What is the Franchisee obligated to comply with regarding the B Bops franchise?

reporting.

• 1. CONTINUING OBLIGATIONS OF FRANCHISEE. Franchisee agrees to comply with the following obligations during the Term of this Agreement:

A. Management and Operation. Franchisee agrees to devote Franchisee's fulltime and best efforts to the active management and operation of the Franchise, or to appoint a manager to devote such manager's full-time and best efforts to operation of the business. Franchisee shall have the right to appoint a full-time manager to operate the Franchise on a day-to-day basis, provided that: (i) Company shall have the right to approve the qualifications of such manager; and (ii) Franchisee shall remain active in the business by monitoring such manager's performance in operating the Franchise. Company's approval of Franchisee's manager shall not be unreasonably withheld, provided such manager has completed the training course (to the satisfaction of Company) required pursuant to Section 7(A) of this Agreement. The individual responsible for the daily management and supervision of the Franchise shall assume such responsibilities on a full-time basis and shall not engage in any other business or activity that requires significant time commitments or that may otherwise be detrimental to or interfere with the management obligations imposed hereunder. If Franchisee is a partnership, corporation or limited liability company, Franchisee shall not be involved in any business or activities apart from ownership and operation of the Franchise (and the ownership of any other B-Bop's Restaurant pursuant to a franchise agreement between Company and Franchisee).

Franchisee shall operate the Franchise only on the Franchise Premises and only in accordance with the business standards, procedures and policies set forth in the Operations Manual, as modified from time to time, or as specified in other manuals or written material provided by Company. Franchisee acknowledges that Franchisee shall be required to sell each of the items contained in the standard B-Bop's Restaurant menu as established from time to time by Company, and that each of such items will be prepared, packaged and sold in strict conformance with Company's standard operating procedures set forth in the Operations Manual.

• B. Employees. Franchisee shall hire a sufficient number of qualified employees to operate the Franchise in an efficient manner, and shall train and supervise such employees in accordance with the Company's standards and policies as contained in the Operations Manual to ensure that such employees at all times provide competent, prompt and courteous service to all patrons of the Franchise. Franchisee shall comply with all federal, state and local equal opportunity, labor and employment laws applicable to its employment relationship with each employee. Franchisee shall require all employees performing managerial or supervisory functions and all personnel receiving special training from Company to execute nondisclosure and noncompetition agreements on forms provided by Company.
• C. Operations Manual. Franchisee shall diligently and thoroughly review and study the Operations Manual and become knowledgeable with respect to the contents thereof. Franchisee covenants and agrees to operate the Franchise at all times in accordance with the procedures and policies contained therein (including, but not limited to, compliance with the prescribed menu of food and beverage items to be old at the Franchise). Franchisee shall also diligently and thoroughly review and study all updates to the Operations Manual, such that Franchisee shall be knowledgeable concerning all additions or modifications to the Licensed System.

• D. Independent Advertising. Franchisee shall, during each calendar quarter during the Term of this Agreement, expend at least two percent (2%) of the gross sales (as defined in Section 9(D) above) generated by the Franchise for independent advertising to be undertaken by Franchisee. The advertising expenditures required by this Section 10(D) shall be in addition to, not in lieu of, the advertising fee required to be paid directly to Company under Section 9(C) of this Agreement. Franchisee may satisfy the independent advertising requirement by implementation of advertising and promotional campaigns provided by Company in accordance with Section 11(A) hereof or may create and implement advertising or promotional campaigns of its own, provided that any advertising or promotional campaign developed by Franchisee shall be submitted to Company for its written approval prior to implementation thereof. Company reserves the right to require Franchisee to submit a report detailing all independent advertising expenditures (along with copies of supporting invoices) at such times as Company may direct.
• E. Licenses, Permits and Legal Compliance. Franchisee shall at its expense obtain and maintain in full force and effect all permits or licenses essential to the lawful operation of the Franchise. Franchisee shall additionally, at its sole expense, at all times promptly and fully comply with all federal, state and local laws, ordinances, rules and regulations applicable to operation of the Franchise, including, but not limited to, the payment when due (unless contested in good faith through appropriate proceedings) of all taxes assessed against Franchisee or against the sale of any product or item by the Franchise.
• F. Maintenance of Franchise Premises.

Source: Item 22 — CONTRACTS (FDD page 53)