What is the role of FSI in relation to the Fat Shack franchise?

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FAT SHACK INC. FRANCHISE AGREEMENT

THIS AGREEMENT (the "Agreement") is made as of the effective date set forth above between FAT SHACK INC., a Delaware corporation, located at 420 East 58th Avenue, Suite 128B, Denver, Colorado 80216 ("FSI") and the undersigned franchisee ("Franchisee"), who, on the basis of the following understanding, and in consideration of the following promises, agree as follows:

1. PURPOSE

• 1.1. FSI has developed methods for establishing, operating and promoting quick service sandwich restaurants under the name FAT SHACK® that features "Fat Sandwiches," burgers and wings, together with appetizers, desserts and hot and cold beverages, and related merchandise, for dine in, takeout and delivery, and specializes in late night delivery of its products to its customers ("FAT SHACK Restaurants" or "Restaurant") associated with the service mark "FAT SHACK". FSI licenses its franchisees to use certain valuable trade names, service marks and trademarks, including the service marks "FAT SHACK" and "LATE NIGHT DONE RIGHT" (collectively, the "Marks"), and FSI's distinctive techniques, expertise and knowledge in the establishment, operation and promotion of FAT SHACK Restaurants and related licensed methods of doing business (collectively the "Licensed Methods").
• 1.2. FSI grants the right to others to establish and operate FAT SHACK Restaurants, under the Marks and pursuant to the Licensed Methods.
• 1.3. Franchisee recognizes and acknowledges the benefits to be derived from being identified and associated with FSI and being able to utilize the Licensed Methods, and therefore desires to establish a FAT SHACK Restaurant at an approved location. FSI is willing to grant Franchisee the right to operate a FAT SHACK Restaurant under the terms and conditions contained in this Agreement.

2. GRANT OF FRANCHISE

2.1. Grant of Franchise

FSI grants to Franchisee, and Franchisee accepts from FSI, the right to use the Marks and Licensed Methods in connection with the establishment and operation of a FAT SHACK Restaurant, at the location described in Section 3.1. Franchisee agrees to use the Marks and Licensed Methods, as they may be changed, improved, and further developed by FSI from time to time, only in accordance with the terms and conditions of this Agreement.

2.2. Scope of Franchise Operations

Franchisee agrees at all times to faithfully, honestly and diligently perform Franchisee's obligations hereunder, to use best efforts to promote its FAT SHACK Restaurant and to not engage in any other business or activity that conflicts with the operation of the FAT SHACK Restaurant in compliance with this Agreement. Franchisee agrees to utilize the Marks and Licensed Methods to operate all aspects of Franchisee's FAT SHACK Restaurant in accordance with the methods and systems developed and prescribed from time to time by FSI, all of which are a part of the Licensed Methods. Franchisee's FAT SHACK Restaurant shall offer all products and services designated by FSI. Franchisee shall implement any additions and changes to the products and services offered by its FAT SHACK Restaurant that FSI requires.

3. RESTAURANT LOCATION AND TARGET AREA

3.1. Restaurant Location

Franchisee is granted the right to own and operate one FAT SHACK Restaurant at the address and location ("Restaurant Location") set forth in the Addendum to Franchise Agreement attached hereto as Exhibit I (the "Addendum"). If a specific address has not been chosen as of the date this Agreement is signed, then Franchisee shall choose and acquire a location for its FAT SHACK Restaurant within the nonexclusive Target Area set forth in the Addendum. Franchisee shall select and propose to FSI for approval a specific site for the Restaurant Location within the Target Area, which FSI shall have the right to approve or disapprove in accordance with the terms set forth in this Agreement. If the Addendum lists only a Target Area and not the Restaurant Location, then the Restaurant Location Supplement to Franchise Agreement attached hereto as Exhibit II will be executed by FSI and Franchisee upon FSI's later approval of the Restaurant Location. Franchisee acknowledges and agrees that the Restaurant Location will be a specific numbered street or mall address at which Franchisee's FAT SHACK Restaurant will be physically located. The Restaurant Location cannot and will not under any circumstances be defined as a geographic area or be described in terms other than a specific numbered street or mall address. During and after the term of this Agreement, neither Franchisee nor Franchisee's successors and assigns shall use the Restaurant Location for any purpose other than operating a FAT SHACK Restaurant.

3.2. Protected Territory

Subject to Section 3.4 and Section 3.5 of this Agreement regarding Special Venues and Channels and Captive Audience Venues, Franchisee is granted a geographic area around the Restaurant Location (the "Protected Territory") in which FSI will not operate, nor permit a third party to operate, a FAT SHACK Restaurant as long as Franchisee is in substantial compliance with all the provisions of this Agreement. The Protected Territory is an area encompassing a three mile radius around the Restaurant Location as measured from the front door of the Restaurant. A FAT SHACK Restaurant at a Captive Audience Venue does not have a Protected Territory. Because there are exceptions where FSI, its affiliates or other third parties may operate a FAT SHACK Restaurant in Franchisee's Protected Territory, Franchisee's Protected Territory is not considered an exclusive territory.

3.3. Limitation on Franchise Rights

The rights granted to Franchisee are for the specific Restaurant Location and cannot be transferred to any other location, except with FSI's prior written approval. The Marks and Licensed Methods are licensed only for the Restaurant Location. If Franchisee elects to move or relocate the Restaurant Location at any time during the term of this Agreement, Franchisee shall submit information about the proposed Restaurant Location to FSI for approval in accordance with the terms of Section 6.1 and other provisions of this Agreement and shall simultaneously pay FSI a "Relocation Fee" that is equal to 25 percent of the then-current Initial Franchise Fee for a first FAT SHACK Restaurant.

3.4. FSI's Sales Through Special Venues and Channels

FSI reserves the right for itself and its affiliates to market, offer, and sell, and to authorize third parties to market, offer, and sell, any and all products and services through venues and channels of distribution other than franchised and company-owned FAT SHACK Restaurants, including but not limited to grocery stores, wholesale distributors, coffee shops, restaurants that are not FAT SHACK Restaurants, offices, hospitality and food service venues, or through retail store display, catalog sales, Internet and other electronic methods, and catering (collectively, "Special Venues and Channels"). The

products and services available through Special Venues and Channels may include those that are the same as or similar to those which Franchisee will offer and sell, such as "Fat sandwiches," or entirely different services and products. The Special Venues and Channels may be in any location, including in close proximity to Franchisee's Restaurant Location. The marketing, offer, and sale of products and services through the Special Venues and Channels may be under the Marks and Licensed Methods or different trademarks, service marks, and methods.

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