UFOC

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FARMER BOYS® OFFERING CIRCULAR

ITEM 1. THE FRANCHISOR, OUR PREDECESSOR AND AFFILIATES

The purpose of this offering circular is to familiarize you with important legal and business aspects of Farmer Boys Food, Inc., a franchisor, and of the franchise we offer. To simplify the language, we will refer to Farmer Boys Food, Inc. as "Farmer Boys," "we" or "us" and the person or company that is granted a franchise by Farmer Boys as "you." The word "you" does not include your owners, who will be described as "Related Parties." "Affiliate" means a company controlled by, controlling, or under common control with us. The word "Predecessor" means a company from which we, within the past ten years, acquired, directly or indirectly, the major portion of our assets.

We were incorporated in California on March 11, 1997. We do not do business under any other name. We have no Predecessors. Our Affiliate, Andrew's Sons, Inc. ("Andrew's Sons"), was incorporated in California on August 26, 1981. A second Affiliate, Havadjia Holdings, Inc. ("Havadjia Holdings"), was formed on October 8, 1985.

Our principal business office is at 3452 University Avenue, Riverside, CA 92501. Both Andrew's Sons and Havadjia Holdings are located at 1380 Etiwanda Avenue, Ontario, CA 91761. The name and address of our agent for service of process in this state are stated in Exhibit A-2 to this offering circular.

We have been in the business of offering and granting franchises and of training and otherwise helping our franchisees since September 17, 1997. We have never offered any other franchise. We also own and operate ^Afour restaurants of the type being offered by this offering circular. We have no other business.

Andrew's Sons owns and operates eight restaurants that are similar to the franchised restaurant. It has never offered franchises of any kind nor does it sell goods or services to FARMER BOYS® franchisees. Havadjia Holdings has never offered franchises nor operated a restaurant, but it does lease or sublease restaurant premises to some FARMER BOYS® franchisees.

The business you will operate under the franchise agreement is a family-oriented "FASTAURANT®" (fast casual restaurant) featuring freshly cooked, made-to-order hamburgers and other "made from scratch" breakfast, lunch, and dinner menu items. The market served by the FARMER BOYS® Restaurant ("Restaurant") is the general public. Your competitors will be other restaurants offering fast casual on-premises dining and drive-through and carry-out services.

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Except for state and local environmental and health and safety laws and regulations that are generally applicable to eating establishments, there are no laws or regulations that are specific to this business.

ITEM 2. BUSINESS EXPERIENCE

Demetris Havadjias. ^ACEO and Director

Demetris Havadjias has been our ^ACEO since January 2006 andj Director since the company was formed in March 1997. From March 1997 until January 2006, he was our President. He was also manager of Andrew's Sons from November 1989 until March 1997.

^AKenneth W. Clark, President

Kenneth W. Clark joined us as President in January 2006. From March 1990 to January 2006, he served in increasingly responsible positions at El Polio Loco, Irvine-California, beginning as Director of Operations and ending as Vice President operations. Before that, he was Vice President development of Winchell's Donut House, La Mirada, California, from July 1986 to December 1989.

Donald W. Tucker. Director of Franchising

Donald W. Tucker has been our Director of Franchising since January 1998. Before joining the company, he was a self-employed franchise broker in Redlands, California, doing business as "Franchise Network of the Inland Empire," from June 1995 to December 1997. From September 1975 to March 1995, he served in several increasingly more responsible positions with Southland Corporation (7-Eleven) in Dallas, Texas, ending as National Franchise Manager.

^AMelanie Brune-Carbone

Melanie Brune-Carbone joined us as Marketing Executive in December 2005. Before that, she was Executive Director of Marketing for Pick Up Stix, Inc., San Ciemente, California, from ^AJanuary 2002 to June 2005. Earlier, from ^AFebruarv 1997 to January 2002. she was Marketing Director of ^ATGI Friday's, Inc.. Dallas, Texas.

Elizabeth B. Santiago, Corporate Controller

Elizabeth B. Santiago has served as our corporate controller since November 2002. Before joining us, she was Director of Finance for Castle Park, Riverside, California, from May 2002 to November 2002. Earlier, from May 1996 to December 2001, she was Vice President and ^AControHer of Skilled Care Pharmacy. Yorba Linda, California.

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Makis Havadiias, Director

Makis Havadiias has been our Director since the company's inception in 1997. He was also our Vice-President Sales from March 1997 until April 2006. He has also been Secretary/Treasurer of Andrew's Sons since 1981 and President of Havadjia Holdings since June 1985.

Christakis Havadiias, Director

Christakis Havadjias joined us as a Director in March 1997. He was also our Vice-President - Training from March 1997 until April 2006. He has also been Vice President of Andrew's Sons since 1981 and Secretary of Havadjia Holdings since June 1985.

Haralambos_Havadjias, Director

Haralambos Havadjias became our Director when the company was incorporated in 1997. He was also our Vice-President - Consulting from March 1997 until April 2006. He has also been President of Andrew's Sons since 1981 and Vice President of Havadjia Holdings since June 1985.

George Havadjias, Director

George Havadiias has served as our Director since March 1997. He was also our Vice-President - Marketing from March 1997 until April 2006. He has also been Vice-President of Andrew's Sons, Inc.. since 1983 and Chief Financial Officer of Havadiia Holdings since June 1985.

ITEM 3. LITIGATION

There is no litigation to disclose in this offering circular.

ITEM 4. BANKRUPTCY

No person identified in Items 1 or 2 of this offering circular has been involved as a debtor in proceedings under the United States Bankruptcy Code required to be disclosed in this item.

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ITEM 5. INITIAL FRANCHISE FEES

Deposit Agreement

When you sign the Deposit Agreement, you will deliver to us the sum of ^Aten thousand ^Adollars ($10,000) ("Deposit") to be used in any manner in which we decide to use it. The entire Deposit will be applied toward your initial franchise fee for a FARMER BOYS® franchise unless the Deposit Agreement is terminated without your signing a Franchise Agreement. The Deposit will not be refunded under any circumstances.

Franchise Agreement

When you sign the Franchise Agreement, you will pay us in cash or other form of payment that is immediately accessible to us, such as cashier's check or wire transfer, an initial fee of $4^A5,000 for your first franchise and $25,000 for each subsequent franchise, less any Deposit or applicable portion of a Development Fee that you have already paid. Otherwise, the initial fee is not refundable.

Area Development Agreement

When you sign the Area Development Agreement, you will pay us in cash or another form of payment that is immediately accessible to us, such as cashier's check or wire transfer, a Development Fee in the sum of ^Atwelve ^Athousand ^Afive ^Ahundred ^Adollars ($12,500) multiplied by the number of Restaurants required to be opened during the Term according to the Development Schedule attached to the Area Development Agreement. The Development Fee will not be refundable, but will be credited against your initial franchise fees, as described in each franchise agreement, at the rate of $12,500 for each Restaurant opened under the Area Development Agreement, the total amount of the credits not to exceed the Development Fee.

We may waive or reduce the initial fee for franchises granted to our Related Parties. Otherwise, the initial fees are uniform for all franchises currently being granted.

ITEM 6. OTHER FEES

NAME OF FEE	AMOUNT OR FORMULA	WHEN DUE	REMARKS¹
Royalties	5% of Adjusted Gross Revenue²	weekly
^AMarketinq Fund	^A3% of Adjusted Gross Revenue	weekly
Audit Cost	Actual cost =	Upon demand	Only due if discrepancy exceeds 3%

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NAME OF FEE	AMOUNT OR FORMULA	WHEN DUE	REMARKS¹
Loaned Employees'*	Payroll expense plus $3 per hour plus employee travel expense	Upon invoice
Replacement Manager Training	Not to exceed $350 per day	When training begins
Ongoing Training Fees	Not to exceed $300 a day	At program	Continuing education will not be required more than twice a year and will not last more than three days
Annual Meeting	Not to exceed $500 a day	Before meeting
Software License Fee	To be determined	Quarterly	Payable only after software introduced into System
Transfer Fee	^AS20,000 unless transferee is existing franchisee, in which case fee is $5000	Upon transfer
Base Rent	As negotiated bv the parties and specified on Schedule A to Lease or Sublease	Monthly	Payable to Havadiia
		Monthly	Holdinqs if you rent your premises from it
Percentaqe Rent	See Note 5	Annually	Payable to Havadiia Holdinqs if vou rent
			Payable to Havadiia Holdinqs if vou rent
			vour premises from it
Interest on Late Payments	18% per year or highest amount allowed by law, whichever less	Upon billing

A*.

All payments are imposed by and collected on our behalf or on behalf of an Affiliate unless otherwise stated. Payments to us or an Affiliate are not refundable; ^Arefundability of payments to others depends on the arrangements you make with them.^A

"Adjusted Gross Revenue" is defined in Article 3 of the Franchise Agreement as "the total amount of money or other consideration received by you and your Related Parties for all goods sold and services rendered from the Approved Location or under the Trade Name or Marks, excluding sales tax, returns, and allowances, within an accounting period."^A

^AAlso, if underpayment exceeds 3%, we may require that from then on your annual financial statements be audited at your expense/

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4: Upon your request and at our' option, we may temporarily lend you trained employees to enable

you to meet System standards at opening or at other times when you are temporarily understaffed. If this occurs, you must reimburse us as described above.

Si Percentage Rent under a Sublease (or Lease, as the case may be) with Havadjia Holdings is

calculated as follows:

M Two hundred thousand dollars ($200,000)

fb) PLUS Annual gross sales (amount received by Subleasee or Tenant and its

related parties for all goods sold and services rendered from the premises during the year)

&) TIMES Four Percent (4%)

(e) MINUS Base Rent

(!) EQUALS Percentage Rent

If components (a) through (d) above do not exceed Base Rent, no Percentage Rent is payable.

Percentage Rent is due, for each calendar year of the term of the Sublease or Lease, on the tenth (10th) day of the following January. A final Percentage Rent payment is due on the tenth (10th) day of the month following expiration or termination of the Sublease or Lease. If the first or last year of the term of this Sublease is not a full calendar year, the percentage rent, the Base Rent. and the two hundred thousand dollars ($200,000.00) will be prorated.

^REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK**

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ITEM 7. INITIAL INVESTMENT THROUGH FIRST 90 DAYS

^AEXPENSE¹	L^AOW	^AHIGH	^AMETHOD OF PAYMENT	^AWHEN	T^A0 WHOM PAID
^AEXPENSE¹	L^AOW	^AHIGH	^AMETHOD OF PAYMENT	^AWHEN
Combined Deposit Fee, Initial Franchise Fee, and Development Fee²	$25,000	$4^A5,000	Single payment	At signing	Farmer Boys
Real Estate (includes security deposit and first 3 months' rent on land lease)³	$20,000	$40,000	As arranged	At lease signing	Lessor
Equipment and Signs⁴	^A$72.661	$^A89.^A108	As arranged	As arranged	Suppliers and Contractors, Lender
Construction of Building and Surroundings⁵	^A$152,^A263	$264,557	As arranged	As Arranged	Contractors, Architects, Engineers, Govt. Agencies, Lender
Insurance	$8,652	$9,500	Single payment	Before opening	Insurance carriers
Initial Inventory	$12,000	$15,000	As arranged	As arranged.	Suppliers
Training Expenses⁶	$500	$15,000	As arranged	At training	Hotel, Restaurants
Grand Opening Advertising	$2,500	$5,000	Single payment	One month after opening	Agencies and Media
Professional Fees⁷	$1,000	$5,000	As incurred	Before opening	Attorney"^ & Accountant
Additional Funds⁸	$1M4.^A992	^A$173.^A030	As incurred	Varies	Employees, others
TOTAL Land Lease, Construction Financed	^A$439,^A568	$^A661.^A195

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ALL FIGURES ARE ESTIMATES ONLY

1: SBA financing may be available for the construction of building and improvements on leased real

estate, as well as for the equipment and other initial expenses in opening the franchised restaurant. Typical SBA financing will require a down payment of 20% of the project costs, with financing ranging from 20 to 25 years. Interest rates vary, but often are expressed as Wall Street prime plus 1.5 to 2.0 percent. For purposes of the figures in the table, we estimated financing at ten percent a year. You will also pay SBA guarantee fees, which are not included in the preceding table. You should consult a lender to determine your qualifications for financing of this nature, as well as current financing costs. Other than costs connected with financing, this Item shows all expenses through first 90 days of operation. If you select a site on which we have already begun development, you will reimburse us for any of the costs described in this table that we have already incurred.

2: If you enter into a franchise agreement, your deposit fee is fully applicable to the initial franchise

fee. If you are purchasing franchises separately, the initial franchise fee for the first franchise is $4^A5,000 and $25,000 for each subsequently purchased franchise. However, if you are purchasing franchises under an Area Development Agreement, you must pay, in advance, $12,500 toward the initial franchise fee for each franchise to be developed under the Development Schedule when you sign the Area Development Agreement. $12,500 of the fees paid in advance will be credited toward the initial franchise fee for each restaurant developed under the Agreement until all fees have been credited.

3: Figures are based on assumption that real estate will be leased, that the value of the land is

between $600,000 and $1,200,000, and that lessor will require an initial payment of one month's rent and a security deposit of one month's rent. We also include the second and third months' rent. See Item 10 of this Offering Circular for information on leasing your business premises from Havadjia Holdings.

4: This category includes such items as food preparation and other kitchen equipment, dining room

furniture, office equipment and janitorial equipment. Total price of these items will range from ^AS297,^A436 to $3^A63,^A076. The figures in the table are based on financing at 10% per year, which includes down payment and first 3 months' loan payment".

5: This category includes costs of constructing the building and other improvements on the real

estate, architectural and engineering fees, sales tax deposits or bonds, construction permit, sewer hookup charges, and utility deposits. The figure includes down payment and first 3 months loan payments assuming the total cost is $6^A82,300 to ^A$1.185.500.^A

6: This figure includes your costs of attending the franchise training program, and includes

transportation, lodging, and meals while attending the program.

7: This figure includes attorney review and negotiation of the lease for the franchised restaurant. If

we have paid for lease review while developing your site, you will reimburse us for this expense rather than pay attorney directly.

8: This category includes the cost to you of transportation and wages for pre-opening work and

training for ^Alg cooks and ^Alg cashier servers. This will range from $^A^1,000 to $^A66,000.^AIncluded are 90 days' wages for Approximately 30 full time and part-time employees, opening cash, employee uniforms and other miscellaneous expenses incurred during the first 90 days of the franchised business' operations. We relied on our management's experience in operating company and affiliated ^Arestaurants in estimating this figure. You should review these figures carefully in light of local conditions and the economy, consulting a business advisor if necessary.

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ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

You will not be required to purchase any goods or services from us or Andrew's Sons. At your request and at our option, we may temporarily lend you trained employees to enable you to meet System standards at opening or at other times when you are temporarily understaffed. If this occurs, you must reimburse us for the employee's wages or salary while working in your Restaurant, a markup of ^Athree dollars an hour to compensate the employee for the inconvenience, and any incidental costs incurred by the employee in fulfilling the temporary assignment that he or she would not incur in his or her usual employment. Otherwise, neither we nor Andrew's Sons is a supplier of any goods or services that you will sell or use in your Restaurant other than services that are paid for by your franchise fees.

As a condition of offering you a site that we have located, we are likely to require that you lease or sublease, at our sole option, the land on which you build your restaurant from our affiliate, Havadjia Holdings. Otherwise, Havadjia Holdings is not a supplier of any goods or services you will sell or use in the Restaurant.

We require you to buy our proprietary products from a designated supplier to preserve secrecy. For quality assurance and protection of the Marks, you must buy all food products, including meat, chicken, fish, dairy products, bread, fountain drinks, and produce, employee uniforms, and all dry goods and items bearing the FARMER BOYS® Marks, such as fountain cups, napkins, and tray liners, from approved or designated suppliers and according to our specifications.

To seek our approval of a site for your Restaurant, you must advise us in writing of the street address of the proposed site and provide a copy of any demographic information you have on the site and complete the FARMER BOYS® Evaluation Form. We will base our approval of the site on the general guidelines for suitable franchise premises that are stated in the Manual.

To seek our approval of the lease or purchase agreement for the premises of your Restaurant, you must provide a copy of the proposed lease or purchase agreement or a lease summary. The terms of the lease or purchase agreement must allow you to operate profitably under the terms of the Franchise Agreement, in our reasonable discretion. A lease must grant us an option, without cost or expense to us, to assume or authorize our assignee to assume the lease if the franchise agreement is terminated or if you should fail to cure a material default under the lease within the time allowed by the lease. Your lessor and you may meet this requirement by ^Aaddinq the language to the lease as listed in the Lease Provisions in the form of Attachment 1 to the Deposit Agreement. If you purchase the land or premises for the Restaurant, under the Franchise Agreement you grant us an option to purchase the property from you upon termination of the Franchise Agreement.

You must ^Afurnish and decorate the Restaurant according to our specifications and submit your plans and furnishings to us for our prior written approval. If you employ an

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approved interior designer, your decoration and furnishings will be considered approved. Once every five years, beginning on the date you first open for business, you, or your successor in interest must ^Amake a minimum remodeiinq expenditure of $41.500 as adjusted annually by the CPI, to completely remodel the exterior and interior of your Restaurant. Your remodeling dollars should be spent to update and revitalize the look of your Restaurant from the customer's point of view, with particular attention to interior and exterior paint, artifacts, furniture upholstery, table tops, valances, window shades, wall coverings, bathroom fixtures and tile, wainscoting and signs.^A Payment for regular maintenance and repair, such as replacement or repair of damaged wall coverings, tiles, equipment or upholstery, will not count toward your remodeling obligation.

You must purchase and maintain a policy or policies of comprehensive public liability insurance, including products liability coverage, covering all Restaurant assets, personnel, and activities on an occurrence basis with a combined single limit for bodily injury, death, or property damage of not less than ^Atwo ^Arnillion ^Adollars. ^AWe may increase the minimum coverage requirement annually if necessary to reflect inflation or other changes in circumstances. You must also carry (1) casualty insurance in a minimum amount equal to the replacement value of your interest in the Restaurant premises, including furniture, fixtures, and equipment; and (2) business interruption insurance in an amount sufficient to cover the rent of the Restaurant premises, salary, or wages of key personnel, and other fixed expenses. In addition, you must maintain policies of workers' compensation insurance, disability insurance, and any other types of insurance required by applicable law. Each insurance policy that is required under the Franchise Agreement must contain a provision that the policy cannot be canceled without ten days' written notice to us. It must be issued by an insurance company that is admitted in California and that is rated B+ or better in Best's Key Rating, designate us as an additional named insured and be satisfactory to us in form, substance, and coverage. You must deliver a certificate of the issuing insurance company evidencing each policy to us within ten days after the policy is issued or renewed.

Except for reimbursement for employees we lend you at your request, neither we nor Andrew's Sons receive any income based upon your purchase of items from approved or designated suppliers or according to specifications. In the fiscal year ending January 31, 200^A6, our total revenue was $^A7.96^A9.^A869. Of this, ^A$6,931 or .0^A9% was derived from reimbursement for loaned employees. Vendor rebates, all of which we contributed to the advertising fund, constituted $82,513 or about 1.04% of our total revenue.

In the fiscal year ending January 31, 200^A6, Havadjia Holdings derived ^A$1,^A859,069 as rent for leases or subleases of real property to FARMER BOYS® franchisees. Otherwise, Havadjia Holdings received no income from sale or lease of goods or services to franchisees during this period.

We negotiate purchase arrangements with suppliers, including advantageous price terms, for the benefit of all members of the FARMER BOYS® Network. In some

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cases, all FARMER BOYS® Restaurants must purchase certain items, such as fountain drinks, from a designated supplier in return for a systemwide price discount.

If you would like to use or sell any product in the categories described above from a supplier not previously designated or approved by us, you must advise us of this fact and, upon our request, give us product specifications, sample products, and information about the supplier. ^AWe will promptly communicate to you either our approval or our reasons for withholding our approval. Silence may not be construed as consent. As a condition of approving a supplier or product, we will require you or the supplier to reimburse us for any expenses reasonably incurred by us in inspecting the supplier's premises, checking the supplier's credentials, or testing the product. As a condition of approving a supplier of any product that bears the Trade Name or Marks, we may require that the supplier sign our License Agreement. Normally, we will not take longer than 60 days to evaluate a supplier. ^AWe may withdraw our approval of a supplier if the supplier no longer meets our standards.

Our existing standards and specifications and criteria were evolved through our management's years of experience in operating Andrew's Sons. Periodically, we retain a food consultant to undertake ongoing research, development, and testing of food items. ^AWe will communicate our standards and specifications in writing, usually in the Manual. At our discretion, our specifications will also be made available to suppliers.

We will not provide material benefits, such as renewal or granting additional franchises, to you based on your voluntary use of designated or approved sources. Failure to purchase items from approved or designated suppliers or according to specifications when we instruct you to do so is a material event of default that may lead to termination of your franchise.

Approximately 70% of your start-up expenses and 33% of your ongoing expenses will be for purchases from approved or designated suppliers. Most of these purchases will be of food and paper supplies.

ITEM 9. FRANCHISEE'S OBLIGATIONS

THE TABLE BELOW LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AGREEMENT AND ANY RELATED AGREEMENTS. IT WILL HELP YOU LOCATE MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THE AGREEMENTS AND IN OTHER PARTS OF THIS OFFERING CIRCULAR.

DEPOSIT AGREEMENT

I ^AA^OBLIGATION I ^ASECTION IN DEPOSIT I ^AITEM IN OFFERING I

I AGREEMENT | CIRCULAR |

A A A

^Aa.^A Site selection and ^A§ 3 ^A8,10, 11 ______acauisition/lease_________|__________________________|___________________________

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^AAaOBLIGATION

^ASECTION IN DEPOSIT AGREEMENT"

^AITEM IN OFFERING CIRCULAR

^Ab.^A Pre-opening

purchases/leases

^A§3j,

^A5, 8

^Ac.^A Site development and other pre-opening requirements

^A3.1^A

^A8. 11

^Ad.^A Initial and ongoing training

e, Openinq

f. Fees

Article 1

5,6

g. Compliance with standards and policies/Operating Manual

8, 11. 16

h. Trademarks and

proprietary information

13, 14

L Restrictions on

products/services offered

^ANA

^A8JI6^A

^Aj.^A Warranty and customer service requirements

^AM

^AN/A

^Ak.^A Territorial development and sales quotas

L Ongoing product/service purchases

^AN

^Am.^A Maintenance, appearance, and remodeling requirements

^ANA

^A17

^An.^A Insurance

^ANA

^A7, 8

^Ao.^A Advertising

^A6,8, 11

^Ap.^A Indemnification

^ANA

^A13

^Aq.^A Owner's participation/ manaaement/ staffinq

^A§^A3

^A15

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^AAAOBLiGATION	^ASECTION IN DEPOSIT AGREEMENT*	^AITEM IN OFFERING CIRCULAR
A ^Ar.^A Records/reports	A ^ANA	A ^A6
A ^As.^A Inspections/audits	A ^ANA	^A6
t. Transfer	NA	^A6, 17
A ^Au.^A Renewal	A ^ANA	A ^A6, 17
A ^Av.^A Post-termination ^A ^Aobligatio ns	A ^ANA	A A₁₇
A ^Aw.^A Non-competition covenants	A NA	XL
x. Dispute resolution	^AArticle 7	17

FRANCHISE AGREEMENT

OBLIGATION		SECTION IN FRANCHISE AGREEMENT	ITEM IN OFFERING CIRCULAR
a,	Site selection and acquisition/lease	NA	\|,^A1^A0,11
b.	Pre-openinq purchases/leases	§§7.4.1 -7.4.4,7.6	5, ^A8
Qi	Site development and other pre-openinq requirements	§3 7.4.1,7.4.3	JH
Qi	Site development and other pre-openinq requirements		JH
d.	Initial and onqoinq traininq	§7.4.1	11
e.	Openinq	§7.4.3	11
f.	Fees	Article 6	5,6
&	Compliance with standards and policies/Operatinq Manual	§ 7.4.4	8.11. 16
h.	Trademarks and proprietary information	§§7.1,8.1	13, 14

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OBLIGATION		SECTION IN FRANCHISE AGREEMENT	ITEM IN OFFERING CIRCULAR
I	Restrictions on products/services offered	§ 7.4.5	8, 16
L	Warranty and customer service requirements	$ 7.4.6	N/A
k,	Territorial development and sales auotas	NA	j2
k	Onqoina product/service purchases	§7.4.5.7.4.8	8
m.	Maintenance, appearance, and remodelinq requirements	§§ 4.4(c). 4.5.2(d). 7.4.4	JZ
m.	Maintenance, appearance, and remodelinq requirements		JZ
H.	Insurance	§7.9	M
H.		§7.9	M
0.	Advertisinq	§§ 7.2. 7.6	6.8, 11
fi,	Indemnification	§8.5	13
3=	Owner's participation/ manaqement/ staffing	§§7.4.1. 7.5.1.7.5.2	15
r.	Records/reports	§§/L7=&2	6
s.	Inspections/audits	§§6.5,7.4.7	6
L	Transfer	Article 9	6. 17
u.	Renewal	14.5.2	6. 17
V.	Post-termination obliqations	§ 10.3(b)-(h)	iz
w.	Non-competition covenants	§ 8.6. Attachment 43	17
>L	Dispute resolution	§§11.7-11.10	H

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AREA DEVELOPMENT AGREEMENT

OBLIGATION		SECTION IN AREA DEVELOPMENT AGREEMENT	ITEM IN OFFERING CIRCULAR
a.	Site selection and acquisition/lease	§5 4.4, 6.1. Attachment 1	8.10,11
b.	Pre-openinq purchases/leases	M	5.8
<L	Site development and other ore-opening requirements	Attachment 2	H
d.	Initial and onqoing training	NA	11
e.	Openinq	NA	11
f.	Fees	Article 5	LI
sl	Compliance with standards and policies/Operating Manual	ut	8. 11. 16
tL	Trademarks and	NA	13, 14
tL	Droorietarv information	NA	13, 14
i.	Restrictions on products/services offered	NA	8, 16
L	Warranty and customer service requirements	NA	N/A
L	Territorial development and sales quotas	§§ 4.2, Attachment 2	n
L	Onqoinq product/service purchases	NA	1
m.	Maintenance, appearance, and remodeling requirements	NA	n
n.	Insurance	NA	7,8
0.	Advertising	NA	6,8, 11

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OBLIGATION		SECTION IN AREA DEVELOPMENT AGREEMENT	ITEM IN OFFERING CIRCULAR
P.,..	Indemnification	N	13
a±	Owner's participation/ management/ staffinq	NA	8. 15
r.	Records/reports	NA	6
s.	Inspections/audits	NA	6
t.	Transfer	Article 7	6. 17
u.	Renewal	§4.5.2	6.17
Vj	Post-termination obligations	.3 9.3	17
w.	Non-competition covenants	SS 8.1. 8.2	17
X.	Dispute resolution	SS 11.7-11.10	17

ITEM 10. FINANCING

If we locate a site and you are interested in it, Havadjia Holdings, our affiliate, may lease or sublease the real property to you. Of the ^A38 FARMER BOYS® franchised restaurants currently in operation, ^A1^ lease real property from Havadjia Holdings, ^A16 sublease real property from Havadjia Holdings, and ^Ajl_i have made other arrangements.

Havadjia Holdings uses a standard form for our leases to franchisees which is attached to the Deposit Agreement as Exhibit 2-B. The leases offer rent at market rates, a 20-year initial term coupled with renewal options that bring the combined term to 40 years, and a security deposit equal to one month's rent.

Havadjia Holdings may terminate the lease upon the occurrence of any one or more of the following events:

(a) The vacating of the Premises without the intention to reoccupy same, or the ^Aabandonment of the Premises;

(b) Except as expressly otherwise provided in the lease, the failure by the tenant to make any payment of rent or any other monetary payment required to be made by the tenant under the lease, whether to Havadjia Holdings or to a third party,

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as and when due, where the failure continues for a period of three days following written notice by or on behalf of Havadjia Holdings to the tenant;

provisions of the lease that are to be observed, complied with or performed by the tenant, other than those described in phrases (a) or (b), above, where the default continues for a period of thirty days after written notice by or on behalf of Havadjia Holdings to the tenant. However, if the nature of the tenant's default is such that more than thirty days are reasonably required for its cure, then it will not be considered to be a breach of the lease by the tenant if the tenant begins the cure within the thirty day period and thereafter diligently prosecutes the cure to completion;

(d)^A The occurrence of any of the following events:

(i) The making by lessee of any general arrangement or assignment for

the benefit of creditors;

(ii) The tenant's becoming a "debtor" as defined in 11 U.S.C. 101 or any

successor statute to it (unless, in the case of a petition filed against the tenant, the same is dismissed within ^A60 days);

(iii) The appointment of a trustee or receiver to take possession of

substantially all of the tenant's assets located at the Premises or of the tenant's interest in the lease, where possession is not restored to the tenant within thirty days;

(e) The discovery by Havadjia Holdings that any financial statement given to Havadjia Holdings by the tenant or any guarantor was materially false when given;

(f) Termination, for any reason, of the FARMER BOYS® franchise agreement for the restaurant to be operated in the Premises;

(g) If the performance of the tenant's obligations under the lease is guaranteed:

(i) The termination of a guarantor's liability with respect to the lease other

than according to the terms of the guaranty,

(ii) A guarantor's becoming insolvent or the subject of a bankruptcy filing,

(iii) A guarantor's refusal to honor the guaranty, or

(iv) A guarantor's breach of its guaranty obligation on an anticipatory

breach basis, and the tenant's failure, within sixty days following written notice by or on behalf of Havadjia Holdings to the tenant in any such event, to provide Havadjia Holdings with written alternative assurance or security, which, when coupled with the then existing resources of the

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tenant, equals or exceeds the combined financial resources of the tenant and the guarantors that existed at the time of signing of the lease.

A copy of the standard sublease offered by Havadjia Holdings is attached to the Deposit Agreement as Attachment 2-A. It "passes through" the terms and conditions of the underlying lease, with specified exceptions: The rent is marked up to defray Havadjia Holdings' risk and expenses in administering the lease. The security deposit is usually equal to one month's rent. Late payments under the sublease will bear interest at 18% per year.

Havadjia Holdings may terminate the sublease if:

(a) You fail to cure a default in making a payment under the sublease within five days after written notice;

(b) The Franchise Agreement with us is terminated or not renewed for any reason;

(c) Any other agreement between you and us or any of our affiliates is terminated because of your material default or if you terminate such an agreement;

(d) The lease is terminated for any reason;

(e) You cause an event of default by us under the lease and fail to cure it within any applicable cure period.

If Havadjia Holdings brings a legal proceeding to enforce the sublease against you or to remove you from the premises, you may not assert any counterclaims in that proceeding or assert as a defense that we had no right to terminate the Franchise Agreement or that we have violated the franchise laws. Counterclaims of this sort must be brought in a separate proceeding.

Each of your owners must personally guarantee any lease or sublease between you and Havadjia Holdings.

If you default under a lease or sublease with Havadjia Holdings and fail to cure the default within any applicable cure period, we may terminate the Franchise Agreement.

Otherwise, neither we nor our affiliates offer direct or indirect financing. We will not guarantee your note, lease or obligation.

ITEM 11. FRANCHISOR'S OBLIGATIONS

Except as described below, we ^Aare not obligated to give you any assistance:

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Preopeninq Services

Site Approval

You may not sign a Franchise Agreement until you have obtained our written approval of the site for your Restaurant. You must, on your own initiative and at your own expense, locate, obtain, and occupy the site (Deposit Agreement § 3). We will also look for suitable sites for FARMER BOYS® restaurants. If we find an appropriate site, we have the right to develop the site ^Aourselves without offering it to you or to any other prospective franchisee. If we do not want to develop the site ourselves, w§ will offer the site to ^Aour depositors and will award the site to the depositor with the highest priority of those who accept the site in writing within seven days after the offer is made. The order of priority is as follows: (a) any existing franchisee who has signed a Deposit Agreement; (b) the depositor with the earliest dated Deposit Agreement; (c) the depositor with the second earliest dated Deposit Agreement; (d) and so on^A (Deposit Agreement § 3.2). You may have difficulty in finding a site without Farmer Boys' assistance. However, ^Awe cannot and do^A not guarantee that ^Awe will find a mutually acceptable site within your preferred geographic area.

To seek our approval of a site that you locate, you must advise us in writing of the street address of the proposed site, provide a copy of any demographic information you have on the site and submit the FARMER BOYS® Evaluation Form. We will base our approval of the site on the general guidelines for suitable franchise premises that are stated in the Manual^A (Deposit Agreement § 3.1).

To seek our approval of the lease or purchase agreement for the premises of the Restaurant, you must provide a copy of the proposed lease or purchase agreement or a lease summary. The terms of the lease or purchase agreement must allow you to operate profitably under the terms of the Franchise Agreement, in our reasonable discretion. A lease must grant us an option, without cost or expense to us, to assume or authorize our assignee to assume the lease if the franchise agreement is terminated or if you should fail to cure a material default under the lease within the time allowed by the lease. Your lessor and you may meet this requirement by ^Aaddinq the language to the lease listed in the Lease ^AProvision in the form of Attachment 1 to the Deposit Agreement. If you purchase the land or premises for the Restaurant, under the Franchise Agreement you will grant us an option to purchase the property from you upon Termination of the Franchise Agreement (Deposit Agreement § 3.1).

Some of the factors that we consider in approving a site are daytime and residential population, traffic patterns and counts, access and egress, size, parking, availability for lease or purchase, term, and applicable regulatory requirements.

We will approve or disapprove your proposed site within 30 days after you present the information described above to us.

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If you and we do not agree about a site, you must find another site. If you do not find a mutually satisfactory site within the term of the Agreement, the Agreement will terminate and, unless the agreement is extended, you will lose your deposit. Whether or not to extend the term is within our sole discretion (Deposit Agreement § 4).

The average length of time between signing of a franchise agreement and opening of a franchised business is between 12 and 24 months. This period does not include time spent looking for a site because you must have an acceptable site before entering into a FARMER BOYS® franchise agreement. Factors that may affect the length of time it takes to open include lease or purchase negotiations, obtaining regulatory approvals and permits, and speed of construction/

Training^A

The initial training program will take place at one of the company-owned FARMER BOYS^SM Restaurants and at FARMER BOYS® ^Aheadquarters before you open your first Restaurant. The training program will cover the following:

SUBJECT	INSTRUCTIONAL MATERIAL	CLASSROOM HOURS IN ^ATRAINING CENTER	HOURS ON THE JOB	INSTRUCTION TIME IN RESTAURANT
Orientation	Manual, Video	^A8	^AI	2
Server	Manual, Video	^A0	16	2^A
Cashier	Manual	^AS	32	4^A
Prep/Salad/Steam Cook	Manual	^A2	32	4^A
Fry Cook	Manual^A	2	32	^A4
Broiler Cook	Manual	^AS	^A\|Q	5
Middle Cook/ Expediter	Manual^A	0	40	5^A
Breakfast Cook	Manual	^A2	^A40	5
Restaurant Management Training	Manual	^Ao	^A144	M
Franchise^ABusiness Management Training	Manual	45	^A2	0

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Download PDF: Farmer Boys Food UFOC 1

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

The Free Franchise Resource Center

UFOC

Sample UFOC