Does Beggars Pizza or its affiliate maintain and administer a Brand Fund?

After the Restaurant opens, we will provide the following to you:

• 1. We or our affiliate will maintain and administer a Brand Fund as further described below (Franchise Agreement, Sections 3.8 and 12).

You must pay the Brand Fund a weekly fee of 1% of your Gross Sales for the preceding Accounting Period. Your contributions to the Brand Fund are in addition to the required grand opening and local advertising described above. (Franchise Agreement, Section 12.4.) Beggars Pizza® Restaurants owned and operated by us or our affiliates currently contribute to the Brand Fund in the same manner and at the same rates as franchised Beggars Pizza® Restaurants, but they are not required to do so.

We or our affiliates direct all advertising, marketing, and promotional programs and have sole discretion over all aspects of those programs including the concepts, materials, and media used and their placement and allocation. (Franchise Agreement, Section 12.5.1.) The Brand Fund, all contributions to it, and any of its earnings are used exclusively to meet the costs of maintaining, administering, directing, conducting, and preparing advertising, marketing, public relations, and/or promotional programs and materials, and any other activities which we believe will enhance the

image of the System including the costs of preparing and conducting radio, television, print, and Internet-based advertising campaigns, utilizing social and business networking media sites and other emerging media or promotional tactics, developing, maintaining, and updating webpages on the Internet, reviewing locally-produced advertisements, creating door hangers, mailers, inserts, coupons, brochures, and promotional materials, market research, market surveys, sponsorships, website design and maintenance, public relations and related retainers, mystery shoppers for the System and competitors, celebrity endorsements, trade shows (including costs of travel and personnel expenses, trade booths, and specialty entertainment), association dues, search engine optimization, employing advertising and/or public relations agencies, purchasing promotional items, menu development, providing promotional and other marketing materials and services to businesses operating under the System, developing posters, banners, and signs, and advertising the sale of franchises. (Franchise Agreement, Section 12.5.2.) Media coverage for advertising expenditures will be local and regional.

During our most recent fiscal year, 57% of Brand Fund expenditures were spent on media placement, team sponsorships, and donations; 33% on production, and 10% on administrative and related expenses. No Brand Fund fees were used for the solicitation of new franchise sales. We conduct advertising using third-party advertising agencies and in-house marketing personnel. We do not anticipate any Brand Fund expenditures will be principally used to solicit new franchise sales.

A reasonable amount of the Brand Fund fees paid by all franchisees may be used to cover our or our affiliate's costs and overhead as may be incurred from activities reasonably related to the direction and implementation of the Brand Fund and advertising programs for franchisees and the System including costs and salaries of personnel for creating and implementing advertising, promotional, and marketing programs, accounting expenses, and other out-of-pocket expenses paid to third parties. (Franchise Agreement, Section 12.5.3.)

Except as described above, neither we nor our affiliates receive payment for providing goods or services to the Brand Fund. We or our affiliate are not obligated by our administration of the Brand Fund to make expenditures for you that are equivalent or proportionate to your contributions, or to ensure that any particular franchisee benefits directly or on a pro rata basis from the expenditures or activities of the Brand Fund. (Franchise Agreement, Section 12.5.1.)

We anticipate that all contributions to the Brand Fund will be expended for their intended purposes during the fiscal year in which the contributions are made. To the extent any contributions are not expended by the end of the applicable fiscal year, they will be expended no later than the end of the taxable year following the year of receipt. (Franchise Agreement, Section 12.5.4.) Although we intend that the Brand Fund will be of perpetual duration, we and our affiliates may terminate the Brand Fund in our discretion; however, the Brand Fund may not be terminated until all monies in the Brand Fund have been expended for advertising and/or promotional purposes or returned to contributors on the basis of their respective contributions. (Franchise Agreement, Section 12.5.5.) We will maintain separate bookkeeping accounts for the Brand Fund and may form an affiliated entity to control and administer the Brand Fund. The Brand Fund will not be audited. We will make available to you an annual accounting once per year of the Brand Fund's expenditures for the prior year upon your written request.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 19–26)