What criteria does Potbelly Sandwich Works use to evaluate a potential site?

replaced with the following:

A. SITE SELECTION.

You acknowledge that you located, and we accepted, the Site, and you negotiated, and we accepted the Site's occupancy agreement (the "Lease"), before you signed this Agreement. Our acceptance of the Site is not a representation or warranty of any kind, express or implied, of the Site's suitability for a Potbelly Shop or any other purpose. Our acceptance indicates only that we believe the Site meets our then acceptable criteria, unless we waive those criteria in a particular situation. Applying criteria appearing effective with other sites might not accurately reflect the potential for all sites, and demographic and/or other factors included in or excluded from our criteria could change, altering a site's potential. The uncertainty and instability of these criteria are beyond our control, and we are not responsible if the Site we accepted fails to meet your expectations. You acknowledge that your acceptance of the Franchise was based on your own independent investigation of the Site's suitability for the Shop.

You also acknowledge that our review and acceptance of the Lease is not a guarantee or warranty, express or implied, of the successful operation or profitability of a Potbelly Shop at the Site. Our review and acceptance indicates only that we believe the Lease's terms meet our then current criteria for proposed Potbelly Shop sites.

If you lose the right to occupy the Site without your fault, or if the Site is destroyed, condemned , or otherwise rendered unusable, you may relocate the Shop to a new site reasonably acceptable to us. Any relocation will be at your sole expense, and we may charge you twenty percent (20%) of our then-current initial franchise fee for new franchisees for our involvement in the relocation process. If you choose to relocate, whether during the Term or in connection with your acquisition of a successor franchise (see Section 13 below), you agree, as a condition of that relocation, and within the timeframe we specify and at your own expense, to take all action we require to de-brand and de-identify the Shop's former Site so that it no longer is associated in any manner (in our reasonable opinion) with the Franchise System.

1. Lease of Premises. Section 2.B of the Franchise Agreement is deleted in its entirety.

2. Initial Franchise Fee. Section 3.A of the Franchise Agreement is deleted in its entirety and is replaced with the following:

A. INITIAL FRANCHISE FEE.

You agree to pay us a nonrecurring and, except as specifically provided in this Agreement, nonrefundable initial franchise fee of Twenty-Five Thousand Dollars ($25,000). This fee must be paid, and is fully earned by us, when you sign this Agreement. We will credit toward the initial franchise fee any deposit you previously paid under a Shop Development Area Agreement, if applicable.

• 1. Advertising and Development Fund Contribution. Section 3.C of the Franchise Agreement is deleted in its entirety and the immediately following subsections are deemed re-lettered accordingly. You hereby acknowledge and agree that any further references to the brand fund contribution in this Agreement are also deleted.
• 1. Compliance With System Standards. Section 8.A of the Franchise Agreement is amended as follows:
  • (a) Days and Hours of Operation. We recognize and acknowledge that the Potbelly Shop will operate at a Non-Traditional Location and will be required to be open and operating on those days and during those hours that the Non-Traditional Location may set from time to time. Therefore, Subsection 8.A(13) of the Franchise Agreement is deleted.
    • (b) Participation in Franchisee Advisory. Section 8.A(17) is deleted in its entirety.
• 1. Marketing. The first paragraph of Section 9 of the Franchise Agreement is deleted in its entirety and is replaced with the following:

Potbelly Shops must engage in, and prepare materials for, various marketing, advertising, customer relationship management ("CRM"), public relations, and brand building and protection activities and programs we deem appropriate to enhance the Potbelly brand (collectively, "Marketing"). We describe the Marketing below. You must pay us, at the same time and in the same manner as the Royalty, the Production Fee described in Subsection 9.B.

• 1. Market Introduction. Section 9.A of the Franchise Agreement is deleted in its entirety.
• 1. Brand Fund. Section 9.B of the Franchise Agreement is deleted in its entirety and is replaced with the following:

B. PRODUCTION FEE.

You must pay us a production fee (the "Production Fee") equal to one percent (1%) of the Shop's Gross Sales. Said Production Fee will be payable in the same manner as the Royalty. We will use Production Fees to create, prepare, and produce video, audio, and written materials, graphics, and Electronic Media for Potbelly Shops; develop a Franchise System Website, Intranet and/or related strategies; conduct research; hire advertising, promotion, CRM, marketing, graphic design, and research agencies, other advisors, and personnel to provide assistance; support market research, customer satisfaction surveys, and other advertising promotion, CRM, marketing, graphic design, and research activities for Potbelly Shops; and pay third party vendors to customize advertising, promotion, CRM,, and marketing materials for in-Shop and local use by franchisees.

We have sole control over how and where to spend Production Fees. We will give you, at no additional cost, one set of Marketing materials that we consider to be standard for a franchised Potbelly Shop. If you want additional supplies of these Marketing materials, you must pay us an amount equal to their direct production cost plus any related shipping, handling, and storage charges. We need not ensure that any Potbelly Shop benefits directly or in proportion to its Production Fees from the creation and development of Marketing Materials.

• 1. Your Local Marketing. You hereby acknowledge that Section 9.C of the Franchise Agreement has been deleted in its entirety and the immediately following subsections are deemed relettered accordingly. You hereby also acknowledge and agree that any further references to local marketing in this Agreement are also deleted.
• 1. Area Brand Cooperative. You hereby acknowledge that Section 9.D of the Franchise Agreement has been deleted in its entirety and the immediately following subsections are deemed relettered accordingly. You hereby also acknowledge and agree that any further references to an area brand cooperative in this Agreement are also deleted.
• 1. Entire Agreement. The Franchise Agreement, as amended and supplemented by this Addendum, contains the entire understanding of the parties.

Source: Item 22 — CONTRACTS (FDD page 79)