Is an Apricot Lane franchisee required to make capital expenditures to remodel or modernize their franchised business?

one percent (1%) of the FRANCHISEE's annual gross revenues or Five Thousand Dollars ($5,000), whichever is less, per calendar year.

B. Changes to Business and System Modifications

1. Remodeling, Modernization, Changes to Existing Business

FRANCHISEE may be required to periodically make reasonable capital expenditures to remodel, redesign, modernize and change the Franchised Business and to replace and modernize the Premises so that the Franchised Business will reflect the then-current image intended to be portrayed by the Specialty Stores. All remodeling, modernization, or changes to the Premises must be done in accordance with the standards and specifications as prescribed by FRANCHISOR from time to time and with the prior written approval of FRANCHISOR. All replacements must conform to FRANCHISOR's then-current quality standards and specifications and must be approved by FRANCHISOR in writing. FRANCHISEE may be required to remodel, redesign, modernize or change the Premises not more than once during the term of this Agreement or renewal hereof, or more frequently as required by the lease for the Premises.

2. System Modifications

FRANCHISEE acknowledges that from time to time hereafter FRANCHISOR may change or modify the System, including the adoption and use of new or modified trade names, trademarks, service marks or copyrighted materials, new computer systems, including hardware and software, new inventory items, new merchandising techniques, new equipment or new techniques and that FRANCHISEE will be required to accept, use and display for the purpose of this Agreement any such changes in the System, as if they were part of this Agreement at the time of execution hereof. FRANCHISEE shall not change, modify or alter in any way the System, except as directed by FRANCHISOR.

3. Expenditure Amounts for Changes During Agreement Term

FRANCHISEE's required expenditures during the term of this Agreement, for the changes and modifications listed in Section 10.B.1 and 10.B.2, shall not exceed an amount equal to two percent (2%) of the FRANCHISEE's average annual Gross Revenues (defined in Section 12.C below) or Fifteen Thousand Dollars ($15,000), whichever is less.

SECTION 11: MARKETING AND ADVERTISING

Recognizing the value of marketing and advertising and the importance of the standardization of marketing and advertising and promotion to the furtherance of the goodwill and the public image of the Specialty Stores, FRANCHISEE agrees as follows:

A. Grand Opening Marketing and Public Relations

FRANCHISEE shall budget and implement an appropriate Grand Opening Marketing and Advertising program and Pre- and Post-Opening Public Relations campaign for the Franchised Business.

Source: Item 23 — RECEIPTS (FDD pages 51–222)