What is the basis for B Bops' specifications regarding supplies?

The Company has formulated its specifications based on the experience of its affiliate, B-Bop's, in establishing and operating ten B-Bop's Restaurants. Any modifications which the Company may from time to time make to its specifications will be based on B-Bop's continuing experience and its own experience in franchising B-Bop's Restaurants. All specifications relating to construction materials, equipment, fixtures and signage are contained in the Company's construction specifications which will be provided to you after you have executed the Franchise Agreement and paid the initial franchise fee. Specifications relating to inventories of food and beverage items, ingredients, supplies and other items necessary for operation of the Franchise are contained in the Operations Manual provided to you prior to the initial training course. Any modifications which the Company may from time to time make to the specifications will be distributed to you in the form of updates to the Operations Manual or through written reports or memoranda. Except to the extent noted below with respect to employee uniforms and other items bearing the "B-Bop's" logo (including paper products), you may purchase items meeting the Company's specifications from the source of your choosing.

The Company estimates that approximately 90% to 95% of your total purchases associated with establishing your Franchise and 90% to 95% of your total purchases associated with the ongoing operation of your Franchise must conform to Company specifications. The Company will receive a rebate of 25¢ for each gallon of Pepsi-Cola products purchased by its franchisees from Pepsi-Cola distributors. The Company contemplates that rebate arrangements based on franchisee purchases may be negotiated in the future with other suppliers.

Approved Suppliers. Except as noted below, the Company currently neither maintains a list of approved suppliers nor criteria for approving suppliers. The Company, however, reserves the right under the Franchise Agreement to require that you make purchases from an approved supplier should the Company so elect in the future.

You are currently required to purchase all employee uniforms and any other items bearing the "B-Bop's" logo (including paper products) from suppliers which have been approved in advance by the Company. The Company does not maintain a formal list of criteria for

approving suppliers of these items and those firms currently recognized as approved suppliers have received their approval based on the experience of B-Bop's in purchasing supplies for its ten stores. Currently, the only approved supplier for employee uniforms is Carpenter Uniform Co. of Des Moines, Iowa. Currently, the only approved supplier of items bearing the "B-Bop's" logo is Martin Brothers Distributing Co., Inc. of Cedar Falls, Iowa. Currently, the only approved supplier of the Company's shake mix is Anderson Erickson Dairy Co. of Des Moines, Iowa. None of the foregoing approved suppliers are affiliated with the Company or B-Bop's in any manner and neither the Company nor B-Bop's holds an ownership interest in any of these approved suppliers. Neither the Company nor B-Bop's will derive any revenue or other material consideration through your purchase of these items from any approved supplier. The Company estimates that approximately ninety-five percent (95%) of your total purchases associated with establishing your Franchise and approximately ninety-five percent (95%) of your total purchases associated with the ongoing operation of your Franchise must be made from suppliers approved by the Company.

In the event you propose to make purchases of employee uniforms or items bearing the B-Bop's logo from any supplier other than the approved suppliers noted above, you must notify the Company in writing and submit such samples of the items as the Company may in its discretion deem necessary in order to determine whether to approve the alternative supplier as an "approved supplier" of the particular item. The Company will undertake such review and testing of the item as it may in its discretion deem necessary to determine whether the item meets the specifications established by the Company. The Company will advise you within a reasonable period (usually thirty (30) days) whether the particular item meets the specifications and whether the supplier will be deemed an "approved supplier" for the purchase of such item. All decisions regarding the approval of any alternative supplier shall be made in the sole discretion of the Company. The Company does not maintain a formal list of criteria for approving suppliers. The Company does not maintain a formal procedure for revocation of any approval and any revocation will be handled on a case by case basis.

The Company does not currently negotiate purchase arrangements with any suppliers for the benefit of its franchisees. The Company does not provide any material benefits to its franchisees based on purchases from any approved supplier or other source.

The Company has not established any purchasing or distribution cooperatives for the benefit of its franchisees.

9. FRANCHISEE'S OBLIGATIONS

THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS DISCLOSURE DOCUMENT.

Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 21–23)