Does Big Apple Bagels grant franchisees an exclusive territory?

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Item 12. TERRITORY

A. FRANCHISE AGREEMENT

You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. We may establish other franchised or company owned locations that may compete with your location.

You are granted the right to operate a BAGELS Store from 1 specified location only. Your franchise is for a specific location, and not for an area approved by us. There is no minimum territory granted to you.

We will approve relocation of your Store if your lease terminates without your fault or expires without any possibility of renewal on commercially reasonable terms as determined by BAB. We will also approve relocation if in our judgment there is a change in the character of your Store location sufficiently detrimental to its business to warrant relocation. You must obtain our prior written approval before opening your new Store. You may not open your new or relocated Store unless our representative is on-site at the opening, unless you request a waiver in writing, and we approve it in writing. Even if we waive the requirement of on-site presence, you must obtain our written authorization of the specific date that the Store may open. In the event of relocation, we and you will enter into an agreement which will set forth the new location for your Store and a deadline by which you must open for business at the new location, after which time you will be obligated to resume paying the royalty fee and Marketing Fund Contributions whether or not the new location has opened for business. Until such time that the new location is open for business, the amount of the royalty fee and Marketing Fund Contribution will be based on your average weekly level of Gross Revenues during the one year period prior to closing the first Store. We have the right to charge you for services we render to you in connection with your relocation, including reimbursement of our costs for reviewing and approving the new location and the construction drawings for the Store at its new location.

You have no options, rights of first refusal or similar rights to acquire additional franchises in any other locations.

BAB (on behalf of itself and its affiliates) retains the right, in its sole discretion, without restriction:

• (1) to itself operate, or to grant other persons the right to operate, BAGELS Stores at such locations and on such terms and conditions as BAB deems appropriate; and
• (2) Within your territory, to sell the products and services authorized for BAGELS Stores under the Marks through such similar and dissimilar channels of distribution (including the Internet, catalog sales, telemarketing, or other direct marketing sales) and under such terms and conditions as BAB deems appropriate

"alternative distribution channels"). You will receive no compensation for such sales by BAB.

• (3) Within your territory, to sell the products and services authorized for BAGELS Stores under other trademarks, service marks and commercial symbols through such similar and dissimilar channels of distribution (including the Internet, catalog sales, telemarketing, or other direct marketing sales) and under such terms and conditions as BAB deems appropriate "alternative distribution channels"). You will receive no compensation for such sales by BAB.
• (4) to acquire or be acquired by a company establishing businesses identical or similar to the BAGELS Store, even if the other business operates, franchises, and/or licenses competitive businesses anywhere, including in close proximity to the BAGELS Store.

You may not independently solicit for business, promote the business, and/or offer and sell products authorized under the Franchise Agreement through the use of a toll-free number, catalog, any electronic service including the Internet, Social Media, Mobile Application or Digital Marketing. All promotions and sales by you other than from your physical Store must be through programs or applications coordinated by BAB.

BAB currently does not have a prescribed method for resolving any conflicts between BAB and its franchisees regarding territory, customers or franchisor support. BAB anticipates that each situation would be handled on a case by case basis.

BAB may sell Branded Products via the Internet from future company-owned locations it may operate to customers regardless of their location.

C. AREA DEVELOPMENT AGREEMENT

You will receive an exclusive territory under the Area Development Agreement so long as you comply with your obligations under that Agreement, including meeting your Development Obligations by opening the required number of Stores. If you fail to meet your obligations, we have the right to terminate your Area Development Agreement. In that event, you will lose the right to open any additional BAGELS Stores. You will also lose exclusive rights to the Exclusive Area described in the Area Development Agreement, and we may thereafter grant franchises for any BAGELS Stores anywhere in said Exclusive Area. You also lose exclusive rights to any wholesale business in the Exclusive Area.

(1) Size of Protected Development Area

The Area Development Agreement grants Developer certain rights (as described below) within a designated geographical area (the "Protected Development Area") to be described in Rider A attached to the Area Development Agreement. The size of the Protected Development Area will vary,

based on the market potential and BAB's analysis of the financial and operational capabilities of Developer. It may be 1 or more counties in rural areas or a portion of a metropolitan statistical area in heavily populated major cities. The Protected Development Area is not based upon a minimum population.

(2) Rights During Development Periods

BAB: (1) will grant to Developer franchises for the ownership and operation of BAGELS Stores located within the Protected Development Area;

Source: Item 12 — TERRITORY (FDD pages 54–56)