I have recently started working on salesforce commerce cloud. I am trying to create an overlay cartridge on SFRA. I am following the below trailhead.

https://trailhead.salesforce.com/en/content/learn/modules/b2c-cartridges/b2c-cartridges-customize and referring to 'With sgmf-scripts Globally Installed in the trailhead'

Questions

Where do we create the directory for Overlay cartridge 

• Should we create it inside SFRA or outside
• Incase if we have to create it outside SFRA. How do we merge these folders inside the SFRA cartridges