What standards must a Burros Fries franchisee adhere to regarding food preparation?

y vendor or supplier other than us.

You are required to adhere to the standards and specifications established periodically by us with respect to your Burros & Fries Business, all menu and retail items offered, recipes, food preparation, cleanliness standards, operational procedures, advertising, vendors, products and services to be offered through your Franchise and other items for the operation of your Business. You must operate in strict conformity with the methods, standards and specifications that we prescribe in the Operations Manual or otherwise in writing. You must maintain in sufficient supply, sell and use at all times only the products, supplies, kitchen equipment and services that meet our standards and specifications. We may change our standards and specifications, as a result of experience or changes in the marketplace and we will issue such changes to all franchisees.

We base our approval of vendors and suppliers on our discretionary determination of demand, relevance to the System, price, value, quality, reliability, accuracy of product claims, safety, warranty, prompt attention to complaints, financial stability, litigation against supplier, recall history, reputation, frequency of delivery, appearance and contributions or other benefits to us and/or any marketing fund. Some of these specifications are contained in our Operations Manual and others will be set forth in periodic written notices to our franchisees. We have the right to disapprove any product, piece of kitchen equipment and/or supply sources that are not on our approved vendor list. If any product, piece of kitchen equipment, service, vendor or supplier is not authorized by us, you are prohibited

from using, offering or selling it. We may require vendors and/or suppliers to provide certain information, sign a nondisclosure agreement, and agree to guarantee our level of quality and produce sufficient samples to allow us to test the sample at your expense. We may require you to submit to us sufficient specifications, photographs, drawings or other information and samples to determine whether the items meet our specifications. There is a product, vendor and equipment assessment fee for supplier approval, and we may require third-party testing, in which case you will pay the actual cost of the tests as described in Item 6. We may issue specifications in manuals or directives, in writing or orally, and we may modify them at any time. Our response to a written request by you to approve a product (including a menu or retail item), piece of equipment or a supplier will be made within thirty (30) days after we receive it. Approval may be revoked in our sole discretion where an approved product (including any menu or retail item), piece of kitchen equipment, vendor or supplier does not adhere to the specifications described above. We will notify you either by email or any other written form of communication of our approval, disapproval or revocation of any prior approval of any product, kitchen equipment, vendor or supplier.

You are not required to maintain a minimum inventory of products in your Business; however, we retain the rights to do so in the future. If we require you to maintain a minimum inventory of products (currently not in effect) we will notify you by email or any other written form of communication and you will be given 90 days to comply with such requirements at your cost. We will provide you with a written list of approved products, menu items and retail items you are authorized to use, offer and/or sell in your Business after signing the Franchise Agreement and during our initial training. We will enforce these requirements by unannounced on-site visits to your business. When we make other visits to businesses, such as to assist you, we may also take that opportunity to visibly inspect your inventory and determine if unauthorized products (including menu or retail items), kitchen equipment or services are being used, sold or offered. In addition, we expect to receive information from our other businesses or from guests of your Business reporting that unauthorized products (including menu or retail items), pieces of kitchen equipment or services are being used, sold or offered in the Business. You must permit us or our agents, at any reasonable time, to remove a reasonable number of products (including food or non-food items) or pieces of equipment from your Business free of charge for testing by us or by an independent laboratory, to determine whether the samples meet our then-current standards and specifications. Besides any other remedies we may have, we may require you to pay for the testing if we have not previously approved the supplier of the item or if the sample fails to conform to our specifications (see Item 6).

Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 21–25)