UFOC

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Sample UFOC

FRANCHISE OFFERING CIRCULAR

BARNIE'S FRANCHISE SERVICE, LLC

(a Florida limited liability company) 2126 W. Landstreet Road, Suite 300 Orlando, Florida 32809 Telephone: (407) 854-6600

www.barniescoffee.com

Barnie's Franchise Service, LLC ("we" or "us") offers a single unit franchise, pursuant to a standard form franchise agreement (the "Franchise Agreement"), to own and operate a retail store offering gourmet coffee, tea, pastries and related products and accessories to the public (the "Store") under the mark "BARNIE'S COFFEE & TEA COMPANY," as well as other trademarks, service marks, trade names and commercial symbols (collectively, the "Marks"). We also offer an "Area Development" franchise, pursuant to a standard form area development agreement (the "Area Development Agreement"), for the right to develop multiple Stores in a specified area. Finally, we offer a "Regional Director" franchise, pursuant to a standard form regional director agreement (the "Regional Director Agreement"), for the right, in a specific geographic area, to recruit prospective Barnie's Coffee & Tea Company Store franchisees and provide ongoing site and operating support and supervision those franchisees in exchange for a share of various franchise fees.

The initial fee for a Store franchise is $25,000. The initial investment required per Store, including the initial franchise fee, is estimated to be between $263,500 and $372,000 depending, in part, on real estate costs and location of the Store.

The initial fee for an Area Development franchise is an amount equal to $5,000 times the number of Stores the Area Developer commits to build and operate. Area Developers must also pay the $25,000 initial franchise fee for each Store they open, although Area Developers may qualify for a $2,000 discount on the initial fee with respect to each Store that they open ahead of schedule, as further described in Item 5 of this Offering Circular. The initial investment required of Area Developers is estimated to be between $15,500 and $26,500 (based on a 2-store development commitment) plus the individual Store initial investment described in Item 7 of this Offering Circular, for each Store developed.

The initial fee for Regional Directors will vary depending upon the population of the Regional Director Territory, and can range from $50,000 to $500,000. See Item 5. The total estimated initial investment to establish a Regional Director business is $55,000 to $561,000, which amount will vary based on the population and characteristics of the Regional Director Territory. We base this range on organizational and overhead expenses during the first 3 months after you sign the Regional Director Agreement.

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RISK FACTORS:

1.         THE FRANCHISE AGREEMENT PERMITS THE FRANCHISEE TO SUE ONLY IN THE STATE OF FLORIDA EXCEPT IN THE CASE OF INJUNCTIVE ACTION. OUT OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY COST MORE TO SUE THE FRANCHISOR IN FLORIDA THAN IN YOUR HOME STATE.

2.         THE FRANCHISE AGREEMENT STATES THAT FLORIDA LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE YOU THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. SOME STATE FRANCHISE LAWS PROVIDE THAT CHOICE OF LAW PROVISIONS ARE VOID OR SUPERSEDED. YOU MIGHT WANT TO INVESTIGATE WHETHER YOU ARE PROTECTED BY A STATE FRANCHISE LAW. YOU SHOULD REVIEW ANY ADDENDA OR RIDERS ATTACHED TO THIS OFFERING CIRCULAR FOR DISCLOSURES REGARDING STATE FRANCHISE LAWS.

3.         THE FRANCHISE AGREEMENT PERMITS US AND OUR AFFILIATES TO ESTABLISH OTHER FRANCHISED OR COMPANY-OWNED LOCATIONS AT ANY LOCATION OTHER THAN YOUR FRANCHISED LOCATION AND TO SELL OR DISTRIBUTE ANY PRODUCT OR SERVICE TO THE GENERAL PUBLIC, OR TO ESTABLISH OTHER CHANNELS OF DISTRIBUTION WHICH MAY COMPETE WITH YOUR FRANCHISE.

4.         THE REGIONAL DIRECTOR AGREEMENT GRANTS YOU ONLY A NONEXCLUSIVE RIGHT TO RECRUIT PROSPECTIVE FRANCHISEES AND PERMITS US TO SOLICIT AND ESTABLISH FRANCHISES AND COMPANY-OWNED LOCATIONS WITHIN YOUR REGIONAL DIRECTOR TERRITORY, WHICH MAY COMPETE WITH YOUR FRANCHISE.

5.         THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Information comparing franchisors is available. Call the state administrators listed in Exhibit G to this Offering Circular and/or your public library for sources of information.

REGISTRATION OF THIS FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS IT OR HAS VERIFIED THE INFORMATION IN THIS OFFERING CIRCULAR. IF YOU LEARN THAT ANYTHING IN THIS OFFERING CIRCULAR IS UNTRUE, CONTACT THE FEDERAL TRADE COMMISSION AND ANY APPLICABLE STATE AUTHORITY AS LISTED IN EXHIBIT G TO THIS OFFERING CIRCULAR.

EFFECTIVE DATE: The effective dates of this Offering Circular in the states with franchise registration laws are as set forth in Exhibit G.

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NOTICE REQUIRED

BY

STATE OF MICHIGAN

THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.

Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:

(a)       A prohibition on the right of a franchisee to j oin an association of franchisees.

(b)      A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protections provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.

(c)       A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.

(d)       A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of franchisor's intent not to renew the franchise.

(e)       A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.

(f)       A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.

(g)       A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:

(i) The failure of the proposed transferee to meet the franchisor's then-current reasonable qualifications or standards.

THE MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.

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(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.

(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.

(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.

(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).

(i) A provision which permits the franchisor to directly or indirectly convey, assign, or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.

The fact that there is a notice of this offering on file with the attorney general does not constitute approval, recommendation, or endorsement by the attorney general.

Any questions regarding this notice should be directed to the Department of Attorney General, State of Michigan, 670 Williams Building, Lansing, Michigan 48913, telephone (517) 373-7117.

THE MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.

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TABLE OF CONTENTS

ITEM 1           THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES                2

ITEM 2          BUSINESS EXPERIENCE................................................................................5

ITEM 3          LITIGATION.....................................................................................................6

ITEM 4          BANKRUPTCY.................................................................................................6

ITEM 5          INITIAL FRANCHISE FEE                                                                         6

ITEM 6          OTHER FEES....................................................................................................8

ITEM 7          INITIAL INVESTMENT................................................................................11

ITEM 8          RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES          16

ITEM 9          FRANCHISEE'S OBLIGATIONS                                                              18

ITEM 10        FINANCING....................................................................................................20

ITEM 11         FRANCHISOR'S OBLIGATIONS                                                              20

ITEM 12        TERRITORY...................................................................................................27

ITEM 13         TRADEMARKS...............................................................................................30

ITEM 14        PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION         32

ITEM 15         OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION

OF THE FRANCHISE BUSINESS                                                              32

ITEM 16        RESTRICTIONS ON WHAT YOU MAY SELL                                         33

ITEM 17        RENEWAL, TERMINATION, TRANSFER AND DISPUTE

RESOLUTION.................................................................................................33

ITEM 18        PUBLIC FIGURES..........................................................................................40

ITEM 19        EARNINGS CLAIMS......................................................................................40

ITEM 20        LIST OF FRANCHISED OUTLETS                                                           43

ITEM 21         FINANCIAL STATEMENTS.........................................................................46

ITEM 22        CONTRACTS..................................................................................................47

ITEM 23         RECEIPTS.......................................................................................................47

EXHIBITS

Audited Financial Statements for Fiscal Years 2006, 2005, and 2004......................................A

Franchise Agreement...............................................................................................................B

Area Development Agreement.................................................................................................C

Regional Director Agreement .................................................................................................D

List of Franchisees...................................................................................................................E

List of Former Franchisees.......................................................................................................F

List of State Franchise Administrators and Effective Dates......................................................G

Table of Contents of Confidential Operations Manual.............................................................H

State Addenda and Agreement Riders.......................................................................................I

Authorized Brokers..................................................................................................................J

Removable Receipts for Franchisor and Franchisee.................................................................K

Applicable state law may require additional disclosures related to the information contained in this offering circular. These additional disclosures, if any, appear in Exhibit I.

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ITEM1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

To simplify the language in this Offering Circular, "you" means the person who buys the Franchise. If you are a corporation, partnership, limited liability company or other entity, certain provisions of the Franchise Agreement will also apply to your owners. "We" or "us" refers to the Franchisor, Barnie's Franchise Service, LLC.

The Franchisor We are a Florida limited liability company, organized on July 27, 2006. Our principal business address is 2126 W. Landstreet Road, Suite 300, Orlando, Florida 32809. We conduct business under our entity name and under the name Barnie's Coffee & Tea Company. Except as disclosed in this Item 1, neither we, nor any affiliate, has conducted business or offered franchises in any other lines of business. Our registered agents for service of process are disclosed in Exhibit G to this Offering Circular. We offer the Store, Area Development and Regional Director franchises, all as described below.

We have one predecessor, Barnie's Coffee & Tea Company, Inc. ("Barnie's I"), a Florida corporation, incorporated on December 31, 1981, with a principal business address of 2126 W. Landstreet Road, Suite 300, Orlando, Florida 32809. Barnie's I is also an affiliate of ours, in that we share common owners with Barnie's I and Barnie's I may provide products or services to BARNIE'S COFFEE & TEA COMPANY franchisees. Barnie's I began as a sole proprietorship, on October 13, 1980, operating a retail store for the sale of coffee and teas and related products, including pastries, under the mark BARNIE'S COFFEE & TEA COMPANY. Barnie's I began offering franchises under the mark BARNIE'S COFFEE & TEA COMPANY in September 1981. Barnie's I was the franchisor of the BARNIE'S COFFEE & TEA COMPANY franchise system until January 1, 2007.

Another affiliate of ours, Barnie's II, Inc., ("Barnie's II") is a Florida corporation, incorporated on July 24, 2006, with a principal business address of 2126 W. Landstreet Road, Suite 300, Orlando, Florida 32809. Since January 1, 2007, Barnie's II has been engaged in the business of, among other things, supplying BARNIE'S COFFEE & TEA COMPANY branded coffee, tea, flavored syrups, and various other items bearing the Marks ("Barnie's Products") to company-owned and franchised Stores. Barnie's II also makes certain Barnie's Products available to the public through mail order and e-commerce. Barnie's II also sells and licenses others the right to sell certain Barnie's Products to non-retailers, such as offices and restaurants, and sells certain Barnie's Products to other retailers, such as grocery stores. These activities may compete with you. Barnie's II has never offered franchises of any kind. We are a wholly-owned subsidiary of Barnie's II.

We acquired certain rights to use the Marks and certain rights to franchise the Barnie's Coffee & Tea Company concept pursuant to a Trademark License Agreement between us and Barnie's II, dated January 1, 2007. Barnie's II acquired the same rights from Barnie's I pursuant to a Trademark Assignment Agreement dated January 1, 2007.

As of December 31, 2006, Barnie's II also owned and operated 7 BARNIE'S COFFEE & TEA COMPANY Stores through a wholly-owned entity, Barnie's Cafe, LLC ("Barnie's Cafe"), which is a Florida limited liability company, organized on July 27, 2006, with a

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principal business address of 2126 W. Landstreet Road, Suite 300, Orlando, Florida 32809. In this Offering Circular, these Stores are referred to as "company-owned" Stores.

The Franchises Offered.

Store: BARNIE'S COFFEE & TEA COMPANY Stores offer for sale gourmet coffees, teas, pastries and related products and accessories to the general public. Some Stores also offer a small selection of wine and beer and provide other services such as wireless internet and drive-through. Stores are located in enclosed shopping malls and, for the most part, consist of a relatively small square footage when compared to the other retail stores in the shopping mall; however, a growing number of Stores are located in strip centers and free-standing buildings.

Store franchisees will compete with national, regional and local retail chains and individual businesses (including other franchise systems) that offer gourmet coffee, tea and other similar products and services. In addition, we and our affiliates may operate company-owned Stores and sell coffees, teas and other products through mail order, wholesale, the internet, and through other channels of distribution, such as grocery stores and other retailers. These activities may compete with your Store and could materially affect your sales. You may also compete with other Store franchises near your Store location. Store sales at locations inside of malls are substantially seasonal, with a significant portion of sales occurring during the Christmas season. The market for retail coffee and tea stores is highly competitive and well-developed. In addition, global coffee prices fluctuate and could affect your sales and the economics of your business. We are aware of no regulations specific to the operation of a retail gourmet coffee store, although you will be required to comply with all local, state and federal health and sanitation laws in the operation of your Store. If you offer wine and beer, you will also be required to obtain a beer and wine license and comply with local ordinances and state laws governing the sale of alcohol. There may be other laws applicable to your business and we urge you to conduct your own investigation of these laws.

Area Development: Under our Area Development Program, we grant you the right to open and operate Stores in a specific geographic area, which you and we agree upon prior to signing the Area Development Agreement (your "Area"). You and we will also agree upon a development schedule that will state the minimum number of Stores that you will be required to develop within your Area and the dates by which leases for those Stores must be executed and the Stores opened. Your right to develop Stores is exclusive in your Area during the term of the Area Development Agreement, provided that you meet all of the terms and conditions of the Area Development Agreement, including adherence to your development schedule. After we have approved each Store site, you and we will execute a Franchise Agreement for each Store, which will govern the development and operation of that Store.

Regional Directorship: Under our Regional Director Program, we grant you the right in a specific geographic area (your "Regional Director Territory") to (i) recruit prospective franchisees for us ("Sales Services"); (ii) help us identify and secure sites for Stores and provide site development support ("Site Services"); and (iii) provide additional operational, training and field support to franchisees, both before and after they open their Store, ("Support Services"). In exchange for these Regional Director services, we will pay you several different fees, provided certain conditions are met regarding the sale of the franchises and provided that

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you meet your obligations. These fees include percentages of Initial Franchise Fees, Royalty Fees, transfer fees, renewal fees and other fees that franchisees pay in connection with the purchase or operation of a franchise in your Regional Director Territory.

As a condition of the Regional Director franchise, you must satisfy certain cumulative minimum development obligations, or "development quotas," during the term of the agreement, which we identify in Exhibit A to the Regional Director Agreement. There are two separate development quotas: (1) franchise sales for which we credit you with a Sale Services Commission and (2) Stores open and operating in compliance with the Franchise Agreement. We determine these quotas by mutual agreement with you before you sign the Regional Director Agreement.

While we rely on you to present us with those applicants whom you pre-qualify using our criteria, we make the final decision on whether we will sell a franchise to the candidates you present. If we approve the candidate, we and the candidate will sign a Franchise Agreement, and you are not a party to that contract. However, as our agent, you will provide a variety of Site Services and Support Services to the franchisees in your Regional Director Territory.

For Regional Directors, both the Federal Trade Commission and many states regulate the sale of franchises and the relationship between franchisors and franchisees. You agree to comply with these regulations when you act as our agent in offering franchises in your Regional Director Territory and in providing support services. You also agree to comply with all local, state and federal laws of a more general nature that affect the Regional Director business, including employment, workers' compensation, corporate, tax, licensing and similar laws and regulations.

A number of franchise disclosure laws regard you to be our franchise broker in the Regional Director Territory to which you are assigned. Therefore, in accordance with applicable franchise disclosure laws, we will, at our expense, add appropriate disclosures about you in Items 2 and 3 of our Offering Circular, register you as our franchise broker if the laws in your Regional Director Territory require registration, and furnish you with our current Offering Circular and all amendments for you to use in soliciting prospective franchisees in your Regional Director Territory. You are responsible for notifying us immediately of any material changes in the information that you give to us for purposes of our complying with franchise disclosure laws.

If your activities as our Regional Director require you separately to register in your Regional Director Territory as a subfranchisor, you must prepare the necessary documents and file the application at your expense. We will cooperate in providing you with information relating to us, to the extent it is needed for your registration.

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ITEM 2 BUSINESS EXPERIENCE

Neil Leach Chairman of the Board and Chief Executive Officer

Robert Kalafut Director and Executive Vice-President

Mr. Leach has been our Chairman of the Board and Chief Executive Officer since our inception in July 2006. Mr. Leach has also served as the Chairman of the Board and Treasurer of our predecessor and affiliate, Barnie's I, since October of 2001. Prior to that, Mr. Leach served as a Member of the Executive Committee of Sola International, Inc., an ophthalmologic lens manufacturer based in San Diego, California, with which he was involved from August 1999 to June, 2004. Mr. Leach was a principal of Multifocal RX Laboratories, Inc., a manufacturer of ophthalmologic lenses in Miami and Atlanta from 1960 until the business was sold in February 2000.

Mr. Kalafut has been our Director and Vice-President since our inception in July 2006. Mr. Kalafut has also served as the Director and Vice-President of Barnie's I, since October of 2001. From March 1998 to March 2002, Mr. Kalafut served as the Director of Corporate and Local Store Marketing and Special Projects Business Development for Barnie's I and was previously a Regional Director of Operations for Advance America, a national payday advance chain located in Ft. Lauderdale, Florida.

Glorian Leach Director and Executive Vice President / Treasurer

Sonya Hardy Vice President / Merchandising

Ms. Leach has been our Director and Executive Vice President since our inception in July 2006. Ms. Leach has also served as the Director and Executive Vice President of Barnie's I since February 2004. Ms. Leach became an employee of Barnie's I in October 2001 and became its Treasurer in January 2003 and a Vice President in August 2003. From November 1990 to June 2000, Ms. Leach served as a Vice President of Multifocal RX Laboratories, Inc., a manufacturer of ophthalmologic lenses located in Miami and Atlanta. From July 2000 to October 2001, Ms. Leach was retired and involved in various projects.

Ms. Hardy has been our Vice President / Merchandising since our inception in July 2006. Ms. Hardy has also served as the Vice President / Merchandising of Barnie's I since March 2004. Ms. Hardy has been employed by Barnie's I in various marketing, merchandising and purchasing capacities since October 1994. In June 1998, Ms. Hardy became a Food and Merchandise Buyer for Barnie's I and she was promoted to General Merchandise Manager in 2003.

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Jason McCord                 Mr. McCord has been our Franchise Development Coordinator since

Franchise                         our inception in July 2006. Mr. McCord has also served as the

Development                   Franchise Development Coordinator of Barnie's I since September

Coordinator                     2004. From January 2004 until May 2004, Mr. McCord was

employed as Assistant Hotel Manager and Cruise Director by American Cruise Lines located in Guilford, Connecticut. From July 2002 to January 2004, he worked in property management for Rumpf Rental Properties located in Maitland, Florida. From September 1999 until April 2002, he was a Promotions Coordinator and Client Services Administrator with Cox Radio - Orlando.

Authorized Brokers          See Exhibit J

ITEM 3 LITIGATION

Except as disclosed in Exhibit J, with respect to certain of our authorized brokers, there is no current litigation which is required to be disclosed in this offering circular. Neither we, any affiliate or predecessor, nor any person identified in Item 2 of this offering circular has, during the 10-year period prior to the date of this offering circular, been convicted of a felony or pleaded nolo contendere to a felony charge, or been held liable in a civil action by final judgment or been the subject of a material action involving violation of a franchise, antitrust or securities law, fraud, unfair or deceptive practices or comparable allegations.

ITEM 4 BANKRUPTCY

Neither we, any affiliate or predecessor nor any officer identified in Item 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item.

ITEM 5 INITIAL FRANCHISE FEE

Store: You must pay an initial franchise fee of $25,000 for each Store (the "Initial Franchise Fee"). The Initial Franchise Fee is payable in installments: the first installment of $12,500 is due and payable immediately upon execution of the Franchise Agreement (which may be before a site has been identified or, at your option, as late as immediately following approval of a Store site); the second installment of $12,500 is due and payable 90 days after execution of the Franchise Agreement. To reward speedier development if you sign an Area Development Agreement, we reduce the amount of the Initial Franchise Fee by $2,000 for each Store for which a lease is signed (or real estate is purchased) earlier than required under the development schedule (see section B below). In that case, each $12,500 installment will be reduced to $11,500.

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These arrangements may vary between Franchise Agreements depending upon the particular circumstances of the transaction and we reserve the right to reduce the Initial Franchise Fee on a case by case basis. The Initial Franchise Fee is nonrefundable and each installment is fully earned at the time it is due. Regional Directors that open Stores within their Territory may be entitled to a discounted Initial Franchise Fee under their respective Regional Director Agreements. During 2006, actual Initial Franchise Fees paid by franchisees did not deviate in any instance from our then-standard Initial Franchise Fee.

Additionally, as described in Items 7 and 8, before opening a Store, you will be required to purchase much of your opening inventory and other items of equipment and inventory from us or our affiliates. The cost of these purchases will range from $18,000 to $27,000. We or our affiliates may require advanced deposits for some or all of these purchases. These amounts are generally nonrefundable except in the case of defects in the items sold.

Area Development: Prior to execution of the Area Development Agreement, you and we will agree on the number of Stores that you will be required to develop, the Area in which the Stores are to be developed, and a schedule by which leases must be signed (or real estate purchased) and Stores opened (usually specified in quarterly intervals). Upon execution of the Area Development Agreement, you will be required to pay an initial development fee (the "Development Fee") in the amount of $5,000 for each Store which you and we agree that you will be responsible for developing during the term of the Area Development Agreement. The Development Fee is used to defray administrative costs and expenses of your screening or training, general and administrative expenses, and to compensate us for the exclusivity we grant with respect to the Area. To reward development over and above the required number of Stores, the Development Fee is waived for each additional Store above the minimum that you develop during the term of the Area Development Agreement. The actual amount of the Development Fee will be inserted in the Area Development Agreement prior to execution and will be payable in a lump sum upon execution of the Area Development Agreement. The Development Fee is earned when due and is non-refundable.

As each Store is developed, you and we sign an individual Franchise Agreement. While the form of that Franchise Agreement will be the then-current form, the Initial Franchise Fee, Royalty Fee and other fees will be as set forth in the Franchise Agreement which is being utilized at the time you and we execute the Area Development Agreement. Upon signing the Area Development Agreement, you will be required to sign at least one Franchise Agreement and pay the required first installment of the Initial Franchise Fee. The Development Fee is not applied to the Initial Franchise Fee due under individual Franchise Agreements.

Regional Directorship: You pay an initial fee when you purchase the Regional Director franchise (the "Regional Director Fee"). The Regional Director Fee is fully earned upon receipt and is not refundable. You and we negotiate the Regional Director Fee based on a variety of factors, including the population of your Regional Director Territory. The Regional Director Fee will most likely range from $50,000 to $500,000. We will not refund any portion of the Regional Director Fee if the population in your Regional Director Territory declines.

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ITEM 6 OTHER FEES

Store

Name of Fee (1)

Amount

Due Date

Remarks

Royalty Fee

7% of weekly Net Sales; Area Developers may receive a Royalty Fee credit for speedy development(2)

Thursday following week ending the preceding Saturday

Completed accounting forms are due with Royalty Fee payment; we will debit your bank account for amounts due (3)

National and Regional Advertising Fee

Up to 2% of Net Sales

Payable weekly along with payment of the Royalty Fees

This fee is due only upon creation of national and/or regional advertising funds. For national and regional advertising (4)

Transfer Fee

50% of then current Initial Franchise Fee

Before issuance of written approval

Assessed if you transfer your Franchise Agreement to an approved third party

Interest on Past Due Amounts

Maximum interest rate allowed by applicable law

Immediately

Computed from date due until paid; The maximum rate under Florida law is 18% per annum

Assessment for Understatement of Revenues

Amount of underpayment, plus interest; plus cost of audit if

understatement is more than 2% of Net Sales

Upon receipt of invoice

Cost of Enforcement

Reasonable attorneys' fees, plus costs

Upon receipt of invoice

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Name of Fee (1)

Amount

Due Date

Remarks

Expenses Related to

Supplemental

Training

Room, board and travel

As per terms required by us or vendor at the time

Supplemental training is in Orlando, Florida

Renewal Fees

50% of then current applicable Initial Franchise Fee

Concurrent with execution of renewal Agreement

Applies to

Franchise

Agreement

Insurance Premiums

Will vary under circumstances

As incurred

If you do not pay your insurance premiums, we have the option to pay them for you and you must reimburse us

Product and Service Purchases

See Item 8

See Item 8

See Note (5)

(1) Unless otherwise noted, all fees are payable to us are not refundable. Fees are applicable to each Store.

(2)       Net Sales includes all sales and all business transacted in, or through and from your Store, less approved returned merchandise and sales taxes. Area Developers may be eligible for a Royalty Fee credit, as follows. For each Store that opens at least one month earlier than required under an Area Development Agreement, you will be charged a reduced Royalty Fee of 5% of Net Sales. This Royalty Fee percentage will apply until such time as the difference between the amount that would have been paid under the normal 7% rate and the amount paid under the 5% rate reaches $2,000 in the aggregate. After the $2,000 maximum is reached, you will pay the normal 7% rate. If the Store opens two or more months earlier than required under the Area Development Agreement, the maximum Royalty Fee credit will be increased to $3,000, instead of $2,000.

(3)       Before opening your Store, you must sign and deliver to us and your bank all documents needed to permit us to debit your bank account for each week's Royalty Fees, contributions to national and regional advertising funds (if and when formed), and other payments due under the Franchise Agreement. However, we may require you to pay all amounts due by means other than automatic debit whenever we deem appropriate.

(4)       We have the right to create national and regional advertising funds and to require you to contribute to these funds up to 2% of your Net Sales in the aggregate. The national and regional advertising fees, when assessed, will be imposed by us uniformly on all Stores (whether owned by us or by other franchisees); provided, however, that we may not be able to impose this requirement on certain franchisees already in existence as of the date of this Offering Circular, due to the terms of their Franchise Agreements, although we will encourage them to contribute.

(5)        You must buy products and services that meet our standards and specifications and, in some cases, from suppliers we designate. We or our affiliates may also assess a handling

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charge of 12.5% or more on Barnie's Products and other products and supplies that you purchase from us or our affiliates.

Area Development

Name of Fee (1)

Amount

Due Date

Remarks

Transfer Fee

$5,000

Before issuance of written approval

Assessed if you transfer your development rights to an third party, subject to our approval

Cost of Enforcement

Reasonable attorneys' fees, plus costs

As incurred

Assessed if we are the prevailing party in a lawsuit between you an us arising out of the Area Development Agreement

(1) Unless otherwise noted, all fees are payable to us are not refundable. Area Developers will also be subject to the fees listed under the Store fee chart, above, with respect to each Store opened under their Area Development Agreement.

Regional Directorship

Name of Fee(1)

Amount

Due Date

Remarks

Transfer Fee

An amount to cover our administrative costs (not to exceed $2,500) plus a $5,000 training fee paid by transferee

Before issuance of written approval

Assessed if you transfer your franchise rights to an approved third party.

Renewal Fees

50% of Regional Director Fee

Concurrent with execution of new RD Agreement

Other conditions to renewal apply.

Interest on Past Due Amounts

The lesser of 2% per month or the maximum interest rate allowed by applicable law

Immediately

Computed from date due until paid; The maximum rate under Florida law is 18%> per annum.

Cost of Enforcement

Reasonable attorneys' fees, plus costs

Upon receipt of invoice

Assessed if we are the prevailing party in a lawsuit between you an us arising out of the Area Development Agreement

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Name of Fee(1)

Amount

Due Date

Remarks

Missed Training Fee

$1,500

Upon receipt of invoice

You may be required to pay us a fee of $1,500 if you fail to attend a required training program

Expenses Related to

Supplemental

Training

Room, board and travel

As per terms required by us or vendor at the time

Supplemental training is in Orlando, Florida

Insurance Premiums

Will vary under circumstances

As incurred

If you do not pay your rent or insurance premiums, we can pay them for you and you must reimburse us.

Marketing Expenditures

Currently $5,000 per quarter

See Item 11

See Note (2)

(1)       Unless otherwise noted, all fees are payable to us are not refundable.

(2)        You must spend a minimum of $5,000 per quarter on marketing in your Territory, although we reserve the right to increase this amount up to a maximum of $7,500 per quarter. This amount is payable to third party suppliers of marketing and advertising goods and services, which may include us.

ITEM 7 INITIAL INVESTMENT

Store

The following table estimates the total initial investment required to open a typical Store. Your actual investment and expenditures may vary considerably from the figures in the table set forth below depending on many factors, including, without limitation, geographical area, the shopping center, if any, in which your Store is to be located, the size of your Store, quantity of merchandise for sale, the extent of leasehold improvements needed and the capabilities of any particular management and service team. Payments made to us are not refundable; payments made to third parties may or may not be refundable, depending on arrangements you make with those third parties. The expenses listed will apply also to Area Developers, with respect to each Store opened under their Area Development Agreement.

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Category

Actual or

Estimated

Amount

Method of Payment

When Due

To Whom

Payment

is to be

Paid

Initial Franchise Fee

$23,000 to $25,000(1)

Two installments

$12,500 upon execution of Franchise Agreement; remaining $12,500 due 90 days following execution of Franchise Agreement

Us

Leasehold Improvements

$110,000-$160,000

Lump Sum

As incurred before opening

General or Sub-Contractor or other Vendors

Utility Deposits

$0-$1,000

Lump Sum

As incurred before opening

Utilities

Fixtures and Equipment

$75,000-$90,000

Lump Sum

As incurred before opening

Contractor

s,

Vendors,

Us

POS System, including license fee

$13,000 -$17,000(2)

Lump Sum

Upon purchase of POS system before opening

Vendors

Organizational Costs

$500 - $2,000

As Incurred

As incurred before opening

Lawyers, Accountan ts, State Agencies

Opening Inventory, Barnie's Products, Supplies and Store Set-Up Expenses (3)

$18,000-$28,000

Lump Sum

As incurred before opening

Us, Vendors

Insurance -Liability and Workman's Comp

$3,000-$6,000

Installment

Semi-Annual

Insurance Company

Real Estate

Costs(4)

$4,000 - $6,000

Lump Sum

Upon signing lease or sublease

Landlord or us (if sublease)

Grand Opening Advertising

$5,000 - $7,500(;,)

As Incurred

As incurred before opening

Vendors

Additional Funds

(6)

$10,000-$25,000

As Incurred

As incurred before and after opening

Employee s, Vendors & Others

Travel Expenses

$2,000-$4,500

As Incurred

Before opening

Transport

ation

Lines,

Hotels,

Meals,

etc.

TOTAL

$263,500 - $372,000

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(1)        The Initial Franchise Fee may be reduced if the Store is opened pursuant to an Area Development Agreement and the Area Developer satisfies the requirements for the reduced-fee incentives for meeting its development schedule more quickly than required (see footnote 2 to fee chart for Stores in Item 6 above for a more detailed description of that incentive program).

(2)        The required POS System does not include a back-office component. The range shown reflects increases from the basic required configuration for the optional back-office pc-based component (see Item 11 below).

(3)       Payment for opening inventory is not subject to a discount for early payment.

(4)       Real estate costs depend on a variety of factors such as, for example, the size and location of the Store, the size of the Store premises, whether the landlord requires a security deposit, whether the landlord grants any tenant improvement allowances and whether there is a percentage rent factor. Stores are located inside shopping malls, inside shopping centers or strip-centers, or are free-standing units. Mall Stores are typically 1,000-1,200 sq. ft., and non-mall Stores are typically 1,500-2,000 sq. ft. and may contain a drive-through component. Base rent for both types (mall Stores are smaller but have higher rent-per-square-foot than non-mall Stores) is estimated to be between $4,000 and $6,000 per month. Actual base rent, however, will be a function of the specific location, the location of the space within the center or mall, and the size of the space.

(5)       We require Store franchisees to make a minimum expenditure of $5,000 on a grand opening marketing program for each Store. This amount must be spent during a period of time commencing at least one (1) week prior to the opening of the Store and lasting no longer than 90 days. You may choose to spend additional amounts on grand opening marketing for your Store.

(6)        This is an estimate of the funds needed to cover initial operating expenses during the first 3 months of operation of your Store, including initial employee wages (but not including any owner's draw or salary). These figures do not include rent, Royalty Fees or advertising payments or any debt service obligations you may have. These figures are estimates based upon (and consistent with) our experience over the past 26 years of developing and operating Barnie's Coffee & Tea Company stores. We cannot guarantee that you will not have additional expenses starting your business. Your costs will depend on factors such as the degree to which you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions; the local market for Barnie's Products; the prevailing wage rate; competition in your area; and the sales level reached during the first 3 months of operation. Historically, a mall Store experiences approximately one-third of its annual total net sales during the months of November and December and less than one-third of its annual total net sales during the months of June, July, August and September. The additional funds requirement for a mall Store, therefore, may vary due to the time period in which it initially opens.

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Area Development

The following table estimates the total investment required to commence operations as an Area Developer. Your actual investment and expenditures may vary considerably from the figures in the table set forth below depending on many factors, including, without limitation, your existing infrastructure (and efficiencies you achieve through that infrastructure), the number of Stores you commit to developing, the length of the development schedule, the number of employees required to satisfy your obligations, and whether you will require separate office facilities. Payments made to us are not refundable. As an Area Developer, you will be required to open one or more Stores. The investment described below pertains only to those amounts needed to establish yourself as an Area Developer. Consult the Store investment chart above for additional amounts that you will need to invest pursuant to Franchise Agreements for Stores.

Category

Actual or

Estimated

Amount

Method of Payment

When Due

To Whom Payment is Made

Development Fee

$10,000 ($5,000 for each Store to be developed)0}

Lump sum

On execution of Area

Development Agreement

Us

Insurance

$1,000

Lump sum

Before starting business

Insurance Company

Office improvements and equipment^

$1,000 -$5,000

As incurred

As incurred before starting business

Landlord/ Suppliers

Professional Fees

$500-$l,000

As incurred

As incurred before starting business

Suppliers

Additional Funds -3 months(3)

$l,000-$3,000

As incurred

As incurred before and after starting business

Suppliers and Employees

TOTAL

$15,500-$26,500

(1)  Assumes a 2-store development requirement. The actual number of Stores to be developed will be agreed upon prior to signing the Area Development Agreement.

(2)  You must maintain an office serviced by at least one dedicated telephone line with voice mail. This office may be in your home or at a separate location. We estimate that the cost of a telephone service will be approximately $20 per month for voice mail. Your office also must have a facsimile machine with its own dedicated telephone line. The cost to purchase a facsimile machine is approximately $500. However, you may lease a facsimile machine or subscribe for fax service via your computer. You must also purchase or otherwise obtain computer equipment that will operate software programs we require, the cost of which varies but will typically not exceed $1,500. The amount of

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these expenses varies with the geographic, demographic, and physical location of your office and the sophistication of the equipment you select.

(3) This estimates the funds needed to cover your initial expenses for the first 3 months of operation and includes payroll costs, miscellaneous supplies, and start-up marketing and advertising costs but not any draw or salary for you. This amount is an estimate, and we cannot guarantee that you will not have additional expenses in operating your business.

Regional Directorship

The following table estimates the total investment required to commence operations as a Regional Director. Your actual investment and expenditures may vary considerably from the figures in the table set forth below depending on many factors, including, without limitation, your existing infrastructure (and efficiencies you achieve through that infrastructure), the size of your Regional Director Territory, your development quota, the number of employees required to satisfy your obligations, and whether you will require separate office facilities. Payments made to us are not refundable.

Category

Actual or

Estimated

Amount

Method of Payment

When Due

To Whom

Payment is to

be Made

Regional Director Fee(1)

$50,000 to $500,000

Lump Sum

Upon Signing

Us

Vehicle Lease/Purchase

(2)

$0 to $3,000

As Arranged

As Arranged

Suppliers

Computer Hardware (3)

$0 to $2,000

As Arranged

As Arranged

Suppliers

Computer Software (4)

$0 to $1,000

As Arranged

As Arranged

Suppliers

Subfranchisor Registration Costs (5)

$0 to $30,000

As Arranged

As Arranged

Your Attorneys, Accountants and Franchise Registration States

Miscellaneous and Additional Funds (covers first 3 months)(6)

$5,000 to $25,000

As Arranged

As Arranged

Miscellaneous Third Parties. See Note 6.

TOTAL

$55,000 to $561,000

(1) Regional Director Fee. The Regional Director Fee varies between Regional Directors and is based primarily on the population in your Regional Director Territory. See Items 5 and 10 for more information on the Regional Director Fee.

(2) Vehicle Lease/Purchase. You will need the use of a vehicle in the operation of your Regional Director business, which you may own or lease. At this time, we do not require that the vehicle you use meet any specific criteria, except that it must run reliably enough to enable you to perform your obligations under the Regional Director Agreement, such as

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visiting Store franchises and performing Site Services. We have the right, however, to establish in the future specific criteria for the vehicle you use in the operation of your Regional Director business. You may use a vehicle that you already own provided it meets our then-current criteria. The cost of your investment in a vehicle will vary depending on your current assets, the cost of leasing and purchasing vehicles in your area, and the vehicle you choose.

(3)     Hardware Costs. You will need a laptop computer for the operation of your Regional Director business, as further described in Item 11. If you already own a laptop computer, you may use it in the operation of your Regional Director business. The cost of your investment in computer hardware will vary depending on your current assets, the cost of computer hardware in your area, and the specific equipment you choose.

(4)     Software Costs. You will need to purchase computer software for your Regional Director business as further described in Item 11. The cost of your investment in computer software will vary depending on your current assets, the cost of software in your area, and the specific software you choose.

(5)     Subfranchisor Registration Costs. In most states, Regional Director franchisees will be considered franchise brokers, rather than subfranchisors. In those states, you will not incur costs associated with registering as a subfranchisor. If, however, the state in which your Regional Director Territory is located considers you to be a subfranchisor, you will incur costs associated with registrationup to $30,000 or more. These costs will include the preparation of a Uniform Franchise Offering Circular, which may require you to prepare audited financial statements for your business.

(6)     Miscellaneous and Additional Funds. We do not require that you rent commercial office space, nor do we impose specifications for office decoration, fixtures, business equipment, insurance, minimum number of employees or otherwise. You may, if you choose, locate your administrative office for the Regional Director business in your home. However, we expect you will incur miscellaneous expenses to establish your Regional Director business. This chart reflects our estimate of your miscellaneous expenses for the first 3 months after you sign the Regional Director Agreement. The chart assumes you do not incur any real estate leasing costs, but allows for the lease or purchase of home office furniture (we do not impose any specifications and leave this to your judgment); required expenditures such as a facsimile machine, telephone line, business cards and stationery; insurance; travel costs for initial training and site development work in your Regional Director Territory; legal and professional expenses to acquire the franchise and form a business entity to own the Regional Director franchise; and advertising expenditures during your first 3 months of operation, which we estimate may total between $600 and $4,500.

ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

Equipment and Fixtures. You are obligated to purchase or lease, in accordance with specifications for your Store, equipment and fixtures meeting our specifications for quality and

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design. Such specifications are included in the Operations Manual and other directives issued to the franchisee upon signing of the Franchise Agreement and payment of the Initial Franchise Fee. You may purchase or lease original and replacement equipment, fixtures and supplies meeting such specifications only from approved vendors, which may include us. Because we maintain a warehouse, you may make arrangements to purchase up to 100% of equipment and fixtures from us, but our recommendation is to purchase equipment and fixtures through approved third-party vendors.

Products and Supplies.

Barnie's Products. We, our affiliates, or our approved vendors will be your principal or sole source for our branded products ("Barnie's Products"), including, without limitation, coffees, teas, flavored syrups, paper goods, certain food items and "hardlines" (such as mugs, grinders, tumblers and other merchandise bearing the Marks) to be sold at your Store. Certain branded items may be available on a direct bill, direct ship relationship through certain authorized coffee roasters and other approved vendors. If so, we must first authorize in writing the direct bill, direct ship relationship between you and the authorized vendor.

Non-branded products and supplies. You will be required to offer for sale at your Store certain non-branded products, which may vary from time to time. All non-branded products offered for sale at the Store, as well as the supplies used at the Store, must be approved in advance by us and obtained only from approved vendors. The approved products and supplies appear in our Product Order Book which may be amended and updated from time to time. We are a supplier of many of the products and supplies included in our Product Order Book, and we may be the sole supplier of some or all of such items. You are not permitted to offer for sale from the Store any product or supply item which is not included in our current Product Order Book or which has not been approved in writing by us in advance of any sale or use by you. In determining whether to approve a product or supply item, we take into account the concept, image and decor of the Store. We have the sole discretion as to whether to grant such approval. There is no time limitation imposed upon us within which approval must be granted, but we expect that a decision would be rendered within 7 days of submittal.

Approval process for products. Except as discussed in the preceding paragraph, products and other items offered for sale at the Store must be approved in writing in advance by us by the listing of such products and items in either our Product Order Book, or in another approved product listing issued from time to time by us. With respect to unwrapped products, or products otherwise not in a self-contained identified package, in addition to our prior written approval for sale of the products at the Store, you must obtain our prior written approval of the signage that you propose to use in connection with the sale or use of the products. Any signage must clearly set forth the name of the producer of the products. All requests for approval must include fresh samples, a copy of applicable vendor licenses, appropriate health certificates and proof of liability insurance by the vendor. There is no time limitation imposed upon us within which approval must be granted, but a decision can usually be made within 7 days of our receipt of all information and samples.

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Product purchase volume from us and approved roasters versus total product purchases; Our revenues. You should expect that 100% of coffee and tea products and between approximately 65% and 80% of all other items sold through your Store will be purchased from us or our approved roasters or single-source vendors. We may derive revenue from your purchase of products from us, by charging you more than our purchase price. Currently, we sell products and other items, including Barnie's Products, to franchisees at our actual cost plus a handling fee of 12.5%. In some cases, we may receive a license fee from approved roasters and other approved vendors, which is calculated based on the sale price of Barnie's branded products that are drop-shipped and direct-billed from the roaster or vendor to you. For the 12 months ended September 30, 2006, the gross revenues of our predecessor and affiliate Barnie's I from sales made to franchisees from the Barnie's corporate warehouse was approximately $1,145,937, representing approximately 10% of Barnie's Fs total gross revenues of $11,591,442. Of this amount, $1,045,239.52 (about 9% total gross revenues) consisted of the actual cost to Barnie's I of these products and the remaining $100,697.69 (less than 1% total gross revenues) consisted of handling fees charged by Barnie's I. In that same period, Barnie's Fs revenues from payments made by approved roasters and other approved vendors based on sales to franchisees was approximately $92,400, representing 0.8% of Barnie's Fs total gross revenues of $11,591,442.

Other matters. There are no purchasing or distribution cooperatives. We reserve the right to receive license fees, rebates and similar payments from suppliers. We may negotiate purchase agreements with respect to branded or proprietary items which must be purchased directly from us or an approved supplier as described above, and we may, from time to time, negotiate similar agreements with other approved vendors. We will try to receive volume discounts for the system as a whole, but we do not provide material benefits to you because of your use of approved suppliers. We do not negotiate prices not on behalf of individual franchisees.

ITEM 9 FRANCHISEE'S OBLIGATIONS

THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AGREEMENT AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS IN THIS OFFERING CIRCULAR.

PRINCIPAL OBLIGATIONS UNDER VARIOUS AGREEMENTS

Franchise Agreement = FA (Exh. B) Area Development Agreement = ADA (Exh. C) Regional Director Agreement = RDA (Exh. D)

OBLIGATION

ARTICLE OR SECTION IN AGREEMENT

ITEM IN OFFERING CIRCULAR

Site selection and acquisition/lease

FA Art. 2; ADA Art. 4; RDA n/a

Item 11

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The original documents were scanned as an image. The original file can be downloaded at the link above.