nate the Development Agreement, and by cross-default, any other Franchise Agreements.

Advertising

Under the Franchise Agreement, you have a required weekly Marketing Contribution equal to 3.5% of the Gross Sales of your Bakery during the preceding Accounting Week. Franchisees who entered the Bruegger's system before you (or who enter after you) may have different obligations, depending on their form of Franchise Agreement. There is no required Marketing Contribution under the License Agreement.

We have the right to allocate your Marketing Contribution in the proportion that we designate among the following: (a) the Systemwide Marketing Fund ("SMF"); (b) any Marketing Co-op we establish for your area (but we are not required to establish a Marketing Co-op for any area); and (c) local store marketing ("LSM"). Although likely to change, we presently allocate the Marketing Contribution as follows:

• We collect 50% of the Marketing Contribution (that is, 1.75% of your Gross Sales) for the SMF; and
• You must spend 50% of the Marketing Contribution (that is, 1.75% of your Gross Sales) on LSM.

SMF. The SMF is a common fund for the advertising and promotion of Bruegger's Bakeries. There is no contractual obligation for Company-owned Bakeries to contribute to the SMF. Company-owned Bakeries have contributed at times in the past, but our current policy is that they do not contribute.

We have the right to direct all advertising, media placement, marketing and public relations programs and activities financed by the SMF, with final discretion over strategic direction, creative concepts, materials and endorsements used, and the geographic, market and media placement and allocation. We may use the SMF to pay various costs and expenses as we determine, including: preparation and production of video, audio, written, and online advertising materials; production of promotional materials; sponsorship of sporting, charitable, or similar events; design, establishment, and maintenance of websites, search rankings, social media profiles and other online and mobile presence; endorsement contracts; reasonable salaries and expenses of our and our affiliates' employees working for or on behalf of the SMF or on advertising, marketing, public relations, materials, programs, activities or promotions prepared, planned or undertaken on behalf of the SMF; professional fees and administrative costs and overhead incurred in activities reasonably related to the administration and activities of the SMF (including accounting fees, legal fees, and interest on monies borrowed by the SMF); implementation of advertising programs, including purchasing direct mail and media advertising and employing advertising agencies to assist us; and other public relations, marketing, consumer research, and promotional activities, including testing and test marketing programs, fulfillment charges, and development and implementation and testing of trade dress and design prototypes.

We have no obligation to spend any specific portion of the SMF in the geographic area of your Bakery. The media that we use may be local, regional, or national in coverage. We or an advertising agency may prepare the advertising for the SMF. We also use the SMF to support our web site, which has a section describing our franchise opportunity. Otherwise, we do not use any SMF monies for advertising that is principally a solicitation for the sale of franchises.

We have established an Advisory Board to provide input on the administration of the SMF. All franchisees who are in full compliance with their obligations under their agreements with us are eligible to become members of the Advisory Board. The Advisory Board does not have decision-making authority, and we retain the right to dissolve the Advisory Board at any time.

In addition to your regular Marketing Contribution, you may incur charges for copies of SMF-produced materials that you order. We maintain all sums received for the SMF in an account separate from our other monies, but not as a trustee for the SMF or as a fiduciary in any capacity. We also maintain separate bookkeeping accounts for the SMF. Contributions not spent in the year collected remain in the SMF for use in the following year.

We are not required to have the SMF audited, and we do not currently plan to do so. If you request, we will provide you with an annual accounting of the receipts and disbursements of the SMF.

During the fiscal year that ended December 31, 2024, the SMF's expenditures were: 68% on digital marketing;

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, MANUALS AND TRAINING (FDD pages 32–42)