Is Lees Famous Recipe required to provide advertising materials, or is it discretionary?

Franchise Agreement, unless we provide otherwise in writing, and we may terminate the Franchise Agreement if you fail to do so (Franchise Agreement – Exhibit B).

Ongoing Obligations

Throughout the term of the Franchise Agreement, we will satisfy the following obligations under the Franchise Agreement, or if appropriate the Area Development Agreement.

• 1. Administer the Brand Cooperative Advertising Fund to provide such advertising and advertising material on a national, regional or local basis in accordance with its bylaws. We may require you to pay for some of the advertising materials that we make available to you (Franchise Agreement – Section 5(A)).
• 1. At our discretion, provide supplemental and refresher training for up to seven days each calendar year, in addition to any annual or regional conferences that we may require you to attend (Franchise Agreement – Section 7(B) and (F)).
• 1. Provide advisory services relating to Restaurant operations, which may include those related to Products and services offered for sale, selecting, purchasing and marketing other approved materials and items, marketing assistance and sales promotion programs, and general administrative and operating procedures (Franchise Agreement – Section 7(D)).
• 1. Periodically provide you with updated and revised materials for the Operations Manual (Franchise Agreement – Section 7(E)).
• 1. At our discretion, establish, advertise, and promote maximum prices on menu items, products, and services, subject to compliance with applicable laws (Franchise Agreement – Section 9(F))
• 1. Provide you access to our website and intranet system, subject to your compliance with the terms of the Franchise Agreement (Franchise Agreement – Section 9(Q))
• 1. At our discretion, conduct periodic inspections and audits of your Restaurant and periodic evaluations of the products you use and sell in your Restaurant (Franchise Agreement – Section 11).

Advertising

Brand Cooperative Advertising

We, or our designee, maintain and administer an advertising fund (the "Brand Cooperative Advertising Fund" or the "Fund") for such advertising, marketing and public relations programs and materials as we deem necessary or appropriate in our sole discretion. The current designee to maintain and administer the Brand Cooperative Advertising Fund is our affiliate, Lee's Advertising. You must join, actively participate in, and comply with the thencurrent bylaws of Lee's Advertising (attached as Exhibit I) or any successors or replacements we

designate. For ease of reference, we may refer to us and Lee's Advertising together as "we" throughout this Brand Cooperative Advertising section.

As of the issuance date of this disclosure document, we have a Brand Cooperative Advertising council composed of nine directors. The council operates from a set of bylaws (attached as Exhibit I). We appoint three directors to the council and Lee's Famous Recipe franchisees and licensees appoint the remaining six directors, with each member Restaurant receiving one vote. The council possesses certain operational and decision-making power on matters related to the investment of Brand Cooperative Advertising funds, the approval of certain advertising programs and promotions, and rules and policies relating to advertising and marketing materials, among other items. We may change or dissolve the advertising council so long as there is a majority approval of all voting members to make the change or dissolution.

You must contribute 3% of your Gross Sales (as defined in Item 6) on a weekly basis to the Brand Cooperative Advertising Fund. We also will contribute to the Brand Development Fund for each Lee's Famous Recipe Restaurant that we or our affiliates develop or acquire and operate in the United States at the same percentage rate that you pay into the Brand Cooperative Advertising Fund. Other Lee's Famous Recipe franchisees and licensees contribute at different rates and at different times. (Franchise Agreement – Sections 4(C) and 5(A))

Disbursements from the Fund will be made to pay expenses we incur, in our sole discretion, in connection with the general promotion of the Marks and the System, including the cost of formulating, developing and implementing advertising, marketing, direct mail, promotional and public relations campaigns; expenses related to market research and customer and franchise satisfaction surveys; the cost of product research and development and menu development; creative development services (including creation and modification of Lee's Famous Recipe Restaurant design and trade dress, logos, menu design, graphics, and vehicle wraps, and advertising and promotional items, including the cost of retiring expired or obsolete printed items and materials, photography services, and design software); organizing and hosting franchise conferences; the development and maintenance of online ordering, website hosting and ecommerce programs; and the reasonable costs of administering the Fund, including the cost of employing advertising, public relations and other third party agencies to assist us and providing promotional brochures and advertising materials to Lee's Famous Recipe Restaurants and to regional and local advertising cooperatives (if we establish such cooperatives), as well as accounting expenses and the actual costs of salaries and fringe benefits paid to our employees engaged in administration of the Fund. The Brand Development Fund is not a trust or escrow account, and we have no fiduciary obligations regarding the Fund. The Brand Development Fund is intended to maximize the public's awareness of Lee's Famous Recipe Restaurants and the System, and we have no obligation to ensure that any individual franchisee benefits directly or on a pro rata basis from the placement, if any, of advertising, marketing or other activities in its local market. We may use a portion of the monies (but no more than 20% of Brand Development Fund) contained in the Fund to establish regional marketing funds and/or to maintain our Website, which may include one or more pages dedicated to promotion of the franchise program and franchise sales. We may spend in any fiscal year an amount greater or less than the aggregate contributions of Lee's Famous Recipe to the Brand Development Fund in that year. We may have the Brand Development Fund borrow from us or other lenders to cover any Brand Development Fund deficits. If we do not spend the monies in the Brand Development Fund in the year they were

collected, then they will be carried forward to the Brand Development Fund for the following year. We may, through the Brand Development Fund, furnish you with approved local marketing plans and materials on the same terms and conditions as plans and materials we furnish to other Lee's Famous Recipe restaurants. We will determine the methods of advertising, media employed and scope, contents, terms and conditions of advertising, marketing, promotional and public relations campaigns and programs. We will prepare an annual statement of monies collected and costs incurred by the Brand Cooperative Advertising Fund and furnish it to you upon written request.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 34–47)