty Center Representative someone else? cannot fulfill the terms and conditions of the lease, Avon is not obligated to assume the lease.