Sample UFOC

RECEIVED

MAR 1 h 2006

Department of Corporations Los Angeles

INFORMATION FOR PROSPECTIVE FRANCHISEES REQUIRED BY THE FEDERAL TRADE COMMISSION

DIPPIN' DOTS FRANCHISING, INC.

1640 MCCRACKEN BLVD., SUITE 100 PADUCAH, KENTUCKY 42 001

P.O. BOX 9207

PADUCAH, KENTUCKY 42002-9207

270-575-6990

The date of issuance of this Disclosure is ________

TO PROTECT YOU, WE'VE REQUIRED YOUR FRANCHISOR TO GIVE YOU THIS INFORMATION. WE HAVEN'T CHECKED IT, AND DON'T KNOW IF IT'S CORRECT. IT SHOULD HELP YOU MAKE UP YOUR MIND. STUDY IT CAREFULLY. WHILE IT INCLUDES SOME INFORMATION ABOUT YOUR CONTRACT, DON'T RELY ON IT ALONE TO UNDERSTAND YOUR CONTRACT. READ YOUR ENTIRE CONTRACT CAREFULLY. BUYING A FRANCHISE IS A COMPLICATED INVESTMENT. TAKE YOUR TIME TO DECIDE. IF POSSIBLE SHOW YOUR CONTRACT AND THIS INFORMATION TO AN ADVISOR, LIKE A LAWYER OR AN ACCOUNTANT.

IF YOU FIND ANYTHING YOU THINK MAY BE WRONG OR ANYTHING IMPORTANT THAT'S BEEN LEFT OUT, YOU SHOULD LET US KNOW ABOUT IT. IT MAY BE AGAINST THE LAW.

THERE MAY ALSO BE LAWS ON FRANCHISING IN YOUR STATE. ASK YOUR STATE AGENCIES ABOUT THEM.

FEDERAL TRADE COMMISSION

WASHINGTON, D.C.

FRANCHISE OFFERING CIRCULAR.

DIPPIN¹ DOTS FRANCHISING, INC. A Kentucky Corporation 1640 MCCRACKEN BLVD., SUITE 100 PADUCAH, KENTUCKY 42 001

P.O. BOX 92 07

PADUCAH, KENTUCKY 42002-9207

270-575-6990

Dippin' Dots Franchising, Inc. offers single-unit franchises for a Dippin' Dots® retail ice cream store.

The Initial Franchise Fee is $12,500.00. The estimated initial investment ranges from $70,978 to $216,750. This amount does not include rent for the business location.

RISK FACTORS:

1. THE FRANCHISE AGREEMENT REQUIRES THAT BOTH PARTIES WILL FIRST TRY TO SETTLE ANY DISAGREEMENTS BY ENGAGING IN ONE DAY OF MEDIATION. ALL DISAGREEMENTS SHALL BE FINALLY SETTLED BY ARBITRATION IN KENTUCKY ACCORDING TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION. OUT OF STATE ARBITRATION OR LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO ARBITRATE WITH OR SUE DIPPIN' DOTS FRANCHISING, INC. IN KENTUCKY THAN IN YOUR HOME STATE.

2. THE FRANCHISE AGREEMENT STATES THAT KENTUCKY LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.

3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Information comparing franchisors is available. Call the state administrators listed in Exhibit 1 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 the applicable state agency list in Exhibit 1.

Effective Date: _____________

REGISTRATION OF THIS OFFERING CIRCULAR DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE COMMISSIONER.

CALIFORNIA BUSINESS AND PROFESSIONS CODE 20000 THROUGE 20043 PROVIDES RIGHTS TO THE FRANCHISEE CONCERNING TERMINATION OR NON-RENEWAL OF A FRANCHISE. IF THE FRANCHISE AGREEMENT CONTAINS A PROVISION THAT IS INCONSISTENT WITH THE LAW, THE LAW WILL CONTROL.

THE FRANCHISE AGREEMENT PROVIDES FOR TERMINATION UPON BANKRUPTCY. THIS PROVISION MAY NOT BE ENFORCEABLE UNDER FEDERAL BANKRUPTCY LAW. (11 U.S.C.A. SEC. 101 ET SEQ.)

THE FRANCHISE AGREEMENT CONTAINS A COVENANT NOT TO COMPETE WHICH EXTENDS BEYOND THE TERMINATION OF THE FRANCHISE. THIS PROVISION MAY BE ENFORCEABLE UNDER CALIFORNIA LAW.

THE FRANCHISE AGREEMENT CONTAINS A LIQUIDATED DAMAGES CLAUSE. UNDER CALIFORNIA CIVIL CODE SECTION 1671, CERTAIN LIQUIDATED DAMAGES CLAUSES ARE UNENFORCEABLE.

THE FRANCHISE AGREEMENT REQUIRES BINDING ARBITRATION. THE ARBITRATION WILL OCCUR AT PADUCAH, KENTUCKY WITH THE COSTS BEING BORNE BY BOTH PARTIES. THIS PROVISION MAY NOT BE ENFORCEABLE UNDER CALIFORNIA LAW.

PROSPECTIVE FRANCHISEES ARE ENCOURAGED TO CONSULT PRIVATE LEGAL COUNSEL TO DETERMINE THE APPLICABILITY OF CALIFORNIA AND FEDERAL LAWS (SUCH AS BUSINESS AND PROFESSIONS CODE SECTION 20040.5, CODE OF CIVIL PROCEDURE SECTION 1281, AND THE FEDERAL ARBITRATION ACT) TO ANY PROVISIONS OF A FRANCHISE AGREEMENT RESTRICTING VENUE TO A FORUM OUTSIDE THE STATE OF CALIFORNIA.

THE FRANCHISE AGREEMENT REQUIRES APPLICATION OF THE LAWS OF KENTUCKY. THIS PROVISION MAY NOT BE ENFORCEABLE UNDER CALIFORNIA LAW.

SECTION 31125 OF THE CALIFORNIA CORPORATIONS CODE REQUIRES US TO GIVE YOU A DISCLOSURE DOCUMENT, IN A FORM CONTAINING THE INFORMATION THAT THE COMMISSIONER MAY BY RULE OR ORDER REQUIRE, BEFORE A SOLICITATION OF A PROPOSED MATERIAL MODIFICATION OF AN EXISTING FRANCHISE.

YOU MUST SIGN A GENERAL RELEASE IF YOU RENEW OR TRANSFER YOUR FRANCHISE. CALIFORNIA CORPORATIONS CODE SEC. 31512 VOIDS A WAIVER OF YOUR RIGHTS UNDER THE FRANCHISE INVESTMENT LAW (CALIFORNIA CORPORATIONS CODE SEC. 31000 THROUGH 31516). BUSINESS AND PROFESSIONS CODE SEC. 20010 VOIDS A WAIVER OF YOUR RIGHTS UNDER THE FRANCHISE RELATIONS ACT (BUSINESS AND PROFESSIONS CODE SEC. 20000 THROUGH 20043) .

DIPPIN* DOTS FRANCHISING, INC.

FRANCHISE OFFERING CIRCULAR

TABLE OF CONTENTS

\

ITEM 1. THE FRANCHISOR, ITS PREDECESSORS

AND AFFILIATES..................................1

ITEM 2 . BUSINESS EXPERIENCE.............................3

ITEM 3 . LITIGATION......................................7

ITEM 4 . BANKRUPTCY......................................9

ITEM 5 . INITIAL FRANCHISE FEE...........................9

ITEM 6 . OTHER FEES.....................................10

ITEM 7 . INITIAL INVESTMENT.............................17

ITEM 8 . RESTRICTIONS ON SOURCES OF

PRODUCTS AND SERVICES..........................20

ITEM 9 . FRANCHISEE ' S OBLIGATIONS.......................22

ITEM 10 . FINANCING......................................24

ITEM 11 . FRANCHISOR'S OBLIGATIONS.......................2 5

ITEM 12 . TERRITORY......................................31

ITEM 13 . TRADEMARKS.....................................31

ITEM 14. PATENTS, COPYRIGHTS AND

PROPRIETARY INFORMATION........................34

ITEM 15. OBLIGATION TO PARTICIPATE IN THE

ACTUAL, OPERATION OF THE FRANCHISED

BUSINESS.......................................3 6

ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE

MAY SELL.......................................36

ITEM 17 . RENEWAL, TERMINATION, TRANSFER

AND DISPUTE RESOLUTION.........................3 6

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

ITEM 19 . EARNINGS CLAIMS................................41

ITEM 20. LIST OF OUTLETS................................42

ITEM 21. FINANCIAL STATEMENTS...........................48

ITEM 22 . CONTRACTS......................................48

ITEM 23 . RECEIPT........................................49

EXHIBIT 1 EXHIBIT 2 EXHIBIT 3

LIST OF STATE ADMINISTRATORS

LIST OF AGENTS FOR SERVICE OF PROCESS

PIPPIN' DOTS FRANCHISING, INC.'S FRANCHISE AGREEMENT GENERAL RELEASE CUSTOMER AGREEMENT

EXHIBIT 4

EXHIBIT 5 EXHIBIT 6 EXHIBIT 7 EXHIBIT 8 EXHIBIT 9

LIST OF PIPPIN¹ DOTS FRANCHISING, INC.'S FRANCHISEES

FINANCIAL STATEMENTS

STATE ADDENDUM TO OFFERING CIRCULAR

DEFINITIONS

TABLE OF CONTENTS OPERATING MANUAL

ACKNOWLEDGEMENT OF RECEIPT OF OFFERING CIRCULAR

ITEM 1.

THE FRANCHISOR, ITS PREDECESSOR AND AFFILIATES

Please remember as you read this Offering Circular, that "T>i)7^v means Dippin' Dots® Franchising, Inc., the franchisor, and "you'' means the person, including any business entity and its principal owner, buying the franchise, the franchisee. DDF only does business under the name * Dippin' Dots Franchising". DDF has its principal place of business at 1640 McCracken Blvd. , Suite 100, Paducah, Kentucky 42001. DDF is a Kentucky corporation formed on March 30, 1999. Service of process in this state may be made upon DDK's agent, see Exhibit 2.

Dippin' Dots, Inc. ("DDI") makes Dippin¹ Dots® ice cream,, frozen yogurt, sherbet and ice products. DDI licenses DDF to use DDI ' Proprietary Harks and the System with the sale of Dippin' Dots® franchises . DDI also licenses DDF to sublicense you to use the Proprietary Marks and the System with the operation of your single-unit franchises (a "Franchisee Business'¹)- DDI is a separate corporation from DDF and is in no way responsible for DDF' s activities. However, DDF may contract with DDI to perform certain services for DDF, such as sale of merchandise to, and training and service of, franchisees. It is important to remember that DDI and DDF are each independent entities withont any liability for the acts and omissions of the other.

Business Experience

DDF offers, sells, services and supports Dippin' Dots® Franchisea Businesses. DDF has no predecessor. DDF has no affiliates other than DDI. DDF has a license from DDI to use DDI' s Proprietary Marks and System and to sublicense these items to you. DDF has not previously offered franchises before September 1999 when DDF began selling franchises. DDF owns and operates a retail store in Paducah, Kentucky which has operated since November of 1993 (Prior to January of 2000, it was operated by DDI) and Chesterfield Mall in St. Louis, Missouri since July of 2005. DDF owns and operates one additional retail store in Nashville, Tennessee, which it intends to close upon expiration of its lease in 2005. Prior to DDF's Franchisee Business offerings, DDI operated a dealership system. DDK's franchise system has replaced DDI' s dealership system. DDF is not in any other line of business, except for the sale of the type of franchise offered under this Offering Circular. At this time only DDI is an approved supplier of frozen yogurt, sherbet, ice cream and ice products to you.

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Description of the Pippin' Dote Franchises Business

A Franchisee Business is the operation of a retail store featuring the sale of novelty frozen ice cream, yogurt, sherbet and ice products . You will sell products and services to the general public. Customers will include individuals of ail ages, especially from the ages of 8 to IE. We anticipate that you will experience an increase in sales during the warmer months and a decrease in sales during the colder months. DDF expects the most pronounced seasonal sales variations in geographic areas where there are significant seasonal temperature variations. These seasonal variations can be significant and may cause your Franchisee Business to operate at a loss in colder months.

Competition

The market for DDF■s products is developed. There are a large number of potential competitors that sell ice cream and similar frozen-dessert products, including national, regional and local supermarkets, specialty ice cream stores, fast food operations and other retail establishments as well as other Franchisee Businesses and businesses operated by DDI. A single individual owns all of the common stock of DDF and 81.25% of the common stock of DDI. DDI's principal business address is 5101 Charter Oak Drive, Paducah, Kentucky 42001. Competitors will include other retail ice cream stores and food stores offering similar products and services. These may include nationally, regionally or locally owned stores such as Haagen-Dars,. Dressier's, Baskin-Robbins , and Mini-Melts.

Currently the McDonald's Corporation is selling Dippin' Dots through their restaurants in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Kansas, Montana, Nevada, New Mexico, North Carolina, Ohio, Oregon, Utah and Washington. This is pursuant to a test market agreement entered into between McDonald's Corporation and DDI. DDI does not know whether this agreement will continue in the future or be expanded throughout the McDonald's restaurant chains within the United States.

Also, BJ's "Wholesale Club, Inc. entered into an agreement with DDI to sell Dippin' Dots in its facilities. Currently, BJ's is selling Dippin' Dots in its stores in Connecticut, Delaware, Florida, Georgia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, F.hode Island and Virginia.

Industry Specific Regulations

There may be laws applicable to your Franchised Business so you should carefully investigate local, state and federal laws.

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Although no statutes or regulations deal specifically with the operation of a Dippin' Dots Franchisee Business, there are typically statutes and regulations that regulate businesses handling food ana food produces and there may be laws and regulations relating to refrigerated or frozen food items. You must comply with all local, state and federal laws in the operation of your Dippin' Dots Franchisee- Business.

ITEM 2.

BUSINESS EXPERIENCE

Curt D. Jones, President and Chief Executive Officer

Mr. Jones {"Jones") is the President and sole shareholder of DDF as well as a member of the Board of Directors and the Chief Executive Officer of DDF. He is also the inventor of the Dippin' Dots® concept and the Founder of DDI based in Paducah, Kentucky where Dippin' Dots® are made. Additionally, he is the President of DDI.

Connie Ulrich

Ms. Ulrich has been Vice-President in Charge of Finance and Chief Financial Officer for DDI since March 19S8. She is the sister of Cure D. Jones.

Philip Stephen Bligh, Director of Franchising and Chief Marketing Officer

Mr. Bligh has served as Director of Franchising and Chief Marketing Officer of DDF since January 2006. Mr. Bligh has also been Chief Executive Officer for Dippin' Dots, Inc. since January

2005. Prior to his positions with DDF and DDI, Mr. Bligh was the Chief Executive Officer of Inforte Corporation in Chicago, Illinois from January 1994 until January 2005. In January 2005, Mr. Bligh became Chairman of the Board of Inforte Corporation and continues to serve in this capacity for Inforte.

Joseph Chad Wilson, Secretary

Mr. Wilson has served as Secretary of DDF since June 1999. Mr. Wilson was the Controller for DDI from September 1993 to January

2006. He has served as Director for two ice cream distribution companies, Dippin' Dots Australia Pty. Ltd. located in Melbourne, Victoria, Australia, since November 1998, and Dippin' Dots Europe B.3. located in Zaltbommel, The Netherlands, since June 1998 until 2002 when it was dissolved. He is the brother-in-law of Tamara Wilson.

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Charles F. Nelson

Mr. Nelson is the Director of Operations for DDF. He was hired in May of 2 002. Mr. Nelson has extensive franchise operating

experience and "was an owner and operator of z Dippin' Dots® franchise from 1595 until 2001, as well as a franchisee of Auntie Anne's from 1993 until 2001. He was president of CARICO, Inc., food service business in Springfield Missouri from 1993 to 2 001.

William Stanford zinke

Mr. Zinhe has served as the Strategic Advisor for Dippin' Dots, Inc. since January 2005. Mr. linke also began as Chief Operating Officer for Plumgood Food, Inc. of Nashville, Tennessee in January 2005. Prior to joining DDI, Mr. Zinke was the Vice President of Marketing for Heady ?ac Produce in Irwindale, California, from July 1993 to March 2005.

Stephen C. Heisner

Mr. Heisner is a member of the 30D of DDF. Mr. Heisner is the Director of Administration and the Assistant Secretary for DDI. He has held the position of Director of Administration since September 1995 and Assistant Secretary since March 1999.

David S. Tade, Training Officer and Service Officer

Mr. Tade has served as the Training Officer and the Service Officer for DDF since September 199 9. In October of 199 6, Mr. Tade began his tenure as Customer Service Manager for Marketing with DDI.

Edwin E. Fritz

Mr. Fritz has been the Director of International Marketing of DDI since March 2001. Previously, Mr. Fritz was Director of Marketing from April 1992 until February 2001.

Terry E. Reeves

Mr. Reeves has been Corporate Communications Director for DDI since October 1996. He is the husband of Vanessa Reeves.

Tamara S. Wilson.

Ms. Wilson has served as Director of Marketing for DDI since March 2001. She was also the Customer Service Manager/Marketing Representative for DDI since September 1994 to March 2001. She

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is nhe sister-in-law of J. Chad Wilson.

J anile L» Spaulding Eta-ling

Ms. Fhling has served as Property Development Specialist for DDF since September 1999. She has also been employed as Marketing Coordinator for DDI from January 1995 to January 1999 and Project Leader for -he Mall Market for DDI from January 1999 to September 1999 .

Vanessa J. Reeves

Ms. Reeves has served as Franchise Development Specialist for DDF since March 2 001. She served as Marketing Coordinator for DDT from September 1999 to February 2001. She was employed as Marketing Coordinator for DDI between June 1995 and September 1999. She is the wife of Terry Reeves.

Barbara J. Kight

Ms . Hight has served as Business Development Specialist for DDT from September 1999 to February 2001. Before that she was Training Coordinator for DDF from September 1999 to February 2001. She has also been employed as Events Coordinator for DDI since March 1997 until December 1S99.

Mary Allison McGullion

Mary Allison Smith has been Property Development Representative for DDF since December 8, 2003. Prior to joining DDF, Ms. Smith was a manager of Smith's Supermarkets, Inc. from 1992 through November of 2003.

Mary Beth Stuber

Ms. Stuber has been an accountant for DDF since September 2003. Prior to joining the DDF staff, Ms. Stuber was a staff accountant for NES Equipment Rentals, Inc. in Paducah, Kentucky from November 2001 until September 2003. Prior to that, she was a staff accountant with the accounting firm Williams, Williams & Lentz, L? in Paducah, Kentucky from January 2001 until November 2001.

Desiree J. Helm

Ms. Helm has been a Franchise Development Assistant for DDF since January 2003. For the five years prior to joining DDF, Ms. Helm was a homemaker.

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Carole DeJamatt

Ms. DeJarnatt has served as Customer Service Manager for DDI since May 2 001. She also served as Regional Manager for DDI from November 1999 to April 2001 and Customer Service Representative for DDI from July 1998 to October 1999.

Stanya Kragel

Ms. Kragel has served as a Field Agent since October 2001. Ms. Kragel has also served as a Customer Service Representative for DDI from January 2000 to October 2001.

Stephenie Lynn Elliott Derrick

Ms. Derrick has served DDF as Franchising Field representative since April 2003. Prior to her position with DDF, Ms. Derrick was employed by Sentry Insurance Company in Carrollton, Texas as a Sales Team Assistant and Director of Sales Assistant from October 1997 to September 2002.

Michael Eugene Forrest

Mr. Forrest has served DDF as Franchising Consultant since August 2005. Prior to his position with DDF, Mr. Forrest was employed by MVE Beverage Systems in Burnsvilie, Minnesota as a r.egional Sales Representative from October 2001 to October 2003.

Robert Virgil Parciue

Mr. Par due has served DDF as Design Engineer since November 2005. Prior to his position with DDF, Mr. Perdue was employed by SAIC in Bloomfield, Indiana as an Engineering Draftsman from March 2004 to November 2005. Prior to that, Mr. Par due was an AutoCAD Coordinator for P.epublic Builders Products from September 2003 to February 2004. Prior to that, Mr. Pardue was a Draftsman for F. Michael Jordan, A.IA from September 2002 to September 2003.

Katherine Noelle Newell

Ms. Newell has served DDF as Business Development Specialist Assistant since August 2005. Prior to her position with DDF, Ms. Newell served as a Customer Service Representative for Vinyl window Technologies in Paducah, Kentucky from April 2003 to April 2005. Prior to that, she was employed by Lynx Services as a Customer Service Representative from April 2000 to April 2003.

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Dione Ann Stanford

Ms. Stanford has served DDF as Staff Assistant since September 2 005. Prior to her position with DDF, Ms. Stanford was employed by US Food Service in Paducah, Kentucky as an Executive Secretary from August 2003 to June 2005. Prior to char, Ms. Stanford worked in Medical Records for Internal Medicine from December 2002 to August 2003.

DDF does nor currently engage the services of any franchise brokers.

Neither DDF nor any person listed in Item 2 is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 13.S.C.A. TBI et seq., suspending or expelling such persons from membership in such-association or exchange.

ITEM 3. LITIGATION

DDI is currently involved in a Multi-District Litigation (MDL) in the Northern district of Georgia, Atlanta Division entitled In re Dippin' Dots, Inc., Patent Litigation (Civil Action No. 1:00-CV-907-TWT, M.D.L. No. 1377). This MDL is the result of the consolidation of eight (8) actions brought in-various federal district courts. The original actions are as follows: Dippin' Dots, Inc. v Concessions A La Mode, Inc., et al {Civil Action Ho. 1:00-1981), in the Southern District of Florida; Dippin' Dots, Inc. v Concession Obsession, Inc., et al (Civil Action No. 1:00-907-TWT), in the Northern District of Georgia; Dippin' Dots, Inc. v Capital Celebrations, Inc., et al (Civil Action No. 3:00-481), and Dippin' Dots, Inc. v Frosty Bites Distribution, L.L.C. (Civil Action No. 3:00-698), in the Middle District of Tennessee,- and Dippin' Dots, Inc. v Thomas R. Mosey, et al (Civil Action No. 3:96-1959), Frosty Bites, Inc., et al v Curt D. Jones, et al (Civil Action No. 3:00-1307), Frosty Bites Distribution, L.L.-C., et al v Dippin' Dots, Inc., et al (Civil Action No. 3:00-1686), and Frosty Bites of New York, L.L.C, et al v Dippin' Dots, Inc., et al (Civil Action No. 3:00-1587), in the Northern District of Texas.

Plaintiffs in the MDL action, DDI and Jones, allege that Defendants have committed, actively induced and contributed, and continue to commit, actively induce and contribute to acts of patent infringement under the United States Patent Act; acts of trademark infringement, directly or through intermediaries under

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the United States Trademark Act, under common law, and under the Common Lav of Unfair Competition; and injury to business reputation- Plaintiffs seek preliminary and permanent: injunctiv relief, damages for lost profits,- and treble damages for willful infringement. Defendants denied the allegations and are presently defending the suit. Defendants countereIaimed alleging that the patent: is invalid and that Plaintiffs are in violation of the Sherman Antitrust Act.

On March 31, 2002, the MDL Court ruled on the parties' Motions for Summary Judgment. The MDL Court did not grant the Defendants' Motion for Summary Judgment on the issues of patent invalidity and unenforceability. However, the MDL Court did rui~ in favor of the Defendants on their Motion for Summary* Judgment that the patent was not infringed with respect to the Defendants' product; that DDI' s ice cream was not entitled to trade dress protection; that DDI' s logo was not infringed; and, that DDI' s trade secrets were not protected under Kentucky law. The remaining issues not decided in the Motions for Summary Judgment will be decided in a two-part trial. The first part of the trial was held between October 6, 2 003 and October 21, 2 003 in Dallas, Texas. The jury reached a verdict holding DDI's patent was invalid, and that DDI was in violation of anti-trust laws. The jury found, however, that DDI' s actions did not result in any damages ( zero damages ) for any of the Defendant' s counterclaims , including the anti-trust violations. Following post-trial briefing by the parties on the issues of patent validity and whether the Defendant' s were entitled to attorney's fees as a result of the anti-trust violations, the MDL Court upheld the jury decision that DDI' s patent w/as invalid and also awarded attorney's fees in the amount of $2,867,744 to the Defendants for the anti-trust violations.

On August 5, 2005, the MDL Court entered the final judgment regarding the first trial. In its final order and judgment, the court entered the jury verdicts from the first trial. Following entry of the judgment, DDI filed a bond to stay execution of the judgment in the amount of $3,527,400. DDI and Jones timely appealed the patent validity and anti-trust decisions. However, one Defendant has challenged by Motion, which is still pending, the timeliness of filing the apt>eal on the award of attorney's fees.

DDI was also the Defendant and Counterclaim Plaintiff in an action in the Northern District of Texas, Civil Action No. 3:01-CV-I532-M. The Plaintiffs, Frosty Bites, Inc., Nicholas Angus, and Thomas R. Mosey are seeking a judgment declaring that Plaintiffs are not infringing DDI's trade dress, that DDI's trade dress is unenforceable, and that Plaintiffs are not misappropriating DDI's trade secrets. Plaintiffs also seek a

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judgment against DDI for alleged violations of the Sherman Antitrust Act. DDI tiled a counterclaim alleging that the Plaintiffs have misappropriated DDI's trade secrets, have violated their contractual obligations and have violated state and federal trademark and unfair competition laws. This action was consolidated with the MDL.

Philip Bligh, Chief Executive Officer of DDI, was a defendant in the matter, Mary C. 3est v. Inforte Corp., et al. , Case No. OI-CV-10835, in the Southern District of New York, filed on November 30, 2001. This action involved more than 300 putative class action suits against certain issuers, their officers and directors, and underwriters with respect to initial public offerings by those issuers.

The suit alleges federal securities violations by Inforte Corporation, of which Mr. Bligh was the Chief Executive Officer and is presently Chairman of the 3oard of Directors. Mr. Bligh, along with the other individual named defendants, was dismissed from the action without prejudice.

Other than these actions, no litigation is required to be

disclosed in this offering circular.

ITEM 4.

BANKRUPTCY

No person previously identified in Items 1 or 2 has been involved as a debtor in bankruptcy proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item.

ITEM 5.

INITIAL FRANCHISE FEE

Initial Franchise Fee

You must pay a uniform Initial Franchise Fee of $12,500.00 for a single Dippin Dots( Franchise. However, additional franchises may >e purchased for lower fees as in EXHIBIT E to the Franchise Agreement and in Sections 4.1.1, 4.1.2 and 4.1.4 of the Franchise Agreement.

Anyone who held a Dealership Contract with DDI in the calendar year 1999 was offered a franchise by DDF and had 30 days, from the date of offer, or until December 15, 1999, whichever is later, to accept the offer, after that date the

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oner was automatically withdrawn.

The initial Franchise Pee is fully earned and non-refundable upon signing the Franchise Agreement, except as provided below. It is possible no obtain an option to purchase a Franchisee Business with the payment of an option fee. This fee is applied to the payment of ~he Initial Franchise Fee if you exercise the option. The initial Franchise Fee is payable to DDF in full upon sicmina to the Franchise Acrreemenc.

Location	INITIAL	ADDITIONAL	RENEWAL FEE
Size:	FRANCHISE FEE	LOCATION/ SACK UNIT	FOR EACH UNIT
Mail		10,000.00	S2,500.00
{More than 1	$12,500.00
million sq .
Mall		SB,000.00	2,000.00
{Less than 1	$12,500.00

ft. )
Fair/ Festival *	$12,500.00	S3,000.00	$1,000.00
{More than 1
million in
atrendance)
Fair/		1,500.00	500.00
Festival *	$12,500.00
{Less than 1
million but
more man
99,999 in
attendance)

' You may open multiple locations at any single 'air/Festival without payment of an additional franchise lee.

ITEM 5.

OTHER FEES

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Royalty Fee	4 % of weeitly Gross Sales. Section 4.3 of the Franchise Agreement (FA).	Received on or before each Wednesday by 5 PM CST~ '.the week begins on Sunday and ends on Saturday; .	''Gross Sales'' means the. \ entire amount of all \ your revenues from the \ ownership or operation of the Franchisee -; Business or any j business at or about the Premises. Because it is important that you understand this term, examples of Gross Sales and further explanation is provided Exhibit D to the Franchise Agreement. This fee is payable to DDF.
Contributions to National Advertising Fund	Beginning January 1, 2 005, 2% of your Gross Sales during the preceding week. Section 12.2 FA.	Same as Above.	Gross Sales are defined above under Royalty Fee. DDF reserves the right to increase the Advertising Contributions provided DDF reasonably determines the increase is necessary to provide greater advertising and promotional assistance to the System.. "T'ne Advertising Fund and its earnings will not in any other way benefit DDF. DDF or its designee will maintain separate bookkeeping accounts for the Advertising Fund. This fee is payable to DDF.
Contributions to Kegional Fund Advertising	Maximum amount shall not exceed 2% of Gross Sales pursuant to Sections 12.2 and 12.5 FA and as determined by DDF.	Same as Above	Regional Funds have not been established at this time. Should DDF establish these funds, this fee will be payable to DDF.
T^a^r^ng Fees	The initial training is free. Section 6 FA.	N/A	You must pay for all travel, meals and lodging costs for your attendees.
Additional Training	$75.00 per day per person, plus out-of-pocket expenses. Section 6.24 FA.	Immediately upon receipt of invoice unless otherwise arranged	If you require more training or related assistance than DDF's usual training program and routinely scheduled visits, you must pay DDF this fee.

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Maintenance and	Actual cost to DDF.	Immediately	If vou fail to keen* anv
Reoairs	Section 7.10 FA.	uDon receiot	recruired maintenance
		or invoice.	contracts in full effect, DDF may- do so at your e;;pense. This fee is Toavaiue to DDF.
Insurance	Cost of the		If you to maintain
Coverage	Insurance to DDF.	uoon receipt	the insurance required.
	Section '2.4 FA.		by the Franchis e Agreement, DDF may obtain the required insurance and charge you the cost of the insurance. This fee i payable to DDF.
Reimbursement of	Actual cost to DDF,	Immediately	DDF has the ricrht to
Audit Costs	Section 11.4 FA.	upon receipt	have an audi t made of
		oi invoice.	your records and conduct a physical inventory-. If any inspection discloses an understatement- of any-reported amount of any-type, in any report, of 5% or more of Gross Sales, you will, in addition to pay-ing DDF the amount of the understatement , reimburse DDF for all expenses, including, without limitation, travel, lodging and wages expenses and reasonable accounting and legal costs and interest from the date this amount was due until paid, at the rate of eighteen percent (18%) per annum, or the maximum rate permittee! by 1 aw, whi chever i s less. This fee is payable to DDF.
Deficiencies	Actual cost to DDF.	Immediately	DDF may⁷ perform your
	Section 7.8 FA.	upon receipt	obligations for y^ou, if
		or invoice.	you do not satisfy your obligations required by the Franchise Agreement. You must reimburse DDF for its costs in performing your obligations. This fee is payable to DDF.

Option Fee	S2s0.00. Section	Upon purchase	One option fee will be
	4.6 FA.	of the	applied toward the
		option.	Initial Franchise Fee should you exercise 3'our option. An option will not be granted for a term ": onaer tha^. three 131 months. This fee is payable to DDF.
Transfer Fee	The greater of	At the time	Upon a transfer, you or
	S5,000 or 10% of the	of transfer.	your personal
	sales price, or		representative or other
	total consideration,		legal representative
	monetary and/or non-		must pay a Transfer
	monetary, but not to		Fee, in lieu of an
	exceed the current		Initial Franchise Fee,
	Xnitial Franchise		or the greater amount
	Fee (currently		as is necessary to
	$12,500;. For		reimburse DDF for its
	transfers to		reasonable costs and
	existing		esrpenses associated
	franchisees, 10% of		with reviewing the
	the sales price, or		application to
	total consideration,		transfer, including,
			without limitation,
	monetary, but not to		legal and accounting
	exceed the current		fees. However, in the
	Initial Franchise		case of a transfer to a
	Fee (currently		corporation formed by
	$12,500}. Section		-you for the convenience
	14.2.10 FA.		of ownership, no Transfer Fee shall be required. This fee is payable to DDF. \|

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Fee for the	S5,000 or DDF's	Reguired at	If vou desire to offer
Of ferine: of	actual cost,	the same time	for sale corporate
Securities	wmenever is	as tne	securities or
	greater. Section	recruirad	partnership or
	14.6 r j. .	notice of	membership interests in _;
		vour oroDQses	vour Franchisee
		orrertng.	Business or an entity-owning direct or indirect eguity interest in the Franchisee Business, by public or private offering, or otherwise, you will pay to DDF a non-refundable Offering Fee of 55,000 or any greater amount necessary to reimburse DDF for its reasonable expenses associated with reviewing the proposed offering wi thout 1imi tat i on, legal and accounting fees. You must give DDF written notice at least thirty (3 0) days before the dste of commencement of any offeririg. This fee is nevable to DDF.
Replacement Fee	S2 00 for each.	Imniediatelv	If the Manual should
for Manuals or	Section 9 . 6 F.²-..	upon receipt	become lost, stolen or
Software lost or		oi invoice.	damaged to render it,
stolen			in the DDF's sole determination, unusable, you shall pay a replacement fee of at least two hundred dollars (S200.0O). A partial loss or failure to update any Manual or Software diskette is considered a complete loss. This fee is payable to DDF.
'

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interest on Late Payments	None. Section 4.4 FA.	K/i.	If any payment under your Franchise Agreement or any other agreement between you and DDF or its arti-Lietes ror your Franchised Business is overdue for any reason (except for DDF's failure to access your operating account when sufficient funds were in the operating account and the Payment System was in effect) you only pay a late charae to DDF.
l,at "^vif,"ae	75.00. Section 4.4	Immediately upon receipt of invoice.	You will pay a late charge for the fourth j.ate payment m b calendar year and each subsequent late payment immediately upon demand by DDF of seventy-five dollars (75.00), or the maximum amount permitted by law, whichever is less. Entitlement to a late charge shall be in addition to any other remedies DDF may hav'e. You will not be entitled to set-off any payments. This fee is payable to DDF.
SenH ce Cha^ae for Insufficient Funds for ACH Debit	S50.00. Section 4.5 FA.	1\VA	You must pay a service charge of fifty dollars (50.00) to reimburse DD? for its services in correcting an underpayment, in the event a ban): account you designate for ACK Debit payments nas insufficient funds when an ACH Debit is attempted. This fee is in addition to the seventy-five dollar (S75.00) late fee in Section 4.4 FA.

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Indemnif icatior.			you must pay or
Indemnif icatior.	Actual cost co DDr.	Immediatelv	you must pay or
	Section 20.1 FA.	UDon recemt	reimburse DDF for any
		oi invoice.	damages unciucmg reasonable attorneys' fees and cosie, even if incident to appellate, pos t-j udgment or banhruptcy proceedings), from claims brought by third parties involving your ownership or operation of your Franchised Business. This obligation continues in full effect after the Franchise Agreement expires or is tenrdnated. This fe= is payable to DDF.
Hint or cement	Actual cost to DDF.	Immediateiv	If any arbicration,
Costs	Section 17.z FA.	uoon receint	lecai action or otner
		ci invoice.	proceeding is begun fox the enforcement of your Franchise Agreement, or for an alleged dispute, breach, default or misrepresentation under any provision of your Franchise Agreement, DDF is entitled to recover ail costs and expenses. This fee is Toavable to DDF.
Franchisee	$100.00. Section	Time of the	DDF Franchisee Council,
Council Dues	2 7.2 FA.	la-ii meetinc	Inc. is described in
		(varies).	the "Advertising Programs" section of this circular.

Uniformity: Hon.-refundable

The expenses in this ITEM are uniform for persons currently offered a Franchise. Except as provided above, they are nonrefundable and are not collected for, nor paid to, any third person.

Payment Schedule : Pre-Authorized Transfers

You must make all royalty advertising contribution payments on a weekly basis, on or before each succeeding Wednesday, based on Gross Sales for the preceding week (Sunday through Saturday). If DDF does not actually receive any payment or authorization on or before 5 p.m. CST Wednesday by facsimile, e-mail or other courier, DDF considers the payment overdue. You acknowledge that DDF may use an automated information collection system for sales reports and automatic debit from your account of the royalty

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payment. You must get a telephone plus Internet access in order for you to access DDF' s system. You must pay a late charge for the fourth late payment in a calendar year and each subsequent late payment immediately upon demand by DDF a payment of lesser of $75 or the maximum amount permitted by law. You will not be entitled to set-off any payments. You must pay all other amounts owed to DDF as specified above. If DDF does not specify a time, you must pay these payments upon receipt of DDF' s invoice. You must make your payments to DDF by a Payment System by using pre-authoriced transfers from your operating account through the use of special checks or electronic funds transfer (ACH DEBIT) that DDF will process at the time payment is due. If a bank account that you designate for an ACH Debit has insufficient funds at nhe time DDF attempts an ACH Debit, you will be charged a service fee of fifty dollars ($50.00). These include the F.oyalty Fee and the Advertising Contributions.

Cooperatives

Currently, DDF does not require you to in any Cooperatives; however, at your reoue with some survoliers for vou.

ITEM 7.

INITIAL INVESTMENT


Expense	Amount (US$)	Method of Payment	When Due	To Whom Payment Is To Be Made
Initial Franchise Fee'	$12,500	tump Sum	signed	DDr
Grand Opening Advertising Expenditure*	S500 to $2,500	As Incurred	Before Opening of Store	Parties
Credit Card and Gift Card ■ Processingc	$755 to S800_	As Incurred	Before Opening of Store and Onaoina	f'&it&es
Office and Store Supplies'⁵	S100 to $500	Lump Sum.	Before Opening of Store	DDI and Third Parries
Opening Inventory"	$3,024 to $6,800	Lump Sum	Before Opening of Store	DDI and Third Parties
Printing and Signage^f	$499 to $5,000	As Incurred	Before Opening of Store	DDI and Third Parties
Equipment/3uild-0ut⁵	$33,750 to $135,000	As Incurred	Before Opening of Store	DDI and Third Parties
Travel, Lodging, Meals, Etc. for Initial	$1,350 to $3,250	As Incurred	Before Opening of Store	Third Parties
_ ... ._ j

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ioin or participate :, DDF may negotiate


T-'-a-'ir'ncr-	\|
Security Deposit arid Prepaid P-.ent^	S500 to S,400	As Incurred	Before Opening of store	Third Parties
Miscellaneous Start-up Costs-"'	S5,000 to S15,000	AS Incurred	Before Ot>er.--nc-of Store	Third Parties
Additional Funds (6 months)^r"	515,000 to $26,000	As Incurred	Before Opening of Store	Third Parties
TOTALS	$70,S7E to $216,750

KOte?:

See T.TEK 5 for a description of the Initial Franchise Fee.

j! Grand Opening Advertising does no: apply to Fair/Festival Franchisees. Grand opening activities vary greatly based up or.' the location you select and -he local rates for services selectee 'for example, printing and advertising) . DDF requires its franchisees to spend a minimum of $500 to a maximum of 2,500 or. Grand Opening Advertising. However, you ir.ay spend more.

■J You agree to enter into at: Agreement with an Approved Supplier for the ability to conduct credit card transactions at your store. You also agree to enter into an Agreement re sel: and accept Dippir. ' Dots gift cards through DDF. As part of this Agreement you may be required to purchase card-reading equipment at ar. estimated cost of 5755. After that, you wili be responsible for a fee on card transactions that will be deducted by ACH Debit pursuant tc the Agreement with the Approved Supplier.

-.) You agree tc. the importance of image and agree to use only- the supplies DDF specifies or approves. DDF will only allow office and store supplies that support the image of the Systen: in the marketplace. Supplies of this nature include the format, type, decoration and style as they relate to store and office supplies. These costs are based upon DDF's estimate of the initial supplies. The results range from si00 to S500.

-.'. Minimum inventory will fluctuate because of seasonal sales. This may cause the initial inventory investment to be greater or less. DDF retains the right to change the minimum and maximum levels, in response to chancinc market conditions. DDF will wen*}: with you to organice and balance inventories.

i DDT will specify the outdoor and indoor signs and graphics, and only those that DDF

approves are permitted to be used. Signs arid graphics are to be maintained in a condition acceptable to DDF at all times. You, at your expense, will prepare, construct and erect the signs and graphics in accordance with any requirements of governmental authorities anc the landlord. The costs of fabricating and installing approved signs and graphics car. vary depending tpot, local market conditions but are estimated to cost approximately 5^9? to S5,000.

!) You will be required to purchase and/or lease and install the office/kitchen equipment and decor necessary tc operate your Franchisee Business in accordance with DDF's then-current trade dress specifications. The costs of purchase and installation of the furniture, fixtures, equipment and decor will vary according to local market conditions, the size of the Premises, your selections mad**, from DDF's approved line of items, price differences among suppliers, the location of the Premises and other related factors. DDF's estimate is $33,"750 to 5135,000. You can expect initial cash outlays to be lower if the items can be leased rather than purchased cr if any compatible items are included with the lease ftr the Premises.

i) You will be responsible for all out-cf-pocket expenses, workers' compensation insurance and all employee compensation along with federal and state taxes for the trainees plus a Training Fee of S75 per day per person for any additional training beyond the requirements of Basic Management Training. DDF assumes no responsibility for your human-resource related liabilities cr costs during Basic Management Training. The typical costs of training that you will bear are the Training Fee, transportation, lodging, compensation and meals. The estimate is for items that are non-discretionary in nature. Generally these costs will vary widely as a function of the distance traveled, the accommodations selected, the restaurants eaten in, the distance between the hotel and the training center and the transportation selected. Using different lifestyles, distances and compensation assumptions, the estimates are from 51,350 to S3,25C.

.) You will be required to pay rent, and may be required to pay a security deposit at the

beginning of your lease or license agreement with the landlord or operator. The estimated prepaid rent and security deposits are $500 to $9,400.

j ) Miscellaneous expenses include: insurance; leasehold improvements; incorporation fees,

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such as fictitious name registration, legal review and other professional fees; utility deposits; licenses and permits; attorney rees and: point-of-sale system- In ever;- business start up there are many unexpected minor costs, for example, additional licenses and!

permits, professional zees for accountants or additional fees for attorneys, utility deposits, miscellaneous supplies and many others. TTEK E and Section 13 of the Franchise Agreement require that you carry certain specified, insurance. You ant your insurer will resolve the method and timing of payments. It is difficult to estimate the ultimate cost to any given franchisee. Therefore, DDF, lr. light of the availability of the insurance industry", estimates the total cost with the caution that you should obtain quotes from carriers of choice before proceeding. Yot will he required to conform the iocatioij to DDF ' s then- current specif; cati oris for trade dress,. The cost of leasehold improvements for your Franchisee Business will vary, h.11 leasehold improvements are directly related to conforming the Premises to DDF' s current standards for layout, traffic flow, merchandising, trade dress and other specifications. While you may sign the Franchise Agreement individually, you may also decide to hold the franchise interest in a corporation or other entity and transfer the Franchise Agreement to corporation or other entity formed before beginning operations. Pees for doing so will vary" from state to state depending or. each state' s laws and the prevailing rate of attorneys' fees. These costs are paid to the attorneys, newspapers and governmental agencies, are not refundable and are usually incurred before beginning business. You will generally be required to incur deposits with local utilities {for example, electric, telephone, gas, water, etc.).

These v.-fii vary depending or. th& policies of the local utilities. Local, municipal, county ant state regulations vary on what licenses and permits are required tc operate a Franchisee Business. These fees are paid to governmental authorities,, when incurred. before beginning business and are usually not refundable. DDF believes strongly that computers and management information systems play a critical part in the performance of the Sysceir.. DDF requires that designated new Pippin' Dots®' Franchisees (there are exceptions for Fair .-'Festival. Franchisees) open their business with the computer hardware, point-of-sale system with all communication, peripherals and related accessories and Software (the "F'.Q.S. Systeir" ; as mandated by DDF. If you elect to use different computer software and haraware, the software and hardware must comply with DDF' e standards and specifications, particularly rn its ability to communicate with DDF's computer system. The total estimated miscellaneous costs are Zt ■ 000 to Sli , t>00.

hi Y^rou should have additional funds available before begriming operation of a Dippin' Docs^' Franchise. These additional funds should he sufficient to keep the Dippin' DotsS-Franchise in operation for 6 months and capable of covering the excess of expenses over cash flow from the store covering employee salaries and taxes, inventory replenishment, insurance premiums, rent, utilities and other normal expenses that are associated with the day-to-day business operation of the Franchise. You must be able to meet operating expenses from: pre-opening, including hirinc and training expenses, until the Dipptn' DotsS Franchise develops sufficient cash flow tc cover all costs. Tne estimate for additional funds is SI?', 000 to $26,000. These figures do not include any- payments to you during the start-up period. You are encouraged to create a personal/family cash flow budget and determine if there is sufficient revenue on the personal level to provide for your family throughout the start-up period. Clearly, the additional funds requirement will he a function of your decisions regarding nearly every aspect of your Dippin' Dots®- Franchise, for example, the sice of the payroll, rent, utilities, sice of the operation and many other expenses that you decide to incur.

These payments are not refundable, unless otherwise indicated. The following estimate of your initial investment to construct and open a Franchisee! Business covers the period before the opening and for the initial stage of your Franchisee Business. You must have additional funds accessible, either cash or unsecured credit lines, or other assets that you may liquidate, or borrow against, to cover your personal living expenses and any operating losses after the starting phase of your Franchised Business. These estimates do not include cash requirements you may need to cover operating losses or your personal living expenses after the introductory period. DDF strongly recommends that you retain the services of an experienced accountant or financial advisor to come up with a business plan and financial projections for your Franchised Business. The amount actually invested may vary depending upon local conditions that are unique to your geographic area market (for example, real estate demand, availability and occupancy

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rates). Other variables that affect your initial investment may be; size ox your facility; term of your lease or other instrument under which you have the right no occupy the Premises; lease arrangements; purchasing the Premises rather than leasing; age of the structure; any build-out by the developer having no initial out-of-pocket cost to you; whether you are modifying existing Premises and the similarity of the business; costs of rating existing leasehold improvements; location in the market; other variable expenses and whether you currently hold a lease of an acceptable location. Typically, you will be located in major shopping mails or moveable kiosks rather than freestanding buildings. DDF does not require you to buy real estate or build a building that will contain your Franchisee Business, however, doing so will cause the initial investment to be much higher.

Basis for Estimate

DDF relied on the years of experience of the individuals listed in Item 2 to compile these estimates. Yon should review these figures carefully with a business advisor before making any decisions to purchase a Dippin' Dots® Franchise.

Financing

As described in ITEM 10, neither DDF nor its agents or affiliates offer any financing arrangements to you.

THERE ARE NO OTHER DIF.ECT OF INDIRECT PAYMENTS

IN CONJUNCTION WITH THE PURCHASE OF THE FRANCHISE.

ITEM 8 . RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

You must purchase the following goods and supplies, for the

establishment of your Franchisee! Business from DDF or a Designee:

Products

You must purchase Dippin¹ Dots® ice cream, yogurt, sherbet and ice products from the approved source DDF designates and licenses in accordance with DDF' s requirements then in effect.

You must purchase from DDI the following required products: ice cream, yogurt, sherbet and flavored ice products.

You must purchase Credit/Debit Card and Gift Card services from a designated Approved Supplier (Section 5.2 of the Franchise Agreement) .

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Revenues from &ecjuired Products and Services

DDF, now and in the future, may receive rebates or other payments from approved suppliers, or from other suppliers, including equipment and kiosk suppliers, manufacturers, ana front other sales to DDF" s franchisees and DBF's own stores. These rebates or payments will not exceed fifteen percent of the ongoing purchases of equipment, supplies, ingredients and other items used or sold in your franchise. DDI or DDF will derive income from these products by selling, leasing or licensing products to you.

DDF estimates that the cost of required purchases are 3.1% to 4.2% of the cost to establish s. franchise and approximately 32.2% to 40.2% of total operating expenses.

Insurance

In addition to insurance required by applicable law, your landlord, lender or any other party, you must obtain and maintain insurance, at your expense, required by DDF. The insurance company must write all policies in a manner reasonably satisfactory to DDF with a Best rating of "A" or include the risks of coverage and deductibles as stated in the Manuals and Section 13 of the Franchise Agreement.

Section 13 of the Franchise Agreement requires that you obtain at least one quote for your required insurance from Peel & Holland of Paducah, Kentucky. You may obtain quotes for insurance prices and purchase insurance from other agencies.

Building Specifications

If you do not operate a kiosk or cart, you must employ a qualified licensed architect or engineer to prepare a site plan and adopt the building specifications to the specific site and/or adapt the recommended floor plan to the Premises. Section 5.2 of the Franchise Agreement.

Advertising

You must submit to DDF, and receive DDF' s approval for, all materials used for Local Advertising (including Grand Opening Advertising). All materials containing Proprietary Marks must comply with the specifications stated in the Manual and in accordance with Sections 8.2 and 8.3 of the Franchise Agreement.

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Approved Supplies and Suppliers

You may only purchase or lease equipment, supplies, inventory, advertising materials, construction services and other products and services used for the operation of your Franchisee 3usiness from approved manufacturers, contractors and other suppliers who demonstrate, to DDF's continuing reasonable satisfaction: (i) ability to meet DDF's reasonable standards and specifications; (ii) adequate quality controls and capacity to supply your needs promptly and reliably; and (iii) approval in writing by DDF and not later disapproved. DDF may approve a single supplier for any brand and may approve only a certain supplier as to any certain brand or brands and may take into consideration the price and quality of the products or services and the reliability of the supplier and other factors. DDF may condition the approval of a supplier on numerous requirements and the approval may be temporary, pending DDF's additional evaluation of the supplier.

Approval of New Specifications and Suppliers

If you desire to purchase or lease any equipment, supplies, inventory, advertising materials, construction services or other-products or services from an unapproved supplier, you must submit to DDF a written request for approval, or request the supplier do so.

Except as otherwise described above in the ITEM, neither DDF nor its affiliate derives revenues as a result of your purchases or leases in accordance with DDF's standards or specifications. DDF does not discriminate among its franchisees based upon a particular franchisee's use of a particular approved supplier.

ITEM 9. FRANCHISEE'S OBLIGATIONS

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

Obligationi

Section in Your Agreement₂

Item In Offering Circular

(a) Site selection

and acquisition/ lease

SECTIONS 1.2, 1.3, 3.8, 7.2, 7.14, 15.2.1

ITEMS 6, 7 Sc 8

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(b)	Pre-opening	SECTIONS 4,1, 4.5,		ITEMS 5,	7, 8 5:
	purchas e /1 ease	5.1, 5.4.1, 7.2.3, 7.4.5, 7.5, 7.7, 11.1, 12		11
(c)	Site deve1opment and otner pre-opening reouirements	SECTIONS 1.2, 2.2, 3.5, 3.5, 5.2, 5.4.1		ITEMS 7.	8 h 11
(d)	Initial and on-going training	SECTIONS 2.2.7, 3.2, 6, 7.12, 7.16, 14.2.9, 5.2.2, 17.2		ITEMS 6,	7 K 11
(e)	Opening	SECTIONS 3.3, 2.4,		ITEMS 7,	8 « U
(f)	Fees	SECTIONS 2.2.5, 3.10, 4, 6.2.4, 6.5, 9.6, 14.2.10, 14. o , I o . :s . j.<, .i.6.6, 17.6, 20.3, 25.2, 25.6		ITEMS 5,	O *cc i*
(g)	Compliance with	SECTIONS 1.4, 2.1,		ITEMS 8	11 k 14
	standards and	2.2, 7, 8, 9	10,
	doI^ c^ es/	12, 13.1, 13	n
	Operating Manual	14.2.7, 15.3	~i
(h)	Trademarks and	SECTIONS 6.2	1	ITEMS 15	5c 14
	t)roorietarv	7.3, 7.11, B	q
	information	15.3.6, 17.2	16.7
(i)	Restrictions on	SECTIONS 7.1	7.4,	ITEMS 6	K 16
	produces/services	7.6, 7.7, 8
	of fered	12.4.2, 15.5 16.2, 17.2. 1	6,
		18.1.3
(J)	Warranty and customer service reouirements	SECTIONS 7.1, 7.4.3, 20.3, 26.1		N/A
00	Territorial development and sales quotas	N/A There are no territorial development or sales quota reouirements.		N/A
(1)	Ongoing product/service purchases	SECTIONS 5.2, 6.2.4, 7.6		ITEMS 5,	6 & 8
(m)	Maintenance, appearance and remodeling requirements	SECTIONS 1.4, 2.2.2, 7.4.1, 7.4.5, 7.8, 7.10, 7.11, 7.13, 7.15, 7.16, 8.3.7, 15.2.5, 16.4, 17.6		ITEMS 6,	7 & 8
(n)	Insurance	SECTIONS 5.2, 13		ITEMS 6,	7 & 8

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(o) Advertising	SECTIONS 2.2.5, 4.2, 5.4.1, 7.4.3, 7.3! 8.2.2! 8.3. l\ 12, 16.2, 27.1	ITEMS 6, 1 , B a 11
< p) Xndemni f i cati on	SECTION .2.6, 14.6, 20	ITEMS 5 S
(q) Owner's participation/ management/ staffing	SECTIONS 2.2.6, 6.1, 7 .12, 8.2.4, 10.2, 14.2.5, 14.2.9, 15.2.2, 17.1, 17.3, 18.1.2	ITEMS 5 i 15
(r) P.ecords/reports	SECTIONS 4.4, 11, 12.5.4, 15.2.10, 15.2 .12, 16.7, 1S . 1. 3	ITEM 8
(s) Inspections/ audits	SECTIONS 3.7, 7 . S	ITEMS 6 k 11
(t) Transfer	SECTIONS 14 , 15.2.6, 15.2.7	ITEMS 6 & 17
(u) Renewal	SECTIONS 8.3.3. 8.3.5, 15, 16, 17.3, 24.2	ITEMS 6 & 17
(v) Post-termination obligations	SECTIONS 17 .2, 17.3, 17.4	ITEM 17
(w) Non-competition covenants	SECTION 5.5, 19.2	ITEM 17
(x) Dispute Resolution	SECTION 2 5	ITEMS 15 k 17

tl) Unless otherwise stated, all references are to Dippin' Dots Franchise Agreement: see Exhibit 3■

(2) Where DDF cites an entire section in the above table, you should assume that all the provisions of the entire section apply.

Specifications and Standards

DDF provides specifications and/or required suppliers for the purchase or lease of certain items. These may include standards for enhancing the System's image along with minimum standards for safety, appearance and quality. DDF issues the specifications to you in the Manuals or in other in writings.

ITEM 10.

FINANCING

DDF does not offer direct or indirect financing. DDF does not guarantee your note, lease or obligation.

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ITEM 11,

FRANCHISOR'S OBLIGATIONS

EXCEPT AS DISCLOSED BELOW, DDF NEED NOT PROVIDE ANY ASSISTANCE TO YOU.

Mandatory Obligations Before opening of Your Franchised Business

Either directly or through its designee, before the opening of your Franchisee! Business, DDF will provide you the following assistance and services unless you are in default of 'your Franchise Agreement:

(A) Site Selection Assistance

You alone must select the site of your Franchised Business. [Section 7.2 of the Franchise Agreement]. However, DDF may-provide some evaluation of your selection it DDF deems it necessary. DDF will provide you with its standard site selection criteria. You must reimburse DDF for all DDF' s reasonable expenses incurred in the construction or improvements. DDF'S APPROVAL OF A SITE IS NOT A REPRESENTATION OR WARRANTY THAT YOUR FRANCHISED BUSINESS WILL BE PROFITABLE OR THAT YOUR SALES WILL ATTAIN ANY PREDETERMINED LEVELS. DDF ONLY INTENDS FOR ITS APPROVAL TO INDICATE THAT THE PROPOSED SITE MEETS DDF'S MINIMUM CRITERIA FOR IDENTIFYING SITES. YOU MUST AGREE TEAT DDF'S APPROVAL OR DISAPPROVAL OF A PROPOSED SITE DOES NOT IMPOSE ANY LIABILITY OR OBLIGATION ON DDF. [Section 3 . 8 of the Franchise Agreement. j

(B) Lease Assistance

You must use your best efforts to ensure that the lease ox the Premises meets your obligations to DDF under the Franchise Agreement. DDF may, in its sole discretion, assist you in your lease negotiations. [Section 7.2.3 of the Franchise Agreement].

(C) Building Specifications

DDF will loan a sample set of store, cart and kiosk specifications to you. [Section 3.1 of the Franchise Agreement.]

(D) Administrative, Bookkeeping, Accounting and Inventory Control Systems

DDF will provide standardized accounting, cost control, portion control and inventory control systems. [Section 11.1 of the Franchise Agreement.]

(E) Lists, Forms and Schedules

DDT will supply to you a list ot all required inventory, supplies, materials, equipment and other items necessary to operate your Franchised Business. DDF will also provide a list of items that you must purchase from DDT or its affiliates and a recommended list of items you should purchase from third-parties. [Section 3.1 of the Franchise Agreement. ]

(F) Basic Management Training

DDF will provide 3asic Management Training for up to two Trainees . [Section 3 . 2 of the Franchise Agreement. ] DDF describes the details of the Basic Management Training below under the heading "Training Program" .

(G) Opening Supervisor

Except for Fair/Festival Franchisees, DDF will provide you with an opening supervisor, if DD? deems it necessary, for up to two days to assist in the opening of your Franchisee Business. DDF will pay the expenses of the opening supervisor. [Section 3.3 of the Franchise Agreement.J

Obligations of DDF During Operations

EXCEPT AS LISTED BELOW DDF NEED NOT FROVIDE ANY ASSISTANCE TO YOU.

During the operation of your Franchised Business, DDF

(1) continue to research and develop new products and DDF deems appropriate in its complete discretion. 1.4.2 of the Franchise Agreement.]

(2) loan you one registered copy of the Manual. You shall keep this Manual and its contents confidential. The Manual remains DDF's property. [Section 3.5 of the Franchise Agreement.1

(3) maintain a telephone "line" for the exclusive benefit of its franchisees for informational assistance in addressing any operating problems you may experience. [Section 3.6 of the Franchise Agreement.]

(4) provide you advice on Local Advertising. [Subsection 3.9 of the Franchise Agreement.]

(5) provide you with advertising and promotional methods and materials DDF may develop. [Section 3 .4 of the Franchise Agreement.]

(6) provide administrative, bookkeeping, accounting

(A)

will:

services [Section

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and inventory procedures. [Section 3.9 of the Franchise Agreement.j

(7) make itself available to you for consultation and ongoing assistance on products and service offered in your Franchisee 3usiness. [Section 3.9 of the Franchise Agreement.]

(8) periodically send one copy of DDF's publication for franchisees, THE SYNERGIST® either electronically or by mail.

(B) Advertising Programs

You must pay an Advertising Fund contribution each week of 2% of weekly Gross Sales. DDF reserves the right to increase the Advertising Contributions. [Subsection 12.2 of the Franchise Agreement.] A report of the operations of the Advertising Fund as shown on DDF' s books will be prepared annually by an independent certified public accountant DDF selects, at the e>tpense of the .Advertising Fund, and made available to you upon written request . DDF may utilize local, regional, national or international sources of advertising in various scope and media, such as print, radio, television or the world Wide Web. Subject to DDF's approval, you may be allowed to use your own advertising materials. [Section 12.6 of the Franchise Agreement.]

Additionally, DDF has the right, in its discretion, to establish a Regional Advertising Fund. DDF may require you to become a member of the Regional Advertising Fund. DDF will provide you with a copy of any written document governing the Regional Advertising Fund. DDF retains the right to inspect the financial records of any Regional Advertising Fund, as well as the right to change, dissolve or merge any F.egional Advertising Fund.

DDF and/or DD1 may receive payment for providing goods or services to the Advertising Fund.

DDF Franchisee Council, Inc., is a Kentucky non-profit organization ("DDFFCI") that has been formed to benefit the relationship between DDF and franchisees. DDF may seek the advice and counsel of DDFFCI, its Board of Directors, and committees on matters such as advertising, marketing, operations, new product and services suggestions and other matters concerning the System. All U.S. franchisees of DDF must be members of the DDFFCI. The current annual dues are $100.00 for membership in DDFFCI. All members of DDFFCI will be entitled to one vote on all matters which members are authorized to vote under the Franchise Agreement and the By-Laws of DDFFCI.

See ITEMS 6, 8 and 9 for additional information on the DDF

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advertising; program.

(C) -F.O.S. System

DDF currently approves for a cash register for the P.O.S. System any system capable of maintaining a running grand total. DDF has not approved compatible equivalent hardware components to the P.O.S. System, at this time. The P.O.S. System is an electronic cash register system which provides financial records of sales information on sales levels by time, item menu pricing, product movement statistics, individual unit and category sales data, and various financial information to prepare store reports. DDF will have electronic and manual access to the P.O.S. System information and no contractual limitations exist to prevent or limit DDF ' s right to access this information for your Franchisee Business.

DDF is in no way contractually obligated to provide to you any maintenance, repairs, upgrades or updates, although DDF or a assignee may do so. You must make periodic upgrades and updates to the P.O.S. System software and hardware that DDF or DDF¹ s designee makes available for your Franchised Business and there are no contractual limitations on the frequency and cost of this requirement. DDF reserves the right to designate an Approved Supplier of P.O.S. System Software.

You are also required to obtain equipment for accepting Credit/Debit Cards and Gift Cards. [Section 5.2 of the Franchise Agreement 1 .

Method of Select-ion of Location of Franchised Business

You alone must select of the site of your Franchised Business. [Section 7.2 of the Franchise Agreement. ] You must obtain approval from DDF for a specific location of your choice. DDF will take into account demographic characteristics, traffic patterns, parking, predominant character of the neighborhood, competition from other businesses providing similar services within the area, proximity of competing businesses, the nature of other businesses in proximity to the site and other commercial characteristics, the size, appearance and other physical characteristic of the site and any other factors that DDF considers relevant in approving or disapproving a site. If you qo not select a site acceptable to DDF within ninety days of the Agreement Date, DDF retains the right to terminate your Franchise Agreement and keep your Initial Franchise Fee. [Section 7.2.1 of the Franchise Agreement.]

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Typical Length of Time Between Signing of Franchise Agreement and the Opening of the Franchised Business

The typical length of time between the signing of the Franchise Agreement and the opening of the Franchisee Business can vary from two to six months. The factors that affect this time frame usually include: the uime needed to acquire a site for your Franchisee Business (depends in part on selecting a satisfactory site, arranging financing, local ordinance compliance issues, etc.) and the time when you receive and complete satisfactorily Basic Management Training.

Training Program

(A) Location, Duration and General Outline of the Basic Management Training (Mandatory)

DDF will provide Basic Management Training for up to two persons during a five-day training period (minimum of seven hours per -day) at DDF ' s offices or a designated Dippin' Dots business. DDF may shorten the training period. However, you must satisfactorily pass the Basic Management Training Test. Unless we agree in writing, you or your Principal Owner must be one of the trainees. You may designate another person who will be active in the day-to-day activities of your Franchised Business to be the other trainee. DDF must approval all trainees. In addition to a written test, Basic Management Training includes instruction in marketing, promotion and advertising, sales techniques and computer applications at a time DDF schedules. DDF provides, at its expense, instructors, facilities, training materials and technical training tools for Basic Management Training. You must pay for all expenses of your trainees in attending Basic Management Training including all travel, lodging and meal expenses. You must pay all expenses incurred to have additional employees or agents attend Basic Management Training including reasonable training fees. [Section 6 of the Franchise Agreement. ]

Sub j ect	Time Begun	Instructional Material	Hours of Classroom Training	Hours of On-the- Job Training	Instructor
Operation-	8:30 a .m.	Operations Manual	7	10	D.Tade/ various
Food Preparation	S :30 a. m.	Operations Manual	6	4	D..Tade/ various
Manager Duties	8:30 a .m.	Operations Manual	6	2	D.Tade/ various

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(B) Failure to Complete Basic Management Training

If you fail to complete satisfactorily the Basic Management Training by passing the exam given upon completion of the Basic Management Training with a score of at least 75%, DDF may terminate your Franchise Agreement and the fees collected. [Section 6.3 of the Franchise Agreement.] Basic Management Training will occur BO to 45 days after either the signing of the Franchise Agreement or the approval cf the site selected for Franchised Business, which ever comes later in time. [Subsection 6.2.2 ox the Franchise Agreement.]

(C) Pre-Opening On-site Training; Opening Supervisor Registrations and Applications

Except for Fair/Festival Franchisees, DDF will provide you with an opening supervisor, if DDF deems it necessary, for up tc two days to assist in the opening of your Dippin' Dots Franchise. 'DD'F will pay the e?rpenses of the opening supervisor. [Section 6.2 of the Franchise Agreement.]

(D) Refresher or Additional Training (Mandatory)

DDF may provide mandatory refresher or additional training programs, seminars or advanced management training for you and your employees at DDF's principal training facility (or any other location DDF designates provided the other location is closer to your Franchised Business). DDF will not require training more often than twice a year. You are solely responsible for all expenses associated with these programs, including DDF^! s then-prevailing standard training fee for the programs and ail travel, meals and lodging costs for your attendees. [Subsection 6.1 of the Franchise Agreement.]

(E) New Manager Basic Management Training (Mandatory)

If DDF permits the Manager of your Franchised Business to be an individual other than you, and the Manager fails to satisfy his or her obligations under Subsection 6.2.4 of the Franchise agreement due to death, disability, termination of employment or for any reason, you must satisfy these obligations until you designate a new Manager who has successfully completed Basic Management Training. You must pay for the expenses associated with this New Manager Basic Management Training, including the then-prevailing standard training fee DDF charges for Basic Management Training (currently $75 per day per person) . [Subsection 6.2.4 cf the Franchise Agreement.]

(F) Experience of Instructors

DDF maintains a training staff. Mr. David Tade is the person most familiar with the opening and operational goals of DDF. Because of this, Mr. Tade possesses a unique ability to train you to respond to your various questions concerning the successful operation of a DDF Franchised Business. For this

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reason, Mr. Tade (disclosed in ITSM 2) is responsible for all aspects of franchise training. DDF employed him in September 1995 due to his sionificant experience relevant to \^rour trainina.

ITEM 12.

TERRITORY

DDF grants you the right to operate a Franchised Business at an Approved Location. During the term of the Agreement DDF will not itself open,, or franchise or in any way grant any person the right to open, any business similar to your Franchised 3usiness within a radius of Thirty feet from the principal entrance of the Approved Location (the "Protected Territory"), if you are not in default under the Franchise Agreement. [Section 1.3.1 of the Franchise Agreement] . DDF grants the Franchise only for a specific Approved Location within the Protected Territory. Vou cannot change this ' Approved Location without DDF ' s written approval and compliance with DDF' s relocation procedures as stated in Section 1.2 of the Franchise Agreement. DDF does not permit you to operate out of any location other than the Approved Location within the Protected Territory without DDF's written approval. Although, DDF does not prohibit you from soliciting sales outside your Protected Territory. You must make all sales at the Approved Location granted to you. [Sections 1.2 and 1 .3 of the Franchise Agreement.]

Sales volume or market penetration will not in any way affect the exclusivity of your Protected Territory.

ITEM 13. TRAPEMZIRKS

Sections 7.9 and 8.2 of the Franchise Agreement grant you the right to use only the Proprietary Property DDF designates, and only in the manner DDF authorizes and permits and only for the operation of your Dippin' Dots® Franchise.

Registrations and Applications

The following Proprietary Marks, which are registered on the Principal Register of the United States Patent and Trademark Office, are owned by DDI, have been licensed to DDF and will be sublicensed to you for your use pursuant to the Franchise Agreement:

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	DIPPIK¹ DOTS®	- ICE CREAK OF THE FUTURE®
Class	46 & 101	100 Si 101
1 In:'1. Class	03 0 : 042	042
Reg. No.	1,551,1S3	1,769,015

	DIPFIN' DOTS ICE CREAM OF THE FUTURE®
Class	100 S: 101
i Int'1. Class	042
P.eo. Wo'.	1,874,3^5

	DIPPIK' DOTS ICE CREAM OF THE FUTURE®
Class	03 0
Int' 1. Class	046
Heg. Isio.	2,156,90S

Mark	DIPFIN' DOTS
Class	039
Int'I. Class	025
Reg. No.	3,043,871

Registration No. 1,551,183 is for a term of twenty years, Registration No. 1,769,015, 1,874,395 and 2,156,908 are for a term of ten years and DDI intends to promptly renew it before expiration. Since the above listed federal registrations are over five (5) years old, Section 8 and 15 affidavits have been filed and they are incontestable.

Application Serial No. 76/611,547 was filed on September 10, 2004, and receipt was acknowledged by the Trademark Office.

DDI has used the Proprietary Marks and has acquired common law rights in the Proprietary Marks as a result of this use.

DDI owns the Proprietary Marks and has licensed to DDF the right to sublicense the Propriety Marks to franchisees throughout the United States under a license agreement. The agreement is for a term of thirty years from September 1999. The agreement may be canceled or modified solely by DDR. There are no other agreements currently in effect that significantly limit DDF's rights to use or license the use to you of the Proprietary Marks in any manner.

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There are no infringing uses in the United States actually known to DDT chat could materially affect your use of the Proprietary Marks.

DDF grants you the right to use the Proprietary Marks. These rights are derived exclusively from your Franchise Agreement and are strictly limited to the operation for your Dippin' Docs® Franchise under your Franchise Agreement and ail applicable standards, specifications and operating procedures DDF reguired during the Term. Any unauthorized use of the Proprietary Property is a breach of your Franchise Agreement and infringement of DDF's rights in and to the Proprietary Property.

Your use of the Proprietary Property and any goodwill developed by your use inures to the exclusive benefit of DDF. T'^e Franchise Agreement does not confer any good will or other interest in the Proprietary Property to you. You have only the right to operate a Franchisee! Business in compliance with the Franchise Agreement. The Proprietary Property will also apply to any other trademarks, service marks, commercial symbols, designs, artwork and logos that DDF may license to you to use during the Term.

You must use the Proprietary Property as the sole trade identification of your Franchisee Business, and must identify your Franchisee- Business in the form DDF requires as the independent owner of the Franchisee! Business. You must use all Proprietary Marks and other commercial symbols that DDF may license to you in full compliance with rules DDF adopts. You cannot use a name or mark as a part of a corporation name or with modifying words, designs or symbols except for those which DDF licenses to you. You may not use the Proprietary Property with the sale of an unauthorized product or service or in a manner not authorized in writing to DDF.

You must notify DDF in writing immediately (within 10 days) of any claim of infringement, unfair competition or other challenge to your right to use any Proprietary Property, or if you become aware of any use of or claims to any Proprietary-Property by persons other than DDI, DDF or its franchisees. DDF will take this action if, in its sole discretion, deems appropriate. You must not communicate with anyone except your counsel, DDI, DDF and its counsel concerning any infringement, challenge or claim except under judicial process. DDI and DDF retain the exclusive right to control any litigation or other proceeding involving any infringement, challenge or claim of any Proprietary Property. You must fully cooperate to protect and maintain DDI's and DDF's interest in any litigation or proceeding involving the Proprietary Property or otherwise to protect and

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maintain DDI^! s and DDF's interests in the Proprietary Property including signing all instruments and documents, rendering all assistance and taking ail actions that DD?'s attorneys deem necessary or advisable. [Section B.2.8 of the Franchise Agreement.j

DDF is not required to defend you against any claim against your use of the Proprietary Property. DD? will, however, reimburse you for your liability and reasonable costs for defending the Proprietary Property. To be eligible for reimbursement you must meet all DDF' s requirements as stipulated in this offering circular and in the Franchise Agreement.

You must modify or discontinue the use of any Proprietary Marks co the extent DDF modifies or discontinues it. DDF is liable solely to reimburse you for your reasonable direct expenses in modifying or discontinuing the use of a Proprietary Mark and substituting a different Proprietary Mark. "These expenses may not include any of your expenditures to promote a modified or substitute Property Mark.

	THE SYNERGIST®
Int'1. Class	015
Fee. No.	2,457,376

This registration is for a term of ten years and DDF intends to promptly renew it before expiration. Since the above listed federal registration is not five years old, no Section 8 and 15 affidavits have been filed and it is not incontestable.

ITEM 14.

PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION

Patents

DDF does not own or license any patents. The ice cream produced by DDI and sold to you by DDI, as our approved supplier, is manufactured under several different United States patents. One of those patents, No. 5,12 6,156, was found invalid by the U.S. District Court, Northern District of Texas, as described in Item 3 of this Circular. However, the Court entered its final judgment on February 28, 2005, and DDI plans to appeal the decision.

Copyrights

In addition to certain advertising and promotional

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materials, operations manuals and training materials., DDF owns the following copyrights. DDF reserves the right to, and expects to, register additional copyrights in the future.

i

[

i

THE

FRANCHISE OP

TEE FUTURE

FRANCHISE

NEWSLETTER/THE SYNERGIST

DIPFXKT' DOTS CHRONICLE

Reg. , No.

LX- J - ' J / - ^- J o

TX 5-247-573

TX 5-285-255

Confidential Information

The Manual and other materials made available to you contain confidential and proprietary information, as well as DDI ' s and DDF' s trade secrets. Because of this you must take all reasonable steps necessary to maintain this information and trade secrets (together the "Confidential Information") as secret and confidential and to ensure that this material and the information contained in it is not used in any unauthorized manner. DDI and DDF own and will develop and acquire certain confidential and proprietary information and trade secrets including, the following categories of information: (1) methods, techniques, tools, specifications, standards, polices, procedures, information, concepts, systems and knowledge and experience in DDF ' s development, operation and franchising; (2) marketing and promotional programs for DDF; (3) the software; (4) knowledge of specifications for and knowledge of suppliers of certain materials, equipment, furniture and fixtures for DDF; and (5) knowledge of DDF' s customer lists, operating results and financial performance. DDF, its Affiliates or its franchisees may develop these methods, techniques, procedures and knowledge.

DDF will disclose to you all parts of the Confidential Information for the operation of the Franchisee Business in the Manuals, during Basic Management Training and the course of the Term. You may learn additional Confidential Information of DDF during the Term. You must disclose the Confidential Information to your employees only to the extent reasonably necessary and to maintain this information as secret and confidential.

Each and every person whom you allow access to the Manuals or any other Confidential Information, must first sign DDF' s confidentialitv agreement.

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ITEM 15.

OBLIGATION TO PARTICIPATE IK THE- ACTUAL OPERATION OF THE FRANCHISED BUSINESS

If DDT does agree, an on-site manager who has successfully completed the Basic Management Training Program; (the "Manager") must directly supervise the business. DDF expects the Manager to devote his or her best full-time efforts to the management and operation of your Franchised Business. The Manager cannot have an interest or business relationship in any business competing with DDI, DDT or its franchisees. Any replacement or additional Managers must complete Basic Management Training before managing your Dippin' Dots® Franchise, unless DDF does not require it in writing.

ITEM 16.

RESTRICTIONS ON WHAT TEE FRANCHISEE MAY SELL

DDF requires that you must use only the Approved Location for the operation of your Dippin' Dots® Franchise. You must offer and sell all goods and services that DDT requires for all franchisees, and DDF has the right to add or remove products or services offered by you. Some products and services offered will be optional for some franchisees based on market, distribution, and legal and unit conditions . DDT will determine these on a case-by-case basis. You must keep the Franchised Business open and in normal operation for the minimum hours and days that DDF requires in the Manual or in other writings except that local governmental regulations or the landlord¹ s rules and regulations may limit it, but DDF does not require you to meet any sales quotas. You must not allow the use of the Premises for any other purpose or activity at any time without first obtaining DDF' s written consent. You must not allow Catering to exceed fifty percent (50%) of your Gross Sales.

DDF does not place any restrictions on the customers you may serve, provided you do not intend the sale for resale. DDF prohibits sales to customers over the Internet. You must not offer any goods or services without DDF's written consent.

ITEM 17.

RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION

This table lists important provisions of the Franchise Agreement and related agreements. You should read these provisions in the agreements attached to this Offering Circular.

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Provision	Section in Franchise Agreement	Si2OTni.ry
(a) Terrr; of the Franchise	2 . 1	The t erm o f the Franchise Agreement is five years.
(b) Renewal or extension of the franchise	2 . 2	You may renew the term. o f thi s Agreement for two additional consecutive terms of five years each, subject to conditions spelled out in the Franchise Agreement.
(c) Requirements for you to renew or extend	2.2	Give DDF written notice of your intent to renew before the end of the term; be in good standing; remodel; sign a release.
(d) Termination bv vou	None
f e) Termination by DDF without cause	None
(f) Termination by DDF with cause	15 . 2	If you default, DDF can terminate.
(g) "Cause" defined- de faults which you can cured	15 . 3	You have thirty days to cure: Non-payment of fees, sanitation problems, failure to submit reports and any other default not listed in Section 15.2.
(h) "Cause" defined -defaults which you cannot cure	15.2	Non-curable defaults: conviction of a felony, repeated defaults even if cured, abandonment, trademark misuse and unapproved transfer.
(i} Your obligation on	16	You must immediately stop operating the

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termination/ nonrenewal		Franchised Business, and not represent to the public or hold yourself out as a present or former franchisee of DDF. You must stop using any confidential methods, procedures and techniques; pay all monev owed.
(j ') Assignment of contract by DDF		No restriction on DDF's right to assign.
{'}-.) T^an^fer bv you -definition	14.1	Sell, assign, transfer, convey, piedge, mortgage, encumber, merge or give away any direct or indirect interest in this Agreement, in you or in all or most of the assets of the Franchised Business.
{1) DDF ' S approval of transfer by you	14	DDF must approve any Transfer of the Franchised Business. Approval will not be unreasonably withheld.
(m) Condition for DDF approval of transfer	14.2, 14.7, 14.8	If new franchisee qualifies, transfer fee paid, purchase agreement approved, training arranged and released, signed by you and new franchisee (See "r" below).
(n) DDF's right of first refusal to acquire your business	14.3	DDF has the right to ■ purchase your Franchised Business before anyone else by matching their offer.
(0} DDF's option to purchase your business	14.3	DDF has the right and option, within thirty days to notify you of DBF's intent to purchase your interest. If DDF does' not do so, it does not mean DDF waives any other provision of the

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		franchise Agreement.
(p) Your death or disability	14 . 4	You estate must assign franchise to approved buver wi thin 5 months.
(c) Noncompetition covenants during the term of franchise	1" . 2 - 17 . 4	No involvement in competing business within a six mile radius of the Approved Location or any franchised business operating under the S*ys tem f or a peri od of two vears.
(r) Noncompetition covenants after the franchise terminates or expires		No competing business within two vea^s w> th"i n six miles of another DDF franchise (including after assignment).
(s) Modification of the Agreement	23	Generally, no modifications , but Manual may change.
(t) Integration/ merger clause	23	Only the terms of the Franchise Agreement are binding (subject to state lav;) . Any other promise may not be enforceable.
(u) Dispute resolution by arbitration or mediation	25.1 - 25.3	Parties must first engage in one day of mediation in Paducah, Kentucky at an agreeable time. Except for certain claims, all disputes must be arbitrated in Paducah, Kentucky.
(v) Choice of forum	25.2	Litigation must be in Paducah, Kentucky.
(w) Choice of law	25.1	The laws of the Commonwealth of Kentucky-apply.

Note: Although not required, DDF may buy back inventory at fair market value upon termination of the franchise. This policy may change at any time without notice.

Restrictions on Termination or Non-Renewal Under State Law

These states have status that may supersede the Franchise

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Agreement in your relationship with DDF including the area of termination and renewal of your Franchise: ARKANSAS [Stat. Section 70-807], CALIFORNIA [Bus. * Prof. Code Sections 20000-200431, CONNECTICUT [Gen. Stat. Section 42-133e et seq.j, DELAWARE [Code, tit.], HAWAII [Rev.Stat. Section 482E-2], ILLINOIS [Rev.Stat Chapter 121 1/2, Sections 1719-17201, INDIANA [Stat. Section 23-2-2.7], MICHIGAN [Stat. Section IS.854 (27)], MINNESOTA [Stat. Section 80C.14], MISSISSIPPI [Code Section 75-24-511 , MISSOUF.I [Stat. Section 407.400] , NEBRASKA [Rev.Stat Section 87-401], NEW JERSEY [Stat. Section 55:10-1], SOUTH DAKOTA [Codified Laws Section 37-5A-51], VIRGINIA [Code 13.1-557-574-13.1-5641, WASHINGTON [Code Section 19.100.180], WISCONSIN [Stat. Section 135.03] . These and other states may have court decisions that may supersede the Franchise Agreement in your relationship with DDF with respect to the areas of termination and renewal of the Franchise.

Any termination or expiration of the Term! that violates any applicable law, may result in DDF reinstating or extending the Term for the purpose of complying with the laws. Reinstatement or extension will be only for the duration DDF provides in written notice to you, and will not result in waiver, or otherwise modify, of any of DDF's rights under the Franchise Agreement.

A provision in your Franchise Agreement that terminates your Dippin' Dots® Franchise upon your bankruptcy may not be enforceable under Title 11, United States Code Section 101 et seq.

These states have statutes limiting DDF's ability to restrict your activity after the Franchise Agreement has ended: California Business and Professions Code Section 16,600 Florida Statutes Section 542.33, Michigan Complied Laws Section 445-772 et sec., Montana Codes Section 30-14-201, North Dakota Century Code Section 9-08-06, Oklahoma Statutes Section 15-217-19, Washington code section 19-86-030. Certain states have court decisions limiting DDF's ability to restrict your activity after the Franchise Agreement has ended.

ITEM 18.

PUBLIC FIGURES

DDF does not use any public figure to promote its franchises.

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ITEM IS. &&HKXNG CLAIMS

DDF does not furnish employees, including salespersons, with nor authorize to furnish any oral or written information concerning actual or potential sales, costs, income or profits with respect to your Franchisee! Business. Actual results vary from Franchise to Franchise, and DDF cannot estimate the results of anv franchise.

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ITEM 20. LIST OF OUTLETS AS OF DECEMBER 31, 2003/DECEMBER 31, 2004/DECEMBER 31, 2005

STATE	TRANSFERS	CANCELLED OR TERMINATED	NOT RENEWED	REACQUIRED BY DDF	LEFT THE SYSTEM OTHER	TOTAL FROM LEFT COLUMNS	FRANCHISES OPERATED AT YEAR-END
Alabama	0/0/0	0 / 0 / 0	0/5/1	o/o/o	0 / 0 / 0	0/5/1	21 /1 6 / 12
Alaska	0/0/0	0/0/0	0/1/1	0 / 0 / 0	o/o/o	0/1/1	4/3/3
Arizona	0/0/0	0 / 0 / 0	0/7/1	0 / 0 / 0	0/0/0	0/7/1	13/6/7
Arkansas	0/0/0	0/0/0	0/1/0	o/o/o	0/0/0	0/1/0	■JO/9/6
California	0/0/0	1/0/0	0/0/21	0/0/0	0/0/0	1/0/21	39/45/34
Colorado	0/0/0	0/0/0	0/5/1	0/0/0	0/0/0	0/5/1	10/5/4
Connecticut;	0/0/0	0/0/0	0 / 0 / 0	0 / 0 / 0	0 / 0 / 0	0/0/0	4/5/6
Delaware	0/1/0	0 / 0 / 0	0 / "J. / l	0 / 0 / 0	0 / 0 / 0	0/2/1	6/1/4
Florida	5/1/0	2/1/2	0/6/5	0 / 0 / 0	0/0/0	7/G/7	34/28/31
Georyia	0/0/0	0/0/1	0/0/0	0/0/0	0/0/0	0/0/1	0/8/12
Hawaii	0/0/0	0/0/0	0/0/4	0/0/0	0 / 0 / 0	0/0/4	6/7/4
Idaho	0/0/0	0/0/0	0/0/4	0/0/0	0/0/0	0 / 0 / 4	4/4/0
Illinois	1/2/0	0/0/0	0/5/0	0/0/0	0/0/0	1/7/0	32/29/24
Indiana	0/0/0	0/0/0	0/1/1	0/0/0	0/0/0	0/1/1	14/15/13
Iowa	0/0/0	0/0/0	0/0/0	0 / 0 / 0	o/o/o	0/0/0	5/5/6
Kansas	0 / 0 / 0	0/0/0	0 / 0 / 0	0 / 0 / o	0/0/0	0 / 0 / 0	4/5/4
Kentucky	0/0/0	0/0/0	0/7/1	0/0/0	0/0/0	0/7/1	13/7/7
Louisiana	0/0/0	0/5/0	0/1/0	0/0/0	0/1/0	0/7/0	18/12/8
Maine	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/1/4
Maryland	1/2/0	0/0/0	0/0/2	0/0/0	0/0/0	1/2/2	10/10/11
Massachusetts	0/0/0	0/0/0	0/0/0	0/0/0	0 / 0 / 0	0/0/0	1/2/0
Michigan	0/0/0	0/4/0	0/0/0	0 / 0 / 0	0/1/0	0/5/0	8/4/8
Minnesota	0/0/0	o/o/o	0 / 2 / 11	0 / 0 / 0	0 / (.! / 0	0/2/11	17/15/3
Mississippi	1/0/0	0 / 0 / 0	0/0/0	o/o/o	0 / 0 / 0	1/0/0	6/6/4
Missouri	0/0/0	0/5/0	0/2/1	0/0/0	0/1/0	0/8/1	17/3 0/10

STATE	TRANSFERS	CANCELLED OR TERMINATED	NOT RENEWED	REACQUIRED BY DDF	LEFT THE SYSTEM OTHER	TOTAL FROM LEFT COLUMNS	FRANCHISES OPERATED AT YEAR-END
Montana	0/0/0	0/0/0	0/0/0	0/0	0/0/0	0/0/0	0/0/0
Nebraska	0/0/0	0/1/0	0/9/2	0/0/0	0/0/0	0/10/2	22/12/4
Nevada	0/0/0	0 / 0 / 0	0 / 0 / 0	0 / 0 / 0	0 / 0 / 0	0/0/0	4/4/4
New Hampshire	0/0/0	0/0/0	0/0/0	0/0/0	0 / 0 / 0	0/0/0	1/1/2
New Jersey	0/0/0	0 / 0 / 0	0/0/0	0/0/0	0/0/0	0/0/0	3/5/4
New Mexico	0/0/0	1/0/0	0/0/1	0/0/0	0/0/0	1/0/1	6/6/6
New York	0 / 0 / 0	0/0 / 0	0/1/4	o/o/o	o/o/o	0/1/4	10/11/6
North Carolina	8/0/1	0/1/0	0/3/1	0/0/0	0/0/0	8/4/2	25/22/15
North Dakota	0/0/0	0/0/0	0/1/0	0 / 0 / 0	0 / 0 / 0	0/1/0	4/3/2
Ohio	0/0/0	1/1/0	0/8/0	0/0/0	0/0/0	1/9/0	40/34/21
Oklahoma	0/1/0	0 / 0 / 0	0/0/0	0/0/0	0/1/0	0/2/0	15/13/16
Oregon	0 / 0 / 0	0 / 0 / 0	0 / 3 / 0	0 / 0 / 0	0 / 0 / 0	0/3/0	13/10/6
Pennsylvania	1J / 0 / 0	3/1/1	0/2/5	0/0/0	0 / 0 / 0	12/3/6	19/22/13
Rhode Island	0/0/0	0 / 0 / 0	0 / 0 / 0	0 / 0 / 0	0 / 0 / 0	0 / 0 / 0	0 / 0 / 0
South Carolina	3/0/1	0/1/0	0/1/2	0/0/0/	0/0/0	3/2/3	10/10/10
South Dakota	1/0/0	0/0/0	0/1/0	0/0/0	o/o/o	1/1/0	5/4/5
Tennessee	1/0/0	0/0/0	0/2/4	o/o/o	0 / 0 / 0	1/2/4	20/18/9
Texas	5/5/3	'1/3/1	0/2/0	0/0/0	0/2/0	9/12/10	53/47/44
Utah	0/0/0	0/0/0	0/2/0	0 / 0 / 0	o/o/o	0/2/0	9/7/2
Vermont	0/0/0	0/0/0	o/o/o	0/0/0	0/0/0	0/0/0	0/0/0
Virginia	0/0/0	0/1/1	0/0/3	0/0/0	0/0/0	0/1/4	8/10/12
Washington	0 / 0 / 0	0/0/0	0/12/1	0/0/0	0 / 0 / 0	0/12/1	21 / 10 / 6
West Virginia	0/1/0	1/1/0	0 / 0 / 6	0/0/0	o/o/o	1/2/6	13 / 12 /"/
Wisconsin	0/0/0	0/0/0	0/1/0	o/o/o	0/0/0	0/1/0	8/8/7
Wyoming	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	2/2/2
TOTALS	37/13/5	11/2 5/6	0/92/90*	0/0/0	0/6/0	48/136/101	615/532/420*

*TjD1? notes t:ha t 42 no (.-renewed E rantjliises for the yea r 20u'.i are the result of changes in the cie f. i nil; ions of French i sed

Businesses .in Lhe Franchise Agreement.

'- 1

o

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n

O

<

CO X

c

< -9

n . -

R*

o

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CO

TOTAL, STORES OPERATED AT YEAR END	o	o	ii t1	~ q	1 t:	00
STORES OPENED DURING YEAR	o	o o	o o	c		i o
STORES REACQUIRED DURING YEAR	o	o o	o o o	o o	°
STORES SOLD DURING YEAR	o o	o o c	Q O o	o		o o
STORES CLOSED DURING YEAR	O o	o o	o o	o o o	o o	o o o
r-1 < E-; CO	(0 -H 1-1 Q	CO -H 0 c ! r! ^H M	>1 u 1' c (D	■r-; i-i pj 0 CO CO s	CO CO CL¹ c CD H	3 Eh o E-i

O O

CO 7^"

Cy

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d

Q in 3 2 m « 5 5 b T g a >h rj -- o^ a 0 CJ
s Ed i o co ?i [j a	■=3"	O	U~.	-!		Cv	~;		X		^H
FRANCHISE AGREEMENTS SIGHED BUT STORE NOT OPEN	<-		CN						7-i
CO H < CO	TO TO to H <	CO Jut CO rH	to c O IS! -H <	CO' TO CO TO	TO r-'H -iH r1 TO 'CJ	0 TO rH 0 U	rj ■n fj 0) n 6	0) TO TO rH QJ Q	TO 5 rH	TO ■H H ci; rⁿ	-H ■H TO 3 TO

-44-

Idaho		0
111 i n o i s		1
Indiana		U
Iowa		(J
Kansas		0
Kentucky		n
Louisiana		J.
Maine		"i
Maryland	1	n
Massachusetts		0
Michigan		2
Minnesota		4
Mississippi	1	0
Missouri		1
Montana		0
Nebraska		0
Nevada		1
Mew Hampshire		0
Mew Jersey		]
New Mexico		1
New York	1	0
North Ca coiina		2
North Dakota		0
Ohio	J.	3
Oklahoma		0
Oregon		0
Pennsylvania	1	"i
Rhode Island		.1.
Soutli Carolina		"i
South Da kota		1
1e nness e e		0
Texas	1	'1

Utah		"
Ve.i;i i ion t		(
Virginia	1	^
Washington		{
West Virginia	1	i_
Wisconsin		i
Wyoming		0

Total	20	71	0

^

Franchisees Who Here I*eft the Franchisor's System

During the Fiscal 1'eE.r January 1, 2005 to December 21, 2 DC 5

5861 Svv !-■ Pembroke, ~L

o ~, A - z i /; _ 0 =■. 0 "*

P.O. Box 6 042 3

-47-

As of December 31, 2 005, DDF had 42 8 franchisee: Dippin'

Dots(B' and 3 company owned outlets in operation. A list of the names, addresses and telephone numbers of all franchisees is included in ITEM 20.

In the preceding fiscal year (calendar year 2005), 90 franchisees chose not to renew their franchise at the conclusion of their Franchise Agreement (DDF notes that 42 of these non-renewed franchises were the result of a change in the definition of Franchisee! Businesses for 2005 and that these 42 locations remained open as non-franchised attachments to existing franchise agreements, and no other franchisees terminated their franchise relationship during the term of their Franchise Agreement under the terms of their Franchise Agreement. DDF has not reacquired any franchises.

DDF terminated or did not renew 6 franchises during the previous fiscal year.

ITEM 21.

FINANCIAL STATEMENTS

Attached as Exhibit 5 is DDF's audited balance sheet prepared by Blythe & Associates, as of December 31, 2005. Also, attached is the audited balance sheet by Blythe & Associates as of December 31, 2 004 and the audited balance sheet by Blythe & Associates, as of December 31, 2 003 .

ITEM 22.

CONTRACTS

The following contracts, agreements and other relevant documents are attached as Exhibit 3 to this Offering Circular:

DIPPIN'DOTS FRANCHISE AGREEMENT

GENERAL. RELEASE

CUSTOMER AGREEMENT

CREDIT/DEBIT AND GIFT CARD AGREEMENT

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ITEK 23.

RECEIPT

In accordance with the Trade P,egulation Rule of the Federal Trade Commission titled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures", DDF attached an Acknowledgment of P^eceipt by the Prospective Franchisee as Exhibit 9.

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