Big_Apple_Bagels 2025 Franchise FAQ - FDD Ninja

Question 1

What is the estimated total initial investment range for a Big Apple Bagels production store franchise?

Accepted Answer

| Type of Expenditure | Estimated Amount or Estimated High-Low Range | Method of Payment | When Due | To Whom Paid |
|---|---|---|---|---|
| Initial Franchise Fee (1,2) | $25,000 | Lump Sum less Franchise Fee Deposit paid | When you sign the Franchise Agreement | BAB |
| Store Opening Marketing Fee(3) | $7,500 | Lump Sum | Upon signing Franchise Agreement | BAB (BAGELS Marketing Fund) |
| Professional Fees(4) | $5,000 - $10,000 | As Agreed | As incurred | Professionals |
| First Month's Rent and Security | $4,000 - $9,000 | As agreed in | As agreed in lease | Lessor |
| Deposit(5) |  | lease |  |  |
| Insurance(6) | $5,000-$9,000 | Lump Sum | As incurred | Insurance Company |
| Leasehold Improvements(7) | $170,000 - $292,000 | As agreed | As incurred | Suppliers |
| Exterior and Interior Signage | $6,000 - $12,000 | As agreed | As incurred | Designated |
| and Display (8) |  |  |  | Supplier |
| Furniture, Fixtures, Equipment | $226,000 - $270,000 | As agreed | As incurred | Approved |
| (9) |  |  |  | Suppliers |
| Training(10) | $2,000 - $5,000 | As incurred | Before Opening | Hotels; Transportation Lines; Car; Restaurants |
| Prepaid Expenses, Deposits(11) | $500 - $1,500 | Lump Sum | As incurred | Third Parties |
| Opening Inventory, Supplies(12) | $15,000-$23,000 | As agreed | As incurred | Approved Suppliers |
| Additional Funds - 3 months(13) | $12,000 - $18,000 | Varies | As incurred | Third Parties |
| TOTALS | $478,000-$685,000 |  |  |  |

Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 26–34)

Question 2

How many Big Apple Bagels outlets opened in all states during 2024?

Accepted Answer

| Col. 1 State | Col. 2 Year | Col. 3 Outlets at Start of Year | Col. 4 Outlets Opened | Col. 5 Terminations | Col. 6 Non- Renewals | Col. 7 Reacquired by Franchisor | Col. 8 Ceased Operations Other Reasons | Col. 9 Outlets at End of the Year |
|---|---|---|---|---|---|---|---|---|
| California | 2022 | 3 | 0 | 0 | 0 | 0 | 0 | 3 |
|  | 2023 | 3 | 0 | 0 | 0 | 0 | 1 | 2 |
|  | 2024 | 2 | 1 | 0 | 0 | 0 | 0 | 3 |
| Florida | 2022 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2023 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2024 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| Illinois | 2022 | 3 | 0 | 0 | 0 | 0 | 0 | 3 |
|  | 2023 | 3 | 0 | 0 | 0 | 0 | 0 | 3 |
|  | 2024 | 3 | 0 | 0 | 0 | 0 | 0 | 3 |
| Indiana | 2022 | 3 | 0 | 0 | 0 | 0 | 0 | 3 |
|  | 2023 | 3 | 0 | 0 | 0 | 0 | 0 | 3 |
|  | 2024 | 3 | 0 | 0 | 0 | 0 | 0 | 3 |
| Iowa | 2022 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2023 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2024 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| Michigan | 2022 | 23 | 0 | 0 | 0 | 0 | 1 | 22 |
|  | 2023 | 22 | 0 | 0 | 0 | 0 | 0 | 22 |
|  | 2024 | 22 | 0 | 0 | 0 | 0 | 0 | 22 |
| Minnesota | 2022 | 2 | 0 | 0 | 0 | 0 | 0 | 2 |
|  | 2023 | 2 | 0 | 0 | 0 | 0 | 0 | 2 |
|  | 2024 | 2 | 0 | 0 | 0 | 0 | 0 | 2 |
| Nebraska | 2022 | 2 | 0 | 0 | 0 | 0 | 0 | 2 |
|  | 2023 | 2 | 0 | 0 | 0 | 0 | 0 | 2 |
|  | 2024 | 2 | 0 | 0 | 0 | 0 | 0 | 2 |
| Nevada | 2022 | 1 | 0 | 0 | 0 | 0 | 1 | 0 |
|  | 2023 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
|  | 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Ohio | 2022 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| Col. 1 State | Col. 2 Year | Col. 3 Outlets at Start of Year | Col. 4 Outlets Opened | Col. 5 Terminations | Col. 6 Non- Renewals | Col. 7 Reacquired by Franchisor | Col. 8 Ceased Operations Other Reasons | Col. 9 Outlets at End of the Year |
|---|---|---|---|---|---|---|---|---|
|  | 2023 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2024 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| Pennsylvania | 2022 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2023 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2024 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| South | 2022 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| Carolina |  |  |  |  |  |  |  |  |
|  | 2023 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2024 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| Washington | 2022 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2023 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
|  | 2024 | 1 | 0 | 0 | 0 | 0 | 1 | 0 |
| Wisconsin | 2022 | 9 | 0 | 0 | 0 | 0 | 0 | 9 |
|  | 2023 | 9 | 0 | 0 | 0 | 0 | 0 | 9 |
|  | 2024 | 9 | 0 | 0 | 0 | 0 | 0 | 9 |
| Wyoming | 2020 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
|  | 2023 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
|  | 2024 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| All States | 2022 | 52 | 0 | 0 | 0 | 0 | 2 | 50 |
| and Totals |  |  |  |  |  |  |  |  |
|  | 2023 | 50 | 0 | 0 | 0 | 0 | 1 | 49 |
|  | 2024 | 49 | 1 | 0 | 0 | 0 | 1 | 49 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 81–86)

Question 3

What was the total number of Big Apple Bagels outlets operating across all states at the end of 2024?

Accepted Answer

| Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2022 | 52 | 50 | -2 |
|  | 2023 | 50 | 49 | -1 |
|  | 2024 | 49 | 49 | 0 |
| Company- | 2022 | 0 | 0 | 0 |
| Owned |  |  |  |  |
|  | 2023 | 0 | 0 | 0 |
|  | 2024 | 0 | 0 | 0 |
| Total Outlets | 2022 | 52 | 50 | -2 |
|  | 2023 | 50 | 49 | -1 |
|  | 2024 | 49 | 49 | 0 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 81–86)

Question 4

What was the total number of Big Apple Bagels outlets operating across all states at the start of 2023?

Accepted Answer

| Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2022 | 52 | 50 | -2 |
|  | 2023 | 50 | 49 | -1 |
|  | 2024 | 49 | 49 | 0 |
| Company- | 2022 | 0 | 0 | 0 |
| Owned |  |  |  |  |
|  | 2023 | 0 | 0 | 0 |
|  | 2024 | 0 | 0 | 0 |
| Total Outlets | 2022 | 52 | 50 | -2 |
|  | 2023 | 50 | 49 | -1 |
|  | 2024 | 49 | 49 | 0 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 81–86)

Question 5

What types of revenue did BAB, Inc. derive from Big Apple Bagels franchisees and My Favorite Muffin Franchisees in its fiscal year ended November 30, 2024?

Accepted Answer

imited to branded disposables and catering packaging.

In its fiscal year ended November 30, 2024, BAB, Inc. derived license fee revenue of \$80,490 from coffee purchases, \$2,849 from cream cheese purchases, \$3,797 from frozen bagels purchases, and \$93,646 from purchases of muffin mix and bakery products by Franchisees, including My Favorite Muffin Franchisees as well as BAGELS Franchisees.

You must obtain exterior and interior signage, menu panels and certain printed promotional tools from our designated supplier, which is an independent third party. Prior to December 2017, our designated supplier for these same items was BAB Operations, Inc., an affiliate of BAB, which

derived revenue from franchisee purchases of said services. A small selection of these items continue to be supplied by BAB Operations, Inc. In its fiscal year ended November 30, 2024, BAB Operations, Inc.

Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 35–38)

Question 6

According to the Big Apple Bagels franchise agreement, what is the primary difference in production capabilities between a BAGELS Production Store and a BAGELS Satellite Store?

Accepted Answer

BAGELS Stores may be either a BAGELS Production Store or a BAGELS Satellite Store.

A "BAGELS Production Store" is a store which has the capacity for the production, baking, retail and wholesale distribution, and on-site consumption of bagels and muffins, and the production, retail distribution and on-site consumption of cream cheese spreads, breakfast and lunch sandwiches, coffee beverages, and soft drinks.

A "BAGELS Satellite Store" is a store which has the capacity for baking, retail and wholesale distribution of bagels and muffins, and the production and retail distribution of cream cheese spreads, breakfast and lunch sandwiches, coffee beverages, and soft drinks.

BAGELS Satellite Stores may or may not have the capacity for on-site consumption of these menu items.

All mixing/production of bagel dough, muffin batters and other specialty bakery products is performed at Franchisee's BAGELS Production Store.

The BAGELS Satellite Store may have a more limited menu than a BAGELS Production Store.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 7

According to the Big Apple Bagels Transferee's Waiver and Release, what might be different in the Transferee's Franchise Agreement compared to the Seller's Franchise Agreement?

Accepted Answer

- 2. Transferee makes the following acknowledgements and statements, with the express understanding that BAB is relying on such statements in giving its consent and in waiving its right of first refusal:
  - a. Transferee will be required to sign a new Franchise Agreement ("Transferee's Franchise Agreement") with BAB, and will not be assuming the Seller's Franchise Agreement. Transferee's Franchise Agreement will be for a new term as described in Transferee's Franchise Agreement, and will not be the remaining term of Seller's Franchise Agreement. Transferee's Franchise Agreement may contain materially different terms than in the Seller's Franchise Agreement, including a different rate for royalty fees and Marketing Fund contributions.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 8

Besides Big Apple Bagels, does BAB Systems, Inc. operate a franchise distribution system?

Accepted Answer

- F. Under a separate offering and disclosure document, Franchisor, BAB Systems, Inc., operates a franchise distribution system to own and operate stores ("My Favorite Muffin Stores") for retail distribution of "My Favorite Muffin" branded muffins and Brewster's branded coffee. These Stores are operated under the trademarks and service marks "My Favorite Muffin Gourmet Muffin Bakery" or "My Favorite Muffin Your All Day Bakery Cafe," one of which is their primary identifying brand.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 9

Besides Big Apple Bagels, what other branded products are associated with BAB Systems, Inc. and its My Favorite Muffin Stores?

Accepted Answer

s Bros. is a brand acquired by an affiliate of Franchisor in 1999, and the use of that brand name by Franchisee for wholesale products is authorized.
- F. The grant of the right of Franchisee to distribute Branded Products under a catering program is strictly at the discretion of Franchisor, and shall be by execution of the Catering Program Addendum to this Franchise Agreement. "Branded Products" are those bagels, cream cheese spreads, muffins and bakery products, sandwiches and coffee retailed and sold to the public under the "Big Apple Bagels," "My Favorite Muffin," and "Brewster's" trademarks, respectively.
- G. Under a separate offering and disclosure document, Franchisor, BAB Systems, Inc., operates a franchise distribution system to own and operate stores ("My Favorite Muffin Stores") for retail distribution of "My Favorite Muffin" branded muffins and Brewster's branded coffee. These Stores are operated under the trademarks and service marks "My Favorite Muffin Gourmet Muffin Bakery" or "My Favorite Muffin Your All Day Bakery Cafe," one of which is their primary identifying brand. BAB Systems, Inc. has offered My Favorite Muffin franchises since 1998 and currently there are 18 My Favorite Muffin franchised stores in operation throughout the United States.

#### 1. **GRANT OF FRANCHISE.**

|  BAGELS Satellite Store ("Store") in or at the following general location (when the exact location is |
|-------------------------------------------------------------------------------------------------------------|
|                                                                                                             |
| determined, the parties will complete Rider A):                                                             |

and to use the Marks and the System in the operation thereof. Termination or expiration of this Agreement shall constitute a termination or expiration of the Franchise. Franchisee agrees that he will at all times faithfully, honestly and diligently perform his obligations hereunder, and that he will continuously exert his

best efforts to promote and enhance the business of the Store and the goodwill of the Marks.

- b. **Restrictions Upon Franchisee's Channels of Distribution.** Franchisee is restricted solely to the retail sale of products sold under this Agreement. Franchisee is expressly prohibited from engaging in the wholesale distribution of products under this Agreement, unless Franchisee and Franchisor have entered into a Wholesale Program Addendum. Franchisee is expressly prohibited from engaging in a catering service selling Branded Products under this Agreement, unless Franchisee and Franchisor have entered into a Catering Program Addendum.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 10

What other brands are associated with BAB Systems, Inc. besides Big Apple Bagels?

Accepted Answer

BAB Systems, Inc. (the "Company") franchises and licenses Big Apple Bagels® ("BAB"), My Favorite Muffin® ("MFM") and SweetDuet Frozen Yogurt & Gourmet Muffins® ("SD") concepts located in the United States. The franchised units operating as "Big Apple Bagels®," featuring daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagel sandwiches and other related products. The BAB units are primarily concentrated in the Midwest and Western United States. The MFM brand consists of units operating as "My Favorite Muffin Gourmet Muffin Bakery™" ("MFM Bakery"), featuring a large variety of freshly baked muffins and coffees and units operating as "My Favorite Muffin Your All-Day Bakery Café®" ("MFM Cafe") featuring these products as well as a variety of specialty bagel sandwiches and related products. Although the Company doesn't actively market Brewster's stand-alone franchises, Brewster's coffee products are sold in most franchised units.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 11

What is the difference in the initial franchise fee for the first and subsequent Big Apple Bagels Production Stores, as detailed in Item 5?

Accepted Answer

. BAGELS Production Store Franchise

Your first BAGELS Store must be a BAGELS Production Store. You must pay an initial non-refundable franchise fee of \$25,000 for your first BAGELS Production Store, payable upon execution of the Franchise Agreement. The initial franchise fee shall be fully earned when you pay it to BAB.

For each subsequent store, the franchise fee will be as follows:

2 nd and subsequ

Question 12

What is the difference between a Big Apple Bagels Production Store and a Big Apple Bagels Satellite Store?

Accepted Answer

d procedures, and trade dress, all of which may be improved, further developed or otherwise modified from time to time by Franchisor ("System").
- B. BAGELS Stores may be either a BAGELS Production Store or a BAGELS Satellite Store. A "BAGELS Production Store" is a store which has the capacity for the production, baking, retail and wholesale distribution, and on-site consumption of bagels and muffins, and the production, retail distribution and on-site consumption of cream cheese spreads, breakfast and lunch sandwiches, coffee beverages, and soft drinks. A "BAGELS Satellite Store" is a store which has the capacity for baking, retail and wholesale distribution of bagels and muffins, and the production and retail distribution of cream cheese spreads, breakfast and lunch sandwiches, coffee beverages, and soft drinks. BAGELS Satellite Stores may or may not have the capacity for on-site consumption of these menu items. All mixing/production of bagel dough, muffin batters and other specialty bakery products is performed at Franchisee's BAGELS Production Store. The BAGELS Satellite Store may have a more limited menu than a BAGELS Production Store.
- C. Franchisor grants to certain persons who meet Franchisor's qualifications a franchise ("Franchise") to own and operate a BAGELS Store utilizing the Marks and System.
- D. Franchisee has applied for a license to own and operate a BAGELS Store at the location described in Rider A to this Agreement. Such application has been approved by Franchisor in reliance upon all of the representations made therein. Franchisee represents to Franchisor, as an

inducement to Franchisor's entry into this Agreement, that Franchisee has made no misrepresentations in obtaining the Franchise herein granted.

- E.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 13

How does the initial franchise fee for a Big Apple Bagels Production Store (Item 5) relate to the ongoing royalty fees or other payments required under the Franchise Agreement?

Accepted Answer

. BAGELS Production Store Franchise

Your first BAGELS Store must be a BAGELS Production Store. You must pay an initial non-refundable franchise fee of \$25,000 for your first BAGELS Production Store, payable upon execution of the Franchise Agreement. The initial franchise fee shall be fully earned when you pay it to BAB.

For each subsequent store, the franchise fee will be as follows:

2 nd and subsequ

Question 14

How does the initial franchise fee for a Big Apple Bagels store in Item 5 compare to the store opening marketing fee in Item 7?

Accepted Answer

[Item 5: INITIAL FEES]

#### A. BAGELS Production Store Franchise

Your first BAGELS Store must be a BAGELS Production Store. You must pay an initial non-refundable franchise fee of $25,000 for your first BAGELS Production Store, payable upon execution of the Franchise Agreement. The initial franchise fee shall be fully earned when you pay it to BAB.

#### B. BAGELS Satellite Store Franchise

The initial franchise fee for a BAGELS Satellite Store franchise is currently $15,000, payable upon the execution of the Franchise Agreement.

### F. Store Opening Marketing Fee

In addition to the initial franchise fee, you must pay BAB a Store Opening Marketing Fee when you sign the Franchise Agreement. The Store Opening Marketing Fee is $7,500 for a BAGELS Production Store, and $3,000 for a BAGELS Satellite Store. For a Franchisee who purchases an existing BAGELS Store, the Store Opening Marketing Fee is $1,000. The Store Opening Marketing Fee will be used in connection with your grand opening as well as for local advertising for your Store during the initial few months of operation. The Store Opening Marketing Fee is not refundable under any conditions.

#### G. Veterans Discount Program

To provide support to past veteran and current veterans being released from active service we offer all qualifying veterans a discount of $10,000 from the Initial $25,000 Franchise Fee off your first BAGELS Production Store Franchise. This discount does not apply to the Satellite Store franchise, or to your 2nd or subsequent franchises.

At our discretion, we may waive some or all of the Store Opening Marketing Fee.

Question 15

Are the insurance requirements potentially higher for a Big Apple Bagels Satellite Store compared to a Production Store?

Accepted Answer

If this Agreement is for a BAGELS Satellite Store, the insurance requirements may be higher than for a BAGELS Production Store, due to increased vehicle use.

- h. **Delivery of Products to BAGELS Satellite Store.** If this Agreement is for the grant of a BAGELS Satellite Store, the bagels sold in Franchisee's Store will be fresh baked bagels supplied by Franchisee's own BAGELS Production Store.

If Franchisee has a BAGELS Production Store that furnishes bagels to Franchisee's BAGELS Satellite Store, Franchisee must facilitate the timely delivery of products requiring among other items, additional vehicles, higher insurance coverages, and storage bins.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 16

What is the relationship between the initial franchise fee for a Big Apple Bagels Production Store in Item 5 and the estimated initial investment for the same in Item 7?

Accepted Answer

[Item 7: ESTIMATED INITIAL INVESTMENT]

| Type of Expenditure | Estimated Amount or Estimated High-Low Range | Method of Payment | When Due | To Whom Paid |
|---|---|---|---|---|
| Initial Franchise Fee (1,2) | $25,000 | Lump Sum less Franchise Fee Deposit paid | When you sign the Franchise Agreement | BAB |
| Store Opening Marketing Fee(3) | $7,500 | Lump Sum | Upon signing Franchise Agreement | BAB (BAGELS Marketing Fund) |
| Professional Fees(4) | $5,000 - $10,000 | As Agreed | As incurred | Professionals |
| First Month's Rent and Security | $4,000 - $9,000 | As agreed in | As agreed in lease | Lessor |
| Deposit(5) |  | lease |  |  |
| Insurance(6) | $5,000-$9,000 | Lump Sum | As incurred | Insurance Company |
| Leasehold Improvements(7) | $170,000 - $292,000 | As agreed | As incurred | Suppliers |
| Exterior and Interior Signage | $6,000 - $12,000 | As agreed | As incurred | Designated |
| and Display (8) |  |  |  | Supplier |
| Furniture, Fixtures, Equipment | $226,000 - $270,000 | As agreed | As incurred | Approved |
| (9) |  |  |  | Suppliers |
| Training(10) | $2,000 - $5,000 | As incurred | Before Opening | Hotels; Transportation Lines; Car; Restaurants |
| Prepaid Expenses, Deposits(11) | $500 - $1,500 | Lump Sum | As incurred | Third Parties |
| Opening Inventory, Supplies(12) | $15,000-$23,000 | As agreed | As incurred | Approved Suppliers |
| Additional Funds - 3 months(13) | $12,000 - $18,000 | Varies | As incurred | Third Parties |
| TOTALS | $478,000-$685,000 |  |  |  |

[Item 5: INITIAL FEES]

#### **Item 5. INITIAL FEES**

#### A. BAGELS Production Store Franchise

Your first BAGELS Store must be a BAGELS Production Store. You must pay an initial non-refundable franchise fee of $25,000 for your first BAGELS Production Store, payable upon execution of the Franchise Agreement. The initial franchise fee shall be fully earned when you pay it to BAB.

[Chunk 6 | Item 7: Estimated Initial Investment]
(1, 2) Initial Franchise Fee. The initial franchise fee is $25,000. If you enter into a Preliminary Agreement, you must pay BAB a deposit in the amount of $10,000. If you ultimately sign a Franchise Agreement, you must pay BAB the balance of the applicable initial franchise fee at the time you sign the Franchise Agreement. You must sign the Franchise Agreement within 14 days after we approve your site, or we may terminate the Preliminary Agreement. See Item 5 concerning the refund of your deposit. The $25,000 is for your first Franchise Agreement; if you sign more than 1 Franchise Agreement, the franchise fee is $20,000 for your 2nd and subsequent BAGELS Production Stores.

Question 17

Does a Big Apple Bagels Satellite Store have the same menu as a Production Store?

Accepted Answer

xhibit B.

A "BAGELS Production Store" is a store which has the capacity for the production, baking, retail and wholesale distribution, and on-site consumption of bagels and muffins, and the production, retail distribution and on-site consumption of cream cheese spreads, breakfast and lunch sandwiches, coffee beverages and soft drinks.

Other than Brewster's branded coffee and My Favorite Muffin branded muffins, the food and drink products utilized in the BAGELS Production Store must be purchased from approved suppliers and/or must meet established standards and specifications. You must purchase coffee and muffin mix from either BAB or its designated supplier.

The franchise is primarily to operate a retail business. However, you may also be granted rights to wholesale certain products under the Wholesale Program Addendum attached as Exhibit F.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 18

Since what year has BAB Systems, Inc. offered My Favorite Muffin franchises, which are related to Big Apple Bagels?

Accepted Answer

- G. Under a separate offering and disclosure document, Franchisor, BAB Systems, Inc., operates a franchise distribution system to own and operate stores ("My Favorite Muffin Stores") for retail distribution of "My Favorite Muffin" branded muffins and Brewster's branded coffee. These Stores are operated under the trademarks and service marks "My Favorite Muffin Gourmet Muffin Bakery" or "My Favorite Muffin Your All Day Bakery Cafe," one of which is their primary identifying brand. BAB Systems, Inc. has offered My Favorite Muffin franchises since 1998 and currently there are 18 My Favorite Muffin franchised stores in operation throughout the United States.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 19

According to the FDD, under what conditions can financial performance information differing from Item 19 be given to a prospective Big Apple Bagels franchisee?

Accepted Answer

BAB does not use any public figure to promote its franchise.

#### **19. FINANCIAL PERFORMANCE REPRESENTATIONS**

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the Disclosure Document. Financial performance information that differs from that included in Item 19 may be given only if (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

The information included in the Table 1 below is based on reports submitted to us by 48 (for 2024 and 2023) fully-reporting franchised BAGELS Stores located in the United States that were operated for the entire 2023 and 2024 Fiscal Years. For 2023 and 2024, the Franchised Stores include 48 BAGELS Production Stores and 0 BAGELS Satellite Store (collectively the "Franchised Stores"). The Table does not include any company-owned or affiliate-owned stores. Any franchised BAGELS Stores that either opened or closed during the 2023 or 2024 Fiscal Years, or failed to submit all 52 weeks of reporting during the 2023 or 2024 Fiscal Years, have been excluded from the information contained in these Tables.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 76–80)

Question 20

According to RCW 49.62.020, under what earnings threshold is a noncompetition covenant void and unenforceable against a Big Apple Bagels employee in Washington?

Accepted Answer

Pursuant to RCW 49.62.020, a noncompetition covenant is void and unenforceable against an employee, including an employee of a franchisee, unless the employee's earnings from the party seeking enforcement, when annualized, exceed $100,000 per year (an amount that will be adjusted annually for inflation).

As a result, any provisions contained in the franchise agreement or elsewhere that conflict with these

R:\59000s\59000 - 59099\59039 BAB Bagels\2025 Franchise Filings General\BAB FDD2025.001 multistate marked up by CKT 02 04 2025.docx

limitations are void and unenforceable in Washington.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 21

According to RCW 49.62.030, under what earnings threshold is a noncompetition covenant void and unenforceable against an independent contractor of a Big Apple Bagels franchisee in Washington?

Accepted Answer

es are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, rights or remedies under the Act such as a right to a jury trial, may not be enforceable.
- 5. Transfer fees are collectable to the extent that they reflect the franchisor's reasonable estimated or actual costs in effecting a transfer.
- R:\59000s\59000 59099\59039 BAB Bagels\2025 Franchise Filings General

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 22

According to the Big Apple Bagels Transferee's Waiver and Release, what are the conditions that must occur for the Transferee's Franchise Agreement to be executed prior to the closing of the purchase?

Accepted Answer

- 3. Transferee's Franchise Agreement, if executed prior to the closing of Transferee's purchase of the Seller's interest in the Subject Store, is contingent on the following conditions and events occurring:
  - a. Transferee must meet all of BAB's criteria to qualify as a franchisee;
  - b. Transferee must complete BAB's initial training program to BAB's satisfaction;
  - c. All the requirements set forth in Paragraph 14.b.ii. of Seller's Franchise Agreement relating to transfer are performed;
  - d. Transferee and the Seller close on Transferee's purchase of the Subject Store; and
  - e. The Seller's Franchise Agreement is terminated by mutual agreement of the Seller and BAB.

Upon completion of the conditions and events set forth above in this Paragraph 3, BAB will issue a letter to Transferee acknowledging said fact; said letter will constitute BAB's consent to Transferee's purchase of the Subject Store.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 23

According to the Big Apple Bagels Transferee's Waiver and Release, what criteria must the transferee meet to qualify as a franchisee?

Accepted Answer

- 3. Transferee's Franchise Agreement, if executed prior to the closing of Transferee's purchase of the Seller's interest in the Subject Store, is contingent on the following conditions and events occurring:
  - a. Transferee must meet all of BAB's criteria to qualify as a franchisee;
  - b. Transferee must complete BAB's initial training program to BAB's satisfaction;
  - c. All the requirements set forth in Paragraph 14.b.ii. of Seller's Franchise Agreement relating to transfer are performed;

- i. **Franchisee May Not Transfer Without Approval of Franchisor.** Franchisee understands and acknowledges that the rights and duties created by this Agreement are personal to Franchisee (and its owners) and that Franchisor has granted the Franchise to Franchisee (and its owners) in reliance upon the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of Franchisee (and its owners). Accordingly, neither this Agreement nor the Franchise (or any interest therein), nor any part or all of the ownership of Franchisee or of the assets of Franchisee or the BAGELS Store (or any interest therein) may be transferred, sold, assigned, pledged, mortgaged or liened without the prior written approval of Franchisor, and any such transfer or attempt to transfer without such approval shall constitute a breach hereof, such be null and void, and shall convey no rights to or interests in this Agreement, the Franchise, Franchisee, the BAGELS Store or its assets.
- ii. **Conditions for Approval of Transfer.** If Franchisee and its owners are in full compliance with this Agreement, Franchisor shall not unreasonably withhold its approval of a transfer that meets all the applicable requirements of this Paragraph. The proposed transferee and its owners must be

individuals of good moral character and otherwise meet Franchisor's then applicable standards for BAGELS Store franchisees. Franchisor shall interview and evaluate the proposed transferee at Franchisor's principal place of business or at such other location that Franchisor designates.

- (1) the assignee, transferee or purchaser shall have been approved by Franchisor for financial responsibility, good moral character and suitability as an operator of a BAGELS Store;
- (3) the assignee, transferee or purchaser shall not be engaged in any activity which would be prohibited by Paragraph 9.f. of this Agreement;
- (12) if the transferee, prior to his or her initial contact with Franchisee, had contact with Franchisor with respect to a franchise opportunity, Franchisee shall pay Franchisor, in addition to the transfer fee described in Paragraph 14.b.ii.(2) above, a sum equal to ten percent (10%) of the gross sales price relating to the transaction between Franchisee and transferee, but in no event shall such sum be greater than Franchisor's then-current initial Franchise Fee;
- (14) the transferee must submit a Store Opening Marketing Fee in the amount of One Thousand Dollars ($1,000), to conduct a "re-Grand Opening,"

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 24

According to the Big Apple Bagels Transferee's Waiver and Release, what must happen to the Seller's Franchise Agreement?

Accepted Answer

- e. The Seller's Franchise Agreement is terminated by mutual agreement of the Seller and BAB.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 25

According to the Big Apple Bagels Transferee's Waiver and Release, what must happen between the transferee and seller regarding the purchase of the Subject Store?

Accepted Answer

BAB Franchise, made to Transferee by the Seller, are not to be considered as being made by, or imputed to, BAB.
  - c. No statements or representations made to Transferee by the Seller as to the operation of the Subject Store, including expected sales volume, profitability or income, have been authorized by BAB.
  - d. Transferee or its agents have examined the books and records of the Seller covering the Seller's operations of the Subject Store.

R:\59000s\59000 - 59099\59039 BAB Bagels\2025 Franchise Filings General\BAB FDD2025.001 multistate marked up by CKT 02 04 2025.docx

- e. In agreeing with the Seller to acquire Seller's interest in the Subject Store, Transferee has relied on its own investigation and evaluation of such operation and/or upon the advice and opinion of Transferee's accountant, banker, or other advisor; and has considered whether there is a reasonable prospect that the Subject Store will yield a profit to Transferee commensurate with Transferee's investment therein, including, but not limited to, compensation for Transferee's labor in operating the Subject Store.
- 3. Transferee's Franchise Agreement, if executed prior to the closing of Transferee's purchase of the Seller's interest in the Subject Store, is contingent on the following conditions and events occurring:
  - a. Transferee must meet all of BAB's criteria to qualify as a franchisee;
  - b. Transferee must complete BAB's initial training program to BAB's satisfaction;
  - c. All the requirements set forth in Paragraph 14.b.ii. of Seller's Franchise Agreement relating to transfer are performed;
  - d. Transferee and the Seller close on Transferee's purchase of the Subject Store; and
  - e. The Seller's Franchise Agreement is terminated by mutual agreement of the Seller and BAB.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 26

According to Washington state law, RCW 19.100.180, are there instances where the Big Apple Bagels Franchise Agreement can be superseded regarding termination and renewal?

Accepted Answer

The State of Washington has a Statute, RCW 19.100.180 which may supersede the BAGELS Franchise Agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise.

There may also be court decisions which may supersede the BAGELS Franchise Agreement in your relationship within the franchisor including the areas of termination and renewal of your franchise.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 27

Does the addendum to the Big Apple Bagels Franchise Agreement specify any exceptions to the Minnesota law regarding termination and non-renewal rights?

Accepted Answer

"With respect to franchises governed by Minnesota law, Franchisor will comply with Minn. Stat. Sec. 80C.14, Subd. 3, 4 and 5 which require, except in certain specified cases, that a franchisee be given 90 days' notice of termination (with 60 days to cure) and 180 days' notice for non-renewal of the BAGELS Franchise Agreement."

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 28

How is the amount determined if a Big Apple Bagels franchisee upgrades their store type?

Accepted Answer

In the event, subsequent to execution of this Franchise Agreement, Franchisee changes his BAGELS Store from one type to another (for example, from a BAGELS Satellite Store to a BAGELS Production Store), Franchisee must pay Franchisor the amount by which the franchise fee for the upgraded store, in effect when this Franchise Agreement is executed) exceeds the amount paid by Franchisee in connection with the type of BAGELS Store Franchisee originally intended to open.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 29

What is the assessment fee for Big Apple Bagels franchisees for the first three dishonored electronic bank drafts in a calendar year?

Accepted Answer

| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Assessment for Electronic bank draft being Dishonored | $25 or $50 | On demand | You must pay a $25 assessment fee for each of the 1st 3 times in any calendar year an electronic bank draft we attempt is dishonored, due to insufficient funds or a change in your bank account; after the 1st 3 transactions per calendar year, the assessment fee is $50 each |

Source: Item 6 — OTHER FEES (FDD pages 21–25)

Question 30

When does the Assignment Agreement (Exhibit M) apply to a Big Apple Bagels franchise?

Accepted Answer

| Exhibit B with Riders       | Franchise Agreement for BAGELS Production Store and BAGELS Satellite Store,                                                                           |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit C | Area Development Agreement |
| Exhibit D | Disclosure Acknowledgement Statement |
| Exhibit F | Wholesale Program Addendum |
| Exhibit G | Catering Program Addendum |
| Exhibit L | General Release (to be signed upon renewal or assignment of the franchise) |
| Exhibit M | Assignment Agreement (applies only if you are assigning your franchise to a corporation, limited liability company, or other entity controlled by you |

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 31

For a Big Apple Bagels BAGELS Satellite Store, is on-site consumption of menu items always permitted?

Accepted Answer

A "BAGELS Satellite Store" is a store which has the capacity for baking, retail and wholesale distribution of bagels and muffins, and the production and retail distribution of cream cheese spreads, breakfast and lunch sandwiches, coffee beverages, and soft drinks.

BAGELS Satellite Stores may or may not have the capacity for on-site consumption of these menu items.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 32

What is the condition under which BAB may derive revenue or other material consideration from a supplier of equipment to a Big Apple Bagels franchisee?

Accepted Answer

If you purchase equipment from a certain supplier approved by BAB, which supplier furnishes BAB blueprints for your Store (at BAB's expense), BAB may derive revenue or other material consideration from that supplier, either in the form of a partial reimbursement of the cost of the blueprints, or a credit toward future obligations of BAB to that supplier.

Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 35–38)

Question 33

What are the conditions that a Big Apple Bagels developer must meet to be granted franchises within the Exclusive Area during the Development Periods?

Accepted Answer

hisor (on behalf of itself and its affiliates) retains the right, in its sole discretion and without granting any rights to Developer: (a) to itself own and operate, or to grant other persons the right to own and operate, BAGELS Stores at such locations outside the Exclusive Area and on such terms and conditions as Franchisor deems appropriate in its sole discretion; and (b) to sell outside the Exclusive Area the services and products authorized for BAGELS Stores under the Marks or other trademarks, service marks and commercial symbols through dissimilar channels of distribution and pursuant to such terms and conditions as Franchisor deems appropriate.
- B. Rights During Development Periods. Provided Developer: (i) is in full compliance with the terms and conditions contained in this Agreement, including without limitation, the development obligations contained in Paragraph C of this Section 3; and (ii) is in full compliance with all obligations under all Franchise Agreements heretofore or hereafter entered into with Franchisor; then during the Development Periods, Franchisor: (1) will grant to Developer, in accordance with the provisions of Section 5 hereof, franchises for the ownership and operation of BAGELS Stores located within the Exclusive Area; and (2) will not operate (directly or through an affiliate), nor grant a franchise for the operation of, any BAGELS Stores to be located within the Exclusive Area, except such franchises as are granted to Developer.
- C. Development Obligations. Developer agrees during the term of this Agreement and any extensions thereof that he will at all times faithfully, honestly, and diligently perform his obligations hereunder and that he will continuously exert his best efforts to promote and enhance the development of BAGELS Stores within the Exclusive Area. Without limiting the foregoing obligation, Developer agrees to have signed leases within the Exclusive Area for the cumulative number of BAGELS Production Stores or BAGELS Satellite Stores at the end of each Development Period set forth in Section 4 of Rider B hereof ("Minimum Development Quota") and to have each

such Store open and operating within four (4) months from the date of possession. If Developer fails at any time to meet any Minimum Development Quota, Franchisor shall have the right to terminate this Agreement by delivering a notice to Developer stating that Franchisor elects to terminate this agreement as a result of such failure. Such termination shall be effective upon delivery of such notice of termination. Franchisor's right to terminate this Agreement shall be the sole and exclusive remedy of Franchisor for Developer's failure to meet a Minimum Development Quota.

#### **4. STORE CLOSINGS**

A BAGELS Store which is permanently closed with the approval of Franchisor after having been open shall be deemed open and in operation for purposes of the Minimum Development Quota if a substitute BAGELS Store is open and in operation within six (6) months from the date of such closing. Such replacement Store shall not otherwise count toward such quotas.

#### **5. GRANT OF FRANCHISES TO DEVELOPER**

- A. Subject to the provisions of Section 3 hereof, Franchisor agrees to grant franchises to Developer for the operation of BAGELS Stores located within the Exclusive Area, subject to the following:
  - (1) Developer must execute a franchise agreement and pay the applicable franchise fee before Franchisor will approve a site.
  - (2) When Developer selects a site under a franchise agreement, he shall submit to Franchisor a complete site report (containing such demographic, commercial, and other information and photographs as Franchisor may reasonably require) for each site at which Developer proposes to establish and operate a BAGELS Store and which Developer reasonably believes to conform to site selection criteria established by Franchisor from time to time. Such proposed site shall be subject to Franchisor's prior written approval.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 34

What are the conditions that must be met for a Big Apple Bagels franchisee to be indemnified against damages arising from the use of a Mark?

Accepted Answer

- f. **Indemnification of Franchisee.** Franchisor agrees to indemnify Franchisee against and to reimburse Franchisee for all direct, but not consequential (including, but not limited to, loss of revenue and/or profits), damages for which Franchisee is held liable in any proceeding arising out of the use of any Mark pursuant to and in compliance with this Agreement, and for all costs reasonably incurred by Franchisee in the defense of any such claim brought against it or in any such proceeding in which it is named as a party, provided that Franchisee has timely notified Franchisor of such claim or proceeding and has otherwise complied with this Agreement, and that Franchisor shall have the right to defend any such claim. If Franchisor defends such claim, Franchisor shall have no obligation to indemnify or reimburse Franchisee with respect to any fees or disbursements of any attorney retained by Franchisee.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 35

What is the consequence if a Big Apple Bagels developer fails to obtain the franchisor's written consent before offering or selling securities?

Accepted Answer

### C. Public or Private Offerings

(1) In the event Developer (or any of its owners) shall, subject to the restrictions and conditions of transfer contained in Paragraph B of Section 12 of this Agreement, attempt to raise or secure funds by the sale of securities (including, without limitation, common or preferred stock, bonds, debentures or general or limited partnership interests) in Developer or any affiliate of Developer, Developer, recognizing that the written information used with respect thereto may reflect upon Franchisor, agrees to submit any such written information to Franchisor prior to its inclusion in any registration statement, Franchise Disclosure Document, offering circular, or similar prospectus or memorandum and must obtain the written consent of Franchisor to the method of financing prior to any offering or sale of such securities. The written consent of Franchisor shall not imply or constitute the

approval of Franchisor with respect to the method of financing, the offering literature submitted to Franchisor or any other aspect of the offering. No information respecting Franchisor or any of its affiliates shall be included in any securities disclosure document, unless such information has been furnished by Franchisor, in writing pursuant to the written request of Developer, in which Developer states the specific purposes for which the information is to be used. Should Franchisor, in its sole discretion object to any reference to Franchisor or any of its affiliates or to any of their franchisees in such offering literature or prospectus, such literature or prospectus shall not be used unless and until the objections of Franchisor are withdrawn. Franchisor assumes no responsibility for the offering whatsoever.

(2) The prospectus or other literature utilized in any such offering shall contain the following language in bold-face type on the first textual page thereof:

"NEITHER BAB SYSTEMS, INC. NOR ANY OF ITS AFFILIATES IS DIRECTLY OR INDIRECTLY THE ISSUER OF THE SECURITIES OFFERED HEREBY. NEITHER BAB SYSTEMS, INC. NOR ANY OF ITS AFFILIATES ASSUMES ANY RESPONSIBILITY WITH RESPECT TO THIS OFFERING AND/OR THE ADEQUACY OR ACCURACY OF THE INFORMATION SET FORTH HEREIN, INCLUDING ANY STATEMENTS MADE WITH RESPECT TO ANY OF THEM. NEITHER BAB SYSTEMS, INC. NOR ANY OF ITS AFFILIATES ENDORSES OR MAKES ANY RECOMMENDATION WITH RESPECT TO THE INVESTMENT CONTEMPLATED BY THIS OFFERING."

- (3) Developer and each of its owners must indemnify, defend and hold harmless Franchisor and its affiliates, and their respective officers, directors, employees and agents, from any and all claims, demands, liabilities, and all costs and expenses (including, without limitation, reasonable attorneys' fees) incurred in the defense of such claims, demands or liabilities, arising from the offer or sale of such securities, whether asserted by a purchaser of any such security or by a governmental agency. Franchisor shall have the right (but not the obligation) to defend any such claims, demands or liabilities and/or to participate in the defense of any action to which Franchisor or any of its affiliates or any of their respective officers, directors, employees or agents is named as a party.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 36

What is the consequence if a Big Apple Bagels franchisee fails to provide the required written notice before filing arbitration or litigation?

Accepted Answer

In addition, Franchisee must give Franchisor written notice of at least fourteen (14) days prior to filing arbitration or litigation.

In the event Franchisee fails to give said notice, Franchisor is entitled to dismissal of the action, without prejudice, and Franchisee must reimburse Franchisor its costs and expenses incurred in connection with the action.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 37

What is the consequence if a prospective Big Apple Bagels franchisee fails to submit any sites to BAB within the 60-day period?

Accepted Answer

If PROSPECTIVE FRANCHISEE fails to submit any sites to BAB within the 60 day period specified in Paragraph 3 above, BAB may, at any time thereafter, terminate this Preliminary Agreement, in which event PROSPECTIVE FRANCHISEE shall not be entitled to any refund of the Deposit.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 38

What is the deadline after site approval for a Big Apple Bagels franchisee to sign a Franchise Agreement, and what happens if they fail to meet this deadline?

Accepted Answer

d toward the initial franchise fee. If you locate a site and it is approved by BAB within the 60 days but you fail to sign a Franchise Agreement within 14 days of the approval, BAB may terminate the Preliminary Agreement and you will not be entitled t

Source: Item 5 — INITIAL FEES (FDD pages 18–20)

Question 39

What is the dependency for the Preliminary Agreement not expiring if a site is submitted close to the expiration date for a Big Apple Bagels franchise?

Accepted Answer

- 7. Notwithstanding the expiration of this Agreement, the parties agree that in the event PROSPECTIVE FRANCHISEE submits a proposed site to BAB within twenty (20) days prior to the expiration date, this Agreement will not expire until BAB has had a reasonable opportunity to evaluate the site to determine whether the site meets BAB's standards and criteria described in Paragraph 3 above.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 40

How is it determined whether fees paid to Third Party Delivery Services are included or excluded from Gross Revenues for a Big Apple Bagels franchise?

Accepted Answer

The inclusion in or exclusion from Gross Revenues of any fees paid by Franchisees to Third Party Delivery Services will be determined by BAB and published in BAB's Operations Manual or as promulgated in a Policy Statement issued by BAB. A "Third Party Delivery Service" is a company or business through which customers purchase menu items from Franchisee's Store, that delivers said menu items to the customer at a location other than Franchisee's Store. Third Party Delivery Services typically charge the Franchisee a fee for this

service, which may be automatically deducted from the funds that are collected from the customer prior to disbursement of the funds by the Third Party Delivery Service to the Franchisee. Examples of Third Party Delivery Services include, but are not limited to GrubHub, DoorDash, UberEats, ezCater.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 41

What is the effective date of this addendum to the Big Apple Bagels franchise agreement?

Accepted Answer

on in a BAGELS Franchise Agreement that designates jurisdiction and venue in a forum outside of the State of Illinois However, a BAGELS Franchise Agreement may provide for arbitration to take place Il

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 42

In the event of conflicting laws, which law prevails for a Big Apple Bagels franchise in Washington: the franchise agreement or the Washington Franchise Investment Protection Act, Chapter 19.100 RCW?

Accepted Answer

- 3.

In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW shall prevail.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 43

In the event of a pandemic, can Big Apple Bagels modify its obligations relating to on-site assistance for a new store opening?

Accepted Answer

- e. **Store Opening.** Franchisee shall complete development of the BAGELS Store, obtain all licenses required by Franchisor for the operation of the BAGELS Store and have the BAGELS Store ready to open and commence the conduct of its business by the earlier of
  - i. six (6) months after Franchisee obtains possession of such site or
  - ii. six (6) months from the date of this Agreement if Franchisee has possession of such site on the date hereof, or
  - iii. twelve (12) months from the date of this Agreement.

If Franchisee fails to commence the conduct of business by the deadline set forth above in this Subparagraph 3.e., then this Agreement and the Franchise granted hereby may, at the sole option of Franchisor, be terminated upon the giving of written notice to Franchisee by Franchisor. A new BAGELS Store may not open for business without the prior written approval of Franchisor. Franchisee may not open a new or relocated BAGELS Store without the on-site presence of Franchisor's representative, unless a waiver is requested in writing by Franchisee and approved in writing by Franchisor. Even if the aforementioned request and approval are granted, Franchisee must obtain Franchisor's written authorization, in its sole discretion, of the specific date that the Store may open. For a BAGELS Store that had been closed by a franchisee and is being reopened by a new franchisee (for example, in a transfer), Franchisor's written approval is required prior to the reopening of the BAGELS Store. The reopening of a previously-closed BAGELS Store may or may not, at Franchisor's sole option, include an on-site inspection by a representative of BAB.

Source: Item 22 — CONTRACTS (FDD pages 86–87)

Question 44

In the event of termination or expiration of the Big Apple Bagels agreement, what happens to the covenants not to compete set forth in each franchise agreement executed by the Developer?

Accepted Answer

Notwithstanding anything contained in this Agreement to the contrary, or in the event of termination or expiration of this Agreement, the covenants not to compete set forth in each franchise agreement

executed by Developer shall continue in full force and effect for the duration of the time periods and for the geographic limits applicable to each such franchise agreement.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 45

For a Big Apple Bagels franchise in Virginia, what is the condition for the franchisor to cancel the agreement?

Accepted Answer

her accrued liabilities | 6 1,950 | 55,702 |
| Total Deferred Income Tax Assets | 1 63,767 | 167,917 |
| Depreciation and amortization | ( 354,217) | (354,217) |
| Total Deferred Income Tax Liabilities | ( 354,217) | (354,217) |
| Total Net Deferred Tax Liabilities | $         (190,450) | $      (186,300) |
R:\59000s\59000 - 59099\59039 BAB Bagels\2025 Franchise Filings General\BAB FDD2025.001 multistate marked up by CKT 02 04 2025.docx

#### **Big Apple Bagels**

| 2. | Item | 17, | i.  of  the Franchise | Disclosure Document | on  "Franchisee’s obligations | on |
|---|---|---|---|---|---|---|
# **EXHIBIT R BAB SYSTEMS, INC. ADDENDUM TO THE BAGELS FRANCHISE AGREEMENT FOR THE COMMONWEALTH OF VIRGINIA**

This Addendum is to a BAGELS Franchise Agreement dated , 20 between BAB Systems, Inc. and (Franchisee) to amend said Agreement as follows: 1. Paragraph 16.a.x. of the BAGELS Franchise Agreement on Termination for Failure to Complete Training is amended to read in its entirety as follows: Successful Completion of Training. The grant of the franchise herein is conditioned upon successful completion of the sales/operations seminar and technical training seminar by Franchisee (or Franchisee's individual owner if Franchisee is a corporation, partnership, or other entity.) If during the course of the training programs or within fifteen (15) days thereafter Franchisor concludes that Franchisee has not successfully completed the sales/operations seminar and technical training seminar, may, in its sole discretion and judgment, cancel this Agreement and all rights hereunder, where permitted by applicable law, by giving notice to Franchisee and tendering to Franchisee a refund of its initial franchise fee less an amount to cover the reasonable expenses incurred by Franchisor in connection with training Franchisee. Franchisee agrees that such refund shall be the full extent of Franchisor's liability and responsibility in the event of such cancellation, and Franchisee and its owners shall execute a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its affiliates, officers, directors, employees and agents. Upon cancellation of this Agreement, Franchisee shall return to Franchisor all materials, manuals, information and all other items that Franchisee received from Franchisor, including all copies thereof and notes thereon which Franchisee may have or control.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 46

For a Big Apple Bagels franchise in Virginia, what is the condition for the refund of the initial franchise fee?

Accepted Answer

This Addendum is to a BAGELS Franchise Agreement dated , 20 between BAB Systems, Inc. and (Franchisee) to amend said Agreement as follows: 1. Paragraph 16.a.x. of the BAGELS Franchise Agreement on Termination for Failure to Complete Training is amended to read in its entirety as follows: Successful Completion of Training. The grant of the franchise herein is conditioned upon successful completion of the sales/operations seminar and technical training seminar by Franchisee (or Franchisee's individual owner if Franchisee is a corporation, partnership, or other entity.) If during the course of the training programs or within fifteen (15) days thereafter Franchisor concludes that Franchisee has not successfully completed the sales/operations seminar and technical training seminar, may, in its sole discretion and judgment, cancel this Agreement and all rights hereunder, where permitted by applicable law, by giving notice to Franchisee and tendering to Franchisee a refund of its initial franchise fee less an amount to cover the reasonable expenses incurred by Franchisor in connection with training Franchisee. Franchisee agrees that such refund shall be the full extent of Franchisor's liability and responsibility in the event of such cancellation, and Franchisee and its owners shall execute a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its affiliates, officers, directors, employees and agents. Upon cancellation of this Agreement, Franchisee shall return to Franchisor all materials, manuals, information and all other items that Franchisee received from Franchisor, including all copies thereof and notes thereon which Franchisee may have or control. Franchisee further agrees to maintain strictly the confidentiality of all information received relating to the BAB System and not to use in the operation of a food service or similar business, any trade secrets or confidential information obtained from Franchisor in the course of the training program or otherwise. In witness whereof, each of the undersigned hereby acknowledges having read this Addendum, understands and consents to be bound by all of its terms, and agrees it shall become effective the day of, 20 BAB SYSTEMS, INC.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 47

For a Big Apple Bagels franchise in Washington, what is the condition for the arbitration site to be determined by the arbitrator?

Accepted Answer

In any arbitration involving a franchise purchased in Washington, the arbitration site shall be either in Washington or in a place as mutually agreed upon at the time of the arbitration, or as determined by the arbitrator at the time of arbitration or mediation.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 48

For a Big Apple Bagels franchise in Washington, what is the condition for the arbitration site to be determined by mediation?

Accepted Answer

In any arbitration involving a franchise purchased in Washington, the arbitration site shall be either in Washington or in a place as mutually agreed upon at the time of the arbitration, or as determined by the arbitrator at the time of arbitration or mediation.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 49

For a Big Apple Bagels franchise in Washington, what is the condition for the arbitration site to be in a place as mutually agreed upon?

Accepted Answer

In any arbitration involving a franchise purchased in Washington, the arbitration site shall be either in Washington or in a place as mutually agreed upon at the time of the arbitration, or as determined by the arbitrator at the time of arbitration or mediation.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 50

For a Big Apple Bagels franchise in Washington, what is the condition for a franchisee to bring an action or proceeding?

Accepted Answer

In addition, if litigation is not precluded by the BAGELS Franchise Agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 51

For a Big Apple Bagels franchise in Washington, what happens if provisions in the franchise agreement conflict with the Washington Franchise Investment Protection Act?

Accepted Answer

relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions which may supersede the BAGELS Franchise Agreement in your relationship within the franchisor including the areas of termination and renewal of your franchise.
- 2. In any arbitration involving a franchise purchased in Washington, the arbitration site shall be either in Washington or in a place as mutually agreed upon at the time of the arbitration, or as determined by the arbitrator at the time of arbitration or mediation. In addition, if litigation is not precluded by the BAGELS Franchise Agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.
- 3. In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW shall prevail.
- 4. A release or waiver of rights executed by a franchisee shall not include rights under the Washington Franchise Investment Protection Act or any rule or order thereunder except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, rights or remedies under the Act such as a right to a jury trial, may not be enforceable.
- 5. Transfer fees are collectable to the extent that they reflect the franchisor's reasonable estimated or actual costs in effecting a transfer.
- 6. Pursuant to RCW 49.62.020, a noncompetition covenant is void and unenforceable against an employee, including an employee of a franchisee, unless the employee's earnings from the party seeking enforcement, when annualized, exceed \$100,000 per year (an amount that will be adjusted annually for inflation).

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 52

Is a Big Apple Bagels franchisee required to participate in a local advertising cooperative if one exists?

Accepted Answer

If at the time you sign a Franchise Agreement, a local advertising cooperative is in existence, or if after you sign a Franchise Agreement, a local advertising cooperative is formed in the area where your BAGELS Store is to be located, you must participate. Currently there are no local advertising cooperatives in existence. All aspects of the formation and operation of the cooperative are determined by the members of the cooperative who are not BAB-owned or affiliate-owned Stores; such aspects include the budget, members' contribution, area, membership of the cooperative, voting rights, responsibility for administration, the governing documents, the preparation of financial statements, and the availability of those statements for review by you. BAB does not have the power to require cooperatives to be formed or to change, dissolve, or merge existing cooperatives. BABowned or affiliate-owned Stores are not required to participate in any local co-operatives, however if they do participate, BAB-owned or affiliate-owned Stores shall have no voting rights or power to dictate the operation of any local advertising co-operative. Franchisor-owned outlets have no voting power on fees imposed by franchisee cooperatives.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 42–53)

Question 53

For Big Apple Bagels franchises, does the franchisor have any administrative actions pending against them alleging a violation of securities law?

Accepted Answer

Neither BAB, nor any person or franchise broker in Item 2 of the FDD is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.C.A. 78a et seq., suspending or expelling such persons from membership in such association or exchange.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 54

For Big Apple Bagels franchises, has the franchisor been convicted of a felony charge within the last 10 years?

Accepted Answer

C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 55

For Big Apple Bagels franchises, can the franchisor offer terms more favorable than those set forth in the Franchise Disclosure Document in New York?

Accepted Answer

**INFORMATION COMPARING FRANCHISORS IS AVAILABLE. CALL THE STATE ADMINISTRATORS LISTED IN EXHIBIT J OR YOUR PUBLIC LIBRARY FOR SOURCES OF INFORMATION. REGISTRATION OF THIS FRANCHISE BY NEW YORK STATE DOES NOT MEAN THAT NEW YORK STATE RECOMMENDS IT OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT. IF YOU LEARN THAT ANYTHING IN THE FRANCHISE DISCLOSURE DOCUMENT IS UNTRUE, CONTACT THE FEDERAL TRADE COMMISSION AND NEW YORK STATE DEPARTMENT OF LAW, INVESTOR PROTECTION BUREAU, 28 LIBERTY STREET, 21st FLOOR, NEW YORK, NEW YORK 10005. THE FRANCHISOR MAY, IF IT CHOOSES, NEGOTIATE WITH YOU ABOUT ITEMS COVERED IN THE FRANCHISE DISCLOSURE DOCUMENT. HOWEVER, THE FRANCHISOR CANNOT USE THE NEGOTIATING PROCESS TO PREVAIL UPON A PROSPECTIVE FRANCHISEE TO ACCEPT TERMS WHICH ARE LESS FAVORABLE THAN THOSE SET FORTH IN THIS FRANCHISE DISCLOSURE DOCUMENT.**

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 56

For Big Apple Bagels franchises, does the franchisor have any pending civil actions alleging fraudulent conversion?

Accepted Answer

Except as provided above, with regard to the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:

- A. No such party has an administrative, criminal or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations.
- B. No such party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the

franchise system or its business operations.

C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 57

For Big Apple Bagels franchises, does the franchisor have any pending civil actions alleging unfair or deceptive practices?

Accepted Answer

Except as provided above, with regard to the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:

- A. No such party has an administrative, criminal or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations.
- B. No such party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the

franchise system or its business operations.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 58

For Big Apple Bagels franchises, does the franchisor have any pending criminal actions alleging embezzlement?

Accepted Answer

3. The following is added at the end of Item 3:

Except as provided above, with regard to the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:

- A. No such party has an administrative, criminal or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations.
- B. No such party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the

franchise system or its business operations.

C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 59

For Big Apple Bagels franchises, has the franchisor been the subject of a civil action alleging embezzlement within the last 10 years?

Accepted Answer

C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 60

For Big Apple Bagels franchises, has the franchisor been the subject of a civil action alleging fraudulent conversion within the last 10 years?

Accepted Answer

3. The following is added at the end of Item 3:

Except as provided above, with regard to the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:

- A. No such party has an administrative, criminal or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations.
- B. No such party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the

franchise system or its business operations.

C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 61

For Big Apple Bagels franchises, is the franchisor subject to a currently effective injunctive order under a Federal securities law?

Accepted Answer

ces, or comparable civil or misdemeanor allegations.
- B. No such party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the

franchise system or its business operations.

C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.

D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a Federal, State, or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent.

4.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 62

For Big Apple Bagels franchises, is the franchisor subject to a currently effective injunctive order under a State antitrust law?

Accepted Answer

D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a Federal, State, or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 63

For Big Apple Bagels franchises, is the franchisor subject to a currently effective restrictive order or decree relating to the franchise under a Canadian franchise law?

Accepted Answer

D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a Federal, State, or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Question 64

For Big Apple Bagels franchises, is the franchisor subject to a currently effective restrictive order or decree relating to the franchise under a Federal antitrust law?

Accepted Answer

D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a Federal, State, or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent.

Source: Item 23 — RECEIPTS (FDD pages 87–319)

Big_Apple_Bagels 2025 FDD FAQ