Corner_Bakery_Cafe 2025 Franchise FAQ - FDD Ninja

Question 1

As of December 31, 2024, how many Corner Bakery Cafe franchisees were there?

Accepted Answer

| 2023 franchise agreements acquired | 40  |
|------------------------------------|-----|
| 2023 terminations                  | (3) |
| Franchisees at December 31, 2023   | 37  |
| 2024 franchise agreements acquired | -   |
| 2024 terminations                  | (5) |
| Franchisees at December 31, 2024   | 32  |

Source: Item 21 — FINANCIAL STATEMENTS (FDD page 55)

Question 2

For a Corner Bakery Cafe franchise, what are the requirements for the individual designated as the Operating Partner?

Accepted Answer

Operating Partner. You must designate an individual who has been approved by us to serve as the Operating Partner of your Franchised Cafe. The Operating Partner must have full control over and devote his or her best efforts to supervising the day-to-day operations of the Franchised Cafe and all other Franchised Cafes that you operate, unless you have named and we have approved a Multi-Unit Manager. The Operating Partner may not, without our prior written approval, engage in any other business or activity, directly or indirectly, that requires substantial management responsibility or time commitments or otherwise may conflict with your obligations under the Franchise Agreement. The Operating Partner must, among other things: (1) must holds a legal or beneficial interest in you of 10% or more (**"Principal(s)"**), unless you were a publicly-held entity or a wholly-owned subsidiary of a publicly-held entity as of the date of the first franchise-related agreement between you and us; (2) have completed our Initial Training Program to our satisfaction; and (3) live within a 100-mile radius of the Franchised Cafe.

Source: Item 15 — OBLIGATION TO PARTICIPATE IN (FDD pages 42–43)

Question 3

How many Corner Bakery Cafe locations were open in total at the start of 2022 across all listed states?

Accepted Answer

2022 2023 2024 |
| TX | 2022 2023 2024 |
| UT | 2022 2023 2024 |**Table No. 4 Status of Company-Owned Cafes For years 2022 to 2024**

| State | Year | Cafes at Start of Year | Cafes Opened | Cafes Reacquired from Franchisees | Cafes Closed | Cafes Sold to Franchisees | Cafes at End of Year |
|-------|------|------------------------------|-----------------|--------------------------------------------|-----------------|--

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 51–55)

Question 4

What is the total percentage of gross sales that Corner Bakery Cafe franchisees must contribute to marketing and advertising obligations (MAO)?

Accepted Answer

| National Marketing Fund (Section 6.3.1) | 1.25% of Gross Sales |
|---|---|
| Regional Marketing Fund (Section 6.3.2) | 0% of Gross Sales |
| Brand Development Fee (Section 6.4) | 0% of Gross Sales |
| Field Marketing (Section 6.5.1) | 1% of Gross Sales |
| TOTAL MAO: | 2.25% of Gross Sales |

Source: Item 23 — RECEIPTS (FDD pages 55–227)

Question 5

How does the Development Fee for Corner Bakery Cafe in Item 5 relate to the territory granted in the Development Agreement as described in Item 12?

Accepted Answer

When you sign the Development Agreement, you will pay a development fee in the amount of $20,000 for each Franchised Cafe that you agree to develop (the "Development Fee"). The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees that you will pay to us. You must agree to develop at least two Corner Bakery Cafes under a Development Agreement.

If you sign a Development Agreement, you will receive a Development Area, which will be mutually agreed upon by us and you, taking into consideration the density of the area and the number of Franchised Cafes that you agree to develop. A description of the Development Area will be attached as an appendix to the Development Agreement. The perimeters of the Development Area may be described by specific street boundaries, county lines, state lines, municipal boundaries, railroad tracks, or other similar boundary descriptions, and the size may range from a portion of a metropolitan area to a county or a state in less densely populated areas.

We have the right during the term of your Development Agreement and within your Development Area to: (1) operate, and license others to operate restaurants identified in whole or in part by the Marks at non-traditional locations and captive market venues; (2) award licenses to third parties to sell products under the Marks in foodservice facilities primarily identified by the third party's trademark; (3) merchandise and distribute products identified by the Marks through any method or channel of distribution other than through the operation of a restaurant or catering services; (4) sell and distribute products identified by the Marks to restaurants other than restaurants identified by the Marks, provided that those restaurants are not licensed to use the Marks in connection with their retail sales; (5) sell products and services through other channels of distribution, including the Internet, wholesale, mail order and catalog; (6) operate, and license others to operate any type of restaurant other than a restaurant identified in whole or in part by the Marks; (7) develop and own other franchise systems for the same or similar products and services using trade names and trademarks other than the Marks; and (8) purchase, be purchased by, merge or combine with, businesses that directly compete with Cafes and convert such businesses to the Marks and System, continue to operate such businesses under another name or system, and/or convert Cafes to such other name or system. We and our affiliates have no obligation pay any compensation to you if we exercise these rights.

You will not receive an exclusive territory under the Development Agreement or the Franchise Agreement. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.

As explained in Item 1, our affiliate, On Smile LLC, offers franchises for Cici's restaurants. Cici's restaurants specialize in pizza and other foods and operate either as dine-in buffet style restaurants or carry-out restaurants. The principal business address of On Smile LLC is the same as ours. Corner Bakery Cafes and Cici's restaurants currently offer significantly different menu items but they do offer some similar goods and they may offer similar goods or services in the future. There may be now or in the future Cici's restaurants located in the same market as current and future Corner Bakery Cafes. These Cici's restaurants could be company-owned, franchised or both. If there is a conflict between you and us caused by a Cici's restaurant or between a Corner Bakery Cafe franchisee and a Cici's restaurant franchisee, our management team will attempt to resolve the conflict after taking into account the specific facts of each situation and what is in the best interests of the affected system or systems. However, we are not responsible for resolving conflicts between or among Corner Bakery Cafe franchisees, or between or among a Corner Bakery Cafe franchisee and a Cici's franchisee.

Question 6

How does the initial franchise fee for Corner Bakery Cafe, as detailed in Item 5, compare to the potential pre-construction costs outlined in Item 7?

Accepted Answer

[Item 5: INITIAL FEES]

### **ITEM 5 INITIAL FEES**

#### **Initial Franchise Fee**

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of $40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

#### **Design Development Fee**

Once we have approved your site and you have completed due diligence as required in the Corner Bakery Cafe Operations Manual ("Manual"), we will engage the services of an architect or planner to prepare a design plan (the "Design Development Plan") for your Franchised Cafe. The Design Development Plan will include a schematic space plan layout, and exterior elevations showing desired branding. You must reimburse us for the cost of preparing the Design Development Plan according to the cost schedule set forth in the Manual, which currently includes a $5,000 base price plus add-ons based on the complexity of the project. This reimbursement is not refundable.

[Item 7: ESTIMATED INITIAL INVESTMENT]

#### **NOTES**

- 2. Pre-Construction Costs. This estimate includes costs for project and construction management, design, architectural, kitchen, mechanical, electrical, plumbing and related drawings including the Design Development Fee described in Item 5, engineering, testing, permit expeditor, city permits and fees, and legal costs for lease negotiation. Costs may vary significantly by geographic location.

Question 7

How does the initial franchise fee for Corner Bakery Cafe in Item 5 compare to the development fee, and under what circumstances would both be applicable?

Accepted Answer

EM 5 INITIAL FEES**

#### **Initial Franchise Fee**

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of \$40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

#### **Development Fee**

When you sign the Development Agreement, you will pay a development fee in the amount of \$20,000 for each Franchised Cafe that you agree to develop (the "Development Fee"). The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees that you will pay to us. You must agree to develop at least two Corner Bakery Cafes under a Development Agreement.

Question 8

How does the initial franchise fee for Corner Bakery Cafe in Item 5 compare to the potential revenue generated by a franchise, and where can information about potential revenue be found (if anywhere in these items)?

Accepted Answer

[Item 5: INITIAL FEES]

### **ITEM 5 INITIAL FEES**

#### **Initial Franchise Fee**

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of $40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

#### **Development Fee**

When you sign the Development Agreement, you will pay a development fee in the amount of $20,000 for each Franchised Cafe that you agree to develop (the "Development Fee"). The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees that you will pay to us. You must agree to develop at least two Corner Bakery Cafes under a Development Agreement.

#### **Design Development Fee**

Once we have approved your site and you have completed due diligence as required in the Corner Bakery Cafe Operations Manual ("Manual"), we will engage the services of an architect or planner to prepare a design plan (the "Design Development Plan") for your Franchised Cafe. The Design Development Plan will include a schematic space plan layout, and exterior elevations showing desired branding. You must reimburse us for the cost of preparing the Design Development Plan according to the cost schedule set forth in the Manual, which currently includes a $5,000 base price plus add-ons based on the complexity of the project. This reimbursement is not refundable.

Question 9

How does the initial franchise fee for Corner Bakery Cafe in Item 5 compare to the total estimated initial investment in Item 7, and what percentage does it represent?

Accepted Answer

| Type of Expenditure | Amount (Low Range) | Amount (High Range) |  | Method of Payment(1) | When Due | To Whom Payment Is To Be Made |
|---|---|---|---|---|---|---|
| Initial Franchise Fee(10) | $40,000 |  | $40,000 | Lump sum | See Item 5 | BCF |
| TOTAL ESTIMATED | $1,090,000 | $2,335,000 | (does not include real property costs) |  |  |  |
| INITIAL |  |  |  |  |  |  |
| INVESTMENT(18) |  |  |  |  |  |  |

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of $40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

Question 10

How does the initial franchise fee for Corner Bakery Cafe in Item 5 relate to the ongoing royalty fees or other fees listed in Item 6?

Accepted Answer

EM 5 INITIAL FEES**

#### **Initial Franchise Fee**

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of \$40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

#### **Development Fee**

When you sign the Development Agreement, you will pay a development fee in the amount of \$20,000 for each Franchised Cafe that you agree to develop (the "Development Fee"). The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees that you will pay to us. You must agree to develop at least two Corner Bakery Cafes under a Development Agreement.

#### **Design Development Fee**

Once we have approved your site and you have completed due diligence as required in the Corner Bakery Cafe Operations Manual ("Manual"), we will engage the services of an architect or planner to prepare a design plan (the "Design Development Plan") for your Franchised Cafe. The Design Development Plan will include a schematic space plan layout, and exterior elevations showing desired branding. You must reimburse us for the cost of preparing the Design Development Plan according to the cost schedule set forth in the Manual, which currently includes a \$5,000 base price plus add-ons based on the complexity of the project. This reimbursement is not refundable.

Question 11

How does the initial franchise fee for Corner Bakery Cafe in Item 5 relate to the overall profitability of the franchise, and where can information about potential profitability be found (if anywhere in these items)?

Accepted Answer

EM 5 INITIAL FEES**

#### **Initial Franchise Fee**

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of \$40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

#### **Development Fee**

When you sign the Development Agreement, you will pay a development fee in the amount of \$20,000 for each Franchised Cafe that you agree to develop (the "Development Fee"). The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees that you will pay to us. You must agree to develop at least two Corner Bakery Cafes under a Development Agreement.

#### **Design Development Fee**

Once we have approved your site and you have completed due diligence as required in the Corner Bakery Cafe Operations Manual ("Manual"), we will engage the services of an architect or planner to prepare a design plan (the "Design Development Plan") for your Franchised Cafe. The Design Development Plan will include a schematic space plan layout, and exterior elevations showing desired branding. You must reimburse us for the cost of preparing the Design Development Plan according to the cost schedule set forth in the Manual, which currently includes a \$5,000 base price plus add-ons based on the complexity of the project. This reimbursement is not refundable.

Question 12

How does the initial franchise fee for Corner Bakery Cafe in Item 5 relate to the potential for building equity in the franchise, and where can information about potential equity building be found (if anywhere in these items)?

Accepted Answer

[Item 5: INITIAL FEES]

### **ITEM 5 INITIAL FEES**

#### **Initial Franchise Fee**

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of $40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

#### **Development Fee**

When you sign the Development Agreement, you will pay a development fee in the amount of $20,000 for each Franchised Cafe that you agree to develop (the "Development Fee"). The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees that you will pay to us. You must agree to develop at least two Corner Bakery Cafes under a Development Agreement.

#### **Design Development Fee**

Once we have approved your site and you have completed due diligence as required in the Corner Bakery Cafe Operations Manual ("Manual"), we will engage the services of an architect or planner to prepare a design plan (the "Design Development Plan") for your Franchised Cafe. The Design Development Plan will include a schematic space plan layout, and exterior elevations showing desired branding. You must reimburse us for the cost of preparing the Design Development Plan according to the cost schedule set forth in the Manual, which currently includes a $5,000 base price plus add-ons based on the complexity of the project. This reimbursement is not refundable.

Question 13

How does the initial franchise fee for Corner Bakery Cafe in Item 5 relate to the potential long-term value of the franchise, and where can information about potential long-term value be found (if anywhere in these items)?

Accepted Answer

[Item 5: INITIAL FEES]

### **ITEM 5 INITIAL FEES**

#### **Initial Franchise Fee**

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of $40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

#### **Development Fee**

When you sign the Development Agreement, you will pay a development fee in the amount of $20,000 for each Franchised Cafe that you agree to develop (the "Development Fee"). The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees that you will pay to us. You must agree to develop at least two Corner Bakery Cafes under a Development Agreement.

#### **Design Development Fee**

Once we have approved your site and you have completed due diligence as required in the Corner Bakery Cafe Operations Manual ("Manual"), we will engage the services of an architect or planner to prepare a design plan (the "Design Development Plan") for your Franchised Cafe. The Design Development Plan will include a schematic space plan layout, and exterior elevations showing desired branding. You must reimburse us for the cost of preparing the Design Development Plan according to the cost schedule set forth in the Manual, which currently includes a $5,000 base price plus add-ons based on the complexity of the project. This reimbursement is not refundable.

Question 14

How does the initial franchise fee for Corner Bakery Cafe in Item 5 relate to the potential return on investment for a franchise, and where can information about potential return on investment be found (if anywhere in these items)?

Accepted Answer

EM 5 INITIAL FEES**

#### **Initial Franchise Fee**

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of \$40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

#### **Development Fee**

When you sign the Development Agreement, you will pay a development fee in the amount of \$20,000 for each Franchised Cafe that you agree to develop (the "Development Fee"). The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees that you will pay to us. You must agree to develop at least two Corner Bakery Cafes under a Development Agreement.

#### **Design Development Fee**

Once we have approved your site and you have completed due diligence as required in the Corner Bakery Cafe Operations Manual ("Manual"), we will engage the services of an architect or planner to prepare a design plan (the "Design Development Plan") for your Franchised Cafe. The Design Development Plan will include a schematic space plan layout, and exterior elevations showing desired branding. You must reimburse us for the cost of preparing the Design Development Plan according to the cost schedule set forth in the Manual, which currently includes a \$5,000 base price plus add-ons based on the complexity of the project. This reimbursement is not refundable.

Question 15

How does the initial investment for a Corner Bakery Cafe franchise, as detailed in Item 7, compare to the fees outlined in Item 5 and Item 6?

Accepted Answer

NITIAL INVESTMENT**

#### **YOUR ESTIMATED INITIAL INVESTMENT**

| Type of Expenditure | Amount (Low Range) | Amount (High Range) |  | Method of Payment(1) | When Due | To Whom Payment Is To Be Made |
|---|---|---|---|---|---|---|
| Pre-Construction | $25,000 | $144,000 |  | As arranged | As arranged | Suppliers, |
| Costs(2) |  |  |  |  |  | BCF |
| Construction Costs(3) | $450,000 | $997,000 |  | As arranged | As arranged | Contractors/ Suppliers |
| Front of House | $40,000 | $89,000 |  | As incurred | As incurred | Contractors/ |
| Furniture, Fixtures & |  |  |  |  |  | Approved |
| Equipment(4) |  |  |  |  |  | Suppliers |
| Back of House | $208,000 | $300,000 |  | As incurred | As incurred | Contractors/ |
| Furniture, Fixtures & |  |  |  |  |  | Approved |
| Equipment(5) |  |  |  |  |  | Suppliers |
| Smallwares(6) | $23,000 | $40,000 |  | As arranged | As arranged | Approved Suppliers |
| Technology System(7) | $45,000 |  | $65,000 | As arranged | As incurred | Suppliers |
| Catering Equipment(8) | $35,000 |  | $45,000 | As incurred | As incurred | Suppliers |
| ESTIMATED | $826,000 | $1,680,000 |  |  |  |  |
| BUILDING COSTS |  |  |  |  |  |  |
| Real Property(9) | Variable |  | Variable | As arranged | As incurred | Landlord |
| Initial Franchise Fee(10) | $40,000 |  | $40,000 | Lump sum | See Item 5 | BCF |
| Grand Opening | $15,000 | $15,000 | $15,000 | As Arranged | 30 days before opening to 180 days after opening |  |
| Marketing(11) |  |  |  |  |  |  |
| Training(12) | $40,000 |  | $100,000 | As arranged | As incurred | Suppliers |
| Inventory(13) | $14,000 |  | $25,000 | As incurred | As incurred | Suppliers |
| Security Deposits(14) | $5,000 | $25,000 | $25,000 | As incurred | As incurred | Contractors/ Suppliers |
| Additional Funds – 3 Months (15) | $150,000 | $450,000 |  | As arranged | As incurred | Suppliers/ Landlord/ Employees |
| ESTIMATED OPENING | $264,000 | $655,000 |  |  |  |  |
| COSTS |  |  |  |  |  |  |
| FRANCHISE AGREEMENT |  |  |  |  |  |  |
| Type of Expenditure | Amount (Low Range) | Amount (High Range) | Method of Payment(1) | When Due | To Whom Payment Is To Be Made |  |
| TOTAL ESTIMATED | $1,090,000 | $2,335,000 | (does not include real property costs) |  |  |  |
| INITIAL |  |  |  |  |  |  |
| INVESTMENT(18) |  |  |  |  |  |  |
| DEVELOPMENT AGREEMENT |  |  |  |  |  |  |
| FOR TWO TO THREE CORNER BAKERY CAFES |  |  |  |  |  |  |
| Type of Expenditure | Amount (Low Range) | Amount (High Range) | Method of Payment |  | When Due | To Whom Payment Is To Be Made |
| Development Fee(10) | $40,000 | $60,000 | Lump Sum |  | When the Development Agreement is signed | BCF |
| Leasehold and Office | $0 | $1,500 |  | As | Monthly | Landlord and |
| Expenses(16) |  |  |  | Arranged |  | Vendors |
| Additional Funds - 3 | $0 | $15,000 |  | As | As incurred | Insurers and |
| Months(17) |  |  |  | Arranged |  | Vendors |
| Estimated Investment | $1,090,000 | $2,335,000 |  |  |  |  |
| for First Cafe from Table |  |  |  |  |  |  |
| Above |  |  |  |  |  |  |
| TOTAL ESTIMATED | $1,130,000 | $2,411,500 |  |  |  |  |
| INITIAL |  |  |  |  |  |  |
| INVESTMENT(18) |  |  |  |  |  |  |#### **NOTES**

- 1. Expenditures. Costs paid to us are not refundable. Whether any costs paid to third parties are refundable will vary based on your vendors' policies. We do not offer any financing directly or indirectly for any part of the initial investment.
- 2. Pre-Construction Costs. This estimate includes costs for project and construction management, design, architectural, kitchen, mechanical, electrical, plumbing and related drawings including the Design Development Fee described in Item 5, engineering, testing, permit expeditor, city permits and fees, and legal costs for lease negotiation. Costs may vary significantly by geographic location.
- 3. Construction Costs. This estimate includes all costs incurred in constructing or remodeling a site to conform to our standards, general contractor and sub-contractor fees and other costs to construct leasehold improvements to conform to our standards, including exterior signage and awnings. In addition, this estimate includes items provided by the tenant for use in the lease space which would remain in the space at the conclusion of the lease (e.g. walk in cooler, refrigeration, exhaust hoods and fans, patio heaters, flooring, HVAC test & balance, etc.). The cost of constructing a building shell is not included. The cost of developing a site will vary widely depending upon the location/market, design, configuration, condition of the premises, condition and configuration of existing services and facilities (e.g. air conditioning, electrical, and plumbing),

the lease terms, and the local real estate market. Often, landlords provide allowances for tenant improvements.

Construction costs presented are net of tenant improvement allowances, which vary widely. For Company-Owned Cafes that opened in 2011 through 2024, tenant improvement allowances ranged from \$0 to approximately \$523,000. Your total net cost to construct a Cafe may be significantly impacted by the level of tenant improvement allowances received.

- 4.

Question 16

What is the relationship between the initial franchise fee for Corner Bakery Cafe in Item 5 and the lack of financing options offered by the franchisor in Item 10?

Accepted Answer

EM 5 INITIAL FEES**

#### **Initial Franchise Fee**

When you sign the Franchise Agreement, you will pay an initial franchise fee to us in the amount of \$40,000 (the "Initial Franchise Fee"). The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason.

#### **Development Fee**

When you sign the Development Agreement, you will pay a development fee in the amount of \$20,000 for each Franchised Cafe that you agree to develop (the "Development Fee"). The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees that you will pay to us. You must agree to develop at least two Corner Bakery Cafes under a Development Agreement.

#### **Design Development Fee**

Once we have approved your site and you have completed due diligence as required in the Corner Bakery Cafe Operations Manual ("Manual"), we will engage the services of an architect or planner to prepare a design plan (the "Design Development Plan") for your Franchised Cafe. The Design Development Plan will include a schematic space plan layout, and exterior elevations showing desired branding. You must reimburse us for the cost of preparing the Design Development Plan according to the cost schedule set forth in the Manual, which currently includes a \$5,000 base price plus add-ons based on the complexity of the project. This reimbursement is not refundable.

Question 17

When is the Franchisor released from further liability under the lease after assuming it for a Corner Bakery Cafe?

Accepted Answer

If Franchisor assumes the Lease, as provided above, Franchisor may, without Landlord's prior consent, further assign the Lease to a franchisee of Franchisor to operate the Corner Bakery Cafe at the Premises provided that the following criteria are met: (a) Franchisor has an established franchising program for Cafes; and (b) the proposed franchisee has met all of Franchisor's applicable program criteria and requirements and has executed Franchisor's standard franchise agreement. Landlord agrees to execute such further documentation to confirm its consent to the assignment permitted under this Addendum as Franchisor may reasonably request. Upon such assignment to a franchisee of Franchisor, Franchisor shall be released from any further liability under the terms and conditions of the Lease.

Source: Item 23 — RECEIPTS (FDD pages 55–227)

Question 18

According to the addendum, can a lawsuit be brought in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law related to a Corner Bakery Cafe franchise?

Accepted Answer

Notwithstanding the foregoing, you may bring a lawsuit in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law.

Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of the franchise.

Section 14-226 of the Maryland Franchise Registration and Disclosure Law prohibits a franchisor from requiring a prospective franchisee to assent to any release, estoppel, or waiver of liability as a condition of purchasing a franchise. Representations in this Agreement are not intended to, nor shall they act as a release, estoppel, or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.

Source: Item 22 — CONTRACTS (FDD page 55)

Question 19

According to Item 4, under what conditions would a principal officer's involvement in a company's bankruptcy affect Corner Bakery Cafe's disclosure obligations?

Accepted Answer

Neither the franchisor, its affiliate, its predecessor, officers, or general partner during the 10-year period immediately before the date of the offering circular: (a) filed as debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code; (b) obtained a discharge of its debts under the bankruptcy code; or (c) was a principal officer of a company or a general partner in a partnership that either filed as a debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code or that obtained a discharge of its debts under the U.S. Bankruptcy Code during or within 1 year after that officer or general partner of the franchisor held this position in the company or partnership.

Source: Item 23 — RECEIPTS (FDD pages 55–227)

Question 20

Does the addendum to the Corner Bakery Cafe Area Development Agreement modify the original agreement?

Accepted Answer

- **1.** The provisions of this Addendum form an integral part of, and are incorporated into the Development Agreement. This Addendum is being executed because: **(A)** the offer or sale of the franchise to you was made in the Commonwealth of Virginia; **(B)** you are a resident of the Commonwealth of Virginia; and/or **(C)** part or all of the Development Area is located in the Commonwealth of Virginia.
- **2.** The following statement is added to the end of Section 10 (Representations):

No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

- **3.** Any capitalized terms that are not defined in this Addendum shall have the same meaning given them in the Development Agreement.
- **4.** Except as expressly modified by this Addendum, the Development Agreement remains unmodified and in full force and effect.
- **5.** This Addendum may be executed in multiple counterparts, each of which when executed and delivered shall be deemed an original and all of which together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page of this Addendum by electronic transmission (including PDF) shall be as effective as delivery of a manually executed counterpart of this Addendum.

Source: Item 22 — CONTRACTS (FDD page 55)

Question 21

Does the addendum change any obligations of the Corner Bakery Cafe franchisee?

Accepted Answer

[Item 22: CONTRACTS]

## **ADDENDUM TO THE CORNER BAKERY CAFE AREA DEVELOPMENT AGREEMENT REQUIRED FOR MARYLAND DEVELOPERS**

This Addendum to the Corner Bakery Cafe Area Development Agreement dated ("Development Agreement") between Best Cafe – Franchises, LLC ("Franchisor", "we", "us" or "our"), a Delaware limited liability company, and ("Developer," "you" or "your"), a, is entered into simultaneously with the execution of the Development Agreement.
- 1 The provisions of this Addendum form an integral part of, and are incorporated into the Development Agreement. This Addendum is being executed because: **(A)** the offer or sale of a franchise to you was made in the State of Maryland; **(B)** you are a resident of the State of Maryland; and/or **(C)** part or all of the Development Area is located in the State of Maryland.
  - 2 The following is added to the end of Section 2 of the Development Agreement:

Based upon our financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all development fees and initial payments owed by you shall be deferred until the first Cafe under this Agreement opens.

3 The following sentence is added to the end of Sections 7 and 8:

This release shall not apply to any liability under the Maryland Franchise Registration and Disclosure Law.

4 The following sentence is added to the end of Section 10:

Notwithstanding the foregoing, you may bring a lawsuit in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law.

- **3.** No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
- **4.** Any capitalized terms that are not defined in this Addendum shall have the meaning given them in the Franchise Agreement.
- **5.** Except as expressly modified by this Addendum, the Franchise Agreement remains unmodified and in full force and effect.

## **ADDENDUM TO THE CORNER BAKERY CAFE FRANCHISE AGREEMENT REQUIRED FOR WASHINGTON FRANCHISEES**

## **ADDENDUM TO THE CORNER BAKERY CAFE FRANCHISE AGREEMENT REQUIRED FOR NEW YORK FRANCHISEES**

## **ADDENDUM TO THE CORNER BAKERY CAFE FRANCHISE AGREEMENT REQUIRED FOR MINNESOTA FRANCHISEES**

Source: Item 22 — CONTRACTS (FDD page 55)

Question 22

Does the addendum create any new prohibited actions for the Corner Bakery Cafe franchisee?

Accepted Answer

Section 14-226 of the Maryland Franchise Registration and Disclosure Law prohibits a franchisor from requiring a prospective franchisee to assent to any release, estoppel, or waiver of liability as a condition of purchasing a franchise. Representations in this Agreement are not intended to, nor shall they act as a release, estoppel, or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.

Section 41 of the Illinois Franchise Disclosure Act states that any condition, stipulation or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of the Act is void.

Source: Item 22 — CONTRACTS (FDD page 55)

Question 23

Does the addendum create any new required actions for the Corner Bakery Cafe franchisee?

Accepted Answer

**Illinois Maryland Minnesota New York North Dakota Rhode Island Virginia Washington**

Source: Item 22 — CONTRACTS (FDD page 55)

Question 24

Who bears the cost of inspections during the construction of a Corner Bakery Cafe, and are there any exceptions?

Accepted Answer

Such inspections shall be at our expense, except for inspections made upon your request, which shall be at your expense.

If we make travel arrangements for our personnel and you need to delay their arrival, you must reimburse us for any costs and expenses that we incur in changing our travel arrangements.

Source: Item 22 — CONTRACTS (FDD page 55)

Question 25

Besides the listed states, are there potentially other states where Corner Bakery Cafe has appointed an agent for service of process?

Accepted Answer

We intend to register this disclosure document as a "franchise" in some or all of the following states, if required by the applicable state law. If and when we pursue franchise registration (or otherwise comply with the franchise investment laws) in these states, we will designate the following state offices or officials as our agents for service of process in these states. There may be states in addition to those listed below in which we have appointed an agent for service of process. There may also be additional agents in some of the states listed.

Source: Item 23 — RECEIPTS (FDD pages 55–227)

Question 26

Besides Section 4.1, what other agreements might contain restrictions on Corner Bakery Cafe's business activities?

Accepted Answer

or other commitment to open in the Development Area as of the Effective Date of which we have provided you with prior written notice.

**4.2 No Other Restriction On Us.** Except as expressly provided in Section 4.1 or any other agreement between the parties, we and our affiliates retain the right, in our sole discretion, to conduct any business activities, under any name, in any geographic area, and at any location, regardless of the proximity to or effect on your Cafes.

Source: Item 23 — RECEIPTS (FDD pages 55–227)

Question 27

What is the condition for the franchisor to repurchase a Corner Bakery Cafe franchisee's business in Washington?

Accepted Answer

- 1. **Background**.

The provisions of this Addendum form an integral part of, are incorporated into, and modify the Franchise Agreement regardless of anything to the contrary contained therein.

This Addendum applies if: (a) the offer to sell a franchise is accepted in Washington; (b) the purchaser of the franchise is a resident of Washington; and/or (c) the franchised business that is the subject of the sale is to be located or operated, wholly or partly, in Washington.

- 3. **Conflict of Laws.** In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, chapter 19.100 RCW will prevail.

- 4. **Franchisee Bill of Rights.** RCW 19.100.180 may supersede provisions in the Franchise Agreement or related agreements concerning your relationship with the franchisor, including in the areas of termination and renewal of your franchise.

There may also be court decisions that supersede the Franchise Agreement or related agreements concerning your relationship with the franchisor.

Franchise agreement provisions, including those summarized in Item 17 of the Franchise Disclosure Document, are subject to state law.

- 5. **Site of Arbitration, Mediation, and/or Litigation.** In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation.

In addition, if litigation is not precluded by the Franchise Agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.

Source: Item 22 — CONTRACTS (FDD page 55)

Question 28

What is the condition for a lease for a Corner Bakery Cafe location to be valid under the Franchise Agreement?

Accepted Answer

Under the Franchise Agreement, any lease for the location of a Corner Bakery Cafe is subject to Franchisor's approval with regards to the terms and conditions that affect Franchisor, and Franchisor expressly disclaims any other connotations either expressed or implied as to the other terms and conditions set forth in the Lease that are negotiated between Landlord and Franchisee.

Source: Item 23 — RECEIPTS (FDD pages 55–227)

Question 29

What condition makes it lawful for Corner Bakery Cafe to repurchase a franchisee's business in Washington?

Accepted Answer

- 5. **General Release.** A release or waiver of rights in the franchise agreement or related agreements purporting to bind the franchisee to waive compliance with any provision under the Washington Franchise Investment Protection Act or any rules or orders thereunder is void except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel, in accordance with RCW 19.100.220(2).

In addition, any such release or waiver executed in connection with a renewal or transfer of a franchise is likewise void except as provided for in RCW 19.100.220(2).

Source: Item 23 — RECEIPTS (FDD pages 55–227)

Question 30

What is the condition for the payment of the Development Fee for a Corner Bakery Cafe franchise in Washington?

Accepted Answer

- 2. **Fee Deferral.** The State of Washington has imposed a financial condition.

Therefore, payment of the Development Fee will be released proportionally with respect to each Cafe opened and is deferred until have met our pre-opening obligations under the Franchise Agreement and the Cafe is open for business.

Source: Item 22 — CONTRACTS (FDD page 55)

Question 31

What is the condition regarding pricing for products or services that a Corner Bakery Cafe franchisee is required to purchase or rent?

Accepted Answer

lace at the time that you sign the Franchise Agreement for each Cafe.

Catering and Delivery Services. You must participate in the Corner Bakery Cafe Catering Program and provide the catering services designated by us from the Franchised Cafe (the "Catering Services") to customers located within your Protected Area subject to your obligation to follow our procedures and menu requirements, purchase all supplies, products and ingredients through our approved and designated suppliers and otherwise follow the Manual as to the catering services.

We may require or permit you to offer delivery services for regular (non-catering) menu items from the Franchised Cafe using your own delivery personnel or third-party vendors that we designate or approve ("Delivery Services") to customers located within your Protected Area in accordance with the Manual. You may not offer Delivery Services without our prior written approval. We may require you to exclusively use one or more vendors that we designate for such Delivery Services in accordance with the terms of any agreements that we enter into with such vendors (which may require you to pay such vendor a portion of your revenue from such sales).

During the term of the Franchise Agreement, you have the exclusive right to directly solicit catering or delivery customers and provide Catering Services or Delivery Services from the Franchised Cafe only within the Protected Area.

Source: Item 22 — CONTRACTS (FDD page 55)

Question 32

What condition related to a certificate of occupancy can trigger a reimbursement obligation for a Corner Bakery Cafe franchisee?

Accepted Answer

If we make travel arrangements for our personnel to conduct the final inspection of the Franchised Cafe prior to opening and you need to extend the inspection date, you must reimburse us for any costs and expenses that we incur in changing our travel arrangements.

Source: Item 22 — CONTRACTS (FDD page 55)

Question 33

What is the condition for Corner Bakery Cafe to repurchase the franchisee's business for any reason during the term of the Franchise Agreement in Washington?

Accepted Answer