Who pays for the local ads and promotions for a Monicals Pizza franchise?

• 1. Each month, you must spend at least 2% of the previous month's gross sales on advertising, promotions and public relations in the local area surrounding the franchised restaurant. You will pay for your ads and promotions directly, but we will provide you with general marketing guidelines and we will review and approve your advertisements. We will not spend any funds on advertising your franchised restaurant in your local area. (Franchise Agreement, Section 11.2)
• 1. We may develop a System-wide marketing fund, and you must contribute to the fund. (Franchise Agreement, Section 11.3) We will set the exact percentage that you must contribute and we may adjust the percentage periodically. We will administer the marketing fund as follows:
• (a) We will control the creative concepts and the materials and media to be used, and we will determine the placement and allocation of advertisements. We may use print, television, radio, Internet or other media for advertisements and promotions. We do not guarantee that any particular franchisee will benefit directly or in proportion to their contribution from the placement of advertising by the marketing fund.
• (b) We may use your contributions to meet or reimburse us for any cost of producing, maintaining, administering and directing consumer advertising (including the cost of preparing and conducting television, radio, Internet, magazine, direct mail and newspaper advertising campaigns and other public relations activities; developing and/or hosting an Internet web page of similar activities; employing advertising agencies to assist therein; providing promotional brochures; conducting market research; and providing other marketing materials to franchisees). We will maintain your contributions in a separate account from our funds and we will not use them for any of our general operating expenses, except for our reasonable administrative costs and overhead related to the administration of the marketing fund. We will not use marketing fund contributions for the direct solicitation of franchise sales.
• (c) We expect to use all contributions in the fiscal year they are made. We will use any interest or other earnings of the marketing fund before we use current contributions. We intend for the marketing fund to be perpetual, but we have the right to terminate it if necessary. We will not terminate the marketing fund until all contributions and earnings have been used for advertising and promotional purposes or have been returned to our franchisees on a pro rata basis.
• (d) All Monical's restaurants owned by an affiliate or us will make similar contributions to the marketing fund as required of franchisees.
• (e) We will have an accounting of the marketing fund prepared each year and once completed, we will provide you with a copy if you request it. We may require that the annual accounting be audited by an independent certified public accountant at the expense of the marketing fund.
• (f) The marketing fund is not a trust and we assume no fiduciary duty in administering the marketing fund.

We have not collected any marketing fund contributions. As a result, we have not spent any money from the System-wide marketing fund. Except for our reasonable administrative costs, overhead related to the administration of the marketing fund and salaries of any marketing personnel that may be

employed by us, we do not and will not receive compensation for providing goods or services to the fund. No marketing funds are used for solicitation of new franchisees.

• 1. Although we are not obligated to do so and have not yet done so, we may create a cooperative advertising program for the benefit of all Monical's restaurants located within a particular region. If we do, we have the right to collect and designate all or a portion of the local advertising for a cooperative advertising program. We will determine the geographic territory and market areas for each cooperative advertising program. You must participate in any cooperative advertising program established in your region. If a cooperative advertising program is implemented in a particular region, we may establish an advertising council for franchisees in that region to self-administer the program. If we establish a cooperative advertising program or programs with or without an advertising council, there are no limits on our right to change, dissolve or merge such program(s) and/or council(s) at any time. (Franchise Agreement, Section 11.4)
• 1. You should list the telephone number for the franchised restaurant in your local telephone directory. (Franchise Agreement, Section 11.6)
• 1. Under the Franchise Agreement, you are restricted from establishing a presence on, or marketing using, the Internet or by cellphone in connection with the franchised restaurant except under a Franchisor designated program or our prior written consent. However, you may market using the internet in connection with the franchised restaurant for the purpose of collecting e-mail addresses and cellphone numbers from guests of your restaurants for use in future e-mail and text marketing activities. You must continue to follow Monical's internet usage rules, policies and requirements.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 20–27)