Can a Card My Yard franchisee face competition from other franchisees?

re, and you will not be entitled to any compensation as a result of such modification.

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.

You cannot relocate the Card My Yard business under any circumstances without our consent, and our consent will only be granted if your Location is your home and you move to a new residence within your existing Protected Area. Such a request must be submitted to us as soon as possible (but in no event longer than 10 days) after the date you discover you will be unable to continue the operation of the Card My Yard business at the Location.

In order to maintain your territorial rights within the Protected Area, you must pay us monthly minimum royalties as described more fully in Item 6 above. There is no minimum royalty requirement applicable to the first seven months of your Franchise Agreement. If your royalty payments during any applicable month fall below the minimum royalty amount for that month, you must pay us the difference immediately upon our request, and we will be entitled, at our option, to deduct the difference from your designated account via ACH/EFT. In addition to our right to demand payment of these minimum royalties, we may reduce or eliminate your rights within the Protected Area, or terminate your Franchise Agreement, upon 30 days' written notice to you. You are not required to meet any other contingency to maintain your rights in the Protected Area, and we may not reduce your rights in the Protected Area due to population increases or other circumstances other than: (a) a zip code boundary change implemented by the U.S. Postal Service, (b) your failure to achieve the minimum royalty levels described in this paragraph, or (c) your breach of the Franchise Agreement or other agreement you have with us or our affiliates. We also reserve the right to reduce or eliminate your territorial rights within the Protected Area if you fail to achieve annual Gross Sales of at least $15,000. In order to maintain your territorial rights as described in Section II.B above, you must meet or exceed Gross Sales of $15,000 during each 12-month period throughout the term of this Agreement. However, during the period comprising your first 12 months of operation, your Gross Sales requirement shall instead comprise $5,000, with the period from your 13th month of operation through the completion of your 24th month of operation being accompanied by a Gross Sales requirement of $10,000. Thereafter, the standard Gross Sales requirement of $15,000 during each 12-month period shall apply. If you fail to achieve the minimum Gross Sales level during any applicable 12-month period, we may reduce or eliminate your territorial rights within the Protected Area, or terminate this Agreement, upon 30 days' written notice to you.

You must operate the Card My Yard business only at the Location. You may not solicit or accept orders from consumers outside the Protected Area through any channels of distribution (including the Internet, catalog sales, telemarketing and other direct marketing sales). If you are unable to provide services for all orders or inquiries submitted by consumers in the Protected Area, or if you mark yourself as unavailable, we or one of our other franchisees may provide services to those consumers during such times.

We retain all other rights. Among other things, this means we can:

{00281964-1 } 44 (i) Operate, and license others to operate, Card My Yard businesses at any location outside the

Protected Area.

• (ii) Develop and establish other business systems (including systems that offer products or services similar to those offered at Card My Yard businesses) using other names or marks, and grant licenses to use those systems at any location;
  • (iii) Advertise and promote the Card My Yard Concept within and outside the Protected Area;
• (iv) Acquire, or be acquired by, any competing system or other third party, including a competing system that has one or more units located within your Protected Area;

Source: Item 12 — TERRITORY (FDD pages 43–46)