What happens if Beggars Pizza does not adhere to the standards and specifications set by the Franchisor?

red by Franchisee and its employees in connection with the initial training program and any additional courses, seminars, and other training programs, and mandatory meetings and/or conferences including, without limitation, the costs of transportation, lodging, meals, and wages.

7. DUTIES OF FRANCHISEE

• 7.1 Operating Standards. Franchisee understands and acknowledges that every detail of the Restaurant is important to Franchisee, Franchisor and other franchisees in order to develop and maintain high operating standards, to increase the demand for the products sold by all Beggars Pizza® restaurants operating under the System, and to protect Franchisor's reputation and goodwill.
• 7.2 Shop Operations. Franchisee must use the Premises solely for the operation of the business franchised hereunder; must keep the Restaurant open and in normal operation for such minimum hours and days as Franchisor may specify; must refrain from using or permitting the use of the Premises for any other purpose or activity at any time without first obtaining the written consent of Franchisor; and must operate the Restaurant in strict conformity with such methods, standards, and specifications as Franchisor may from time to time prescribe in the Manual or

otherwise in writing. Franchisee must refrain from deviating from such standards, specifications, and procedures without Franchisor's prior written consent.

• 7.3 Trade Secret Items, Commissary Items, and Other Items. Franchisor has developed certain proprietary, confidential and trade secret recipes that are part of the System including, without limitation, pizza dough, spaghetti and pizza sauces, sausage, and secret spice blends, and may develop additional such recipes and products from time to time. Franchisor sells such products through Begcom or other designated suppliers. Franchisee acknowledges and agrees that such items are essential to the operation of the Restaurant. Begcom is the designated supplier of certain additional food items and supplies (including, without limitation, cheeses, sausages, and paper products), some of which bear the Proprietary Marks and some of which do not bear the Proprietary Marks, and Franchisor may from time to time specify in the Manual or otherwise in writing certain other parties that will be designated suppliers for specified products, materials, supplies, paper goods, fixtures, furnishings and equipment used or sold at the Restaurant. Franchisee acknowledges and agrees that it must purchase such items from Begcom or such other designated suppliers in order to assure the uniform quality and image associated with the Restaurant.

• 7.4 Adherence to Standards and Specifications. To ensure that the highest degree of quality and service is maintained, Franchisee must operate the Restaurant in strict conformity with such methods, standards, and specifications as Franchisor may from time to time prescribe in the Manual or otherwise in writing. Franchisee must:

• 7.4.1 Maintain in sufficient supply as Franchisor may prescribe in the Manual or otherwise in writing, and to use at all times, only such products and ingredients acquired from a supplier or suppliers designated or approved by Franchisor, and such other ingredients, products, materials, supplies, paper goods, fixtures, furnishings, equipment, signs and menu items, as conform with Franchisor's standards and specifications, and to refrain from deviating therefrom by the use of nonconforming items, without Franchisor's prior written consent. Franchisor may designate itself or an affiliate to be an approved supplier, or the only approved supplier, of any products or other items;

• 7.4.2 Sell or offer for sale only such menu items, and other products and services as have been expressly approved for sale in writing by Franchisor; to sell or offer for sale all types of menu items, and other products and services specified by Franchisor; to refrain from any deviation from Franchisor's standards and specifications without Franchisor's prior written consent; and to discontinue selling and offering for sale any menu items, or other products or services which Franchisor may, in its discretion, disapprove in writing at any time. Any time Franchisor notifies Franchisee that an item will become an approved product, or that an item will no longer be an approved product, Franchisor will include a deadline by which Franchisee must offer such approved product for sale, or must cease selling the item that is no longer an approved product. The deadline will be at least ninety (90) days after Franchisor gives Franchisee the notice, in the case of a new approved product, and at least thirty (30) days after Franchisor gives Franchisee the notice, in the case of a product that is no longer an approved product; and

• 7.4.3 Purchase products and supplies designated by Franchisor solely from Franchisor, Begcom, or such other designated sources as Franchisor may describe in the Manual or otherwise in writing from time to time.

• 7.4.3.1 Franchisee must enter into Begcom's then-current commissary agreement ("Commissary Agreement") for the purchase of products designated by Franchisor for purchase from Begcom during the term hereof, and must make payment to Begcom as required thereunder.

• 7.4.3.2 If Franchisee fails to make any payment in full to Franchisor, its designee, or Begcom for any reason when due under the Agreement, the Commissary Agreement, or otherwise, Franchisor and Begcom may, among other remedies, (a) suspend or refuse shipment to Franchisee of additional products until such payment has been made, and (b) require payment for any or all future shipments of products to be made on a cash-on-delivery basis.

• 7.4.4 All products must be stored, maintained, and served in strict conformity with Franchisor's standards, specifications, and procedures including, without limitation, stored in equipment approved by Franchisor in the Manual or in writing from time to time from the time of delivery to the time of sale as Franchisor may specify in the Manual or otherwise in writing from time to time.

Source: Item 22 — CONTRACTS (FDD page 39)