What conditions must a City Publications franchisee meet before opening their franchised business?

the requirements for a controlled entity transfer (Section 20.C.) apply at signing.

SECTION 3. SCOPE OF LICENSE

A. Grant

In consideration of the royalties paid to Franchisor by Franchisee throughout the term hereof, Franchisor hereby grants to Franchisee, and Franchisee undertakes and accepts, upon the terms and conditions herein contained, the right, license and privilege to operate one (1) CITY PUBLICATIONS Business under the System and Marks. Subject to zoning and local ordinances, the Franchised Business may be operated or administered from any location. Franchisee is not required to obtain Franchisor's approval of any site, or to obtain a store front or commercial space, for the operation of the Franchised Business. If Franchisee establishes a commercial business location, any lease for the location must contain a provision entitling Franchisor, or its nominee, to assume such lease upon Franchisee's default of said lease.

B. Exclusive Territory

So long as this Agreement is in force and effect and Franchisee is not in default under any of the terms hereof, Franchisor will neither establish, nor license another to establish or operate, a CITY PUBLICATIONS Business within the geographic area identified in Exhibit A to this Agreement (the "Exclusive Territory"). The Exclusive Territory granted to Franchisee shall consist of approximately one hundred thousand (100,000) homes of an appropriate market value and shall be defined by zip codes. Demographics will be based upon the most recent available U.S. Census data at the time the Exclusive Territory is designated. Franchisee is required to confine its distribution of Card Packs to Franchisee's Exclusive Territory.

Franchisee may solicit for Card Pack advertisements outside of the Exclusive Territory so long as such advertisements are to be directed to consumers residing or situated within the Exclusive Territory. All activity to solicit advertising from individual business owners or other business entities having operations or sites in multiple franchise territories shall be reserved for Franchisor.

C. Franchisor's Rights

Except as otherwise provided, Franchisor retains all of its rights and discretion with respect to the Marks and the System, including the right:

• 1. To establish and operate, and license others to establish and operate, businesses under the System and Marks at any location outside of the Exclusive Territory as Franchisor deems appropriate;
• 1. To establish and operate, and license others to establish and operate, businesses under other systems using other proprietary marks both within and outside the Exclusive Territory as Franchisor deems appropriate; provided, however, that such other business will not be a loose card deck business similar to the Franchised Business if located within the Exclusive Territory. Without limiting the foregoing, it is acknowledged and agreed that the franchised business will market loose packaged card packs, and that affiliates of the Franchisor are developing and expect to market coupon advertising in booklet format or something other than the loose card deck format licensed by this Franchise Agreement. These concepts will use other proprietary marks, but may be licensed within the Exclusive Territory of Franchisee;
• 1. To sell the products or services authorized for the Franchised Business, including Proprietary Products & Services under the Marks or other trademarks, service marks and commercial symbols through alternative channels of distribution, such as retail outlets and Internet sales, pursuant to such terms and conditions as Franchisor deems appropriate; and

Source: Item 23 — RECEIPT (FDD pages 39–129)