What is the Cinnaholic franchisee's obligation regarding compliance with the Franchisor's business practices?

Franchisee recognizes the mutual benefit to Franchisee, Franchisor and other franchisees of the CINNAHOLIC® System of the uniformity of the appearance, services, products and advertising of the CINNAHOLIC® System and acknowledges and agrees that such uniformities are necessary for the successful operation of CINNAHOLIC® Bakeries. Franchisee also acknowledges and agrees that products and services sold under the Marks and at CINNAHOLIC® Bakeries have a reputation for excellence. This reputation has been developed and maintained by Franchisor, and Franchisee acknowledges and agrees that it is of the utmost importance to Franchisor, Franchisee, and all other franchisees of the CINNAHOLIC® System that such reputation be maintained. To this end, Franchisee covenants and warrants with respect to the operation of the Bakery that Franchisee and its employees and agents will comply with all of the requirements of the CINNAHOLIC® System and the Operations Manual and will throughout the term of this Agreement:

• (i) Operate the Bakery and prepare and sell all products and services sold therein in accordance with the specifications, standards, business practices and policies of Franchisor now in effect or hereafter promulgated, and comply with all requirements of Franchisor, the CINNAHOLIC® System and the Operations Manual as they are now or hereafter established, including, without limitation, any health, sanitation and cleanliness standards and specifications.

Franchisor may impose fines for Franchisee's failure to comply with the Operations Manual. Before any fine may be imposed, Franchisor must first have given Franchisee one written notice of the non-compliance with the Operations Manual; thereafter, any further non-compliance with that specific provision of the Operations Manual shall allow the imposition of a fine. Fines shall be in the amount of $100 to $1000, per violation, per day, as determined in Franchisor's sole discretion. However, Franchisor may elect to provide guidance in the Operations Manual regarding the amount of fines it may levy for given acts of noncompliance. Franchisee must pay any fines levied within ten days of written notice of the fine from Franchisor. If the fine is not paid within that time, Franchisor may cause an electronic funds transfer from Franchisee's bank account for the amount of any fine. Failure to pay any fine within ten days shall be a material default under this Agreement.

Franchisee recognizes and agrees that from time to time hereafter, Franchisor may change, modify or improve the CINNAHOLIC® System, including, without limitation, modifications to the Operations Manual, the menu and format, the processes and systems to support the business, the menu items and other product ingredients, the products offered for sale, the required equipment, the signage, the presentation and usage of the Marks, and the adoption and use of new, modified or substituted Marks or other proprietary materials. Franchisee agrees to accept, use and/or display for the purposes of this Agreement any such changes, modifications or improvements to the CINNAHOLIC® System, including, without limitation the adoption of new, modified or substituted Marks, as if they were part of the CINNAHOLIC® System as of the Effective Date, and Franchisee agrees to make such expenditures as such changes, modifications or improvements to the CINNAHOLIC® System may require. For purposes of this Agreement, all references to the CINNAHOLIC® System shall include such future changes, modifications and improvements.

• (xiii) For carry-out orders, serve all products in such printed paper containers, boxes, wrappers, trays, soft drink cups and carry-out bags that conform to the standards and specifications designated by Franchisor in the Operations Manual or otherwise.

• (xiv) Make no physical changes from blueprint specifications or approved remodeling plans in connection with the premises constituting the Bakery on the Franchised Site, or the design thereof, or any of the materials used therein, or their colors, without the express written approval of Franchisor, except that Franchisee will, upon request of the Franchisor, make such reasonable alterations to the Bakery or premises as may be necessary to conform to the then-current marketing and operating standards and specifications of CINNAHOLIC®.

Franchisee will paint the Bakery (interior or exterior) at such intervals

as Franchisor may reasonably determine to be advisable, which determination shall in no event be more than once in any calendar year, using paints which will be in accordance with specifications given by Franchisor.

• (xv) Ensure that an individual who has completed the initial training program described in Section 14.1 below is at the Bakery at all times during normal business hours as established by Franchisor from time to time.

• (xvi) Participate in all national, regional or local advertising and promotional activities Franchisor requires.

Franchisee understands that Franchisor implements promotions such as discount coupons, certificates, frequent customer cards, special menu promotions, gift cards and other activities intended to enhance customer awareness and build traffic at CINNAHOLIC® Bakeries on a national, regional or local level.

Franchisor may establish procedures and regulations related to these promotions in the Operations Manual and Franchisee agrees to honor and participate in these programs in accordance with such procedures and regulations specified by Franchisor in the Operations Manual or otherwise in writing.

Franchisee understands that its participation in these programs is essential to its success and that its participation may entail some cost to Franchisee.

Franchisee agrees that Franchisor has no obligation to reimburse Franchisee for any costs it incurs due to its mandatory participation in these special promotional programs.

Source: Item 22 — CONTRACTS (FDD pages 61–62)