Does the B Bops Franchise Agreement require franchisees to purchase from specific sources?

Purchases from Required Sources. You are not required by the terms of the Franchise Agreement or otherwise to purchase or lease from the Company or any particular source designated by the Company any goods, services, supplies, fixtures, equipment, inventory or real estate necessary for the establishment or operation of the Franchise. The Company, however, reserves the right under the terms of the Franchise Agreement to require that inventory and other supplies necessary for operation of the Franchise (which may include any new items added to the Licensed System from time to time) be purchased through the Company or a designated source. The Company, however, has no current plans to require that any inventory or supplies be purchased through the Company or any designated source or to add any new items to the Licensed System which must be purchased through the Company or any designated source.

Purchase Specifications. To maintain uniformity in use of the Licensed System, you will be required by the Franchise Agreement to purchase all items necessary to establish and operate the Franchise in accordance with specifications established by the Company, and to purchase items bearing the "B-Bop's" name and logo (primarily consisting of employee uniforms and paper products) from suppliers approved in advance by the Company. Items to be purchased in accordance with specifications include the following:

• (a) Real estate. Your site must be approved by the Company as being suitable for a B-Bop's Restaurant.
  • (b) All materials necessary for construction and decoration of the Franchise premises.
    • (c) All equipment and fixtures necessary for operation of the Franchise. Specifications for equipment and fixtures relate primarily to the manufacturer and model number of such items.
• (d) An electronic cash register system and related software.
• (e) All signage. Specifications for signage relate primarily to the size, color and manner of display of the "B-Bop's" name and logo.
  • (f) All inventories of food and beverage items and ingredients, including the Company's proprietary hamburger seasoning. Specifications for inventory relate primarily to the type and brand of food and beverage items required to prepare the products offered as part of the standard B-Bop's Restaurant menu. The seasoning

• will be produced by a manufacturer licensed by the Company and you must purchase the seasoning from the food distributor of our choice.
• (g) All supplies, including all paper products. Specifications for supplies relate primarily to the type, brand and size of items required to operate the business and, with respect to paper products, the use of the "B-Bop's" name and logo. The requirement to purchase "logo" items from approved suppliers is discussed below.
• (h) Employee uniforms. The requirement to purchase uniforms from approved suppliers is discussed below.
  • (i) Insurance coverage. You will be required to maintain property insurance in the minimum amount of the full replacement valve of the premises and equipment, liability insurance in the minimum amount of $2,000,000 and workers compensation insurance as required by the laws of the applicable jurisdiction.

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 "

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