Is a Fat Shack franchisee required to participate in promotional campaigns and advertising programs that FSI periodically establishes?

Advertising

Franchisee shall obtain FSI's prior written approval of all written advertising or other marketing or promotional programs not previously approved by FSI regarding the FAT SHACK Restaurant,

including, without limitation, "Yellow Pages" advertising, newspaper ads, flyers, brochures, coupons, direct mail pieces, specialty and novelty items, radio and television advertising, Internet "web" pages and other home pages or domain names on any common carrier electronic delivery system. Franchisee acknowledges that web pages and websites on the Internet constitute advertising and is subject to the terms set forth in Section 13.5 below. Any proposed written advertising or a description of a marketing or promotional program not previously approved by FSI shall be submitted to FSI at least 10 days prior to publication, broadcast or use. Franchisee acknowledges that advertising and promoting the FAT SHACK Restaurant in accordance with FSI's standards and specifications is an essential aspect of the Licensed Methods, and Franchisee agrees to comply with all advertising standards and specifications. Franchisee also agrees to participate in any promotional campaigns and advertising and other programs that FSI periodically establishes.

13.2. Grand Opening

Franchisee agrees to conduct a grand opening advertising and promotional program for the FAT SHACK Restaurant at the time and in the manner specified by FSI. Franchisee's grand opening program will utilize the marketing and public relations programs and media and advertising materials that FSI has either developed or approved. Franchisee agrees that FSI may order and pay for some or all of the grand opening materials on behalf of Franchisee. If FSI does pay for Franchisee's grand opening expenses, FSI shall have the right to debit Franchisee's bank account or otherwise require Franchisee to reimburse FSI for such expenses not later than 60 days prior to the planned FAT SHACK Restaurant opening date. Franchisee will provide FSI with a summary of grand opening program expenditures within 120 days after the FAT SHACK Restaurant opens.

13.3. Marketing and Promotion Fee

FSI may in its sole discretion, conduct regional, national or international advertising to promote the FAT SHACK brand and system generally, and charge its franchisees for this service. FSI reserves the right, upon not less than 30 days' notice to Franchisee, to require Franchisee to pay to FSI an advertising, marketing and promotion fee ("Marketing and Promotion Fee") in an amount designated in the notice, up to a maximum of 1½ percent of the total amount of Franchisee's weekly Gross Sales. FSI may change the percentage of the Marketing and Promotion Fee upon 30 days' notice to Franchisee, but it shall not increase the Marketing and Promotion Fee above 1½ percent of Franchisee's weekly Gross Sales during the term of this Agreement. The Marketing and Promotion Fee, once due, is payable weekly, concurrent with the payment of the Royalty in accordance with Article 5 above, by electronic transfer of funds pursuant to the Authorization Agreement for preauthorized payment described in Section 5.4, and is nonrefundable once it is paid. The Marketing and Promotion Fee is also subject to the same administrative fee, late charge and interest as the Royalty Fee, as set forth above. If and when collected, the Marketing and Promotion Fee will be deposited into a separate bank account, commercial account or savings account ("Marketing and Promotion Fund"), which will be administered as follows:

a. The Marketing and Promotion Fund will be administered by FSI and may be used for production and placement of media advertising, direct response literature, direct mailings, brochures, radio and television advertising, collateral advertising material, surveys of advertising effectiveness, development of Internet websites, or other advertising or public relations expenditures relating to advertising FAT SHACK Restaurants services and products, providing professional services, materials, and personnel to support the marketing function, and creating, producing, and implementing websites for FSI and/or its franchisees. FSI will direct all advertising and promotional programs, with the sole and absolute right of approval over agencies, spokespersons, creative concepts, materials, media placements and allocations used in the programs.

Source: Item 23 — Receipts (FDD pages 53–223)