Buona 2025 Franchise FAQ - FDD Ninja

Question 1

According to the table, what range of pizza sales as a percentage of total gross sales was observed at the listed Buona stores?

Accepted Answer

| Store # (corresponds to numbers in Table 1) | Pizza Sales as a percentage of Total Gross Sales |
|---|---|
| 1 | 5.24% |
| 2 | 4.04% |
| 3 | 4.99% |
| 4 | 3.87% |
| 5 | 4.07% |
| 6 | 4.45% |
| 7 | 3.49% |
| 8 | 3.61% |
| 9 | 3.10% |
| 10 | 5.13% |
| 11 | 3.02% |
| 12 | 4.44% |
| 13 | 4.78% |
| 14 | 3.25% |
| 15 | 3.48% |
| 16 | 0.00% |
| 17 | 2.12% |
| 18 | 0.00% |
| 19 | 4.12%

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 2

What is the highest percentage of total gross sales derived from pizza sales among the affiliate-owned Buona restaurants?

Accepted Answer

The operations of the 10 affiliate-owned units included in 3 tables below do not differ materially from those of a new franchised Buona Business that is a free standing location with a drive through window except that the affiliate-owned units sell pizza, and the new franchised Buona Businesses will not sell pizza. Information is provided below on what percentage of total sales of the affiliate-owned units was derived from the sale of pizza products.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 3

What is the lowest percentage of total gross sales derived from pizza sales among the affiliate-owned Buona restaurants?

Accepted Answer

Affiliate-owned restaurants sell pizza, but the franchised restaurants will not sell pizza. The table below shows what percentage of total sales of the affiliate-owned units was derived from the sale of pizza products for each of the affiliate-owned restaurants. It is anticipated that customers who might have ordered pizza at an affiliate-owned restaurant will order other menu items at the Franchised Restaurant.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 4

What positions has Mike Buonavolanto held at Five Flavors Franchising related to the Buona franchise?

Accepted Answer

The following individuals are employed by Five Flavors Franchising LLC but perform services for us in their roles with those companies:

#### **Mike Buonavolanto, Manager and Vice President of Real Estate**

Mike Buonavolanto has served a Manager and Vice President of Five Flavors Franchising since August 1, 2018 and served as its Director of Operations from August 2018 to April 2021. He also has also served as Manager of Five Flavors LLC from May 2018 to the present and Manager of Rainbow Cone LLC from

June 2018 to the present. From October 2014 to the present, he has served as Director of Real Estate for The Buona Companies, L.L.C, in Burr Ridge, Illinois.

Source: Item 2 — BUSINESS EXPERIENCE (FDD pages 11–14)

Question 5

What post-termination obligations does a Buona franchisee have?

Accepted Answer

r requests in connection with an audit of Franchisee's Franchised Business under Section 4.7. of this Agreement, or refuses entry to Franchisor's representative for an inspection of the Franchised Business under Section 10.2(m). # **XVII. EFFECT OF TERMINATION OR EXPIRATION** - 17.1 Post-Termination Obligations. Upon termination or expiration of this Agreement, all rights granted to Franchisee under this Agreement will immediately terminate, Franchisee shall cease to be a licensed franchisee of Franchisor, and: - (a) Franchisee shall immediately cease to operate the Franchised Business as an Franchised Business, and shall not thereafter, directly or indirectly, represent to the public that the restaurant is or was a Franchised Business; - (b) Franchisee shall immediately and permanently cease to use, by advertising or in any manner whatsoever, any menus, recipes, confidential formulae, equipment, methods, procedures, techniques associated with the System, the Marks, and Franchisor's other trade names, trademarks and service marks associated with the System. In particular, and without limitation, Franchisee shall cease to use all signs, menus, advertising and promotional materials, stationery, forms, packaging, containers and any other articles which display the Marks; - (c) In the event Franchisee continues to operate or subsequently begins to operate a restaurant or other business, Franchisee shall not use any reproduction, counterfeit, copy, or colorable imitation of the Marks in conjunction with such other business which is likely to cause confusion or mistake or to deceive, and further agrees to remove all unique markings, colors, décor, Marks and other features ("**Trade Dress**") that identify the Franchised Business as a former Franchised Business, and otherwise take all necessary steps to disassociate itself from the System and Franchisor, including but not limited to, the removal of signs and all Trade Dress from the premises of the Franchised Business and destruction of printed materials. Source: Item 23 — RECEIPTS (FDD pages 78–356)

Question 6

What is the range of pizza sales as a percentage of total gross sales for the affiliate-owned Buona restaurants?

Accepted Answer

- Affiliate-owned restaurants sell pizza, but the franchised restaurants will not sell pizza. The table below shows what percentage of total sales of the affiliate-owned units was derived from the sale of pizza products for each of the affiliate-owned restaurants. It is anticipated that customers who might have ordered pizza at an affiliate-owned restaurant will order other menu items at the Franchised Restaurant.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 7

What representations and warranties does the Guarantor make to Buona regarding the Guaranty?

Accepted Answer

Guarantor(s) represents and warrants to Franchisor that: (a) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (b) this Guaranty is executed at Franchisee's request and Franchisor would not execute the Franchise Agreement were it not for the execution and delivery of this Guaranty; (c) Guarantor has not and will not, without the prior written consent of Franchisor, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all, or substantially all, of Guarantor's assets, or any interest therein if any such event would have a material negative effect on Guarantor's ability to perform its obligations under this Guarantor or the Franchise Agreement; (d) neither the execution nor the delivery of this Guaranty, nor compliance with the terms hereof, will conflict with or result in the breach of any law or statute, will constitute a breach or default under any agreement or instrument to which Guarantor may be a party, or will result in the creation or imposition of any charge or lien upon any property or assets of Guarantor; (e) Franchisor has made no representation to Guarantor as to the creditworthiness of Guarantor; and (f) Guarantor has established adequate means of obtaining from Franchisee, on a continuing basis, information regarding Franchisee's financial condition.

Guarantor agrees to keep adequately informed of any facts, events or circumstances which might in any way affect Guarantor's risks under this Guaranty, and Guarantor further agrees that, absent a request for information from Guarantor, Franchisor shall have no obligation to disclose to Guarantor any information or documents acquired by Franchisor in the course of its relationship with Franchisee.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 8

What was the total number of Buona outlets at the end of 2022?

Accepted Answer

. # ITEM 20 OUTLETS AND FRANCHISEE INFORMATION # Table No. 1 System-wide Outlet Summary For Years 2022 – 2024 | Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 75–78)

Question 9

What is the total projected number of new franchised Buona outlets expected to open in the next fiscal year across all states?

Accepted Answer

| | Franchise Agreements Signed But Outlet Not Opened | Projected New Franchised Outlets in the Next Fiscal Year | Projected New Company- | |---|---|---|---| | State | | | Owned Outlets in the Next Fiscal Year | | | | | | | Illinois | 0 | 0 | 1 | | Indiana | 0 | 1 | 1 | | Michigan | 1 | 1 | 0 | | Tennessee | 1 | 1 | 0 | | Texas | 1 | 0 | 0 | | Wisconsin | 1 | 1 | 0 | | Total | 4 | 5 | 2 | Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 75–78)

Question 10

How might the absence of pizza sales at a Buona franchise affect sales compared to the affiliate-owned restaurants?

Accepted Answer

- Affiliate-owned restaurants sell pizza, but the franchised restaurants will not sell pizza. The table below shows what percentage of total sales of the affiliate-owned units was derived from the sale of pizza products for each of the affiliate-owned restaurants. It is anticipated that customers who might have ordered pizza at an affiliate-owned restaurant will order other menu items at the Franchised Restaurant.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 11

According to the Buona FDD, how do the operations of the 8 affiliate-owned Dual Brand restaurants differ from a new franchised Dual Brand Business?

Accepted Answer

The operations of the 8 affiliate-owned Dual Brand restaurants included in the table below do not differ materially from those of a new franchised Dual Brand Business that is a free standing location with a drive through window, except that the affiliate-owned units sell pizza, and the new franchised Buona Businesses will not sell pizza. Information is provided below on what percentage of total sales of the affiliate-owned units was derived from the sale of pizza products.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 12

What fees will Buona franchisees be required to pay under the Franchise Agreement that the affiliate-owned restaurants do not?

Accepted Answer

- The affiliate-owned restaurants do not pay royalties or other ongoing fees to that you will pay to us under the Franchise Agreement. However, as noted in the tables above, we have imputed the fees that a franchisee would be required to pay.

- (15) "Tech Fee" represents the $100/week charge that a Franchised Restaurant will currently pay to Chicago's Original Italian Beef Franchising LLC under the Franchise Agreement.

- (16) "Local Advertising" represents the minimum percentage of sales (1.0%) that a Franchised Restaurant must spend on local advertising expenses under the Franchise Agreement.

- (17) "BUONA Brand Marketing Fund" represents the maximum percentage of BUONA sales (2.5%) that a Franchised Restaurant would pay to Chicago's Original Italian Beef Franchising LLC under the Franchise Agreement.

- (18) "BUONA Royalty" represents the percentage of BUONA sales (4.0%) that a Franchised Restaurant will pay to Chicago's Original Italian Beef Franchising LLC as a service royalty under the Franchise Agreement.

- (19) "Rainbow Cone Brand Marketing Fund" represents the percentage of sales (3.0%) that a Franchised Restaurant will pay to the Five Flavors Franchising Marketing Fund under the Franchise Agreement.

- (20) "Rainbow Cone Royalty" represents the percentage of sales (6.0%) that a Franchised Restaurant will pay to Five Flavors Franchising LLC as a royalty under the Franchise Agreement.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 13

How does the Buona franchise fee in Item 5 compare to the potential costs and attorney's fees mentioned in Item 6?

Accepted Answer

as described above.

# **ITEM 6 OTHER FEES**

#### **Franchise Agreement**

| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Indemnification | Actual costs incurred by us. | As incurred | You have to reimburse us if we are held liable for claims arising from your operation of the development business or incur costs in defending them. |
| Costs and Attorney’s Fees | Actual costs incurred by us. | As incurred | You must reimburse us for costs and attorneys’ fees for enforcement of covenants, for obtaining specific performance of injunctive relief, and if we are successful in an action to enforce the Area Development Agreement. |
| Type of Fee | Amount | Due Date | Remarks |
| Technology Fee | As determined by us based on technology costs for the franchise system. Currently \$100 per week | Payable each week.

Question 14

How does the indemnification fee described in Item 6 relate to the potential liabilities arising from the operation of the Buona business as described in Item 7?

Accepted Answer

| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Indemnification | Actual costs incurred by us. | As incurred | You have to reimburse us if we are held liable for claims arising from your operation of the development business or incur costs in defending them.

Question 15

How does the indemnification fee in Item 6 relate to the franchisee's obligations regarding compliance with laws and regulations as outlined in Item 9 for a Buona franchise?

Accepted Answer

|    | Obligation                                                 | Section in Franchise Agreement                                                                                                             | Disclosure Document Item |
|----|------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
| a. | Site selection and acquisition/lease | Sections 1.1, 6.2, 6.3 9.2(b), and 16.2(a) Exhibit A | Item 11 |
| b. | Pre-opening purchases/leases | Sections 6.3 and 10.3 | Items 5 and 7 |
| c. | Site development and other pre-opening | Sections 1.1, 5.5, 6.1 – | Items 5, 6, 7, 8 and |
|  | requirements | 6.4, 8.2, and 8.3 | 11 |
| d. | Initial and ongoing training | Article VIII | Item 11 |
| e. | Opening | Section 6.5 and 16.2(a) | Items 8 and 11 |
| f. | Fees | Sections 2.2, Article III, 4.7, 6.6, 8.2, 8.3, 8.4, 8.5, 8.6, 9.7, 10.3, 12.3, 15.3, 15.4 16.6, 16.9 and 24.11 ADA – Sec. 2 | Items 5 and 6 |
| g. | Compliance with standards and policies/Operating Manual | Article VII and Section 10.2 | Items 8 and 11 |
| h. | Trademarks and proprietary information | Article V ADA – Sec. 6 | Items 13 and 14 |
| i. | Restrictions on products/services offered | Section 4.1 and Article X | Item 16 |
| j. | Warranty and customer service requirements | Section 10.12 | Item 11 |
| k. | Territorial development and sales quotas | Section 14.1 ADA – Sec. 3 | Item 12 |
| l. | Ongoing product/service purchases | Section 10.3 | Item 8 |
|    | Obligation                                             | Section in Franchise Agreement           | Disclosure Document Item |
|----|--------------------------------------------------------|---------------------------------------------|-----------------------------|
| m. | Maintenance, appearance and remodeling requirements | Sections 10.1 and 10.8 | Item 11 |
| n. | Insurance | Article XII | Item 8 |
| o. | Advertising | Section 1.6, 10.5 and Article XI | Item 11 |
| p. | Indemnification | Sections 10.1, 12.4, 15.6, 16.8 and 19.3 | Item 6 |

Question 16

How does the initial franchise fee for a Buona franchise in Item 5 compare to the estimated initial investment in Item 7, and what does this difference represent?

Accepted Answer

[Item 5: INITIAL FRANCHISE FEE] # **ITEM 5 INITIAL FRANCHISE FEE** #### **Initial Franchise Fee** The Initial Franchise Fee for a franchise granting the right to open one Buona Business is $40,000.00. The Initial Franchise Fee is due in full upon your execution of the Franchise Agreement. The Initial Franchise Fee is non-refundable with one exception. If we terminate your Franchise Agreement for your failure to successfully complete the initial training program, we will refund you 10% of the initial franchise fee paid once you have signed and delivered to us a termination agreement and general release of all claims in a form satisfactory to us. If you are purchasing a Dual Brand franchise, you will pay us the initial franchise fee above and you will pay Five Flavors the non-refundable initial franchise fee due under its Franchise Disclosure Document. Currently that initial franchise fee is $20,000 for a Rainbow Express franchise. #### **On-Site Training Fee Deposit** You must pay us an on-site training fee for the on-site assistance that we will provide you at your restaurant location before and around the time of the opening of the Buona Business. When you sign the Franchise Agreement, you must pay a non-refundable on-site training fee deposit in the amount of $20,000. The nonrefundable balance of the on-site training fee will be paid after training is complete and you have opened for business. #### **Initial Purchases of Products and Services** Before you open your Buona Business, you must purchase from our affiliate Authentic Brands of Chicago, LLC an initial inventory of proprietary food products. The estimated cost of the initial purchase of inventory products ranges from $2,500 to $7,500. Before you open your Buona Business, you may purchase an initial supply of marketing materials from our affiliate The Buona Companies, L.L.C. or another supplier. If you purchase the initial marketing materials from us, the estimated cost is $100 to $10,000. Payments made for these purchases are non-refundable. --- [Item 7: ESTIMATED INITIAL INVESTMENT] #### Notes for Buona Inline Single Brand: These estimated initial expenses are our best estimate of the costs you may incur in establishing and operating your Buona Business. We do not offer direct or indirect financing for these items. None of the fees payable to us are refundable. Fees paid to vendors or other suppliers may or may not be refundable depending on their policies or your arrangements with them. - (1) Initial Franchise Fee Your Initial Franchise Fee is $40,000 and is payable in full when you sign the Franchise Agreement. The Initial Franchise Fee is non-refundable, except if we terminate your Franchise Agreement for your failure to successfully complete initial training in which case we will refund 10% of the Initial Franchise Fee paid upon delivery to us of an executed release. - (2) Design and Architect Fees You must engage our designated architect to plan the layout and required improvements for the leased premises. - (3) Lease Deposits and Rent These figures presume that you will be leasing your premises. Generally, you will need to lease a site of approximately 2,800 to 3,700 square feet. We may allow or require variations to typical size parameters under certain circumstances. Your landlord will typically require a security deposit equal to one or two months' rent and may, also, require payment in advance of the first and/or last (or more) month's rent. These figures provide the estimated amount of the security deposit for a location meeting our typical size requirements. The expense of leasing will vary depending upon the size of the premises, its location (for example, downtown, mall, suburban or rural), landlord contributions and the requirements of individual landlords. The lease rental payments shown in the charts above includes 3 months' rent (including CAM, taxes and insurance) for your initial period of operation. The estimate assumes that the landlord will not charge rent until the Buona Business opens. - (4) Leasehold Improvements- The cost of leasehold improvements will vary depending on numerous factors including the size and configuration of the premises and pre-construction and construction costs. The low end of this range presumes that (i) the premises was formerly used as a restaurant and therefore the space is finished and outfitted with many of the fixtures necessary for the operation of a Buona Business and/or (ii) your landlord will provide a partial build-out allowance. - (8) Sign Package The estimate includes the cost to acquire and install all interior and exterior signs for your Restaurant, but it does not include sales tax. Your investment in exterior signs necessary to operate the Restaurant is variable. Your exact investment depends on several factors, including the number and size of the proposed exterior signs, local labor costs, prices charged by suppliers, inflation, financing costs and similar factors beyond BUONA's or your control. All exterior signs and supplies for your Restaurant must meet our standards and specifications, comply with any state or local government regulations, and must be manufactured by a supplier approved by us. - (9) POS System The estimate includes the cost to acquire and install the required point of sale system meeting our standards and specifications. The estimate does not include sales tax. - (10) Miscellaneous Expenses This amount estimates for professional services, such as attorneys' fees, and accounting fees, and license fees such as liquor license fees and business licenses, and utility deposits. - (11) Grand Opening Advertising and Marketing You must conduct an advertising and marketing campaign to promote the grand opening of your Buona Business and spend a minimum of $20,000. We may recommend you spend more if you will be the first Buona Business in the market. These amounts must be spent starting 60 days prior to opening and within the first 90 days after opening. - (12) Onsite Training Fee This is an estimate of the on-site training fees that you must pay to us for the on-site training we provide to you. You pay us a $20,000 deposit on this fee when you sign the franchise agreement. The fee is based on a daily rate for each training on-site plus the travel costs incurred by our representatives who travel to your site for the training. The number of trainers and the length of training may vary based on the training we deem necessary for you and your operations. - (12) On Site Training Fee This is an estimate of the on-site training fees that you must pay to us for the on-site training we provide to you. You pay us a $20,000 deposit on this fee when you sign the franchise agreement. The fee is based on a daily rate for each training session on-site, plus the travel and living expenses incurred by our representatives who travel to your site for the training. The fee is based on a daily rate for each training on-site. The number of trainers and the length of training may vary based on the training we deem necessary for you and your operations. - (13) Additional Funds (for 3 months of operation) This is an estimate of your additional funds requirements for the first 3 months of operations, based on our affiliate's experience of opening and operating Buona Businesses. New businesses often generate a negative cash flow. The estimated range for necessary additional funds for the first 3 months is as shown in the charts above, and includes general operating expenses, such as supplies, food and beverage products, packaging, payroll, payroll expenses, royalties, advertising, utilities, insurance, pest control, security, repairs, maintenance and complimentary sales and other costs. These figures only are estimates and you may incur additional expenses in starting your Buona Business. Your actual cost will depend on factors including without limitation your management skill, experience and business acumen, local economic conditions, the local market for your Buona Business, wage and labor rates, competition in the marketplace, the local market for your products and the sales level reached during the start-up phase. These amounts do not include any estimates for debt service. - (14) Totals We relied on our experience and our owners' experience of over 40 years in the restaurant business to compile these estimates. Except as otherwise noted, none of these payments are refundable. These payments are only estimates and your costs may be higher, depending on your particular circumstances. You should review these figures carefully with a business advisor, accountant or attorney before making any decision to purchase a Franchise. We do not offer any financing for your initial investment. The availability and terms of financing with third-party lenders will depend on factors such as the availability of financing generally, your credit-worthiness and policies of lending institutions concerning the type of business to be operated. - (13) Additional Funds This is an estimate of your additional funds requirements for the first 3 months of operations, based on our experience of opening and operating Buona Businesses. New businesses often generate a negative cash flow for a period of time. The estimated range for necessary additional funds for the first 3 months is as shown in the charts above, and includes general operating expenses, such as supplies, food and beverage products, packaging, payroll, payroll expenses, royalties, advertising, utilities, insurance, pest control, security, repairs, maintenance and complimentary sales and other costs. These figures are estimates and we cannot assure you that you will not have additional expenses in starting your Buona Business. Your actual cost will depend on factors including without limitation your management skill, experience and business acumen, local economic conditions, the local market for your Buona Business, wage and labor rates, competition in the marketplace, the local market for your products and the sales level reached during the start-up phase. These amounts do not include any estimates for debt service. - (14) Total We relied on our experience and our owners' experience of over 40 years in the restaurant business to compile these estimates. Except as otherwise noted, none of these payments are refundable. These payments are only estimates and your costs may be higher, depending on your particular circumstances. You should review these figures carefully with a business advisor, accountant or attorney before making any decision to purchase a Franchise. We do not offer any financing for your initial investment. The availability and terms of financing with third-party lenders will depend on factors such as the availability of financing generally, your credit-worthiness and policies of lending institutions concerning the type of business to be operated. You are cautioned to allow for inflation, discretionary expenditures, fluctuating interest rates and other costs of financing, and local market conditions, which can be highly variable and can result in substantial, rapid and unpredictable increases in costs. You must bear any deviation or escalation in costs from the estimates in this Item 7 or estimates that we give during any phase of the development process. #### **Area Development Agreement** - (1) Initial Franchise Fee Your Initial Franchise Fee is $40,000 and is payable in full when you sign the Franchise Agreement. The Initial Franchise Fee is non-refundable, except if we terminate your Franchise Agreement for your failure to successfully complete initial training in which case we will refund 10% of the Initial Franchise Fee paid upon delivery to us of an executed release. If you are signing a Dual Brand Franchise Agreement, you will pay us the $40,000 initial franchise fee and you will pay our affiliate Five Flavors the initial franchise fee of $20,000 for a Rainbow Express. - (2) Land This estimate assumes that you will acquire land and build a building for the restaurant. The estimate covers the cost of acquiring land. Your initial investment will be less if you lease the land upon which your Restaurant sits. The estimated low range for leasing land is $75,000 annually and the estimate high range for leasing is $225,000 annually. The cost of purchasing unimproved land or leasing land will vary significantly depending on location, availability of utilities and other factors. Depending on the market conditions and other factors in your geographic area, your land costs may vary from the estimates provided in this Item 7. We estimate that the size of your land will range from 45,000 to 60,000 square feet. - (3) Site Work This estimate is for the cost of developing the site for constructing a new building. You will not incur this expense if you lease the building for your Restaurant. The site costs for a building will vary significantly depending on many factors including the difficulty of site work, utilities, site grading, labor costs, local taxes and development fees and the availability of financing. You may also buy land with an existing building to convert into a Buona Restaurant in which case you will likely not incur the expenses associated with site work. - (4) Building We assume that you will acquire land and build the building for the Restaurant, and this estimate is for the cost of constructing a new building. The Restaurant premises are typically a free standing building. There are 2 approved building styles. One style is 3,920 square feet and the other is 4,200 square feet. The square footage may increase to 4,680 square feet for a Dual Brand Restaurant. We may allow or require variations to this size under certain circumstances. This estimate includes the expense of a new, completely finished building, including carpentry, all interior finishes, mechanical, electrical, and plumbing. This estimate also includes fees for architectural and engineering services such as site planning, state approvals and other permits for building, heating and air conditioning, plumbing, bid review, construction coordination, pay request review, and project closeout. The construction costs for a building will vary significantly depending on many factors including the size of the building, difficulty of site work, labor costs, local taxes and development fees and the availability of financing. If you are not building a new building and purchased land with an existing building, your will in

Question 17

How does the initial investment for a Buona franchise in Item 7 relate to the initial franchise fee detailed in Item 5?

Accepted Answer

ay not be refundable depending on their policies or your arrangements with them.

- (1) Initial Franchise Fee Your Initial Franchise Fee is \$40,000 and is payable in full when you sign the Franchise Agreement. The Initial Franchise Fee is non-refundable, except if we terminate your Franchise Agreement for your failure to successfully complete initial training in which case we will refund 10% of the Initial Franchise Fee paid upon delivery to us of an executed release. If you are signing a Dual Brand Franchise Agreement, you will pay us the \$40,000 initial franchise fee and you will pay our a

Question 18

Why might a new Buona franchisee experience higher food and product costs compared to the affiliate-owned restaurants?

Accepted Answer

- Food and product costs for all existing affiliate-owned restaurants have been negotiated by our affiliates with manufacturers and distributors on a consolidated basis and have the benefit of volume costs for units all located within one region. New franchisees in new markets may not have the volume to negotiate favorable prices with manufacturers and distributors serving the franchisee's region which would result in higher costs for these products.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 19

How might the performance of a new Buona franchise in a market without brand recognition differ from the affiliate-owned restaurants described in Item 19?

Accepted Answer

- 1) Characteristics of the 19 units in this Item 19 may differ materially from those of any franchised outlets being offered under this Franchise Disclosure Document include:
  - The 19 affiliate-owned restaurants included in this Item 19 are located in a market where there has been recognition of the Buona name and brand for 40 years. The Original Rainbow Cone name and brand was established in the market over 90 years ago. Franchisees establishing a unit in a new market without brand recognition may not perform as well, especially in the initial phase of the new business.
  - Food and product costs for all existing affiliate-owned restaurants have been negotiated by our affiliates with manufacturers and distributors on a consolidated basis and have the benefit of volume costs for units all located within one region. New franchisees in new markets may not have the volume to negotiate favorable prices with manufacturers and distributors serving the franchisee's region which would result in higher costs for these products.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 20

What is the relationship between the initial franchise fee for a Buona Business in Item 5 and the potential refund if training is not completed successfully?

Accepted Answer

*ITEM 5 INITIAL FRANCHISE FEE**

#### **Initial Franchise Fee**

The Initial Franchise Fee for a franchise granting the right to open one Buona Business is \$40,000.00. The Initial Franchise Fee is due in full upon your execution of the Franchise Agreement.

The Initial Franchise Fee is non-refundable with one exception. If we terminate your Franchise Agreement for your failure to successfully complete the initial training program, we will refund you 10% of the initial franchise fee paid once you have signed and delivered to us a termination agreement and

Question 21

According to the Buona Development Agreement, under what conditions will the rights granted to the developer automatically terminate without notice or opportunity to cure?

Accepted Answer

r similar to, those offered by a Buona Restaurant. (The ownership of five percent (5%) or less of a publicly traded Franchisor will not be deemed to be prohibited by this paragraph.) Further, during the term of this Agreement, you will not (1) divert customers or business from any Buona Restaurants to any other business or (2) hire any employees of ours or our affiliates.

#### **7. DEFAULT AND TERMINATION**

- 7.1 The right to open Buona Restaurants has been granted in reliance on your representations and warranties, and strictly on the conditions set forth in this Development Agreement including, without limitation, the condition that you comply strictly with the Development Schedule.
- 7.2 You shall be in default under this Agreement, and all rights granted herein to you shall automatically terminate without notice or an opportunity to cure if:
- (a) you are adjudicated bankrupt, become insolvent, commits any affirmative action of insolvency or files any action or petition of insolvency, or if a receiver (permanent or temporary) of your property or any part thereof is appointed by a court of competent authority, or if you make a general assignment for the benefit of its creditors;
- (b) if a final judgment against your business assets remains unsatisfied of record for thirty (30) days or longer (unless supersedeas bond is filed);
  - (c) if execution is levied against your business or property;
- (d) if suit to foreclose any lien or mortgage against Developer's premises or business assets is instituted against you and not dismissed within thirty (30) days, or is not in the process of being dismissed; provided, however, that Franchisor reserves the right to be named as trustee or receiver in any voluntary petition for bankruptcy or insolvency filed by you;
- (e) upon the dissolution of the entity that is Developer is dissolved, or upon the death of one or more of your Owners;

Source: Item 22 — CONTRACTS (FDD page 78)

Question 22

According to the Buona franchise agreement, what happens if a franchisee controls, is controlled by, or is in active concert with another Buona franchisee regarding arbitration?

Accepted Answer

- (b) The foregoing notwithstanding, in the event Franchisee controls, is controlled by, or is in active concert with another franchisee of Franchisor, or there is a guarantor of some or all of Franchisee's obligations to Franchisor, then the joinder of those parties to any arbitration between Franchisor and Franchisee shall be permitted, and in all events, the joinder of an owner, director, officer, member, manager, partner or other representative or agent of Franchisor or Franchisee shall be permitted.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 23

According to the Buona franchise agreement, what happens if someone has access to the manuals or proprietary information?

Accepted Answer

y portion of know-how, knowledge, methods, specifications, processes, procedures or improvements regarding the Franchised Business or the System that is valuable and secret in the sense that it is not generally known to competitors of Franchised Businesses. Franchisee shall maintain the absolute confidentiality of all Trade Secrets during and after the Term, and shall not use any such information in any other business or in any manner not specifically authorized or approved in writing by Franchisor. Franchisee agrees not to disclose the contents of the Manuals to unauthorized persons and to use Franchisee's best efforts to prevent unauthorized disclosure to any person, as this disclosure would cause irreparable harm to Franchisor and the System. Franchisee understands that the Manuals is loaned to Franchisee, and that at all times, the Manuals remains the sole property of Franchisor. The Manuals may be provided in printed or electronic form and Franchisee agrees to return any printed copies of the Manuals t o Franchisor or destroy any files containing the Manuals upon the termination of this Agreement or at times as may otherwise be directed by Franchisor. Franchisee shall not copy or otherwise duplicate the Manuals or any other proprietary materials without Franchisor's consent. The Manuals may contain both mandatory as well as certain optional or advisory terms which Franchisor includes as a convenience to Franchisee and to assist in the operation of the Franchised Business as Franchisee deems appropriate in its business judgment. Franchisee must comply with all mandatory specifications, standards, and procedures set forth in the Manuals. Franchisor retains the right to modify, change, add to, delete, or supplement the Manuals and to specify other systems, procedures or forms in any manner it deems necessary, in its sole discretion, and shall notify Franchisee about changes in writing by mail, electronic mail or postings on Franchisor's intranet system or website on the internet. Upon receipt of notice of changes to the Manuals, Franchisee must comply with any such changes that are mandatory. #### **VIII. TRAINING** - 8.1 Training Generally. Before Franchisee opens the Franchised Business, and from time to time thereafter, Franchisor will make available to Franchisee various mandatory and optional training programs. Franchisee must timely complete all mandatory training as set forth in this Article VIII. Source: Item 22 — CONTRACTS (FDD page 78)

Question 24

What actions can Buona take if a developer defaults on the Development Schedule under the Area Development Agreement?

Accepted Answer

If you default in your obligations under the Development Schedule, we may, in our sole discretion, do any one or more of the following: (i) immediately terminate the Area Development Agreement and all rights granted under to you without affording you any opportunity to cure the default effective by delivery to you of a written notice from us; (ii) reduce the number of Buona Restaurants which you have the right to establish and open pursuant to the Development Agreement; or (iii) exercise any other rights and remedies which we may have under applicable law. Otherwise, we do not alter your territorial rights.

Source: Item 12 — TERRITORY (FDD pages 46–48)

Question 25

Besides the Federal Arbitration Act, what other federal law might govern the Buona franchise agreement?

Accepted Answer

All arbitration proceedings between Franchisor and Franchisee shall be governed by the Federal Arbitration Act ("FAA") and no procedural arbitration issues are to be resolved pursuant to any state statutes, regulations or common law.

Except to the extent governed by the FAA, the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C.

Section 1051, *et seq*.) or other federal law, this Agreement shall be interpreted and governed under the laws of the State of Illinois and any dispute between the parties shall be governed by and determined in accordance with the substantive laws of the State of Illinois, which laws shall prevail if there is any conflict of law.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 26

In California, when does Buona collect initial fees from franchisees according to the fee deferral condition?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 27

In California, what is the consequence if Buona fails to complete all pre-opening obligations before collecting initial fees?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 28

In California, what is the effect of the Commissioner's determination that Buona must rely on franchise fees to fund its operations?

Accepted Answer

The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations.

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 29

In California, what is the effect of the fee deferral condition on Buona's ability to collect development fees from franchisees who sign a development agreement?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 30

In California, what is the effect of the fee deferral condition on Buona's ability to collect any development fees from California franchisees?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 31

In California, what is the effect of the fee deferral condition on Buona's ability to collect development fees from franchisees until the specific unit is open for business?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

- The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 32

In California, what is the effect of the fee deferral condition on Buona's ability to collect development and initial fees until the specific unit is open?

Accepted Answer

- The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations.

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 33

In California, what is the effect of the fee deferral condition on Buona's ability to collect any fees from California franchisees until they are open for business?

Accepted Answer

The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations. The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business. For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 34

In California, what is the effect of the fee deferral condition on Buona's ability to collect any fees from California franchisees until all pre-opening obligations are completed?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 35

In California, what is the effect of the fee deferral condition on Buona's ability to collect any fees from California franchisees who sign a development agreement?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 36

In California, what is the effect of the fee deferral condition on Buona's ability to collect any initial fees from California franchisees?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 37

In California, what is the effect of the fee deferral condition on Buona's ability to collect initial fees from franchisees until all pre-opening obligations are completed?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

- The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 38

In California, what is the effect of the fee deferral condition on Buona's ability to collect initial fees from franchisees until they are open for business?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

- The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 39

In California, what is the effect of the fee deferral condition on Buona's collection of development fees until the specific unit is open?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 40

In California, what is the effect of the fee deferral condition on Buona's collection of development fees until the specific unit is open for business?

Accepted Answer

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 41

In California, what is the effect of the fee deferral condition on Buona's collection of initial fees until the franchisee is open for business?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 42

In California, what is the effect of the fee deferral condition on Buona's collection of initial fees until all pre-opening obligations are completed?

Accepted Answer

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 43

In California, what is the effect of the Buona Franchise Agreement providing for termination upon bankruptcy under federal law, according to the addendum?

Accepted Answer

- 4.

Section 16.1 of the Franchise Agreement on Termination is amended by the addition of the following language to the original language that appears therein:

- "The Franchise Agreement provides for termination upon bankruptcy.

This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A.

Sec. 101 et seq.)."

Source: Item 22 — CONTRACTS (FDD page 78)

Question 44

For California franchisees who sign a development agreement with Buona, when is the payment of development and initial fees deferred?

Accepted Answer

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 45

In California, what happens if the Buona Franchise Agreement's termination provisions conflict with federal bankruptcy law?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.

The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under

federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).

Source: Item 22 — CONTRACTS (FDD page 78)

Question 46

In California, what is the implication if the Buona Franchise Agreement contains a provision that is inconsistent with the law regarding renewal of a franchise?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 47

In California, what is the implication if the Buona Franchise Agreement contains a provision that is inconsistent with the law regarding termination of a franchise?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 48

In California, what is the implication if the Buona Franchise Agreement contains a provision that is inconsistent with the law regarding transfer of a franchise?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer or nonrenewal of a franchise.

If the franchise agreement contains a provision that is inconsistent with the law, the law will control.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 49

In California, what is the implication if the Buona Franchise Agreement contains a provision that is inconsistent with California law regarding termination?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 50

In California, what is the implication if the Buona Franchise Agreement contains a provision that is inconsistent with California law regarding transfer?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 51

In California, what is the implication if the Buona Franchise Agreement contains a provision that is inconsistent with California law regarding nonrenewal?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 52

In California, what is the implication if the Buona Franchise Agreement contains a provision that violates California Business and Professions Code Sections 20000 through 20043 regarding franchise transfer?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 53

In California, what is the implication if the Buona Franchise Agreement contains a provision that violates California Business and Professions Code Sections 20000 through 20043 regarding franchise nonrenewal?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise.

If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 54

In California, what is the implication if the Buona Franchise Agreement contains a provision that violates California Business and Professions Code Sections 20000 through 20043 regarding franchise termination?

Accepted Answer

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 55

In California, what is the implication if the Buona Franchise Agreement's provisions regarding dispute resolution are inconsistent with California law?

Accepted Answer

For Franchisees operating outlets located in California, the California Franchise Investment Law and the California Franchise Relations Act will apply regardless of the choice of law or dispute resolution venue stated elsewhere.

Any language in the Franchise Agreement or any amendment thereto or any agreement to the contrary is superseded by this condition.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 56

In California, what is the implication if the Buona franchisor fails to demonstrate adequate capitalization?

Accepted Answer

The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations.

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 57

In California, what is the implication if the Buona franchisor or a franchise broker is subject to a suspension or expulsion order from a national securities association or exchange?

Accepted Answer

- 5. Item 3 of the Franchise Disclosure Document on "Litigation" is amended by the addition of the following:
  - Neither Franchisor, 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 22 — CONTRACTS (FDD page 78)

Question 58

In California, what is the implication if Buona must rely on franchise fees to fund its operations, according to the addendum?

Accepted Answer

- The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations.

The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.

For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 59

How might the characteristics of the 19 units in Item 19 differ from those of franchised Buona outlets?

Accepted Answer

The following should be considered in reviewing and determining whether to rely on these figures.

- 1) Characteristics of the 19 units in this Item 19 may differ materially from those of any franchised outlets being offered under this Franchise Disclosure Document include:
  - The 19 affiliate-owned restaurants included in this Item 19 are located in a market where there has been recognition of the Buona name and brand for 40 years. The Original Rainbow Cone name and brand was established in the market over 90 years ago. Franchisees establishing a unit in a new market without brand recognition may not perform as well, especially in the initial phase of the new business.
  - Food and product costs for all existing affiliate-owned restaurants have been negotiated by our affiliates with manufacturers and distributors on a consolidated basis and have the benefit of volume costs for units all located within one region. New franchisees in new markets may not have the volume to negotiate favorable prices with manufacturers and distributors serving the franchisee's region which would result in higher costs for these products.
  - The affiliate-owned restaurants do not pay royalties or other ongoing fees to that you will pay to us under the Franchise Agreement. However, as noted in the tables above, we have imputed the fees that a franchisee would be required to pay.

- Affiliate-owned restaurants sell pizza, but the franchised restaurants will not sell pizza. The table below shows what percentage of total sales of the affiliate-owned units was derived from the sale of pizza products for each of the affiliate-owned restaurants. It is anticipated that customers who might have ordered pizza at an affiliate-owned restaurant will order other menu items at the Franchised Restaurant.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–75)

Question 60

What condition must a Buona developer meet to have rights of first refusal after completing the Development Schedule and the termination of exclusive rights to the Development Area?

Accepted Answer

- 4.2 Following the completion of the Development Schedule and the termination of your exclusive rights to the Development Area, provided you are in full compliance with this Agreement, you shall have the rights of first refusal set forth below:
- (a) In the event we seek to establish or license others to establish a Buona Restaurant within the Development Area, we shall first offer you the option to establish such additional Buona Restaurants under our then-current terms and conditions. We shall provide you with written notice of our intent to establish or license another to establish an additional Buona Restaurant along with a general description of the proposed Buona Restaurant, a copy of the then-current Franchise Disclosure Document and Franchise Agreement and all other documents we deem necessary to include with the notice. You shall have thirty (30) days from the receipt of our notice to exercise the option to establish such additional Buona Restaurants by executing the Franchise Agreement and all other documents we require for such additional Buona Restaurants and to pay the initial fee due under the agreement. If you fail to execute the Franchise Agreement and other required documents and to pay the initial fee required under the Franchise Agreement within the said thirty (30) day period, you shall have no further right to establish or operate such additional Buona Restaurant. Notwithstanding the foregoing, in the event our bona fide arrangements or agreements with a bona fide third party, the lease restrictions for the proposed premises of the Buona Restaurant, or other circumstances or conditions related to the establishment of the additional Buona Restaurant, prevent or restrict you from operating the additional Buona Restaurant or restrict or prevent us from offering you the rights set forth in this Paragraph, we shall have no obligation to offer you the right to establish or operate the additional Buona Restaurant.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 61

What is a condition that would prevent a Buona franchisee from renewing their franchise agreement?

Accepted Answer

ement and Manuals (as defined in Article VII), or otherwise in writing including but not limited to such structural changes, remodeling and redecoration and such modifications to existing improvement as may be necessary to do so;
- (h) Franchisee and its manager(s) comply with Franchisor's then-current training requirements and attend such refresher training classes as Franchisor deems necessary.
- (i) Franchisee maintains possession of the premises of the Approved Location, or if Franchisee is unable to maintain possession of the Approved Location, secures an approved substitute and agrees to expeditiously develop the substitute premises in compliance with the then current standards and specification for the development of Franchised Businesses; and
  - (j) Franchisee pays to Franchisor a renewal fee in the amount of Seven Thousand

Five Hundred Dollars (\$7,500.00) at least thirty (30) days prior to the signing of the renewal Franchise Agreement.

- 2.3 Effect of Non-Renewal. Franchisee will not have the right

Source: Item 22 — CONTRACTS (FDD page 78)

Question 62

What is the condition for receiving a 20% discount on the initial franchise fee for additional Buona restaurants under the Development Agreement?

Accepted Answer

ess activities not expressly prohibited by this Agreement.
- 1.4 This Agreement is not a Franchise Agreement, and you shall have no right to use in any manner the System or the Marks by virtue of entering into this Agreement.
- 1.5 Developer shall have no right under this Agreement to license others to operate a business or use the System or the Marks.

#### **2. FEES**

2.1 Concurrent with the execution of this Agreement, you must execute a Franchise Agreement for the first Buona Restaurant to be developed and pay the initial franchise fees of Forty Thousand Dollars (\$40,000.00) due under said Franchise Agreement.

Source: Item 22 — CONTRACTS (FDD page 78)

Question 63

What conditions must a Buona franchisee meet to be approved for relocation or reconstruction after premises damage or destruction?

Accepted Answer

Compliance with the foregoing shall be a condition subsequent to Franchisor's approval of any relocation request by Franchisee, and in the event complete de-identification of the former Franchised Business premises is not properly and completely undertaken, Franchisor may then revoke its permission for relocation and declare a default under this Agreement.

- (d) In the event Franchisee loses possession of the Franchised Business for whatever reason prior to the expiration of the term of this Agreement, Franchisee is required to diligently search for a new location and open and operate the Franchised Business as promptly as commercially practicable.

In the event Franchisee fails to diligently pursue a new location and open a new Franchised Business, Franchisee shall be liable to Franchisor for Liquidated Damages as provided herein.

Source: Item 23 — RECEIPTS (FDD pages 78–356)

Question 64

What conditions must a Buona franchisee meet to be eligible for renewal?

Accepted Answer

[Item 23: RECEIPTS]

- (e) Franchisee has fully and faithfully performed all of Franchisee's obligations under this Agreement throughout the Term;

- (f) Franchisee has paid or otherwise fully satisfied all monetary obligations owed by Franchisee to Franchisor and its Affiliates and to designated suppliers and any indebtedness of Franchisee that is guaranteed by Franchisor, and Franchisee has timely paid or otherwise satisfied these obligations throughout the Term;

- (g) Franchisee agrees, at its sole cost and expense, to remodel, reimage, renovate, refurbish and modernize the Franchised Business within six (6) months after execution of the thencurrent standard form of franchise agreement including but not limited to building design, parking lot, landscaping, equipment, point of sale system, signs, interior and exterior decor items, fixtures, furnishings, equipment, trade dress, color scheme, presentation of trademarks and service marks, supplies and other products and materials, to meet Franchisor's then-current standards, specifications and design criteria for Buona Businesses, as contained in the then-current franchise agreement and Manual (as defined in Article VII), or otherwise in writing including but not limited to such structural changes, remodeling and redecoration and such modifications to existing improvement as may be necessary to do so;

- (h) Franchisee and its manager(s) comply with Franchisor's then-current training requirements and attend such refresher training classes as Franchisor deems necessary.

- (i) Franchisee maintains possession of the premises of the Approved Location, or if Franchisee is unable to maintain possession of the Approved Location, secures an approved substitute and agrees to expeditiously develop the substitute premises in compliance with the then current standards and specification for the development of Buona Businesses; and

- (j) Franchisee pays to Franchisor a renewal fee in the amount of Seven Thousand Five Hundred Dollars ($7,500.00) at least thirty (30) days prior to the signing of the renewal Franchise Agreement.

- 2.3 Effect of Non-Renewal.

Franchisee will not have the right to renew this Agreement upon its expiration if Franchisee fails to comply with any of the above conditions of renewal.

Source: Item 23 — RECEIPTS (FDD pages 78–356)

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