EUROPEAN WAX CENTER, INC. Management’s discussion and analysis of the financial position and results of operations (Form 10-Q)

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You should read the following discussion of our historical performance,
financial condition and future prospects in conjunction with the management's
discussion and analysis of financial conditions and results of operations and
the audited consolidated financial statements included in our prospectus dated
August 4, 2021, filed with the Securities and Exchange Commission (the "SEC") on
August 6, 2021 pursuant to Rule 424(b)(4) of the Securities Act of 1933, as
amended (referred to herein as the "Prospectus"). The following discussion and
analysis should also be read in conjunction with our unaudited condensed
consolidated financial statements and the notes thereto included elsewhere in
this quarterly report on Form 10-Q. The information provided below supplements,
but does not form part of, our predecessor's financial statements. This
discussion contains forward-looking statements that are based on the views and
beliefs of our management, as well as assumptions and estimates made by our
management. Actual results could differ materially from such forward-looking
statements as a result of various risk factors, including those that may not be
in the control of management. For further information on items that could impact
our future operating performance or financial condition, see the sections titled
"Risk Factors" and "Forward-Looking Statements" included in the Prospectus.

We conduct substantially all of our activities through our subsidiary, EWC
Ventures, LLC and its subsidiaries. We operate on a fiscal calendar widely used
by the retail industry that results in a given fiscal year consisting of a 52-
or 53-week period ending on the Saturday closest to December 31. Our fiscal
quarters are composed of 13 weeks each, except for 53-week fiscal years for
which the fourth quarter will be composed of 14 weeks.

Overview

We are the largest and fastest-growing franchisor and operator of out-of-home
("OOH") waxing services in the United States by number of centers and
system-wide sales. We delivered over 21 million waxing services in 2019 and over
13 million waxing services in 2020 generating $687 million and $469 million of
system-wide sales, respectively, across our highly-franchised network. We have a
leading portfolio of centers operating in 833 locations across 44 states as of
September 25, 2021. Of these locations, 828 are franchised centers operated by
franchisees and five are corporate-owned centers.

The European Wax Center brand is trusted, efficacious and accessible. Our
culture is obsessed with our guest experience and we deliver a superior guest
experience relative to smaller chains and independent salons. We offer guests
high-quality, hygienic waxing services administered by our licensed, EWC-trained
estheticians (our "wax specialists"), at our accessible and welcoming locations
(our "centers"). Our technology-enabled guest interface simplifies and
streamlines the guest experience with automated appointment scheduling and
remote check-in capabilities, ensuring guest visits are convenient, hassle-free,
and consistent across our network of centers. Our well-known, pre-paid Wax Pass
program makes payment easy and convenient, fostering loyalty and return visits.
Guests view us as a non-discretionary part of their personal-care and beauty
regimens, providing us with a highly predictable and growing recurring revenue
model.

Our asset-light franchise platform delivers capital-efficient growth,
significant cash flow generation and resilience through economic cycles. Our
centers are 99% owned and operated by our franchisees who benefit from superior
unit-level economics, with mature centers generating annual cash-on-cash returns
in excess of 60%. The highly consistent and recurring demand for our services
and the competitive advantages provided by our scale have resulted in ten
consecutive years of same-store sales and system-wide sales growth through 2019.

In partnership with our franchisees, we fiercely protect our points of differentiation which attract new customers, build meaningful relationships and promote lasting retention. Our Net Promoter Score (“NPS”) demonstrates our customers’ dedication to our brand. We are so confident in our ability to delight that we have always offered all of our guests their first free wax.

Hair removal solutions are consistently in demand, given the recurring nature of
hair growth. The OOH waxing market is the fastest-growing hair removal solution
in the United States, defined by a total addressable market of $18 billion with
annualized growth that is approximately twice as high as other hair removal
alternatives. European Wax Center has become the category-defining brand within
this rapidly growing market and became so by professionalizing a highly
fragmented sector where service consistency, hygiene, and customer trust were
not historically offered. We are approximately six times larger than the next
largest waxing-focused competitor by center count and approximately ten times
larger by system-wide sales. Our unmatched scale enables us to drive broader
brand awareness, ensures our licensed wax specialists are universally trained at
the highest standards and drive consistent financial performance across each
center.

Under the stewardship of our CEO, David Berg, and the other management team
members, we have prioritized building a culture of performance, success, and
inclusivity. Additionally, we have intensified our focus on enhancing the guest
experience and have invested significantly in our corporate infrastructure and
marketing capabilities to continue our track record of sustainable growth. The
foundation for our next chapter of growth is firmly in place.

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Growth strategy and outlook

We plan to grow our business primarily by opening new franchised centers and
then additionally increasing our same-store sales and leveraging our corporate
infrastructure to expand our profit margins and generate robust free cash flow.

We believe our franchisees' track record of successfully opening new centers and
consistently generating attractive unit-level economics validates our strategy
to expand our footprint and grow our capacity to serve more guests. We aspire to
grow between 7% to 10% of our center count each year. Our center count grew 6%
and 5% during fiscal year 2020 and fiscal year 2019, respectively, and has grown
each year since 2010. Our thoughtful approach to growth ensures each center is
appropriately staffed with the high-quality team and licensed, highly-trained
wax specialists that our brand has been known for since our initial opening.
None of our existing markets are fully penetrated, and we believe we have a
significant whitespace opportunity of approximately 3,000 locations for our
standard center format across the United States. Our centers have a long track
record of sustained growth delivering ten consecutive years of positive
same-store sales growth through 2019 with resilient performance through economic
cycles. We intend to continue increasing our same-store sales growth by, among
other things:

• increase brand awareness to accelerate customer acquisition;

• increase our Wax pass adoption rate;

• increase our share of our clients’ personal care expenses;

• increase our transaction peg rate, which we define as the percentage of transactions including the purchase of a retail product out of the total number of transactions; and

• Drive customer engagement through data analysis.

Our straightforward, asset-light franchise platform and our proven track record
of increasing profitability will continue to drive EBITDA margin accretion and
free cash flow generation as we expand our national footprint. We have invested
in building our scalable support infrastructure, and we currently have the
capabilities and systems in place to drive revenue growth and profitability
across our existing and planned franchise centers.

Key business indicators

We track the following key business metrics to evaluate our performance,
identify trends, formulate financial projections, and make strategic decisions.
Accordingly, we believe that these key business metrics provide useful
information to investors and others in understanding and evaluating our results
of operations in the same manner as our management team. These key business
metrics are presented for supplemental information purposes only, should not be
considered a substitute for financial information presented in accordance with
GAAP, and may be different from similarly titled metrics or measures presented
by other companies.

Number of Centers. Number of centers reflects the number of franchised and
corporate-owned centers open at the end of the reporting period. We review the
number of new center openings, the number of closed centers and the number of
relocations of centers to assess net new center growth, and drivers of trends in
system-wide sales, royalty and franchise fee revenue and corporate-owned center
sales.

System-Wide Sales. System-wide sales represent sales from same day services,
retail sales and cash collected from wax passes for all centers in our network,
including both franchisee-owned and corporate-owned centers. While we do not
record franchised center sales as revenue, our royalty revenue is calculated
based on a percentage of franchised center sales, which are 6.0% of sales, net
of retail product sales, as defined in the franchise agreement. This measure
allows us to better assess changes in our royalty revenue, our overall center
performance, the health of our brand and the strength of our market position
relative to competitors. Our system-wide sales growth is driven by net new
center openings as well as increases in same-store sales.

Same-Store Sales. Same-store sales reflect the change in year-over-year sales
from services performed and retail sales for the same-store base. We define the
same-store base to include those centers open for at least 52 full weeks. This
measure highlights the performance of existing centers, while excluding the
impact of new center openings and closures. We review same-store sales for
corporate-owned centers as well as franchisee-owned centers. Same-store sales
growth is driven by increases in the number of transactions and average
transaction size.

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New Center Openings. The number of new center openings reflects centers opened
during a particular reporting period for both franchisee-owned and
corporate-owned centers, less centers closed during the same period. Opening new
centers is an integral part of our growth strategy, and we expect the majority
of our future new centers to be franchisee-owned. Before we obtain the
certificate of occupancy or report any revenue from new corporate-owned centers,
we incur pre-opening costs, such as rent expense, labor expense and other
operating expenses. Some of our centers open with an initial start-up period of
higher-than-normal marketing and operating expenses, particularly as a
percentage of monthly revenue.

Average Unit Volume ("AUV"). AUV consists of the average annual system-wide
sales of all centers that have been open for a trailing 52-week period or
longer. This measure is calculated by dividing system-wide sales during the
applicable period for all centers being measured by the number of centers being
measured. AUV allows management to assess our franchisee-owned and
corporate-owned center economics. Our AUV growth is primarily driven by
increases in services and retail product sales as centers fill their books of
reservations, which we refer to as maturation of centers.

Wax Pass Utilization. We define Wax Pass utilization as the adoption of our Wax
Pass program by guests, measured as a percentage of total transactions conducted
using a Wax Pass. Wax Pass utilization allows management to better assess the
recurring nature of our business model because it is an indication of the
magnitude of transactions by guests who have made a longer-term commitment to
our brand by purchasing a Wax Pass.



                               Thirteen          Thirteen
                                Weeks             Weeks           Thirty-Nine         Thirty-Nine
(in thousands, except           Ended             Ended           Weeks Ended         Weeks Ended
operating data and            September         September        September 25,       September 26,
percentages)                   25, 2021          26, 2020             2021                2020
Number of system-wide
centers (at period
  end)                                833               786                 833                 786
System-wide sales            $    219,117      $    136,927      $      594,579      $      335,183
Same-store sales(1)                  10.6 %           (32.1 )%              4.7 %             (39.9 )%
New center openings                    18                12                  37                  36




(1) Same-store sales increase for the 13 and 39 weeks ended September 25, 2021
is calculated in comparison to the 13 and 39 weeks ended September 28, 2019 due
to the significant decline in our sales in 2020 due to COVID-19. We believe this
presents a more meaningful comparison of same-store sales. As described below,
we typically remove stores from our calculation of same-store sales if they are
closed for more than six consecutive days. However, given the widespread and
unprecedented impact of COVID-19 same-store sales for the 13 and 39 weeks ended
September 26, 2020 were calculated without removing stores that were closed for
longer than six days due to COVID-19.

The table below presents changes in the number of system-wide centers for the
periods indicated:



                                                   For the Thirteen                         For the Thirty-Nine
                                                      Weeks Ended                               Weeks Ended
                                          September 25,         September 26,       September 25,         September 26,
                                              2021                  2020                2021                  2020
System-wide Centers
Beginning of Period                                  815                   774                 796                   750
Openings                                              18                    13                  39                    39
Closures                                               -                    (1 )                (2 )                  (3 )
End of Period                                        833                   786                 833                   786




Recent Developments

As further described in the notes to the condensed consolidated financial statements included in this quarterly report on Form 10-Q, in August 2021 we have carried out a series of transactions including:

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Reorganization Transactions, which among other things, resulted in the Company
being appointed as the sole managing member of the EWC Ventures and the Company
entering into the tax receivable agreement ("TRA").
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The initial public offering of the Company's class A common stock; and
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The entry into a new credit agreement consisting of a $180.0 million term loan
("2026 Term Loan") and a $40.0 million revolving credit facility ("2026
Revolving Credit Facility") (together, the "2026 Credit Agreement") which
replaced our previous senior secured credit agreement.

For more information on these transactions, see the notes to the condensed consolidated financial statements included in this quarterly report on Form 10-Q.

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Impact of COVID-19

The Company is continuing to monitor the ongoing COVID-19 pandemic and its
impact on its business. Beginning in March 2020, in response to the COVID-19
pandemic, most franchisees temporarily closed their centers in order to promote
the health and safety of its members, team members and their communities. In
April 2020, the entire franchise network was temporarily closed. Beginning in
May 2020, certain governors announced steps to restart non-essential business
operations in their respective states and certain centers began to re-open. By
June 2021, all of the Company's nationwide network of centers had re-opened.

There is a significant amount of uncertainty about the duration and severity of
the consequences caused by the COVID-19 pandemic. While governmental and
non-governmental organizations are engaging in efforts to combat the spread and
severity of the COVID-19 pandemic and related public health issues, the full
extent to which outbreaks of COVID-19 could impact our business, results of
operations and financial condition is still unknown and will depend on future
developments, including new variants of the virus and spikes in cases in the
areas where we operate, which are highly uncertain and cannot be predicted.
However, such effects may be material. Our financial statements reflect
judgments and estimates that could change in the future as a result of the
COVID-19 pandemic.

Important factors affecting our financial results

We believe there are several important factors that have impacted, and that we
expect will continue to impact, our business and results of operations. These
factors include:

New Center Openings. We expect that new centers will be a key driver of growth
in our future revenue and operating profit results. Opening new centers is an
important part of our growth strategy, and we expect the majority of our future
new centers will be franchisee-owned. Our results of operations have been and
will continue to be materially affected by the timing and number of new center
openings each period. As centers mature, center revenue and profitability
increase significantly. The performance of new centers may vary depending on
various factors such as the effective management and cooperation of our
franchisee partners, whether the franchise is part of a multi-unit development
agreement, the center opening date, the time of year of a particular opening,
the number of licensed wax specialists recruited, and the location of the new
center, including whether it is located in a new or existing market. Our planned
center expansion will place increased demands on our operational, managerial,
administrative, financial, and other resources. Managing our growth effectively
will require us to continually attract strong and well capitalized franchisee
partners into our development pipeline and to enhance our center management
system controls and information systems.

Comparable store sales growth. Growth in same-store sales is a key driver of our business. A variety of factors affect same store sales, including:

• consumer preferences and overall economic trends;

• the recurring and non-discretionary nature of healthcare services and purchases;

• our ability to identify and respond effectively to customer preferences and trends;

• our ability to provide a variety of service offerings that generate new and repeat visits to our centers;

• the customer experience we offer in our centers;

• the availability of experienced wax specialists;

• our ability to source and deliver products accurately and on time;

• changes in the price of services or products, including promotional activities;

• the number of services or items purchased per visit to the center;

• Center closures in response to national or local regulations due to the COVID-19 pandemic or other health issues; and

• the number of centers that have been in operation for more than 52 full weeks.

A new center is included in the same-store sales calculation beginning 52 full
weeks after the center's opening. If a center is closed for greater than six
consecutive days, the center is deemed a closed center and is excluded from the
calculation of same-store sales until it has been reopened for a continuous 52
full weeks.

Overall Economic Trends. Macroeconomic factors that may affect guest spending
patterns, and thereby our results of operations, include employment rates,
business conditions, changes in the housing market, the availability of credit,
interest rates, tax rates and fuel and energy costs. However, we believe that
our guests see our services as non-discretionary in nature, given the rebound in
performance in the second half of fiscal year 2020 despite the COVID-19
pandemic. Therefore, we believe that overall economic trends and related

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changes in consumer behavior have less of an impact on our business than they
may have for other industries subject to fluctuations in discretionary consumer
spending.

Guest Preferences and Demands. Our ability to maintain our appeal to existing
guests and attract new guests depends on our ability to develop and offer a
compelling assortment of services responsive to guest preferences and trends. We
estimate that more than two-thirds of OOH waxing consumers start waxing by age
29 or earlier. We also believe that OOH waxing is a recurring need that brings
guests back for services on a highly recurring basis which is reflected in the
predictability of our financial performance over time. Our guests' routine
personal-care need for OOH waxing is further demonstrated by the top 20% of
guests who visit us, on average, nearly every four weeks.

Our Ability to Source and Distribute Products Effectively. Our revenue and
operating income are affected by our ability to purchase our products and
supplies in sufficient quantities at competitive prices. While we believe our
vendors have adequate capacity to meet our current and anticipated demand, our
level of revenue could be adversely affected in the event we face constraints in
our supply chain, including the inability of our vendors to produce sufficient
quantities of some products or supplies in a manner that matches market demand
from our guests, leading to lost revenue. We depend on two key suppliers to
source our proprietary wax and one key supplier to source our branded retail
products and we are thus exposed to concentration of supplier risk.

Our Ability to Recruit and Retain Qualified Licensed Wax Specialists for our
Centers. Our ability to operate our centers is largely dependent upon our
ability to attract and retain qualified, licensed wax specialists. Our unmatched
scale enables us to ensure that we universally train our wax specialists at the
highest standards, ensuring that our guests experience consistent level of
quality, regardless of the specific center they visit. The combination of
consistent service delivery, across our trained base of wax specialists, along
with the payment ease and convenience of our well-known, pre-paid Wax Pass
program fosters loyalty and return visits across our guest base. Over time, our
ability to build and maintain a strong pipeline of licensed wax specialists is
important to preserving our current brand position.

Seasonality. Our results are subject to seasonality fluctuations in that
services are typically in higher demand in periods leading up to holidays and
the summer season. The resulting demand trend yields higher system-wide sales in
the second and fourth quarter of our fiscal year. In addition, our quarterly
results may fluctuate significantly, because of several factors, including the
timing of center openings, price increases and promotions, and general economic
conditions.

Components of the results of operations

Returned

Product Sales: Product sales consist of revenue earned from sales of proprietary
wax, other products consumed in administering our wax services and retail
merchandise to franchisees, as well as retail merchandise sold in
corporate-owned centers. Revenue on product sales is recognized upon transfer of
control. Our product sales revenue comprised 56.3% and 56.1% of our total
revenue for the 13 weeks ended September 25, 2021 and September 26, 2020,
respectively, and 56.0% and 57.0% of our total revenue for the 39 weeks ended
September 25, 2021 and September 26, 2020, respectively.

Royalty Fees: Royalty fees are earned based on a percentage of the franchisees'
gross sales, net of retail product sales, as defined in the applicable franchise
agreement, and recognized in the period the franchisees' sales occur. The
royalty fee is 6.0% of the franchisees' gross sales for such period and is paid
weekly. Our royalty fees revenue comprised 24.4% and 23.5% of our total revenue
for the 13 weeks ended September 25, 2021 and September 26, 2020, respectively,
and 24.6% and 24.5% of our total revenue for the 39 weeks ended September 25,
2021 and September 26, 2020, respectively.

Marketing Fees: Marketing fees are earned based on 3.0% of the franchisees'
gross sales, net of retail product sales, as defined in the applicable franchise
agreement, and recognized in the period the franchisees' sales occur.
Additionally, the Company charges a fixed monthly fee to franchisees for search
engine optimization and search engine marketing services, which is due on a
monthly basis and recognized in the period when services are provided. Our
marketing fees revenue comprised 13.8% and 14.3% of our total revenue for the 13
weeks ended September 25, 2021 and September 26, 2020, respectively, and 13.7%
and 12.4% of our total revenue for the 39 weeks ended September 25, 2021 and
September 26, 2020, respectively.

Other Revenue: Other revenue primarily consists of service revenues from our
corporate-owned centers and franchise fees, as well as technology fees, annual
brand conference revenues and training, which together represent 5.5% and 6.1%
of our total revenue for the 13 weeks ended September 25, 2021 and September 26,
2020, respectively, and 5.7% and 6.1% of our total revenue for the 39 weeks
ended September 25, 2021 and September 26, 2020, respectively. Service revenues
from our corporate-owned centers are recognized at the time services are
provided. Amounts collected in advance of the period in which service is
rendered are recorded as deferred revenue. Franchise fees are paid upon
commencement of the franchise agreement and are deferred and recognized on a
straight-line basis commencing at contract inception through the end of the
franchise license term. Franchise agreements generally have terms of ten years
beginning on the date the center is opened, which is an average of two years
from the date the franchise agreement is signed. Therefore, the franchise fees
are typically amortized over a 12-year period. Deferred franchise fees expected
to be recognized in periods greater

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than 12 months from the reporting date are classified as long-term on the
condensed consolidated balance sheets. Technology fees, annual brand conference
revenues and training are recognized as the related services are delivered and
are not material to the overall business.

Costs and expenses

Product cost: Product cost primarily includes the direct costs associated with wholesale products and retail merchandise sold, including distribution and outbound freight costs and inventory obsolescence charges, as well as the cost of materials. and labor for services rendered in our centers.

Selling, General and Administrative Expenses: Selling, general and
administrative expenses primarily consist of wages, benefits and other
compensation-related costs, rent, software, and other administrative expenses
incurred to support our existing franchise and corporate-owned centers, as well
as expenses attributable to growth and development activities. Also included in
selling, general and administrative expenses are accounting, legal, marketing
operations, and other professional fees.

Advertising expenses: Advertising expenses include advertising, public relations and administrative expenses incurred to increase sales and further improve the public reputation of the company. European Wax Center Mark.

Depreciation and Amortization: Depreciation and amortization includes
depreciation of property and equipment and capitalized leasehold improvements,
as well as amortization of intangible assets, including franchisee relationships
and reacquired area representative rights. Area representative rights represent
an agreement with area representatives to sell franchise licenses and provide
support to franchisees in a geographic region. From time to time, the Company
enters into agreements to reacquire certain area representative rights.

Interest Expense: Interest expense consists of interest on our long-term debt,
including amounts outstanding under our revolving credit facility, amortization
of debt discount and deferred financing costs and gain and losses on debt
extinguishment.

Income Tax Expense: We are subject to U.S. federal, state and local income taxes
with respect to our allocable share of any taxable income of EWC Ventures and
are taxed at the prevailing corporate tax rates. Income tax expense includes
both current and deferred income tax expense.

Noncontrolling Interest: We are the sole managing member of EWC Ventures.
Because we manage and operate the business and control the strategic decisions
and day-to-day operations of EWC Ventures and also have a substantial financial
interest in EWC Ventures, we consolidate the financial results of EWC Ventures,
and a portion of our net income (loss) is allocated to the non-controlling
interest to reflect the entitlement of the EWC Ventures Post-IPO Members to a
portion of EWC Ventures' net income (loss).

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Results of Operations



The following tables presents our condensed consolidated statements of
operations for each of the periods indicated (amounts in thousands, except
percentages):



                                           For the Thirteen Weeks Ended
                                        September 25,        September 26,          $            %
                                             2021                 2020           Change        Change
Revenue:
Product sales                           $       27,611       $       17,082     $  10,529         61.6 %
Royalty fees                                    11,941                7,136         4,805         67.3 %
Marketing fees                                   6,760                4,364         2,396         54.9 %
Other revenue                                    2,699                1,868           831         44.5 %
Total revenue                                   49,011               30,450        18,561         61.0 %
Operating expenses:
Cost of revenue                                 12,825               15,422        (2,597 )      (16.8 )%
Selling, general and administrative             22,725                9,298        13,427        144.4 %
Advertising                                      8,368                2,602         5,766        221.6 %
Depreciation and amortization                    4,850                5,074          (224 )       (4.4 )%
Total operating expenses                        48,768               32,396        16,372         50.5 %
Income (loss) from operations                      243               (1,946 )       2,189        112.5 %
Interest expense                                 9,515                4,597         4,918        107.0 %
Loss before income taxes                        (9,272 )             (6,543 )      (2,729 )      (41.7 )%
Income tax expense                                   -                    -             -            -
Net loss                                $       (9,272 )     $       (6,543 )   $  (2,729 )      (41.7 )%
Less: net income (loss) attributable
to EWC Ventures, LLC prior to the
Reorganization Transactions                      1,496               (6,543 )       8,039        122.9 %
Less: net loss attributable to
noncontrolling interests                        (5,237 )                  -        (5,237 )          -
Net loss attributable to European Wax
Center, Inc.                            $       (5,531 )     $            -     $  (5,531 )   $      -




                                          For the Thirty-Nine Weeks
                                                    Ended
                                         September        September
                                            25,              26,             $            %
                                            2021             2020         Change        Change
Revenue:
Product sales                            $   74,752       $   42,265     $  32,487         76.9 %
Royalty fees                                 32,821           18,138        14,683         81.0 %
Marketing fees                               18,326            9,148         9,178        100.3 %
Other revenue                                 7,671            4,535         3,136         69.2 %
Total revenue                               133,570           74,086        59,484         80.3 %
Operating expenses:
Cost of revenue                              34,296           27,817         6,479         23.3 %
Selling, general and administrative          46,003           26,016        19,987         76.8 %
Advertising                                  19,767            8,893        10,874        122.3 %
Depreciation and amortization                15,259           15,012           247          1.6 %
Total operating expenses                    115,325           77,738        37,587         48.4 %
Income (loss) from operations                18,245           (3,652 )      21,897        599.6 %
Interest expense                             18,686           13,304         5,382         40.5 %
Loss before income taxes                       (441 )        (16,956 )      16,515         97.4 %
Income tax expense                                -                -             -            -
Net loss                                 $     (441 )     $  (16,956 )   $  16,515         97.4 %
Less: net income (loss) attributable
to EWC Ventures, LLC prior to the
Reorganization Transactions                  10,327          (16,956 )      27,283        160.9 %
Less: net loss attributable to
noncontrolling interests                     (5,237 )              -        (5,237 )          -
Net loss attributable to European Wax
Center, Inc.                             $   (5,531 )     $        -     $  (5,531 )          -




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The following table presents the components of our condensed consolidated statements of earnings for each of the periods indicated, as a percentage of sales:



                                         For the Thirteen Weeks Ended                For the Thirty-Nine Weeks Ended
                                     September 25,          September 26,        September 25,             September 26,
                                          2021                   2020                2021                      2020
Revenue:
Product sales                                  56.3 %                 56.1 %               56.0 %                    57.0 %
Royalty fees                                   24.4 %                 23.5 %               24.6 %                    24.5 %
Marketing fees                                 13.8 %                 14.3 %               13.7 %                    12.4 %
Other revenue                                   5.5 %                  6.1 %                5.7 %                     6.1 %
Total revenue                                 100.0 %                100.0 %              100.0 %                   100.0 %
Costs and expenses:
Cost of revenue                                26.2 %                 50.6 %               25.7 %                    37.5 %
Selling, general and
administrative                                 46.3 %                 30.5 %               34.4 %                    35.1 %
Advertising                                    17.1 %                  8.6 %               14.8 %                    12.0 %
Depreciation and amortization                   9.9 %                 16.7 %               11.4 %                    20.3 %
Total operating expenses                       99.5 %                106.4 %               86.3 %                   104.9 %
Income (loss) from operations                   0.5 %                 (6.4 )%              13.7 %                    (4.9 )%
Interest expense                               19.4 %                 15.1 %               14.0 %                    18.0 %
Loss before income taxes                      (18.9 )%               (21.5 )%              (0.3 )%                  (22.9 )%
Income tax expense                                -                      -                    -                         -
Net loss                                      (18.9 )%               (21.5 )%              (0.3 )%                  (22.9 )%
Less: net income (loss)
attributable to EWC Ventures, LLC
prior to the Reorganization
Transactions                                    3.1 %                (21.5 )%               7.7 %                   (22.9 )%
Less: net loss attributable to
noncontrolling interests                      (10.7 )%                   -                 (3.9 )%                      -
Net loss attributable to European
Wax Center, Inc.                              (11.3 )%                   -                 (4.1 )%                      -



Comparison of the thirteen completed weeks September 25, 2021 and September 26, 2020

Returned

Total revenue increased $18.6 million, or 61.0%, to $49.0 million during the 13
weeks ended September 25, 2021, compared to $30.5 million for the 13 weeks ended
September 26, 2020. The increase in total revenue was largely due to our results
for the 13 weeks ended September 26, 2020 being impacted by center closures and
restrictions stemming from the COVID-19 pandemic. In addition, we had 47 new
center openings which became operational during the period from September 26,
2020 to September 25, 2021.

Product sales

Product sales increased $10.5 million, or 61.6%, to $27.6 million during the 13
weeks ended September 25, 2021, compared to $17.1 million for the 13 weeks ended
September 26, 2020. The increase in product sales during the 13 weeks ended
September 25, 2021 was primarily due to the negative impact of center closures
and restrictions resulting from the COVID-19 pandemic on product sales during
the 13 weeks ended September 26, 2020. In addition, the increase in product
sales was also partially attributable to new center openings which became
operational during the period from September 26, 2020 to September 25, 2021.

Royalties

Royalty fees increased $4.8 million, or 67.3%, to $11.9 million during the 13
weeks ended September 25, 2021, compared to $7.1 million for the 13 weeks ended
September 26, 2020. The increase in royalty fees during the 13 weeks ended
September 25, 2021 was the result of the negative impact of the COVID-19
pandemic on network revenues during the 13 weeks ended September 26, 2020. In
addition, the increase in royalty fees was also partially attributable to new
center openings which became operational during the period from September 26,
2020 to September 25, 2021.

Marketing costs

Marketing fees increased $2.4 million, or 54.9%, to $6.8 million during the 13
weeks ended September 25, 2021, compared to $4.4 million for the 13 weeks ended
September 26, 2020. Marketing fees increased primarily due to the negative
impact of the COVID-19 pandemic on network revenues during the 13 weeks ended
September 26, 2020.

                                       30
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Other income

Other revenue increased $0.8 million or 44.5%, to $2.7 million during the 13
weeks ended September 25, 2021, compared to $1.9 million for the 13 weeks ended
September 26, 2020. The increase in other revenue during the 13 weeks ended
September 25, 2021 was primarily due to the negative impact of restrictions on
our corporate-owned centers resulting from the COVID-19 pandemic during the 13
weeks ended September 26, 2020.

Costs and expenses

Cost of income

Cost of revenue decreased $2.6 million, or 16.8%, to $12.8 million during the 13
weeks ended September 25, 2021, compared to $15.4 million for the 13 weeks ended
September 26, 2020. The decrease in cost of revenue was primarily due to an
increase in the inventory obsolescence reserve during the 13 weeks ended
September 26, 2020 related to a pilot program for certain products with a
limited shelf-life that did not have a chance to scale due to COVID-19, as well
as a planned product restaging effort approved by management in the prior year.
This decrease in cost of revenue was partially offset by higher revenues in the
current year period as compared to our revenues for the 13 weeks ended September
26, 2020, which were impacted by center closures and restrictions stemming from
the COVID-19 pandemic.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $13.4 million, or 144.4%,
to $22.7 million during the 13 weeks ended September 25, 2021, compared to $9.3
million for the 13 weeks ended September 26, 2020. The increase in selling,
general and administrative expenses was primarily due to increased payroll and
benefits, professional fees and insurance expenses. The increase in payroll and
benefits expense resulted from increased equity based compensation due to the
modification of certain pre-IPO equity awards and the issuance of new equity
awards, cash bonus payments made in connection with our IPO and increased
headcount at our corporate office as we prepared to become a public company. The
increase in professional fees in the current year was attributable to
preparations for our initial public offering. The increase in insurance expense
was primarily attributable to the purchase of additional lines of coverage due
to becoming a public company.

Advertising

Advertising expenses increased $5.8 million, or 221.6%, to $8.4 million during
the 13 weeks ended September 25, 2021, compared to $2.6 million for the 13 weeks
ended September 26, 2020. The increase in advertising expense was largely
attributable to our suspension of marketing activities in the prior year
commensurate with the center closures caused by the COVID-19 pandemic.

Depreciation and amortization

Depreciation and amortization for the 13 weeks ended September 25, 2021 was
largely consistent with the 13 weeks ended September 26, 2020, decreasing $0.2
million, or 4.4%, to $4.9 million for the 13 weeks ended September 25, 2021,
compared to $5.1 million for the 13 weeks ended September 26, 2020.

Interest charges

Interest expense increased $4.9 million, or 107.0%, to $9.5 million during the
13 weeks ended September 25, 2021, compared to $4.6 million for the 13 weeks
ended September 26, 2020. The increase in interest expense was primarily due to
a $6.3 million loss on debt extinguishment incurred in connection with our
refinancing transaction executed in the period. However, this increase was
partially offset by lower interest expense on the 2026 Term Loan due to the
reduced principal balance and interest rate from the Previous Term Loan as well
as the payoff of our Previous Revolving Credit Facility.

Income tax expense

We recorded zero income tax expense for the period of August 4, 2021 through
September 25, 2021, which is the period following the IPO and Reorganization
Transactions, as we incurred a pre-tax loss for the period and recorded a full
valuation allowance against our deferred tax assets. We estimate that in future
annual periods, our effective tax rate, prior to valuation allowance
consideration, will be approximately 13% of consolidated income or loss before
income taxes. This estimated effective tax rate excludes discrete or other rate
impacting adjustments which may impact the company's income tax provision in the
future and is based on our blended federal and state statutory tax rates reduced
to exclude our non-taxable noncontrolling interest percentage. In the future, as
shares of our Class B common stock and the corresponding EWC ventures units are
exchanged for Class A common stock additional income or loss would be attributed
to the Company. As such, all things being equal, our effective tax rate would
increase in periods following the exchanges. EWC Ventures is not subject to
income taxes. As such, there was no income tax expense for periods prior to
August 4, 2021.

                                       31

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Comparison of the thirty-nine completed weeks September 25, 2021 and September 26, 2020

Revenue

Total revenue increased $59.5 million, or 80.3%, to $133.6 million during the 39
weeks ended September 25, 2021, compared to $74.1 million for the 39 weeks ended
September 26, 2020. The increase in total revenue was largely due to our results
for the 39 weeks ended September 26, 2020 being impacted by center closures and
restrictions stemming from the COVID-19 pandemic. In addition, we had 47 new
center openings which became operational during the period from September 26,
2020 to September 25, 2021.

Product sales

Product sales increased $32.5 million, or 76.9%, to $74.8 million during the 39
weeks ended September 25, 2021, compared to $42.3 million for the 39 weeks ended
September 26, 2020. The increase in product sales during the 39 weeks ended
September 25, 2021 was primarily due to the negative impact of center closures
and restrictions resulting from the COVID-19 pandemic on product sales during
the 39 weeks ended September 26, 2020. In addition, the increase in product
sales was also partially attributable to shipments of a new product line to
franchisees in the current year and new center openings which became operational
during the period from September 26, 2020 to September 25, 2021.

Royalties

Royalty fees increased $14.7 million, or 81.0%, to $32.8 million during the 39
weeks ended September 25, 2021, compared to $18.1 million for the 39 weeks ended
September 26, 2020. The increase in royalty fees during the 39 weeks ended
September 25, 2021 was the result of the negative impact of the COVID-19
pandemic on network revenues during the 39 weeks ended September 26, 2020. In
addition, the increase in royalty fees was also partially attributable to new
center openings which became operational during the period from September 26,
2020 to September 25, 2021.

Marketing costs

Marketing fees increased $9.2 million, or 100.3%, to $18.3 million during the 39
weeks ended September 25, 2021, compared to $9.1 million for the 39 weeks ended
September 26, 2020. Marketing fees increased primarily due to the negative
impact of the COVID-19 pandemic on network revenues during the 39 weeks ended
September 26, 2020.

Other Revenue

Other revenue increased $3.1 million or 69.2%, to $7.7 million during the 39
weeks ended September 25, 2021, compared to $4.5 million for the 39 weeks ended
September 26, 2020. The increase in other revenue during the 39 weeks ended
September 25, 2021 was primarily due to the continuing negative impact of
corporate-owned center closures and restrictions resulting from the COVID-19
pandemic during the 39 weeks ended September 26, 2020. In addition, we waived
technology fees for closed centers in 2020 to provide relief to our franchisees
from the adverse impact of the COVID-19 pandemic.

Costs and expenses

Cost of income

Cost of revenue increased $6.5 million, or 23.3%, to $34.3 million during the 39
weeks ended September 25, 2021, compared to $27.8 million for the 39 weeks ended
September 26, 2020. The increase in cost of revenue was largely the result of
higher revenues in the current year period as compared to our revenues for the
39 weeks ended September 26, 2020, which were impacted by center closures and
restrictions stemming from the COVID-19 pandemic. This increase in cost of
revenue was partially offset by an in increase in the inventory obsolescence
reserve during the 39 weeks ended September 26, 2020 related to a pilot program
for certain products with a limited shelf-life that did not have a chance to
scale due to COVID-19, as well as a planned product restaging effort approved by
management in the prior year.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $20.0 million, or 76.8%,
to $46.0 million during the 39 weeks ended September 25, 2021, compared to $26.0
million for the 39 weeks ended September 26, 2020. The increase in selling,
general and administrative expenses was primarily due to increased payroll and
benefits, professional fees and insurance expenses. The increase in payroll and
benefits expense resulted from increased equity based compensation due to the
modification of certain pre-IPO equity awards and the issuance of new equity
awards, cash bonus payments made in connection with our IPO and increased
headcount at our corporate office as we prepared to become a public company. In
addition, payroll and benefits expense during the 39 weeks ended September 26,
2020 was lower due to our reduction and temporary furlough of certain corporate
employees in the prior year. The increase in professional fees in the current
year was attributable to preparations for our initial public offering. The
increase in insurance expense was primarily

                                       32

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attributable to the purchase of additional lines of coverage due to becoming a
public company. These increases were partially offset by a decrease in
commissions resulting from the reacquisition of rights from certain area
representatives and a decrease in relocation costs in the first 39 weeks of 2021
compared to the first 39 weeks of 2020.

Advertising

Advertising expenses increased $10.9 million, or 122.3%, to $19.8 million during
the 39 weeks ended September 25, 2021, compared to $8.9 million for the 39 weeks
ended September 26, 2020. The increase in advertising expense was largely
attributable to our suspension of marketing activities in the prior year
commensurate with the center closures caused by the COVID-19 pandemic.

Depreciation and amortization

Depreciation and amortization increased $0.2 million, or 1.6%, to $15.3 million
during the 39 weeks ended September 25, 2021, compared to $15.0 million for the
39 weeks ended September 26, 2020. The increase in depreciation and amortization
expense was primarily driven by an increase in amortization expense for the
additional reacquired rights from area representatives completed during fiscal
years 2020 and 2021.

Interest expense

Interest expense increased $5.4 million, or 40.5%, to $18.7 million during the
39 weeks ended September 25, 2021, compared to $13.3 million for the 39 weeks
ended September 26, 2020. The increase in interest expense was primarily due to
a $6.3 million loss on debt extinguishment incurred with our refinancing
transaction executed in the period. However, this increase was partially offset
by lower interest expense on the 2026 Term Loan due to the reduced principal
balance and interest rate on the Previous Term Loan and the payoff of our
Previous Revolving Credit Facility.

Income tax expense

We recorded zero income tax expense for the period of August 4, 2021 through
September 25, 2021, which is the period following the IPO and Reorganization
Transactions, as we incurred a pre-tax loss for the period and recorded a full
valuation allowance against our deferred tax assets. We estimate that in future
annual periods, our effective tax rate, prior to valuation allowance
consideration, will be approximately 13% of consolidated income or loss before
income taxes. This estimated effective tax rate excludes discrete or other rate
impacting adjustments which may impact the company's income tax provision in the
future and is based on our blended federal and state statutory tax rates reduced
to exclude our non-taxable noncontrolling interest percentage. In the future, as
shares of our Class B common stock and the corresponding EWC ventures units are
exchanged for Class A common stock additional income or loss would be attributed
to the Company. As such, all things being equal, our effective tax rate would
increase in periods following the exchanges. EWC Ventures is not subject to
income taxes. As such, there was no income tax expense for periods prior to
August 4, 2021.

Non-GAAP financial measures

In addition to our GAAP financial results, we believe the non-GAAP financial
measures EBITDA and Adjusted EBITDA are useful in evaluating our performance.
Our non-GAAP financial measures should not be considered in isolation from, or
as substitutes for, financial information prepared in accordance with GAAP.
These non-GAAP financial measures are presented for supplemental information
purposes only and may be different from similarly titled metrics or measures
presented by other companies. A reconciliation of the non-GAAP financial
measures to the most directly comparable financial measure stated in accordance
with GAAP and a further discussion of how we use non-GAAP financial measures is
provided below.

EBITDA and Adjusted EBITDA. We define EBITDA as net income (loss) before
interest, taxes, depreciation and amortization. We believe that EBITDA, which
eliminates the impact of certain expenses that we do not believe reflect our
underlying business performance, provides useful information to investors to
assess the performance of our business. We define Adjusted EBITDA as net income
(loss) before interest, taxes, depreciation and amortization, adjusted for the
impact of certain additional non-cash and other items that we do not consider in
our evaluation of ongoing performance of our core operations. These items
include exit costs related to leases of abandoned space, IPO-related costs,
non-cash equity-based compensation expense, corporate headquarters office
relocation, and other one-time expenses. We believe that Adjusted EBITDA is an
appropriate measure of operating performance in addition to EBITDA because it
eliminates the impact of other items that we believe reduce the comparability of
our underlying core business performance from period to period and is therefore
useful to our investors in comparing the core performance of our business from
period to period. EBITDA and Adjusted EBITDA may not be comparable to other
similarly titled captions of other companies due to differences in methods of
calculation.

                                       33
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A reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is shown below for the periods indicated:



                                                Thirteen Weeks Ended                    Thirty-Nine Weeks Ended
                                         September 25,        September 26,       September 25,         September 26,
                                             2021                 2020                2021                  2020
(in thousands)
Net loss                                $        (9,272 )    $        (6,543 )   $          (441 )     $       (16,956 )
Interest expense                                  9,515                4,597              18,686                13,304
Provision for income taxes                            -                    -                   -                     -
Depreciation                                        327                  434               1,168                 1,205
Amortization                                      4,523                4,640              14,091                13,807
EBITDA                                  $         5,093      $         3,128     $        33,504       $        11,360
Exit costs - lease abandonment(1)                     -                    -                   -                   159
Corporate headquarter relocation(2)                   -                  125                   -                   671
Share-based compensation(3)                       7,395                  403               7,952                 1,649
IPO-related costs(4)                              1,715                    -               4,697                   100
IPO-related compensation expense(5)               2,343                    -               2,343                     -
Other compensation-related costs(6)                   -                    -                 380                   350
Adjusted EBITDA                         $        16,546      $         3,656     $        48,876       $        14,289




(1)
Represents exit costs related to abandoned leases resulting from our corporate
headquarters relocation.
(2)
Represents costs related to employee relocation, severance and moving fees
resulting from our corporate headquarter relocation.
(3)
Represents non-cash equity-based compensation expense.
(4)
Represents legal, accounting and other costs incurred in preparation for initial
public offering.
(5)
Represents cash-based compensation expense recorded in connection with the
initial public offering.
(6)
Represents costs related to reorganization driven by COVID-19 and buildup of
executive leadership team.

Liquidity and capital resources

We measure liquidity in terms of our ability to fund the cash requirements of
our business operations, including working capital needs, capital expenditures,
contractual obligations and debt service with cash flows from operations and
other sources of funding. Our primary sources of liquidity and capital resources
are cash provided from operating activities, cash and cash equivalents on hand,
proceeds from our secured term loan and revolving credit facility and proceeds
from the issuance of equity to our members. We had cash and cash equivalents of
$25.4 million as of September 25, 2021.

In August 2021, concurrent with our initial public offering, we entered into a
new credit agreement providing for the 2026 Term Loan and 2026 Revolving Credit
Facility. The proceeds from the new term loan were used together with proceeds
from our initial public offering to fully repay the Previous Term Loan and
Previous Revolving Credit Facility. See the notes to the condensed consolidated
financial statements (Note 7 -Long-Term Debt, net) contained elsewhere in this
quarterly report on Form 10-Q for more information.

Future payments under the TRA with respect to the purchase of EWC Ventures Units
which occurred as part of the IPO are currently expected to be $69.3 million.
Such amounts will be paid when such deferred tax assets are realized as a
reduction to income taxes due or payable. That is, payments under the TRA are
only expected to be made in periods following the filing of a tax return in
which we are able to utilize certain tax benefits to reduce our cash taxes paid
to a taxing authority. The impact of any changes in the projected obligations
under the TRA as a result of changes in the geographic mix of the Company's
earnings, changes in tax legislation and tax rates or other factors that may
impact the Company's tax savings will be reflected in income (loss) before
income taxes on the condensed consolidated statement of operations in the period
in which the change occurs. In connection with entering into the TRA we recorded
a liability of $48.8 million based on current projections of future taxable
income taking into consideration the Company's full valuation allowance against
its net deferred tax asset. During the 39 weeks ended September 25, 2021 there
were no other material changes in our contractual obligations from those
described in the Prospectus.

We believe that our sources of liquidity and capital will be sufficient to
finance our continued operations and growth strategy for at least the next
twelve months. Our primary requirements for liquidity and capital are working
capital, capital expenditures to grow our network of centers, debt servicing
costs, and general corporate needs. We have in the past, and may in the future,
refinance our existing indebtedness with new debt arrangements and utilize a
portion of borrowings to return capital to our stockholders.

                                       34

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Our assessment of the period of time through which our financial resources will
be adequate to support our operations is a forward-looking statement and
involves risks and uncertainties. Our actual results and our future capital
requirements could vary because of many factors, including our growth rate, the
timing and extent of spending to acquire new centers and expand into new
markets, and the expansion of sales and marketing activities. We may, in the
future, enter into arrangements to acquire or invest in complementary
businesses, services and technologies. We have based this estimate on
assumptions that may prove to be wrong, and we could use our available capital
resources sooner than we currently expect. We may be required to seek additional
equity or debt financing. In the event that additional financing is required
from outside sources, we may not be able to raise it on terms acceptable to us
or at all. If we are unable to raise additional capital when desired, or if we
cannot expand our operations or otherwise capitalize on our business
opportunities because we lack sufficient capital, our business, results of
operations and financial condition would be adversely affected.

2026 credit agreement

Our 2026 Credit Agreement consists of the 2026 Term Loan and the 2026 Revolving
Credit Facility. Borrowings under the 2026 Term Loan bear interest at an index
rate as defined in the credit agreement plus an applicable margin of 3.0% (3.1%
at September 25, 2021). The 2026 Term Loan requires principal payments payable
in quarterly installments with the final scheduled principal payment on the
outstanding 2026 Term Loan borrowings due on August 9, 2026. There were no
outstanding borrowings under the 2026 Revolving Credit Facility as of September
25, 2021.

The 2026 Credit Agreement contains certain customary events of default,
including in the event of a change of control, and certain covenants and
restrictions that limit the Borrower's and its subsidiaries' ability to, among
other things, incur additional debt; create liens on certain assets; pay
dividends on or make distributions in respect of their capital stock or make
other restricted payments; consolidate, merge, sell, or otherwise dispose of all
or substantially all of their assets; and enter into certain transactions with
their affiliates.

The Company is also subject to certain financial maintenance covenants under the
2026 Credit Agreement, which require the Company and its subsidiaries to (i) not
exceed certain specified total net leverage ratios and (ii) not fall below a
certain fixed charge coverage ratio, in each case, at the end of each fiscal
quarter.

If the Company fails to perform its obligations under these and other covenants,
or should any event of default occur, the term loan and revolving credit
facility commitments under the 2026 Credit Agreement may be terminated and any
outstanding borrowings, together with accrued interest, under the 2026 Credit
Agreement could be declared immediately due and payable. For additional
information regarding our long-term debt activity, see the notes to the
condensed consolidated financial statements (Note 7-Long-term debt, net)
contained elsewhere in this quarterly report on Form 10-Q.

Derivatives and hedging activities

In December 2018, we entered an interest rate cap derivative instrument which
was designated as a cash flow hedge at inception. Our objective is to mitigate
the impact of interest expense fluctuations on our profitability resulting from
interest rate changes by capping the LIBOR component of the interest rate at
4.5% on $175.0 million of our long-term debt, as the interest rate cap provides
for payments from the counterparty when LIBOR rises above 4.5%. The interest
rate cap has a $175.0 million notional amount and is effective December 31,
2018, for the monthly periods from and including January 31, 2019 through
September 25, 2024. The interest rate cap has a deferred premium; accordingly,
the Company will pay a monthly premium for the interest rate cap over the term
of the agreement. The annual premium is equal to 0.11486% on the notional
amount.

Changes in the cash flows of interest rate cap derivatives designated as hedges
are expected to be highly effective in offsetting the changes in interest
payments on a principal balance equal to the designated derivative's notional
amount, attributable to the hedged risk.

We recognize as assets or liabilities at fair value the estimated amounts we
would receive or pay upon a termination of the interest rate cap prior to the
scheduled maturity date. As of September 25, 2021, the fair value of the
interest rate cap derivative instrument was estimated to be a liability of $0.4
million, with $0.2 million classified within Other current liabilities and $0.2
million within Other long-term liabilities on the condensed consolidated balance
sheet. The fair value is based on information that is model-driven and whose
inputs were observable.

Tax Receivable Agreement

Generally, we are required under the TRA, which is described more fully in "Risk
Factors-Risks Related to Our Organization and Structure-We will be required to
pay the EWC Ventures' pre-IPO members for certain tax benefits we may claim, and
the amounts we may pay could be significant" and "Certain Relationships and
Related Party Transactions-Tax Receivable Agreement" in the Prospectus to make
payments to the EWC Ventures pre-IPO members that are generally equal to 85% of
the applicable cash tax savings, if any, that we actually realize (or are deemed
to realize, calculated using certain assumptions) as a result of (i) increases
in our allocable

                                       35

————————————————– ——————————


share of certain existing tax basis of the tangible and intangible assets of the
Company and adjustments to the tax basis of the tangible and intangible assets
of the Company, in each case as a result of (a) the purchases of EWC Ventures
Units (along with the corresponding shares of our Class B common stock) from
certain of the EWC Ventures Post-IPO Members using a portion of the net proceeds
from the initial public offering or in any future offering or (b) Share
Exchanges and Cash Exchanges by the EWC Ventures pre-IPO members (or their
transferees or other assignees) in connection with or after the initial public
offering, (ii) our utilization of certain tax attributes of the Blocker
Companies (including the Blocker Companies' allocable share of certain existing
tax basis of EWC Ventures' assets) and (iii) certain other tax benefits related
to entering into the TRA, including tax benefits attributable to payments under
the TRA.

Subject to the discussion in the following paragraph below, payments under the
TRA will occur only after we have filed our U.S. federal and state income tax
returns and realized the cash tax savings from the favorable tax attributes. The
first payment would be due after the filing of our tax return for the year ended
December 25, 2021, which is due March 15, 2022, but the due date can be extended
until September 15, 2022. Future payments under the TRA in respect of future
purchases of EWC Ventures Units, Share Exchanges and Cash Exchanges would be in
addition to these amounts. Payments under the TRA are computed by reference to
realized tax benefits from attributes subject to the TRA and are expected to be
funded by tax distributions made to us by our subsidiaries similar to how cash
taxes would be funded to the extent these attributes did not exist. To the
extent we are unable to make payments under the TRA for any reason (including
because our credit agreement restricts the ability of our subsidiaries to make
distributions to us), under the terms of the TRA such payments will be deferred
and accrue interest until paid. If we are unable to make payments due to
insufficient funds, such payments may be deferred indefinitely while accruing
interest until paid, which could negatively impact our results of operations and
could also affect our liquidity in future periods in which such deferred
payments are made.

Under the TRA, as a result of certain types of transactions and other factors,
including a transaction resulting in a change of control, we may also be
required to make payments to the EWC Ventures pre-IPO members in amounts equal
to the present value of future payments we are obligated to make under the TRA.
If the payments under the TRA are accelerated, we may be required to raise
additional debt or equity to fund such payments. To the extent that we are
unable to make payments under the TRA for any reason (including because our
credit agreement restricts the ability of our subsidiaries to make distributions
to us), under the terms of the TRA Agreement such payments will be deferred and
will accrue interest until paid. If we are unable to make payments due to
insufficient funds to make such payments, such payments may be deferred
indefinitely while accruing interest until paid, which could negatively impact
our results of operations and could also affect our liquidity in future periods
in which such deferred payments are made.

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