From whom must Chesters franchisees purchase food items, ingredients, equipment, and other supplies?

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You must buy all food items, ingredients, equipment, furnishings, supplies, materials, and other items used or offered for sale at the Restaurant only from suppliers (including manufacturers, distributors, and other sources) that satisfy our then-current standards and specifications; possess adequate quality controls and capacity to supply your needs promptly and reliably; and have received our approval. With respect to our and our affiliates' trade-secret or proprietary food products and other branded items, we have the right to limit suppliers to us, our affiliates, and/or other specified exclusive sources, in which case you must acquire those trade secret or proprietary food products and other branded items during the franchise term only from us, our affiliates, and/or the other specified exclusive sources at the prices we and they decide to charge. We have the right to restrict your sources of trade secret and proprietary food products and other branded items in order to protect trade secrets, assure quality, assure a reliable supply of products that meet our standards, achieve better purchase and delivery terms, control use of the Marks by third parties, and monitor the manufacture, packaging, processing, and sale of these items.

We license the Marks to certain unaffiliated suppliers to make and brand the proprietary seasonings and specially-formulated pre-prepared mixes (which includes breading, batter dip, and marinades), sauces, branded fresh and frozen poultry products, frozen potato wedges and paper products (which includes packaging, napkins, cups, and other products used in the operation of the Restaurant) (collectively, the "Proprietary Goods"). The suppliers then sell the Proprietary Goods to our designated distributors, and you must purchase the Proprietary Goods from one or more of our designated distributors.

We encourage you to purchase new equipment and fixtures for the Restaurant. We currently are the designated supplier for certain core equipment, signage, fixtures, and supplies (fryers, breading and batter table, hot display case, landing table, and oil-removal caddy) approved for use in the Restaurant. We currently sell the core equipment, signage, fixtures, and supplies at a bona fide wholesale price we set from time to time based in part on our current cost. If you obtain financing for core equipment, signage, fixtures, and supplies through Ascentium (see Item 10), the purchase price for core equipment, signage, fixtures, and supplies will be our then current bona fide wholesale price plus an additional 5% to 10% of the purchase price, which is roughly equivalent to the amount that Ascentium will deduct from their payment to us for the core equipment, signage, fixtures, and supplies as part of our arrangement to reduce the interest rate for the financing you obtain through Ascentium. See Item 10.

In limited circumstances, however, we may allow you to purchase the core equipment, signage, fixtures, and supplies from another designated supplier. We are also an approved (but not the only) supplier for other equipment and fixtures, which are also available through designated suppliers. While we encourage you to purchase new equipment and fixtures, you can purchase used equipment (which need not be purchased from an approved supplier) if it has been in service for less than 2 years and otherwise meets our quality standards. Besides the items described above, we also currently are an approved (but not the only) supplier of marketing materials. Except for us, in which our officers indirectly owns an interest, one of our officers owns a non-controlling interest in Wynn's Grain and Spice, LLC, which currently manufactures various consumables and sells those items to us for resale to our franchisees (indirectly through unaffiliated third-party distributors and grocery wholesalers).

The cost of food items, ingredients, equipment, furnishings, supplies, materials, and other items may vary among Restaurants. These cost variations are due to your Restaurant's proximity to the supplier's distribution center, the number of deliveries scheduled to your area each week, actual transportation costs, and other factors.

Because we currently require you to purchase products only from designated or approved suppliers already established for the CHESTER'S System, or only in compliance with our brand standards and specifications, we will not consider your request to buy from a then-unapproved supplier any product you will use at or sell from the Restaurant. Therefore, we currently have no process in place for granting and revoking approval of alternative suppliers and do not issue any criteria for consideration. We have no intention or obligation to approve alternative or additional suppliers for any products.

You must permit us or our agent at any reasonable time to remove samples of food or non-food items from your Restaurant without payment to determine whether the samples meet our then-current standards and specifications.

Formulae for proprietary seasonings and specially-formulated pre-prepared mixes are not available to you, other franchisees, or non-designated suppliers. Standards and specifications for other food and paper products are not uniformly issued to franchisees but are available for specific products upon a franchisee's written request.

Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 19–22)