How is the Fat Shack Marketing and Promotion Fee payable?

Marketing and Promotion Fund Contribution. We currently do not collect a Marketing and Promotion Fee, nor have we established a National Marketing and Promotion Fund or program. However, upon not less than 30 days' notice, we may require you to remit to us a Marketing and Promotion Fee of up to 1½ percent of Gross Sales. We may change the percentage of the Marketing and Promotion Fee upon 30 days' notice, but not above 1½ percent of Gross Sales. The Marketing and Promotion Fee is due to us along with your Royalty Fee payment, payable weekly by automatic transfer on Tuesday of each week, based on the amount of Gross Sales in the previous week. The Marketing and Promotion Fee will be placed in a separate account ("Marketing and Promotion Fund") will be accounted for separately. All company-owned and affiliate-owned FAT SHACK Restaurants will pay into the Marketing and Promotion Fund on an equal percentage basis with all franchised FAT SHACK Restaurants.

Once established, we will administer the Marketing and Promotion Fund in our sole discretion. We may use the Marketing and Promotion Fund for the creation, production and placement of commercial advertising, agency costs and commissions, creation and production of video, audio, and written advertisements, including direct mail, radio and other media advertising, the establishment and operation of gift card and loyalty card programs, Internet advertising of FAT SHACK Restaurants, employing advertising agencies and in-house staff assistance, supporting public relations, market research and other advertising and marketing activities. We may also use the Marketing and Promotion Fund for product development and menu changes. We will not spend the Marketing and Promotion Fund's money on advertising that is principally the solicitation for the sale of franchises.

We may reimburse ourselves from the Marketing and Promotion Fund for administrative costs, salaries and overhead expenses related to the administration of the Marketing and Promotion Fund and its

marketing programs, including conducting market research, preparing material and collecting and accounting for Marketing and Promotion Fund contributions. In any fiscal year we may spend an amount greater or less than the aggregate contribution of all FAT SHACK Restaurants to the Marketing and Promotion Fund in that year. The Marketing and Promotion Fund may borrow from us or other lenders to cover deficits or cause the Marketing and Promotion Fund to invest any surplus for future use. Any amounts remaining in the Marketing and Promotion Fund at the end of each year accrue and we apply them toward the next year's expenses. Neither we nor the Marketing and Promotion Fund has any obligation to spend any amounts on advertising in your Protected Territory. We have no fiduciary obligation to you or other franchisees in regard to our administration of the Marketing and Promotion Fund. We assume no other direct or indirect liability or obligation to you for collecting amounts due to any advertising account or for maintaining, directing or administering any advertising account.

We may use outside advertising agencies and vendors or in-house personnel, or both, to create local, regional or national advertising, including ad slicks, radio spots, direct mail and other marketing pieces and programs.

Since we have not collected the Marketing and Promotion Fee or established the Marketing and Promotion Fund as of the date of this Disclosure Document, we cannot advise how the Marketing and Promotion Fund was spent in prior fiscal years. Any excess contributions to the Marketing and Promotion Fund that are not spent in the year they are received will be applied towards future marketing expenses. Once established, and if you request it in writing, we will send you an annual unaudited financial statement for the Marketing and Promotion Fund that indicates how the Marketing and Promotion Fund has been spent during the previous year. Because we will not have the Marketing and Promotion Fund audited, audited financial statements will not be available to franchisees.

Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 28–36)