What is the scope of the 'System' that Beggars Pizza franchisees must adhere to?

WHEREAS, Franchisee desires to enter into the business of operating a Beggars Pizza® restaurant under the System and Proprietary Marks, and wishes to enter into an agreement with Franchisor for that purpose, and to receive the training and other assistance provided by Franchisor in connection therewith; and

WHEREAS, Franchisee understands and acknowledges the importance of Franchisor's high standards of quality, cleanliness, appearances, and service and the necessity of operating the business franchised hereunder in conformity with Franchisor's standards and specifications.

NOW, THEREFORE, in consideration of the terms and conditions hereinafter set forth, and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

1. GRANT

• 1.1 Grant of Franchise.

Franchisor grants to Franchisee the right and Franchisee undertakes the obligation, upon the express terms and conditions set forth in the Agreement, to establish and operate a Beggars Pizza® restaurant under the Proprietary Marks and System (the "Restaurant") and to use the Proprietary Marks and the System, as they may be changed and improved from time to time at Franchisor's sole discretion, solely in connection therewith.Approved Location.

• 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.

• 7.4.13 To participate in all promotional programs developed by Franchisor for the System including, without limitation, gift card programs, gift certificate programs, loyalty programs, and coupon or discount programs (except as prohibited by applicable law), as prescribed by Franchisor in the Manual or otherwise in writing from time to time including, without limitation, selling and offering for sale gift certificates or gift cards which may be redeemed at any Beggars Pizza® restaurant for menu items or products, permitting customers who purchased gift certificates or gift cards from another Beggars Pizza® restaurant or Franchisor to redeem their gift certificates for menu items or products at the Restaurant, participating in Franchisor's customer complaint program which may require Franchisee to offer free gift certificates at Franchisee's expense to customers complaining about service at the Restaurant, and installing and using the required equipment or information systems necessary to allow customers to participate in System loyalty programs at Franchisee's expense.

Franchisee must comply with all of Franchisor's policies regarding advertising and promotion including, without limitation, the use and acceptance of coupons and gift cards.

Franchisee acknowledges and agrees that such participation may require the payment and/or transfer of gift card revenue to a centralized account controlled by Franchisor, its affiliate, or to a designated third party for the administration of the gift card program.

• 7.4.14 To participate in all online, electronic, or centralized ordering programs developed or designated by Franchisor for the System, and only such online, electronic, or centralized ordering programs developed or designated by Franchisor, as prescribed by Franchisor in the Manual or otherwise in writing from time to time.

Such participation may include, without limitation, installing and using, at Franchisee's expense, the required fixtures, equipment, and information systems necessary for participation, and paying to Franchisor and/or a designated third- party provider the then-current fees associated with such programs.

Upon termination or expiration of the Agreement, all rights granted hereunder to Franchisee will forthwith terminate, and:

• 16.1 Cease Operations. Franchisee must immediately cease to operate the Restaurant, and will not thereafter, directly or indirectly, represent to the public or hold itself out as a present or former franchisee of Franchisor. Immediately upon the expiration or termination hereof, Franchisee must dispose of, and not sell, any proprietary or trade secret products sold hereunder including, without limitation, any products bearing the Proprietary Marks or contained in packaging bearing the Proprietary Marks.
• 16.2 Cease Use of Confidential Information and Marks. Franchisee must immediately and permanently cease to use, in any manner whatsoever, any confidential methods, procedures and techniques associated with the System; any Confidential Information; the Proprietary Mark "Beggars Pizza®" and all other Proprietary Marks and distinctive forms, slogans, signs, symbols, and devices associated with the System. In particular, Franchisee must cease to use, without limitation, all signs, advertising materials, displays, stationery, forms, products, and any other articles which display the Proprietary Marks.
• 16.3 Cancellation of Registrations. Franchisee must take such action as may be necessary to cancel any assumed name registration or equivalent registration obtained by Franchisee which contains the mark "Beggars Pizza®" or any other Proprietary Marks, and Franchisee must furnish Franchisor with evidence satisfactory to Franchisor of compliance with this obligation within five (5) days after termination or expiration of the Agreement.
• 16.4 Assignment of Lease. Franchisee must, at Franchisor's option, assign to Franchisor any interest which Franchisee has in any lease or sublease for the Premises. If Franchisor does not elect to exercise its option to acquire the lease or sublease for the Premises, Franchisee must make such modifications or alterations to the premises immediately upon termination or expiration of the Agreement as may be necessary to distinguish the appearance of the premises from that of the Restaurant under the System, and must make such specific additional changes thereto as Franchisor may reasonably request for that purpose. If Franchisee fails or refuses to comply with the requirements of this Section 16.4, Franchisor will have the right to enter upon the premises

Franchisee must comply with all federal and state laws requiring disclosure of nutritional information on menus and menu boards including, without limitation, the requirements of Section 4205 of the Patient Protection and Affordable Care Act of 2010 and related regulations.

Franchisor and Franchisee agree that the Agreement does not create a fiduciary relationship between them, that Franchisee will be an independent contractor, and that nothing in the Agreement is intended to constitute either party an agent, legal representative, subsidiary, joint venturer, joint employer, partner, employee, or servant of the other for any purpose whatsoever.

Franchisee must provide delivery service of all approved menu items to customers located in Franchisee's Territory during the term of the Agreement in accordance with Franchisor's then-current delivery standards as set forth in the Manual.

Franchisee must purchase and install, at Franchisee's expense, all fixtures, furnishings, supplies, equipment including, without limitation, décor and signs as F

Source: Item 22 — CONTRACTS (FDD page 39)