UFOC

Sample UFOC

FATBURGER NORTH AMERICA, INC.

a Delaware corporation 301 Arizona Avenue, Suite 200 Santa Monica, CA 90401-1364 Tel. 310.319.1850 Fax 310.319.1863

www.fatburger.com

FATBURGER NORTH AMERICA, INC.

INFORMATION FOR PROSPECTIVE FRANCHISEES

REQUIRED BY THE FEDERAL TRADE COMMISSION

* * * *

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 all of your 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 has 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. 20580

FTC

REDLINE

LOSANGELES 25328W8 61247-00001

The Last Great Hamburger Stand

The Last Great Hamburger Stand*

FRANCHISE OFFERING CIRCULAR FOR PROSPECTIVE FRANCHISEES

You will establish and operate either a single quick-service hamburger restaurant or multiple quick-service hamburger restaurants according to a development schedule.

The initial franchise fee is $^A50.000 per restaurant. (See Item 5). The estimated initial investment required to establish and operate one restaurant ranges from $^A441.500 to S^A768.000 (See Item7)^AA.

Risk Factors:

1. THE FRANCHISE^A AND MANAGEMENT AGREEMENTS PERMIT THE FRANCHISEE TO ARBITRATE WITH FATBURGER ONLY IN CALIFORNIA. OUT OF STATE ARBITRATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO ARBITRATE WITH US IN CALIFORNIA THAN IN YOUR HOME STATE.

2. THE FRANCHISE^A AND MANAGEMENT AGREEMENTS STATE THAT CALIFORNIA 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. EVEN THOUGH THE FRANCHISE^A AND MANAGEMENT AGREEMENTS PROVIDE THAT "HOME STATE" LAW APPLIES, LOCAL LAW MAY SUPERSEDE THEM IN YOUR STATE. PLEASE REFER TO ANY STATE-SPECIFIC ADDENDUM THAT MAY BE ATTACHED TO THE OFFERING CIRCULAR FOR DETAILS.

3. AT OUR SOLE DISCRETION, THE SPOUSE(S) OF FRANCHISE OWNER(S) ^AMUST SIGN A PERSONAL GUARANTY MAKING THE SPOUSE(S) JOINTLY AND SEVERALLY LIABLE FOR ALL OBLIGATIONS OF THE FRANCHISE WHETHER OR NOT THE SPOUSE(S) ARE INVOLVED IN THE OPERATION OF YOUR FRANCHISED BUSINESS. THIS REQUIREMENT PLACES THE PERSONAL ASSETS OF THE FRANCHISE OWNER(S),^A AND SPOUSE(S) AT RISK.

4. FATBURGER AND ITS AFFILIATES MAY ESTABLISH OTHER CHANNELS OF DISTRIBUTION AND SELL OR DISTRIBUTE ANY PRODUCT OR SERVICE TO THE GENERAL PUBLIC, UNDER THE SAME AND/OR DIFFERENT TRADEMARKS, IN COMPETITION WITH YOUR FRANCHISE.

5. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Information comparing franchisors is available. Call the state administrators listed in Exhibit ^AL 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 state authority listed in Exhibit ^AL.

Effective Date: September ^A27, Effective Date is:

California: ^AHawaii: ^AT)linois:

2005. except for ^AMaryland, and th

. 2005

2005 . 2005

Minnesota: New York: North Dakota:

July 30, 2002

.2005 . as amended ^A . 2005 , . 2005

Rhode Island:

. 2005

South Dakota:

Virginia:

Washington:

.2005 . 2005

. 2005

LOSANGELES 25328W8 61247-00001

NOTICE REQUIRED BY THE STATE OF MICHIGAN

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

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

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

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

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

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

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

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

(g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from

i LOSANGELES 246166v1 61247-00001

exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:

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

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

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

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

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

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

THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE ATTORNEY GENERAL.

Any questions regarding this Notice shall be directed to the Department of Attorney General, Consumer Protection Division, 670 Law Building, 525 West Ottawa Street, Lansing, Michigan 48913. (517)373-7117.

THE PROVISIONS OF THIS NOTICE ONLY APPLY TO THE EXTENT THE JURISDICTIONAL REQUIREMENTS OF THE MICHIGAN FRANCHISE INVESTMENT LAW ARE MET INDEPENDENTLY, WITHOUT REFERENCE TO THIS NOTICE.

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TABLE OF CONTENTS

Item Page

Item 1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES............................................................1

Item 2 BUSINESS EXPERIENCE................................................................._..............................................................................................3

Item 3 LITIGATION......................................................................_........_.................................................................................................................^A4

Item 4 BANKRUPTCY...........................................................................................................................................................................................^A4

Item 5 INITIAL FRANCHISE FEE................................................................................................................................................................5

Item 6 OTHER FEES.....................................................................................................................................................................................................6

Item 7 YOUR ESTIMATED INITIAL INVESTMENT FOR SINGLE OR MULTIPLE

LOCATIONS.........................................................._..................................................................................................................^A

Item 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES..........................................^AJ

Item 9 FRANCHISEE'S OBLIGATIONS........................._.............................................................................................................^AH

Item 10 FINANCING..........................................................................................................................................................................................^Ai4

Item 11 FRANCHISORS OBLIGATIONS....................................................._..............................^AJJ

Item 12 TERRITORY...........................................................................................................................................................................................^A2

Item 13 TRADEMARKS....................................................................................................................................................................................^A2i

Item 14 PATENTS AND COPYRIGHTS AND PROPRIETARY INFORMATION.........................^A22

Item 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE

FRANCHISED BUSINESS.....................................................................................................................................^A21

Item 16 RESTRICTIONS ON WHAT FRANCHISEE MAY SELL................................................................. ... ^A24

Item 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION.................^A25

Item 18 PUBLIC FIGURES.......................................................................................................................................................................^A12

Item 19 EARNINGS CLAIMS.....................................................................................................................................................................^A22

Item 20 LIST OF OUTLETS...........................................................................................................................................................................^AM

Item 21 FINANCIAL STATEMENTS.....................................................................................................................................................^A2

Item 22 CONTRACTS.............................................................................................................................................................................................^A2

Item 23 RECEIPT.........................................................................................................................................................................................................^A2

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EXHIBITS:

EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D ^AA Application EXHIBIT ^AE EXHIBIT ^A EXHIBIT ^A EXHIBIT ^AH EXHIBIT ^AI EXHIBIT ^AI EXHIBIT ^AK EXHIBIT ^AL EXHIBIT ^AM EXHIBIT ^AM

Financial Statements

Franchise Agreement and Addenda

Guaranty, Indemnification and Acknowledgment ^A

for Franchise License (Single Restaurant Applicant) Application for Franchise License (Multiple Restaurant Applicant) Site Evaluation and Approval Agreement Confidentiality and Non-Competition Agreement Disclosure Questionnaire and Addendum

Franchise Deposit Acknowledgment (Single Restaurant Applicant) Franchise Deposit Acknowledgment (Multiple Restaurant Applicant) Lease Assignment

Agents for Service of Process and State Administrators Management Agreement General Release

SCHEDULES:

SCHEDULE 1 Table of Contents of Operating Manuals SCHEDULE 2 Addenda to Offering Circular

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THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

The Franchisor, its Predecessor and Affiliates

. To simplify the language in this offering circular, "We" or "Fatburger" means Fatburger North America, Inc., the franchisor. The term "we" only refers to Fatburger North America, Inc., not its officers, directors or shareholders individually. "You" means the person who buys a franchise to operate a Fatburger Restaurant^A. If this person is a corporation, partnership or other business entity, the term "you" includes the business entity and its owners. We are a Delaware corporation that was incorporated on March 28, 1990. Our principal place of business is located at 301 Arizona Avenue, Suite 200, Santa Monica, California 90401. We do business as Fatburger North America, Inc. Our website is www.fatburger.com

This Offering Circular has been prepared in "plain English," as required by law. However, you must still carefully read the actual agreements that you will sign. These agreements will control if there is a dispute between us.

Our agents for service of process are listed in Exhibit ^AL to this offering circular.

We are a wholly-owned subsidiary of Fatburger Corporation (the "Parent"), a Delaware corporation that was incorporated in January 1992. Before the Parent was formed, we were a wholly-owned subsidiary of FB Holding Corporation ("FB Holding"), formerly known as Fatburger Corporation, a Delaware corporation that was incorporated in February 1990. On August 15, 2001, FB Holding merged with Fatburger Holdings, Inc. ("FBHI"), a Delaware corporation that was incorporated on July 17, 2001. Presently, FBHI owns the controlling interest in the Parent. The Parent and FBHI are located at 301 Arizona Avenue, Suite 200, Santa Monica, California 90401.

As of September 1, 2004, our affiliate, Fatburger Restaurants of California, Inc. ("FB California"), a ^California corporation, owns and operates ^AX Fatburger restaurants in California using our trademark. Our other affiliate, Fatburger Restaurants of Nevada, Inc. ("FB Nevada") owns and operates 10 Fatburger restaurants in Nevada using our trademark. The principal business address for both FB California and FB Nevada is 301 Arizona Avenue, Suite 200, Santa Monica, California 90401.

Franchise Offered

We franchise a distinctive quick service Restaurant system which offers limited menu items, primarily hamburgers, under the trademarks "Fatburger" and "The Last Great Hamburger Stand". The distinguishing characteristics of our system include special recipes, ingredients, and menu items, distinctive decor, color scheme, and furnishings, a jukebox featuring music of various eras, uniform operating standards, consistency of products and services offered, procedures for quality control, training, and advertising programs, all of which we may change at our discretion. Our Restaurants do not service any particular segment of the population. The

LOSANGELES 253281v8 61247-00001

currently operating Restaurants are all located in urban and suburban settings and have approximately 800-2500 square feet.

You must complete an application to become a franchisee, sign a deposit acknowledgment, pay a deposit, and submit various financial materials. If we approve you, we will enter into a Site Evaluation Agreement with you and designate your non-exclusive site evaluation territory. We will then select up to two sites located in the territory and provide you with information about the proposed site so that you can conduct an independent evaluation of the site. At our request, you must hire a company to perform a detailed site survey before you sign your lease. We must approve your lease. Once you accept a site, we will enter into a franchise agreement with you. You may operate a Restaurant at the approved site under our trademarks and our system during the term of your franchise agreement. Approved applicants who are purchasing an existing Restaurant will not go through the site selection process. They will just sign a franchise agreement.

We also may license you to establish more than one Restaurant in a certain geographic area according to a ^Asite evaluation scheduled We select sites located in your geographic area and provide you with information about each proposed site so that you can conduct an independent evaluation of the proposed site. Once you accept a site, we will enter into our then current franchise agreement with you for the Restaurant to be located at the approved site.

You may also enter into a Management Agreement with us, if we agree to do so. If we do sign a Management Agreement with you, we will train, supervise and manage the employees of your Restaurant, including your management and supervisory personnel. We do not perform other services, such as accounting, human resources, and record-keeping, and you will continue to be responsible for these.

Occasionally we or our affiliates may enter into joint venture arrangements for the operation of Restaurants.

Competition

Both the restaurant industry in general, and the quick-service restaurant industry in particular, are established industries and are very competitive. As a member of the restaurant industry, you will compete on the basis of quick-service, price and the quality of your food and service. You will compete with the major quick service restaurant chains that dominate the industry, and with other food service businesses.

Franchise Activities

FB California has operated restaurants similar to the type that you will operate for ^AJJi years. FB California does not offer franchises in any line of business. We have offered franchises for the operation of Fatburger restaurants since April 1990. We have not offered franchises in any other line of business. We do not have any affiliates who offer franchises in any line of business or who provide any products or services to you.

LOSANGELES 253281v8 61247-00001

Regulations

In addition to laws and regulations that apply to businesses generally, Fatburger restaurants are subject to various federal, state and local government regulations including those governing construction, site location and the sale of food and beverages as well as public health and safety codes and ordinances. These include regulations concerning smoking, sanitation, discrimination, employment wage and hour and sexual harassment laws as well as OSHA and the Americans with Disabilities Act which requires readily accessible accommodations for disabled individuals and may affect your operations. You should consult with your attorney concerning these and other laws that may affect your business.

Item_2 BUSINESS EXPERIENCE

President. Chief Executive Officer and Director: Keith A. Warlick

Mr. Warlick has served as our President, Chief Executive Officer and Director since August 2001. Before that, from 1998 to 2001, Mr. Warlick was an independent restaurant consultant based in California. From July 1996 to January 1998 he served as President of our Parent.

Vice President of Construction and Purchasing: Bentley C. Hetrick

Mr. Hetrick has been our Vice President of Construction and Purchasing since September 2001. From April 1998 to September 2001, he was the Chief Operating Officer of N & M Restaurants, Inc., one of our franchisees located in Valencia, California. Before that, he was Senior Vice President of our Parent from 1995 to 1998.

Vice President of Operations: John Anderson

Mr. Anderson has been our Vice President of Operations since January 28, 2004. Before joining the Fatburger team, he worked for the RTM Restaurant Group in Atlanta, Georgia from 1999 to 2003, holding a variety of leadership positions including Director of Operations and Vice President of Training and Developments

Chief Financial Officer and Director: Harold Fox

Mr. Fox has been our Chief Financial Officer since September 13, ^A2004. and a director since August 2005. From May 2003 until September 2004, Mr. Fox was Vice President of Specialty Restaurants Corp. in Anaheim, California. From February 2002 until May 2003, he was a partner with Tatum CFO Partners, LLP in Irvine, California, which provides interim Chief Financial Officers for companies. From June 2001 until February 2002, Mr. Fox was the Chief Financial Officer of El Polio Loco, Inc. ("El Polio Loco") in Irvine, California. From September 1993 to June 2001, Mr. Fox was the Chief Financial Officer of RJME, Inc., a national restaurant operating and management company in Malibu, California.

LOSANGELES 25328W8 61247-00001

Controller: Jason Melvin

Mr. Melvin has been our Controller since July 6, 2004. From July 2001 until July 2004, Mr. Melvin was a Senior Manager ^Aof the Los Angeles. California office of BDO Seidman, LLP, an international accounting and consulting firm^A. From September 1999 until June 2001, Mr. Melvin was ^Aan independent CPA and consultant in Tempe. Arizona. Mr. Melvin is a licensed CPA in the states of California and Arizona.

Director of Franchising: Michelle G. Wilkins

Ms. Wilkins has served as our Director of Franchising (previously known as Director of Franchise Relations) since September 2001. From September 2000 to September 2001, she was the Special Events Coordinator at Reign Restaurant in Beverly Hills, California. From June 1996 to March 2000, Ms. Wilkins was the Chief Executive Officer of Dimarco Foods, Inc., one of our franchisees located in Burbank, California.

Director of Marketing: Elaine Patel

Ms. Patel has served as our Director of Marketing since February 2003. From March 2002 to January 2003, Ms. Patel was Director of Marketing for Trizec Properties, a shopping center management company in Pasadena, California. From April 2000 to February 2002, Ms. Patel was a marketing manager with Macerich Company, a shopping center management company in Santa Monica, California. From April 1999 to February 2000, Ms. Patel was Product Development Coordinator for Karl Storz Endoscopy in Culver City, California. From August 1998 to March 1999, Ms. Patel was an advertising coordinator for Gelson's supermarkets, based in Encino, California. From March 1996 to June 1998, Ms. Patel was a conference coordinator with the University of California, Riverside.

Director: Clark Parker. Sr.

Mr. Parker has served as a Director since August 2003. Mr. Parker headed the acquisition team for acquiring new insurance companies for Penn Corp Financial, a New York Stock Exchange Company, which is now part of Citigroup. Mr. Parker is a principal and has been a Director and advisor to Natural Solutions, Inc. since 1995. Mr. Parker serves as a director on many boards that do not conflict with the Company's primary business.

LOSANGELES 253281 v8 61247-00001

Itema

LITIGATION

No litigation is required to be disclosed in this offering circular.

ItemA

BANKRUPTCY

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

Item 5

INITIAL FRANCHISE FEE

Franchisee Initial Fees

If we approve your application for a franchise license for a single Restaurant, you must pay the S^A50.000 initial franchise fee as a deposit and send us a deposit acknowledgment. We will apply the deposit toward the franchise fee. The deposit is partially refundable and partially non-refundable. Of your $^AL000 deposit, S^A25₁QQ0 will be immediately nonrefundable once your application is approved. The remaining $25.000 will become nonrefundable when vou sign the Franchise Agreement. If you decide not to sign the Franchise Agreement after that, you will only receive a refund of $^A25.000. less any fees or other expenses you may then owe to us under the Site Evaluation and Approval Agreement (see below). ^AIf vou signed an earlier form of Franchise Deposit Acknowledgement, for a single Restaurant, which provides for a different initial franchise fee from our current form, vour initial franchise fee will he determined in accordance with your Franchise Deposit Acknowlec-gement

If we approve your application for multiple locations'", you must pay us a minimum deposit of ^A25.000 for each proposed Restaurant that you want to operate and send us a deposit acknowledgment. ^AThe entire deposit of $^A25,000 for each Restaurant will be immediately nonrefundable. You must also pay us the ^Abalance of ^Aour then-current initial franchise fee for each Restaurant when you sign the Franchise Agreement for that Restaurant, provided that we will credit vour deposit against the initial franchise fees Cnot to exceed a credit of $25.000 for any one Franchise Agreement! If vou signed an earlier form of Franchise Deposit Acknowledgement for multiple Restaurants, which provides for a different initial franchise fee for each Restaurant, the remaining balance owed bv vou for vour initial franchise fee will be determined in accordance with vour Franchise Deposit Acknowledgement.

After you sign a Site Evaluation Agreement for a Restaurant, we will propose a site to you and provide you with information about the site. We must provide you with up to two proposed sites. If you do not accept either of them, and we agree to propose additional sites, you

LOSANGELES 25328W8 61247-00001

must reimburse us for our reasonable travel, lodging and meal expenses for the additional evaluation. (See Item 11).

Uniformity

We may waive all or a portion of these fees for affiliates, existing franchisees who are purchasing new Restaurants, or other entities. Otherwise, the initial fees described above are imposed uniformly on all franchisees^

LOSANGELES 253281v8 61247-00001

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OTHER FEES

Name of Fee

Royalty (1)

National Advertising Fund (1)

Local Advertising (4)

■ft- ^!-^%^^T^- ^f</---'

Additional Training (1)

A'->^~*-

Reimbursement for Rescheduled Training Expenses (1)

Reimbursement for additional pre-opening assistance

Transfer (1)

Audit (1)

Indemnification

Amount

6% of total net sales; late fee of interest on any overdue amount of 1.5% per month and late fee of$25perweek(2)

Greater of $250 or 2% of total net sales

Greater of 2% of net sales or $1200

You must reimburse us for our costs of training, up to a maximum of $500 for each individual.

You must reimburse us for our additional travel expenses and wages resulting from changing the travel arrangements of our representatives scheduled to provide initial training.

You must reimburse us for our additional expenses, including additional airfare charges, if any, hotel, rental car and $^A^Q per diem per person.

$15,000

Cost of audit plus interest on unpaid amount of 1.5% interest per month and $25 per week (2)

Varies

Due Date

Weekly on Friday of week following each calendar week f3)

Same as royalty

Report due each calendar quarter

t>.

'?&

Before opening

On demand

Before

consummation of transfer

30 days after billing Varies

Remarks

Net sales includes all gross sales from the franchise location, less sales tax and use tax

Affiliate-owned Restaurants also contribute; we reserve the right to increase your required weekly contribution to the greater of 4% of Net Sales or $400.

You must spend funds on your own advertising that we approve

We train up to 5 persons free -See Item 11

Payable only if your scheduled opening date is delayed or accelerated by more than 2 days from the scheduled opening date previously established by us.

We provide 15 days of initial pre- and post-opening assistance at your location at no charge. If you request additional assistance, you must pay a per diem charge and reimburse us for our additional expenses

Payable when you transfer your franchise; No charge if you transfer to an entity which you control

Cost of audit payable only if audit shows an understatement in any payment of at least 2%

Limitedto certain circumstances - See Item 9

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Name of Fee

Amount

Due Date

Remarks

Reimbursement of Expenses (1)

Our cost and a fee

Unapproved $500 per day

Product/Supplier Fee

(1)

Damages, costs and expenses, including attorneys' fees(l)

Sales or similar taxes

Renewal Fee (1)

Securities/Partnership Interests in Franchisee Offering (1)

Management Fee

Amounts we incur

Sales, gross receipts and similar taxes imposed on us because of payments you make

40% of then-current initial franchise fee

$10,000 or greater

On demand

90 days before renewal

Cost to refurbish $^A, restaurant

to$^AJ25nQD

Up to years

once per 5

Up to 5% of net sales and reimbursement of our expenses

Same as royalty

Design Review Fee $ 1,500

On demand

If you fail to secure required insurance coverage, we can obtain it for you

If you sell unapproved items or purchase from unapproved suppliers, we can require you to pay this fee.

You must pay us if we incur these as a result of your default, or in order to enforce any provision of the Agreement

Payment not required if we are credited against taxes we otherwise owe

Reimburse our costs for reviewing offering documents

We can require you to refurbish your Restaurant once every 5 years

You only pay this fee if we sign a Management Agreement. We determine the amount of the management fee based on the amount of time and travel we estimate will be necessary to provide services under the Management Agreement

Payable only if we allow you to use an architect other than our approved architect.

(1)

(2) (3)

(4)

We impose this fee, and it is payable to us. This fee is non-refundable. At our request, we may require you to

pay Royalty and National Advertising Fund payments due by electronic funds transfer or any similar

arrangement, in which case you must sign the documents that are necessary for us to implement the payment

system.

Interest and late fee begin from the date of underpayment.

We reserve the right to change the time when you must pay the Royalty to us at any time in our absolute

discretion.

We impose this fee but it is payable by you for your own advertising activities that we have approved.

LOSANGELES 253281v8 61247-00001

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YOUR ESTIMATED INITIAL INVESTMENT FOR SINGLE OR MULTIPLE LOCATIONS

Category

Franchise Fee (1)

Leasehold Improvements; Construction Costs (2)

Equipment, Decor & Furnishings (3)

Amount

Method of Payment

Lump Sum

$M 50.000

$^A 305.000

Progress payments from commencement of construction until completion

As required by payment schedule

When Due

Single Restaurant applicants pay $^A5J

upon signing Deposit Acknowledgment; Multiple Restaurant applicants pay, for each Restaurant, a minimum $^A25₁000 upon signing Deposit

Acknowledgment and the balance upon signing Franchise Agreement

According to payment schedule

According to contractor and/or supplier

To Whom Payment Made

Fatburger

Designer, architect, engineer, suppliers, and/or general contractors

Contractor or supplier

Signage

Cash Control Systems

Restaurant Small Wares

Initial Inventory

Security Deposits (Utilities, Insurance, etc.) (4)

Insurance and Bonds

$8,000 to $^A 30.000

$15,000 to $28,000

As required by contractor As required by contractor

As required by supplier As required by supplier

Rent (5)

Miscellaneous (legal, accounting, licenses, permits) (6)

$^A5.500 to Lump sum $^A 7.000

$6,000 to Lump sum $8,000

$7,500 to Lump sum $25,000

$8,000 to $12,000

$3,500 to $13,000

Lump sum

Lumpsum

$14,000 to Lumpsum $15,000

As required As required

Monthly

Monthly As needed

General contractor or sign contractor

Supplier

As required by supplier Wares supplier

Various suppliers

Lessor of personal property, utilities, insurance broker, etc.

Insurance companies, Landlord and Government Agencies

Landlord Various

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To Whom

Cateeorv	Amount	Method of Payment	When Due	Payment Made
Marketing Materials	$3,000 to $^A7.000	As arranged	As arranged	Suppliers
Merchandise	$1,000 to $5,000	As arranged	As arranged	Suppliers
Training (7)	$15,000 to $25,000	As arranged	As arranged	Hotels, airlines, and restaurants; and your employees
Additional Funds - three	$15,000 to	As incurred	As needed	Various
months (8)	$18,000

Total

SM41.500 to

All amounts in Item 7 are estimates only. Actual costs will vary for each franchisee and each location depending on a number of factors. Unless otherwise noted, payments to us are not refundable. We are not able to represent whether or not amounts that you may pay to third parties are refundable.

(1) See Item 5 for a discussion of the franchise fee. We do not finance any fee. ^A

(2) Your leasehold improvement and construction costs will depend on many factors, including the size of your Restaurant, its location, economic conditions, local conditions, the condition of the site, the landlord's contribution to leasehold improvements, if any, local code or other requirements, availability of materials and labor, required use of union labor, freight and delivery costs, taxes, interest rates and other items. These figures do not take into account any financing charge or other related costs which you may have to pay.

(3) This category also includes your purchase of specified various photographs for display at your Restaurant, the cost of which will depend on the size of your Restaurant and the quality of your framing, (See Item 8 for details)

(4) You will probably have to pay security deposits or prepaid expenses as part of your real and personal property leases, insurance requirements, and utilities arrangements. The actual amount of the security deposits or prepaid expenses that you must pay will be determined by your lessor and your suppliers of utility and insurance services.

(5) Your actual costs for real property will depend on general market conditions, including, geographic area, location, desirability, improvements and utilities included, size, and the term of your lease. The real estate required for a typical free-standing Restaurant pad ranges from approximately 20,000 to 35,000 square feet. Restaurant buildings are generally 2000-2800 square feet in size and market rents currently range from $2.25 to $4.50 or more per square foot per month. Rental estimates are based upon a 15 year lease from a third party, and may include a percentage rent clause. The estimated figure includes percentage rent payments.

(6) You must obtain various permits and licenses, including those from health departments, fire departments, sales tax bureaus and other similar state or local governmental agencies. The cost of these permits and licenses are determined by the governmental agencies. You will have to pay these fees directly to these agencies. ^A

(7) We provide instructors and most instructional materials, but you must purchase additional books which are available from general booksellers, e.g., Barnes & Noble. You must arrange for transportation, lodging, food, and wages. Your cost will depend upon the distance that you, your managers and hourly employees must travel, the type of accommodations you choose, the number of hourly employees you train and the duration of their training. (See Item 7 for details)

(8) This estimates your start-up expenses. These expenses include payroll costs. We are unable to estimate the length of time until, or if, your Restaurant will generate revenues needed to meet expenses. But, we recommend a minimum working capital in the range shown that should meet the reasonably anticipated needs

LOSANGELES 253281 v8 61247-00001

of your Restaurant for a period of 90 days under most circumstances. Our estimates are based on our ^AJJ> years of experience in the Fatburger Restaurant business, during which time we or our affiliates operated over ^A2<j restaurants similar to the type of Restaurant you will be establishing. Your actual costs will depend on your management skill, experience and business acumen, your sales figures during the 90 day period, your ability to follow our system and local market and economic conditions. We recommend that you review these figures carefully with a business advisor before making any decision to sign a franchise agreement.

Item 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

We will designate the construction company, architect, kitchen designer and approved signage manufacturer you must use to build or remodel the premises for your Restaurant. The construction company employs contractors and other personnel necessary to construct the Restaurant according to our specifications.

You must purchase all or most parts of the point-of-sale cash register/computer system from an approved vendor that we engaged to design a cash/computer system for our franchisees. Currently, there is only one approved vendor. These parts include software, printers, cash terminals and drawers, video monitors, office server, firewall and bump bars. Your purchase of the proprietary parts of the system will represent 3-5% of all of your purchases to establish your Restaurant.

You must accept MasterCard, Visa and American Express as well as such other credit and debit cards and other non-cash systems, Fatburger loyalty cards and gift cards as we specify, and you must obtain, replace and modify all equipment required to implement the same in accordance with our policies and procedures. Fatburger gift cards must be purchased through a Fatburger approved vendor. Currently, there is only one approved vendor.

You must also purchase photographs for display at your Restaurant from a designated vendor. The number of photographs that you must purchase will depend on the size and layout of your Restaurant. Your purchase of the photographs will be less than 1% of your overall purchases to operate your Restaurant.

We have worked hard to establish and maintain the reputation, good will and public appearance of our trade names, trademarks, service marks and products. So that we can continue to do so in the future, we have the right to determine the quality of the service provided and products sold at our Restaurants. You must purchase all furnishings, fixtures, decor, signage, equipment, computer hardware (personal computer; monitors; manager printer; and modem), software, uniforms, merchandise, jukebox and sound system, inventory and other supplies, food products, ingredients and materials used in the operation of your Restaurant as we may specify in the operations manual from a list of currently approved suppliers. You must also subscribe to a DSL or other type of high speed connection, which you may purchase from any supplier. Our criteria for supplier approval are not currently available to franchisees. Neither we nor any of our affiliates are currently approved sources for any equipment, supplies, fixtures, inventory, real estate or other items that you must purchase to operate your Restaurant. We provide our

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suppliers with. specifications that include standards for quality, appearance, performance and design. The cost of items purchased according to specifications represents 100% of your total purchases for establishing your Restaurant and on an ongoing basis.

If you wish to procure any items from a supplier other than ones we have previously approved or designated, you must deliver written notice seeking approval of the supplier. We will use our good faith efforts to notify you of our decision within 45 days after we receive your request for approval and all requested back-up information. You may not use a supplier unless we have notified you of our approval in writing. We may revoke a supplier's approval for failure to comply with our requirements and specifications. We will disapprove or withdraw our approval of any supplier by written notice to you.

To protect and ensure the consistency of the brand, all marketing materials, including, but not limited to POP materials, operational signs and menu panels are printed by our approved vendor. All marketing and promotional materials must be ordered through the designated printer. All unauthorized signs are prohibited and subject to disposal. All weathered, faded or out dated signs and marketing materials must be removed and discarded immediately. You must order all marketing materials listed in the New Store Opening Marketing Materials section of the Franchise Marketing Resource Guide and New Store Opening Guide given to you by the Marketing Department.

You must permit us or our agents to inspect your premises and to remove samples of food or non-food items from your Restaurant, at reasonable times, and in amounts reasonably necessary for us or an independent laboratory to decide if the samples meet our then-current standards. You may not charge us for the tested items. You may have to pay for the cost of the testing if we have not previously approved the supplier or the item or if the sample does not meet our specifications. If you use ingredients or offer to sell products that we have not approved, or buy from suppliers we have not approved, we can impose a $500 per day fee on you.

Although we do have certain buying arrangements with approved suppliers who will make certain items available to you at discounted prices due to certain volume discounts, in general, we do not currently derive any income from the sale of any designated items to our franchisees, although we reserve the right to do so in the future. There may be suppliers and/or equipment manufacturers who may give us marketing considerations for your purchases. In the case of our current beverage supplier, we do receive marketing consideration of $2.00 for each gallon of syrup purchased by franchisees. ^ACurrentlv. approximately S0% of these funds are distributed to franchisees for use toward local store marketing programs. T|iese funds are distributed to franchisees who submit complete local store marketing reports within 30 days after the end of each quarter. Our beverage supplier's service deductions and chain wide promotional material costs are deducted from these funds. We mav retain additional amounts as we deem

claimed by franchisees through the submission of loca) store marketing reports will he rerouted to the National Marketing Fund 30 davs after the given deadline, and used for the development of local store marketing programs.

During our fiscal year ended June 30. 2005, we received S205.517 pursuant to this arrangement, or approximately 1.14% of our total revenue of $1.807.041. In addition, during its

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fiscal year ended June 30. 2005. our Parent received S40_T000 in revenue from our beverage supplier as a result of purchases bv us and franchisees.

Currently, there are no purchasing or distribution cooperatives.

You must participate in the Fatburger jukebox program. ^APresently, Ecast, Inc. ("Ecast") will provide the music for your jukebox. Ecast is located at 500 Third Street, Suite 510, San Francisco, CA 94107, and its telephone number is (415) 277-3500. Currently, ^A Rock-Ola Manufacturing Corporation ("Rock-Ola') provides the jukebox hardware. Rock-Ola is located at 2335 208^th Street. Torrance. California^A 90501. and its telephone number is f^A3101 328-1306. Jukeboxes must be purchased through our construction department. You must install and operate vour own jukebox. We will select 75% of the music located on the jukebox. ^AYou may select the remaining 25% of the music for the jukebox in your Restaurant.^A

We may designate other merchandise that you must sell at your Restaurant (e.g., hats, t-shirts, etc.). You may not sell any other merchandise. You may not sell merchandise on the Internet or at any location other than at your Restaurant without our approval. We have entered into arrangements with certain suppliers who will provide merchandise to you on flexible terms. We will derive income from your purchase of these items from all suppliers.

We may require that you purchase certain advertising and promotional merchandise from suppliers whom we have approved and who have signed a license agreement with us, and the license agreement may provide for the payment of royalties to us.

Your lease for the premises must contain certain provisions that we specify in the Site Evaluation and Approval Agreement.

Other than as described above, ^Aneither we nor our affiliates derive revenue or other material consideration as a result of these required purchases or leases. Some of our vendors contribute to a marketing fund or fund programs that benefit the entire Fatburger system. We will not provide you any material benefit for using a particular supplier. ^A

Finally, you must obtain and maintain an insurance policy protecting you and us for personal injury, death or property damage, or any loss related to your operation of a Restaurant. The types and minimum amounts of coverage are in our manuals or provided to you in other written materials.

Ttem9

FRANCHISEE'S OBLIGATIONS

Franchise Agreement and Other Agreements

THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AGREEMENT AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE

LOSANGELES 253281v8 61247-00001

DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING.

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Obligation

Site selection and acquisition/lease

Pre-opening purchases/leases

Site development and other preopening requirements

Initial and ongoing training

Opening Fees

Compliance with standards and policies/operating manual

Trademarks and proprietary information

Restrictions on products/services offered

Warranty and customer service requirements

Territorial development and sales quotas

Ongoing product/service purchases

Maintenance, appearance and remodeling requirements

Insurance

Advertising

Indemnification

Owner's participation/management/ staffing

Accounting/reports

Inspection/audits

Transfer

Section in Agreement

Sections 1, 3,4, 5 and 6 of Site Evaluation Agreement

Sections 5, 9.1 and 11.1 of Franchise Agreement; Section 1 of Site Evaluation Agreement

Item in Offering Circular

Sections 5.6 and 5.9 of Franchise Agreement

Section 5.7 of Franchise Agreement

Sections 2.2.6,4, 5.16, 9.6, 10, 11.4, 12.2.2, 12.3, 14.6, 14.7, 16.1, 17.3 and 22.5 of Franchise Agreement; Franchise Deposit Acknowledgment; Sections 4 and 5 of Management Agreement

Sections 5 and 7 of Franchise Agreement

Sections 6 and 8 of Franchise Agreement

Section 5 of Franchise Agreement

N/A

Section 1.2 of Franchise Agreement Section 5 of Franchise Agreement Section 5 of Franchise Agreement

Section 11 of Franchise Agreement

Section 10 of Franchise Agreement

Sections 12.3 and 17.3 of Franchise Agreement; Section 4 of Management Agreement

Item 11

Items 8 and 11

Section 5 of Franchise Agreement Item 11

Item 11

N/A

Items 5 and 6

Items 8 and 11 Items 13 and 14

Items 8 and 16

N/A

Item 12

Items 8 and 11

Item 11 (see note (1) below)

Items 6 and 8

Items 6 and 11

Item 6

Section 5 of Franchise Agreement Items 11 and 15

Section 9 of Franchise Agreement Item 6

Section 9.6 of Franchise Agreement Items 6 and 11

Section 12 of Franchise Agreement; Items 6 and 17 Section 7.2 of Management

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Obligation

u. Renewal

v. Post-Termination obligations

w. Non-competition covenants x. Dispute resolution

Section in Agreement

Agreement

Item in Offering Circular

Section 2.2 of Franchise Agreement; Item 17

Section 6.1 of Management

Agreement

Sections 14 and 15 of Franchise Agreement; Section 6.4 of Management Agreement

Item 17

Section 15 of Franchise Agreement Item 17

Section 22.2 of Franchise Item 17

Agreement; Section 7.16 of Management Agreement

(1) We may require you to refurbish your Restaurant once every 5 years. Your cost to refurbish may range from 3>^A35.QOO to S^A 125.000, depending on many factors, including the scope of refurbishment necessary (i.e., cosmetic v. structural).

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LOS ANGELES 253281 v8 61247-00001

Item 10

FINANCING

You may not borrow more than 75% of the cost of constructing, equipping, supplying and operating the Restaurant. If you are a corporation or other entity, you or your owners must contribute to you as equity at least 25% of the cost of constructing, equipping, supplying and operating the Restaurant. We may waive this requirement if you own more than one Restaurant.

We do not offer direct or indirect financing. However, there are external financing sources that have financed up to 70% of the cost of equipment, fixtures and real estate for franchisees who meet their criteria. Our criteria for approving franchisees who finance the cost of establishing and operating their restaurants are that they must be creditworthy as determined by financing sources' internal credit policies. We cannot estimate if you will be able to obtain financing for all or any part of your investment, or what the terms of this financing would be. We do not receive payment from any person or persons for obtaining or placing financing. We do not guarantee your note or obligation. We may, at our discretion, guarantee your lease.

liemJl FRANCHISOR'S OBLIGATIONS

Except as listed below, we need not provide any assistance to you. Before you open your Restaurant, we (or our designee) will:

1. Specify the non-exclusive territory in which you must locate your Restaurant. We may continue to sell franchises in your non-exclusive territory. (Site Evaluation Agreement -Sections 1 and 2).

2. Provide you with up to 2 proposed sites for your Restaurant. You have 30 days after you receive information from us on a proposed site to conduct your own investigation and to decide whether or not to accept the site. (Site Evaluation Agreement - Section 4).

3. Provide you with up to two on-site evaluations for sites we propose. If you request additional visits and we agree, or if we think additional visits are necessary, you must reimburse us for all of our reasonable expenses for any additional evaluation, including our costs of travel,

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lodging and meals. (Site Evaluation Agreement - Section 5). In general, we only conduct additional site visits if we determine that a Restaurant cannot be opened within 18 to 24 months at the site.

4. If you do not accept 2 proposed sites, we may, at our option, terminate the site evaluation agreement and not enter into a franchise relationship with you. If we terminate the site evaluation agreement, we will return to you the $^A25_r000 refundable portion of your deposit, if any, less any fees or expenses you owe to us at the time of termination. (Site Evaluation Agreement - Section 4; Franchise Deposit Acknowledgment).

5. Approve or disapprove a proposed lease or real estate purchase agreement within 15 business days of our receipt of the lease. (Site Evaluation Agreement - Section 6).

6. Specify your protected territory (Franchise Agreement - Section 1.2).

7. We anticipate that no later than 15 weeks before your opening, we will train your manager (which may be you) and 4 other people who have been designated as restaurant management as follows: assistant manager and shift leaders. We will also provide you with training in basic restaurant business management. The training program is ^Aan 8 week_r 50 hours per vyeek. program (3 weeks fSj 40 hours per week for shift leaders). One break can be taken for up to 7 days after the ^A^th week.

Hours of Instruction Classroom

Material Training and/or_ On the Job Subject (1) Book Work Training Instructor (2)

Orientation/

Positional Skills ^A1S ^A135

^A Shift

^ATOTALS ^A45 ^Al^

(1) Topical training handbooks that are separate from the operating manuals.

(2) Instruction is provided by our ^AVjce President of Operations. John Anderson. Information on the experience of Mr. ^A Anderson is provided in Item 2 above.

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There is a shorter shift leader program available as follows:

Hours of Instruction Classroom On the Job

Subject Material (1) Training Training Instructor (2)

Orientation/ 10 ^AIQ

nal Skills

10 30

(1) Topical training handbooks that are separate from our operating manuals.

(2) Instruction is provided by ^Aour Vice President of Operations. John Anderson. Information on the experience of Mr. ^A Anderson is provided in Item 2 above.

The manager/operator and 4 additional management team members (assistant managers and/or shift leaders) must attend and complete, to our satisfaction, the initial training program. We provide instructors and instructional materials, but you must arrange and pay for transportation, lodging, food, and wages. Your cost will depend upon the distance that you and your managers must travel and the type of accommodations you choose. Training will occur only at our certified training centers, which are currently located in Santa Monica, California, Irvine, California and Las Vegas, Nevada. Before training begins, all persons attending the training program must be covered by your worker's compensation insurance. (Franchise Agreement -Sections 5.6 and 11.1)

8. Provide you with an approved opening date for your Restaurant, after you have provided evidence to us that you have met all of the requirements necessary to be certified to open. (Franchise Agreement - Section 5.7)

9. Provide you with up to 15 days of opening supervision and assistance, by our representative, subject to our scheduling needs and availability of personnel, at no charge to you. (Franchise Agreement - Section 3.2) If you request additional training, you must reimburse us for our expenses, including additional airfare charges, if any, hotel, per diem and rental car.

10. Lend you one copy of the operating manuals. (Franchise Agreement - Section 3.3) During the operation of the Restaurant, we (or our designee) will:

1. Provide you, as we deem appropriate, with advice and written materials concerning techniques of managing and operating the Restaurant, including new developments and improvements in equipment, food products, packaging, and preparation. (Franchise Agreement -Section 3.4)

2. Provide, as we deem appropriate, additional training for you or your manager, assistant managers, shift leaders or other employees and quarterly training and status meetings. You or your employees must attend any additional training programs we believe are necessary.

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You will reimburse us for our costs of training any new manager or new assistant manager or shift leader employed by you up to a maximum of $500 for each individual. We provide instructors and most instructional materials, but you or your employees must arrange for and pay all costs associated with transportation, lodging, food, and wages. (Franchise Agreement -Section 5.6 and 5.9)

3. Conduct, as we deem advisable, inspections of the Restaurant and evaluations of the products sold and services rendered in and from the Restaurant. (Franchise Agreement -Section 3.5)

4. Approve or disapprove all advertising and promotional merchandise in advance and in writing after you submit it to us for consideration, including yellow page advertisements, print ads, posters, billboards, and electronic media materials. (Franchise Agreement - Section 10.1.4)

5. Administer the national advertising Fund described below.

6. Train, supervise and manage your employees if you sign the Management Agreement (Management Agreement, Section 1.1).

As described above, we provide you with up to 2 proposed sites for your Restaurant. We also provide you with up to 2 on-site evaluations. The factors we consider in selecting sites include a demographic analysis focusing on population density and per capita income.

Usually, you will open your Restaurant 4 to 10 months after you sign a franchise agreement, depending on many factors, including ability to obtain a lease, financing or permits, zoning or local ordinances and factors bearing on construction.

Advertising Programs

We will conduct promotional/advertising activities, developed by us, an advertising agency and/or a public relations firm, to enhance our corporate name and image through a national advertising fund (the "Fund"). You, every other franchisee and each Restaurant owned by us or our affiliate, will contribute to the Fund on the same basis. See Item 6 for a description of how much you must contribute to the Fund. In the past, we have made arrangements with certain franchisees whose protected territories are located far from Los Angeles to reimburse them for what they spend on local advertising in an amount equal to all or a portion of what they contribute to the advertising fund. We may change these arrangements in the future.

We must spend all of the Fund's monies on costs of preparing and administering marketing activities for Restaurants (including television, radio, magazine and newspaper advertising campaigns; direct mail and outdoor billboard advertising; marketing surveys; public relations activities; sponsorship of athletic and other events and activities; guest-service monitoring; cost of marketing personnel; mobile marketing vehicles, promotional brochures and other marketing materials, including those used for soliciting franchise sales). During ^Aour fiscal vear^A ended June 30. 2005. the monies in the Fund were spent as follows: ^A22% on radio promotions; ^A4% on guest-service monitoring; ^A2% on print advertising; ^A2% on public relations; ^AJ₌% on 4 wall marketing; ^Ajji% on salaries; ^A4% on local restaurant marketing; ^A% on miscellaneous costs and promotions, market research and website maintenance, printing,

LOSANGELES 253281v8 61247-00001

franchise packages; ^A1X% on marketing consulting and ^A22% on advertising promotions. We are not required to spend any money on advertising any particular Restaurant or on advertising in your area or territory. We use both an outside agency and in-house resources to create and place advertising.

Our marketing and accounting personnel will administer the Fund under the direction of our Finance Department. We will keep separate, unaudited bookkeeping accounts for the Fund. Upon written request, we will provide you with the most recent accounting of the Fund.

We plan to use all contributions to and earnings of the Fund on advertising/promotion during the same fiscal year that we receive the contributions and earnings. If excess amounts are in the Fund at the end of a fiscal year, we will spend the remaining funds in the following fiscal year(s), first out of accumulated earnings from previous years, next out of earnings in the current year, and then from contributions.

Although the Fund is intended to exist as long as we offer franchises, we do have the right to terminate it. We will not terminate the Fund until all monies in the Fund have been spent on advertising/promotion, applied towards any funds that we may have decided to advance at a time when there were not sufficient amounts in the Fund for appropriate advertising activities, or returned to contributors on the basis of their respective contributions. (Franchise Agreement -Section 10.2)

Our affiliate-owned Restaurants also contribute to the Fund. Their contributions may include the value of endorsements by celebrities who own an interest in our Parent.

Expenditures of approximately 15% of the Fund may include advertising that is principally a solicitation for the sale of franchises.

You may develop your own advertisements, including print, radio, television, coupons and internet ads, as well as direct mail for your own use, at your own cost. However, there are specific guidelines, including branding, creative direction, font type, logo design and redemption restrictions that must be adhered to. We may decline any advertisement that does not meet these guidelines. We must approve the advertising materials in advance and in writing. All marketing materials must be ordered through the designated printer. If we do not disapprove of the advertising materials within 2 weeks after we receive them, you may consider the advertising materials approved by us. To save time and resources, you should contact our Marketing Department during your planning stages so the Director of Marketing can authorize your creative direction before your monetary investment in selected media.^A

In addition to contributing to the Fund, you must also spend the greater of 2% of net sales or $1,200 each calendar quarter on local advertising and promotion of your Restaurant. You must furnish us with a marketing report of your local advertising expenditures, together with copies of invoices and other proof of expenditures within 30 days after the end of the quarter. ^A

You must obtain a listing in the yellow pages section of the telephone directories serving the location of your Restaurant, and this listing must be in the form and size that we specify. The expense for the listing will apply against your quarterly local advertising requirement.

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In addition, you must keep an adequate supply of brochures, pamphlets, POP, marketing materials and special promotion materials that we specify at your Restaurant.

Computer systems

You must use an electronic cash register/computer system that accepts MasterCard, Visa and American Express as well as such other credit and debit cards and other non-cash systems, Fatburger loyalty cards and gift cards as we specify, and you must obtain, replace and modify all equipment required to implement the same in accordance with our policies and procedures. (See Section 9.1 of the Franchise Agreement).

The system consists of software, POS terminals, cash drawers, printers, an IBM-compatible personal computer with a minimum of 256 megabyte of RAM, 40 gigabyte hard drive, a VGA monitor, 4 kitchen videos, remote line printer, power vars, magnetic swipe cards, a DSL or other high speed modem connection and modem to be used exclusively by us to access your system, firewall, an office printer and related cabling and a maintenance contract.

Your computer system will enable you to collect information about customer orders, sales by hour/day/month and status of inventory. Your system will also serve as your employee time clock. Your modem will enable you to communicate with us. We will have the ability to and will access your cash system and computer to view what is on your system.

Your cost to purchase the entire cash control system will range from $^A 15.000 to $^A28.000. depending on many factors, including the quality of the components you decide to purchase, whether you purchase the components as a package from one supplier or separately from different suppliers.

Your cost to purchase a maintenance contract for the computer from the computer supplier will typically be at a current cost of $150-250 per month depending on various factors including the level of service that you are interested in purchasing. You must pay for help desk phone support that will cost approximately $1,000 per year. You must also pay an annual software maintenance fee of approximately $^A22 per year.

You must upgrade your hardware and software when we decide it may be necessary, and at your own cost. There are no contractual limits on how often we can require you to purchase these upgrades. Also, if we find another vendor for the customized portions of the system, you may be required to purchase items that will enable you to convert whatever system you initially purchase to use the new system.

Operating Manuals

We have attached the table of contents of our current operating manuals as Schedule 1 to this circular. Our current manuals consist of ^A2 volumes and devote approximately the following

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number of pages to the following volumes: Fatburger Operations Manual (^A335 pages) and franchise Marketing Resource Guide ^Aand New Store Opening Guide (^A1H pages).

A A

Item 12

TERRITORY

We select the site for your Restaurant. You cannot relocate your Restaurant without first obtaining our consent. We may or may not agree to allow you to relocate your Restaurant, depending on many factors, including, your past compliance with your franchise agreement, and our evaluation of your proposed location.

Except as discussed below, we will not operate, or license to anyone else the right to operate, a Restaurant or competitive business under our trademarks in your territory during the term of your franchise^A agreement. We retain all rights that we do not grant to you. We may^Aoperate mobile food service units to service special events in your territorv^A We may operate or permit others to operate Restaurants in certain types of public sites located in your territory, including, sports stadiums, concert facilities, casino and casino adjacent locations, hospitals, army bases, schools, amusement facilities, government facilities, airports, bus and train stations and highway travel plazas. We can also ^Aoperate mobile "Fatburger" vehjcles and provide^Acatering or such mobile vehicle services, both within and outside of your territory, however, we will not license others to provide catering services in your territory. We may also, and we may permit others, to sell products using our trademarks in your area, and establish and give the right to establish noncompetitive businesses under our trademarks in your territory. Other than our guidelines regarding advertising in general which can be found in our Franchise Agreement, we place no specific limits on your ability to advertise or solicit or accept orders outside of your protected territory. You will be given a protected territory of a particular area when you sign the Franchise Agreement, the size of which will depend on many factors, such as population density and residential versus commercial properties in your area. The territory is typically within a one-mile radius of a Restaurant but may vary depending upon factors affecting the specific location. The exclusivity of your territory will not depend on the achievement of a certain sales volume. Your territory is protected only with respect to other "Fatburger" Restaurants.

We will ^AAnot change your protected territory ^Aduring the term of your franchise^

You will not have the right to operate additional Restaurants in your area, unless you are a multiple restaurant applicant\

You do not have the right to operate a website or use our trademarks in any other manner on the Internet or in other electronic means of communication. In particular, you may not use our trademarks as part of an Internet domain name, URL or email address.

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FB California and FB Nevada own and operate Restaurants using our trademarks. We and FB California and FB Nevada own and operate mobile units under our trademarks to service special events which may occur in your protected or exclusive area.

Neither we nor FB California and FB Nevada have established, or presently intend to establish, other franchises or company-owned hamburger restaurants providing similar products or services under a different trademark. We do reserve the right to do so.

Item 13 TRADEMARKS

We will license you to operate your Restaurant under the Fatburger trade names, trademarks, service marks and logos used to identify your Restaurant (the "trademarks"). You may only use our trademarks in the operation of your Restaurant. You are prohibited from using the trademarks on the Internet, as part of an Internet domain name, URL or email address or as part of your corporate or other legal name.

The following marks are registered on the Principal Register of the United States Patent and Trademark Office ("PTO"):

Mark

FATBURGER

THE LAST GREAT HAMBURGER STAND

Registration No.

1,109570

2,862,798 1,677,203

Registration Pate

December 19, 1978

July 30, 2004 February 25, 1992

The following marks are registered on the Supplemental Register of the PTO:

Mark

THE LAST GREAT HAMBURGER STAND

Registration No.

1,327,662

Registration Date

March 26, 1985

We have filed all required affidavits. We were given the right to use and to license others to use the trademarks for the operation of restaurants specializing in the sale of hamburgers and related items under a license agreement dated as of October 14, 1992 with our Parent. Either party can terminate the License Agreement with 30 days notice. If the Agreement is terminated, our Parent will assume all of our obligations regarding the trademarks under any franchise agreements then in effect. Except for this agreement, there are no agreements currently in effect which limit our right to use or license the use of the marks.

LOSANGELES 253281 v8 61247-00001

The marks have also been registered in the State of California. Other than the State of California, our Parent has not filed an application for registration for any trademark in any state. Our Parent does claim common law rights in the above-listed marks, which have been used in commerce..

There are currently no effective material determinations of the PTO, trademark trial and appeal board, the trademark administrator of this state or any court. There are no pending infringement, opposition, or cancellation proceedings. There is no pending material litigation involving the marks which may be relevant to their use in this state or in any other state.

On June 12, 1992 the United States District Court for the Southern District of Texas, Houston Division approved an Agreed Judgment and Injunction between our Parent and Messrs. Fari Estakhri and Moe Mooti. Messrs. Estakhri and Mooti have been operating two restaurants in the adjacent cities of Bryan and College Station, Texas under the marks Fat Burger and Fat Burger H The Agreed Judgment and Injunction provides, among other things, that Messrs. Estakhri and Mooti may continue to use these marks for these businesses "until 60 days after receipt of written notice from our Parent that our Parent, or a licensee or franchisee of our Parent, has opened a hamburger restaurant in the metropolitan areas of Bryan/College Station, Texas, or Houston, Texas using the trade or service mark FATBURGER."

We are not aware of any infringing uses that could materially affect your use of our trademarks in the State of California or in the state in which your Restaurant will be located.

You must notify us immediately when you learn of an infringement of or challenge to your use or our use of our trademarks. We and/or our Parent have the right to direct any action involving our trademarks, including any settlement. While we are not required to, we may take action against uses by others that may constitute infringement of our trademarks. We will defend you against any third-party claim against your use of our trademarks. If we determine that you have used our trademarks as we require, we will reimburse you for your liability and reasonable costs incurred in defending our trademark. If we determine that you have not used our trademarks in accordance with our rules, you will have to pay for the cost of this defense, including the cost of any judgment or settlement. If any litigation relates to your use of our trademarks, you must sign all documents and do those acts as we may determine are necessary to carry out this defense or prosecution, including, becoming a nominal party to any legal action.

We have the right to modify or substitute different trademarks for use in identifying our system and Restaurants operating under it and you must comply with any modification or substitution at your expense.

Item 14

PATENTS AND COPYRIGHTS AND PROPRIETARY INFORMATION

Patents and Copyrights

No patents or registered copyrights are material to your franchise.

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Confidential Operations Manuals

You may use the proprietary material in our operating Manuals. Our Manuals are confidential information as described in Item 11. Although we have not filed a copyright registration for the Manuals, we claim a copyright in the Manuals and the information is proprietary. Our operating Manuals may consist of one or more volumes of books, manuals, or other materials relating to operation under our System, including additions that we may publish periodically.

You must always keep the Manuals in a secure place at your Restaurant. You must always treat the Manuals and the information contained in them as confidential, and must use all reasonable efforts to keep this information secret and confidential. You may never copy or reproduce any part of the materials, nor make them available in any manner to any unauthorized person. You may only divulge the confidential information to your employees that must have access to it in order to operate your Restaurant. All information, knowledge, know-how, and techniques which we designate as confidential will be deemed confidential for purposes of the franchise" agreement.

You must have your personnel sign confidentiality agreements that they will keep confidential the information that they receive because of their employment by you at the Restaurant. You must use the agreement provided by us which provides that we are a third party beneficiary of the agreement with an independent right to enforce its provisions. ^A

You must tell us if you learn about unauthorized use of our Manuals. We are not required to take any action in response to the unauthorized use, but we will respond as we think appropriate.

Our Manuals will at all times be our sole property.

We may change the contents of the Manuals, and you must comply with each new or changed standard. You must at all times make sure that your copy of the Manuals is kept current and up to date; and, if there is a dispute as to the contents of the Manuals, the terms of the master copy of the Manuals maintained by us at our headquarters will be controlling.

Item 15

OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISED BUSINESS

You do not have to personally supervise your Restaurant. Your Restaurant must be directly supervised "on premises" by you (or your principal approved by us), a manager or one of your 4 assistant managers or shift leaders who has successfully completed our training program. Your manager must assume responsibility for the day-to-day operation of the Restaurant, oversight of the preparation of food products, and supervision of personnel and accounting and must spend at least 40 hours per week overseeing the operation of the Restaurant. You may replace your manager or any assistant manager any time as long as you immediately notify us of

LOSANGELES 25328W8 61247-00001

any changes. Any new manager or assistant manager or shift leader must complete our initial training program.

If we sign a Management Agreement f Exhibit IvO with you, we will advise you on employees necessary for the Restaurant, and we will train, supervise and manage your employees, including your management and supervisory personnel.

Your manager, assistant managers and any other personnel having access to our confidential information must sign the Confidentiality and Non-Competition Agreement attached as Exhibit ^AQ. At our request, you must also require that your officers, directors, general partners, limited partners and each person who owns a 5% or greater interest in you to sign Exhibit ^AQ. We may require your spouse or your owners and their spouses to sign the Guarantee, Indemnification and Acknowledgement attached as Exhibit C. If you sign the ^A Management Agreement, and you are an entity, we may require all of your equity owners to sign the guaranty attached as ^AExhibit ^A.

If you are a business entity, or if you operate more than one Restaurant and you do not personally supervise your Restaurants, your manager may have to have up to a 25% equity interest in you or the Restaurant. If we require your manager to have an equity interest, we will also require you to notify us of any change in the manager's equity ownership.

ItemJL6 RESTRICTIONS ON WHAT FRANCHISEE MAY SELL

You must offer for sale only those menu items and approved sizes, products, and services that we have approved and you must use, in the preparation of food products, only the seasonings and chili that we require that you use (see Item 8). You must also sell merchandise that we designate. There are no limits on our right to make changes in the type of authorized goods and services that you must sell in your Restaurant. You must also immediately discontinue selling any menu items, products, merchandise or services which we disapprove in writing at any time. You must use certain uniforms approved by us. You must use and show only menus approved by us, except for prices. You must purchase and install a jukebox on the Restaurant premises, and play only music that we have approved. Our Marketing Department will select 75% of the music located on the hard drive of your jukebox system. ^AYou may select the remaining 25% of the music on the hard drive to customize your jukebox. All downloadable music will contain filters that we specify. You may not install or allow to be installed on the Restaurant premises any other vending, ATM or amusement machine without our consent.

You may not use, or permit use of, your Restaurant for any other purpose or activity at any time, or provide catering or other services outside of the Restaurant, without first obtaining our consent. You may not sell any alcoholic beverages without our consent. Our consent may be conditioned upon those factors as we think are necessary for the protection of our trademarks,

LOSANGELES 253281 v8 61247-00001

including the requirement that you comply with all laws and regulations applicable to the sale of alcoholic beverages.

We do not restrict the type of customer you may service.

LOSANGELES 25328 lvg 61247-00001

Item_L7

RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION

Franchise Agreement

This table lists important provisions of the franchise agreement. You should read these provisions in the agreement attached to this offering circular.

	Provision	Section in Franchise Agreement
a.	Term of the franchise	Section 2.1
b.	Renewal or extension of the term	Section 2.2
c.	Requirements for you to renew or extend	Section 2.2

Termination by you

None

Termination by Fatburger None without cause

Termination by Fatburger Section 13.1 and 13.2 with cause

"Cause" defined -defaults which can be cured

"Cause" defined -defaults which cannot be cured

Section 13.3

Sections 13.1 and 13.2

Summary

15 years

2 ten year renewals if you are in good standing

Continue to be in good standing; sign renewal franchise agreement and pay a renewal fee equal to 40% of the then-current initial franchise fee; sign a general release (Exhibit ^AN); give required notice; renovate Restaurant premises; have timely met monetary obligations during term of franchise agreement; have right to remain in premises; comply with qualification and training requirements current at time of renewal

Only if you default or if events in (g) or (h) occur

You have 10 days to pay any monies due; you have 30 days to cure your failure to comply with requirements of the franchise agreement or manuals including failure to submit required reports and failure to maintain standards or procedures we prescribe

Termination is immediate for insolvency, filing for bankruptcy, receiver or custodian is appointed, final judgment is unsatisfied, you are dissolved, if execution is levied against your property, if suit is filed to foreclose on lien against premises or equipment or if the real or personal property of the Restaurant will be sold after levy. Immediate termination upon receipt of notice for: failure to open Restaurant within 180 days after date of franchise agreement; you abandon the Restaurant; you (or your principal) is convicted of a felony, crime involving moral turpitude or offense we

LOSANGELES 253281 v8 61247-00001

Provision

Section in Franchise Agreement

Your obligations on termination/non-renewal

Section 14

j-	Assignment of contract by Fatburger	Section 12.1
k.	"Transfer" by you -definition	Section 12.2
1.	Fatburger's approval of transfer by franchisee	Section 12.2
m.	Conditions for Fatburger approval of transfer	Section 12.2.2

n. Fatburger's right of first refusal to acquire your business

Section 12.4

Summary

think will have an adverse impact on us; there is not an approved transfer within a reasonable time after your death or mental incapacity; you divulge contents of the manuals or other confidential information; operation of the Restaurant poses a threat to public safety; unapproved transfer; unauthorized use of our trademarks; use of a confusingly similar name; your failure to comply with non-compete provisions; you fail to have your personnel sign an agreement containing covenants not to compete and not to harm our business; you maintain false books and records or submit false reports; you do not perform your obligations under the lease; you or any of your managers or assistant managers fail to satisfactorily complete training; you fail to correct any unsatisfactory conditions at the Restaurant immediately after we advise you of them and repeated failure to comply with franchise agreement and manuals provisions, whether or not cured after notice.

Obligations include de-identification, payment of amounts due, assignment of lease, cease operating the franchise business, cease using confidential methods and procedures and cease using our trademarks, cancel any assumed name registration, refrain from using any similar trademark, pay all amounts due to us, pay us all damages and costs (including attorney's fees) we incur to enforce the provisions of the franchise agreement, deliver all manuals and similar materials to us, assign to us all of your business telephone numbers. Also see (o) and (r).

We may assign to any other party

Includes transfer of any interest in franchise agreement, or interests in you or in the restaurant

Subject to our approval unreasonably withheld

which will not be

Transferee qualifies and signs new agreement, you pay transfer fee, sign release (Exhibit ^AN), upgrade Restaurant, if necessary, you pay all amounts due, you are not in default, your right to receive payment from transferee is subordinate to our rights, the assignee meets our qualifications, you agree to remain liable for obligations before the transfer and the transferee and manager successfully complete our framing program.

We can match any offer

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Provision

Fatburger's option to purchase your business

Section in Franchise Agreement

Section 14.9

Your death or disability Section 12.5

Non-competition Section 15.2

covenants during the term of the franchise

Non-Competition Section 15-2

covenants after the franchise is terminated or expires

Modification of the Section 20

agreement

Integration/merger clause Section 20

Dispute resolution by Section 22.2

arbitration or mediation

Choice of forum

w. Choice of law

Section 22.2

Section 22.1

Summary

We have the option to purchase your furnishings, equipment, fixtures, supplies or inventory for 30 days after termination or expiration

Must assign by estate to approved buyer within 6 months

No solicitation of our customers or employees; no competitive business within 5 mile radius of approved location or any other Fatburger restaurant

Neither you nor your immediate family, shareholder, officer, director or partner may engage in competitive business within the protected territory for 2 years

Except for changes we can make, no amendment without mutual written consent

Only terms of Franchise Agreement are binding (subject to state law)

Except for certain claims, all disputes must be arbitrated in county in which our headquarters are located (currently Los Angeles, California)

Arbitration in the county in which our headquarters is located (currently Los Angeles, California)

California; if a provision is unenforceable under California law, then laws of the state in which the Restaurant is located apply to that provision

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LOSANGELES 253281 v8 61247-00001

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LOSANGELES 25328W8 61247-00001

Deposit Acknowledgment Agreement

This table lists important provisions of the deposit acknowledgment agreement. You should read these provisions in the agreement attached to this offering circular.

Summary

		Section in
		Deposit
		Acknowledgment
	Provision	Aereement
a.	Term of the franchise	None
b.	Renewal or extension of the term	None
c.	Requirements for you to renew or extend	None
d.	Termination by you	5 ^th Paragraph
e.	Termination by Fatburger without cause	None

Termination by Fatburger 6^th Paragraph with cause

"Cause" defined -defaults which can be cured

"Cause" defined -defaults which cannot be cured

Your obligations on termination/non-renewal

J-	Assignment of contract by Fatburger
k.	"Transfer" by you -definition
1.	Fatburger's approval of transfer by franchisee
m.	Conditions for Fatburger approval of transfer

n. Fatburger's right of first refusal to acquire your business

o. Fatburger's option to purchase your business

None

5^th and 6^th Paragraphs

None None None None None

None

You can decide not to go forward at any time before signing a Franchise Agreement by sending notice to us

We can terminate if we terminate the Site Evaluation and Approval Agreement

See (d) and (f) above

You must notify us if you are terminating the Agreement. You will receive the refundable portion of your deposit ($^A25.00(n less any fees and expenses you owe us.

p. Your death or disability None

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	Provision	Section in Deposit Acknowledgment Agreement
q-	Non-competition covenants during the term of the franchise	None
r.	Non-Competition covenants after the franchise is terminated or	None
	expires
s.	Modification of the agreement	None
t.	Integration/merger clause	None
u.	Dispute resolution by arbitration or mediation	None
v.	Choice of forum	None
w.	Choice of law	None

Summary

Site Evaluation and Approval Agreement

This table lists important provisions of the site evaluation and approval agreement. You should read these provisions in the agreement attached to this offering circular.

Section in Site Evaluation and

	Provision	Approval Agreement
a.	Term of the franchise	Section 1
b.	Renewal or extension of the term	None
c.	Requirements for you to renew or extend	None
d.	Termination by you	None
e.	Termination by Fatburger without cause	None
f.	Termination by Fatburger with cause	Section 3

"Cause" defined - None

defaults which can be

cured

"Cause" defined - Section 3

defaults which cannot be

cured

Summary

1 year

We may terminate if you do not lease or purchase a site for the Restaurant within 1 year

Your failure to lease or purchase a site for the Restaurant within 1 year

i. Your obligations on

Section 9

You will receive the refundable portion of your

LOSANGELES 253281 v8 61247-00001

	Provision termination/non-renewal	Section in Site Evaluation and Approval Agreement
j-	Assignment of contract by Fatburger	None
k.	"Transfer" by you -definition	None
1.	Fatburger's approval of transfer by you	None
m.	Conditions for Fatburger approval of transfer	None
n.	Fatburger's right of first refusal to acquire the business	None
o.	Fatburger's option to purchase the business	None
P-	Your death or disability	None
q-	Non-competition covenants during the term of the agreement	None
r.	Non-competition covenants after the agreement is terminated or expires	None
s.	Modification of the agreement	None
t.	Integration/merger clause	None
u.	Dispute resolution by arbitration or mediation	None
V.	Choice of forum	None
w.	Choice of law	None

Summary

deposit less fees or expenses you owe us

Management Agreement

This table lists important provisions of the management agreement. You should read these provisions in the agreement attached to this Offering Circular.

	Provision	Section in Management Aereement
a.	Term of the franchise	Section 6.1
b.	Renewal or extension of the term	Section 6.1
c.	Requirements for you to renew or extend	Section 6.1
d.	Termination by you	Sections 6.1 and 6.2

Summary

One year

Automatic renewal for each subsequent 12 months

None

You can terminate by giving not less than 90

LOSANGELES 253281 v8 61247-00001

Provision

Section in Management Agreement

k. I.

m. n.

P-

Termination by Fatburger Sections 6.3(f), (g) and without cause (h)

Termination by Fatburger Section 6.3 with cause

"Cause" defined - Section 6.3(a)

defaults which can be

cured

"Cause" defined - Sections 6.3(b)-6.3(e)

defaults which cannot be

cured

Your obligations on termination/non-renewal

Assignment of contract by Fatburger

"Transfer" by you-defrnition

Fatburger's approval of transfer by franchise

Conditions for Fatburger approval of transfer

Fatburger's right of first refusal to acquire your business

Fatburger's option to purchase your business

Your death or disability

Non-competition covenants during the term of the franchise

Non-competition covenants after the franchise is terminated or expires

Modification of the Agreement

Section 6.4

Sections 1.2 and 7.2 Section 7.2 Section 7.2 None None

None

None None

None Section 7.12

Summary

days' notice; you can also terminate upon our material default (if we do not cure after 30 days' notice), if we make a general assignment for the benefit of creditors, if we are in bankruptcy or if we become msolvent or legally incapacitated.

We can terminate if you transfer or if you own 4 Fatburger Restaurants

Only if you default or if the events in (g) or (h) occur.

You have 10 days to pay any money due; you have 30 days to cure your material default.

We can terminate immediately if you make a general assignment for the benefit of creditors, if you are in bankruptcy, if you become insolvent or legally incapacitated or if we terminate the Franchise Agreement.

If the Franchise Agreement is still in effect, you must continue to comply with it including your obligation to employ a trained manager to operate the Restaurant.

We may delegate our obligations to others; no restriction on our right to assign

Assignment of Agreement or rights, benefits or obligations under Agreement.

Requires our prior written consent.

If you transfer, we may terminate this Agreement.

No amendment unless signed by us.

LOSANGELES 25328W8 61247-00001

Provision

Integration/Merger clause

u. Dispute resolution by arbitration or mediation

v. Choice of Forum

w. Choice of law

Section in Management Agreement

Section 7.11 Section 7.16

Section 7.16

Section 7.10

Summary

Only terms of Management Agreement are binding (subject to state law)

Except for certain claims, all disputes must be arbitrated in the county in which our headquarters are located (currently, Los Angeles, California).

Arbitration in the county in which our headquarters located (currently, Los Angeles, California).

California law applies.

Please refer to the State Specific addenda in Exhibit 2 for any changes or additional provisions that apply in your state.

These states have statutes which may supersede your franchise agreement in your relationship with us, including the areas of termination and renewal of your franchise: ARKANSAS [Code Section 4-72-204], CALIFORNIA [Bus. & Prof. Code Sections 20000-20043], CONNECTICUT' [Gen. Stat. Section 42-133e et seq.], DELAWARE [Code, Section 2551-2556], HAWAII [Rev. Stat. Section 482E-6(2)(H)], ILLINOIS [815 ILCS 705/19 and 705/20], INDIANA [Stat. Section 23-2-2.7], IOWA [Code Sections 523H.1-523H.17], MARYLAND [Maryland Franchise Registration and Disclosure Law, MD. CODE ANN. BUS. REG. §§ 14-201 to 14-233 (1998 Repl. Vol. & Supp. 2002)], MICHIGAN [Stat. Section 19.854(27)], MINNESOTA [Stat. Section 80C.14], MISSISSIPPI [Code Section 75-24-53], MISSOURI [Stat. Section 407.400 et seq.], NEBRASKA [Rev. Stat. Section 87-401 et seq.], NEW JERSEY [Stat. Section 56:10-1 et seq.], SOUTH DAKOTA [Codified Laws Section 37-5A-51], VIRGINIA [Code Section 13.1-557-574], WASHINGTON [Code Section 19.100.180], WISCONSIN [Stat. Section 135.03]. These and other states may have court decisions which may supersede your franchise agreement in your relationship with us, including the areas of termination and renewal of your franchise.

Item 18 PUBLIC FIGURES

No compensation or other benefit is given or promised to a public figure arising from the use of a public figure in the name or symbol of the franchised business or the endorsement or recommendation of the franchised business by a public figure in advertisements. You do not have the right to use the name of any public figure in promotional efforts or advertising without prior written approval from Fatburger.

No public figures are involved in the actual management or control of Fatburger.

LOSANGELES 25328W8 61247-00001

Item 19

EARNINGS CLAIMS

The table below lists selected historical and unaudited financial and operating data for July 1, ^A2004 to June 30, ^A2005 for the Restaurants our affiliates own and for the Restaurants our franchisees operated. Only Restaurants open for the entire 12 month period (^Aj out of ^A2G) are included in the data.

Selected Financial & Operating Data for Fatburger Restaurants

All data for the one year period ending June 30. 2005 for restaurants open at least 12 months (53 out of 701

Corporate Stores Franchise Systenrwide

Description # Units Amount # Units Amount fl Units Amount

Total Net Sales (Sales net of sales

tax & rebates & refunds) ^A24 ^A21.686.443 "22 $^A 19.312.694 ^A51 SMO.999.137

Average Net Sales per restaurant ^A2^ $^A903.602 ^A29_ $^A665.955 ^A52 $^A773_569

^A4 S^A655.555 ^A14 $^A783.019

. ^A2^ B^A667.619 ^A3J S^A770.176

$^A274.202to $^A274.202to

^A22 S^A 1.267.922 ^A5J $^A2.350.284

Free-standing Restaurants (9 have drive thru)	10	S^A834.004
In-line & endcap restaurants	^AIi	S^A953.314
Median sales (all formats)	^A2	S^AS31.S59
Range of net sales for each Restaurant (all formats)	^A24	$^A197.764to X^A?..350.284
	^Ai	$^A397.764to
:	6	S^A660.499to S^A762.273
	^AS	S^A810.186tn $^A936.697

^AJ2 S^A274.202 to ^A! $^A274.202 to

$^A600.772 $^A603.354

9 S^A602.190 to 15 $^A6Q2.190 to

$^A751.000 S^A762.273

^A4 ^A780.630 to ^A12 S^A780.630 to

$^A877.489 $^A936.697

^A4 S^A952.056to ^Al $^A952.056 to

S^A 1-257.922 ft^A2.350.284

Avg. Food Cost % (including

beverage & paper) ^A24 ^A27.54% ^A22 ^A30.29% ^A5J5 ^A28.92%

Average Labor Cost % (including salaries, wages, insurance, workers compensation and

employee meals) ^A24 ^A30.59% ^A22 ^A28.11% ^A52 ^A29.35%

52% of the franchise restaurants in operation for this 12 month period attained or surpassed the median sales amount listed above.

LOSANGELES 253281v8 61247-00001

Free-standing restaurants refer to those that are not located in a mall. In-line and end cap restaurants are located in strip malls: in-line restaurants have other businesses located on either side and end cap restaurants are located at the end of the strip mall.

(a) ^A Fourteen (or ^A^S%) of the franchise restaurants in operation for this twelve month period attained or surpassed the $^A665.955 average Franchise Restaurant sales amount listed above.

(b) ^AEight (or ^A2&%) of the franchise restaurants in operation for this twelve month period attained or surpassed the $^A773.569 average Systemwide Restaurant sales amount listed above.

(c) One (or ^A21%) of the franchised free standing restaurants in operation for this twelve month period attained or surpassed the $^A655.555 average free standing Franchise Restaurant sales amount listed above.

(d) One (or ^A2%) of the franchised free standing restaurants in operation for this twelve month period attained or surpassed the S^A783.Q19 average free standing Systemwide Restaurant sales amount listed above.

(e) Eleven (or ^A44%) of the franchised in-line and end cap restaurants in operation for this twelve month period attained or surpassed the $^A667₁619 average in-line and end cap Franchise Restaurant sales amount listed above.

(f> ^ANine (or ^A22%) of the franchised in-line and end cap restaurants in operation for this twelve month period attained or surpassed the S^A77Q,176 average in-line and end cap Systemwide Restaurant sales amount listed above.

(g) ^A Fifteen (or 52%) of the franchise restaurants in operation for this twelve month period attained or surpassed the $^A621.015 median Franchise Restaurant sales amount listed above.

(h) ^AfiighJ; (or ^Al%) of the franchise restaurants in operation for this twelve month period attained or surpassed the $^A 770.176 median Systemwide Restaurant sales amount listed above.

(i) ^ATwenty Two (or ^AJ5%) of the franchised restaurants had food costs which were greater than the Systemwide Restaurant average; and ^Aseven (or ^A25%) of the franchise restaurants had food costs which were less than the Systemwide Restaurant average.

(j) ^A Eleven (or ^A2g%) of the franchised restaurants had labor costs which were greater than the Systemwide Restaurant average; and ^Aeighteen (or ^A2%) of the franchised restaurants had labor costs which were less than the Systemwide Restaurant average.

YOU SHOULD UNDERSTAND THAT PAST RESULTS ARE NO ASSURANCE AS TO FUTURE RESULTS. ACTUAL RESULTS WILL VARY FROM RESTAURANT TO RESTAURANT AND NO ONE (INCLUDING US) CAN RELIABLY ESTIMATE OR PROJECT THE RESULTS OF OPERATION OF ANY PARTICULAR RESTAURANT. YOU

LOSANGELES 25328 lv8 61247-00001

SHOULD NOT ASSUME YOU WILL ACHIEVE THE SAME RESULTS AS SHOWN ABOVE. IF YOU ASSUME THAT BY SIMPLY ACQUIRING A LICENSE TO OPERATE A FRANCHISE YOU WILL ACHIEVE THE RESULTS EXPERIENCED IN THE PAST (OR ANY OTHER PARTICULAR RESULTS), YOU'LL PROBABLY BE WRONG.

Before signing any binding documents or making any investment, you should make your own independent investigation regarding the possible purchase of a franchise. We strongly urge you to speak with our current and past Franchisees regarding their experiences and you should also have an experienced legal, financial and/or business advisor, such as an attorney or accountant (preferably one with experience in franchising and/or the quick-service restaurant industry) review this and all other documents. See Item 20 of this offering circular and any related exhibits regarding the names, addresses and phone numbers of our current and past Franchisees.

Purchasing a franchise gives you no guarantee of success. Any business venture (including our Restaurants) always involves some risk of loss or failure and the purchase of a quick-service restaurant (or any other) franchise is a speculative investment, with no guarantee of results.

THE INFORMATION PRESENTED REGARDING PAST OPERATING RESULTS FOR RESTAURANTS IS NOT A FULL PROFIT AND LOSS OR INCOME STATEMENT (OR STATEMENT OF CASH FLOWS), OMITS ALL OPERATING COSTS AND EXPENSES RELATED TO OPERATION OF A RESTAURANT EXCEPT FOOD. PAPER AND STORE LEVEL LABOR. AND HAS NOT BEEN AUDITED AND DOES NOT MEET STANDARDS GENERALLY APPLICABLE TO AUDITED FINANCIAL STATEMENTS^A. IN ADDITION, HISTORICAL COSTS MAY NOT APPLY TO YOUR OPERATIONS. THE COSTS (INCLUDING TRANSPORTATIONS OF FOOD AND PAPER GOODS ARE LIKELY TO RE HIGHER IN MORE REMOTE MARKETS WHERE THERE ARE FEWER OR NO PREEXISTING FATBURGER RESTAURANTS. FURTHER. SALES IN MARKETS TN WHICH WE HAVE NO PRIOR BRAND RECOGNITION ARE LIKELY TO RE LOWER THAN MARKETS IN WHICH WE ARE WELL KNOWN. ALSO. TT'S POSSIBLE THAT FUTURE REQUIREMENTS BY US (E.G. UPGRADING OF A RESTAURANT, NEW OPERATIONAL STANDARDS AND REQUIREMENTS, ETC.) OR MARKET-DRIVEN, COMPETITIVE OR OTHER CHANGES MAY AFFECT YOUR REVENUES AND/OR INCREASE YOUR COSTS OVER THOSE WHICH APPLIED IN THE PAST.

The information presented is based on unaudited internal financial statements prepared by franchisees and by us for corporate restaurants using a cash basis of accounting. With respect to information presented for franchised restaurants, we are relying upon information included in royalty reports and other unaudited financial reports provided to us by our franchisees. We have not audited this information nor have we otherwise verified its accuracy.

The information presented is not sufficient to analyze, calculate or predict past or future profitability, if any, cash flows or other important financial information for existing or prospective Restaurants.

LOSANGELES 25328 lv8 61247-00001

Some factors that can affect results (and may be reasons why your results may differ from those reported above), include the location or market in which a Restaurant operates, the Restaurant's size,' product or service mix, labor and other costs, as well as existing and potential competition. Your background, skills and qualifications may be different from those of our existing Franchisees. You should consider all of these (and other) factors and determine if the Restaurants whose results are reported are really comparable to the Restaurant that may be operated by you.

For many Restaurants, location can be an important factor affecting results, particularly with respect to demographics, competition and general economic conditions. It is possible that the character of existing Restaurant locations may be different than where you plan to do business. Location, competition and other factors may change over time and this could have an effect (positive or negative) on your results in the future. You should, before making any investment decision, carefully examine any location you might choose, together with the surrounding area, including an analysis of existing and potential competition, research the need in the proposed area of operation for a quick-service restaurant, as well as other characteristics of the area.

Success in most businesses (including franchised ones) depends, in large part, on your personal efforts and your marketing, operational, financial, administrative and other skills and your active participation in the daily affairs of the business and many other factors. You should determine the level of personal effort you can commit to the operation of your Restaurant and whether you possess the skills that may contribute to your being successful.

Substantiation of the data used to prepare the table will be made available to you upon reasonable request.

Item_2Q

LIST OF OUTLETS

FRANCHISED

RESTAURANT STATUS SUMMARY

FOR YEARS 2Qfi52004/2003^A<¹>

				Reacquired	Left the	Total from Franchises
		Canceled or	Not	by	System/	Left Operating at
State	Transfers	Terminated	Renewed	Fatbureer	Other	Columns (2) Year End
Arizona						^A5/2/2
California	0/0/2 *	Q/0/2^A			i/^Ai/o	1/1/4^A 24/^A24723
Colorado						3il/^A0
Florida					um	1/0/0 i/2/^A0
^A Georpia	,-, .	i- ,		A		^A!/0/0
*^z J v**	,-, .	i- ,	-w	z		^.,_c; -%. 2Z&Q
i-New Jersev		-			"■".	*.{''/ ' 1/0/0
, New York		-		"-	"	*W& '*
Pennsylvania						l/^Ai/0

LOSANGELES 253281 v8 61247-00001

Washington

Totals

&0/2'

DZO/2'

0/0/0

0/0/^AQ

2Z1/^A0

4/3/^A2 2/l/4^A 44/33/^A27

(1) All numbers are as of June 30 for each year.

(2) The numbers in the "Total" column may exceed the number of restaurants affected because several events may have affected the same restaurant. For example, the same restaurant may have had multiple owners.

i*f-

_F a-

J-'

f j V

n -

■>-

, i,

■7 j

<- ^,!v * *

State

California

Nevada

Totals

STATUS OF AFFILIATE OWNED RESTAURANTS*¹) FOR YEARS 2M5/2004/2003^A(2)

Restaurants Sold or Transferred to a Restaurants Closed Restaurants Opened

Franchisee During Year During Year During Year

^A0/!20 0iO/l^A 2/2/1^A

QLO/V

2/^A2/l

(1) FB California and FB Nevada own and operate these Restaurants.

(2) All numbers are as of June 30 for each year.

DEVELOPMENT AGREEMENT SUMMARY

STATUS SUMMARY

FOR YEARS 2M5/2004/^A2GQ3!

Total Restaurants Operating at Year End

M14/^A13

10/10/10

M24/^A23

Canceled or

Reacquired

Left the

Developers

LOSANGELES 25328W8 61247-00001

State Transfers Terminated Not Renewed by System/ Total from at

Fatburger Other Left Columns Year End

Arizona "Q/UO ⁿ0/I/0 0/^Afl/l

California ^A ^A 1/1/^A1

Totals 0/0/0 ^A0/i/0 0/0/0 0/0/^Afl 0/0/^Afi &1/0^A J^l/2^

All numbers are as of June 30 for each year. We are not currently offerinfr development agreements,

LOSANGELES 253281 v8 61247-00001

New Jersey

PROJECTED OPENINGS

AS OF JUNE 30, ^A2005

	FOR FISCAL YEAR ENDING JUNE 30,		^A20M
State	Franchise Agreements Signed but Restaurant Not Opened 111	Projected Franchised New Restaurants In The Next Fiscal Year	Projected Company Owned Openings In Next Fiscal Year
Arizona	^AI	A
California	^Al	*^Al*	A
Colorado	^A2	^AI
Florida	1	A
Georgia	A	1

Pennsylvania

¹ Texas^ t- _Tr-; ₍-^ >'_-*

^J"_t *," ■*■ * ⁵ "5" .. ^ »" ; "** **

Washington

International Totals

(!) As of June 30, 2004.

"11

		1
		1
	t \*	-
.		*k
' __	' -	-2
-		2 1
*'AX* r	-	1 ! A ^A13

The names, addresses, and telephone numbers of the franchisees as of .Tune 30_T 20Q5 are as follows:

Franchisee

Location

Telephone No.

Spot Enterprises, Inc. Matthew A. Glick

Ladera Culver Foods, Inc. Howard L. Hughes

6162 1/8 Sepulveda Blvd. VanNuys, CA 91411

^A3020 Manchester Blvd. ^AInglewood. CA 90305

4325 Glencoe Avenue, Unit C-l Marina Del Rey, CA 90292

(818)989-2695 (760)798-9318

LOSANGELES 25328W8 61247-00001

Franchisee

Location

Telephone No.

7984 La Palma Avenue Buena Park, CA 90620

Titan Simplex of Arizona Howard L. Hughes Marcus Walherg

AH Moallempour

AAZ Enterprises, Inc. Abdul & Zeenat Mithani

City Link, Inc. Imitaz Vaid

N & M Restaurants, Inc. Neil & Melissa Fishkin Robert Schuster

Pacific Coast Fast Foods, Inc. Perry Johnson

10600 1/2 Ventura Blvd. Studio City, CA 91604

1780 S. Victoria Avenue, Suite E Ventura, CA 93003

414 South Mill Ave., Suite 101 Tempe,AZ 85281-5606

21001 N. TatumBlvd., Bldg 34-1140 Phoenix, AZ 85050

2815 Peoria Snace A-l08 Phoenix. AZ 85029

16459 N. Scottsdale Road Scottsdalp, AZ 85254

^757 S Gilbert Road #106 Gilbert. AZ 85204

1641 South Stanley Drive. Suite 101 Mesa. A7.SS704

5001 Wilshire Blvd., #103 Los Angeles, CA 90005

10955 Kinross Avenue Los Angeles, CA 90024

3026 S. Figueroa Street Los Angeles, CA 90007

11275 Venice Blvd. Los Angeles, CA 90066

23460 Cinema Drive, Suite A Valencia, CA 91355

24802 Orchard Village Road #C Santa Clarita, CA 91355

3907 Cochran Street Simi Valley, CA 93063

26741 Aliso Creek Road #A Aliso Viejo, CA 92656

215 W. Birch Street, Unit 1 Brea,CA 92821

1223 University Avenue #120 Riverside, CA 92507

(^A48J2) ^A5--6i9_9.

(323) 939-9593 (310)208-7365

(310)390-7831 (661)260-1142

(949) ^A584-^A4238

LOSANGELES 253281 v8 61247-00001

Franchisee

Location

Telephone No.

Richardson Management LLC ^A Spencer Sabatasso

CDT Enterprises, LLC Travis Williams

8716 Garfield Avenue #CD-11 South Gate, CA 90280

1240 Lakes Drive, Bldg. A-l West Covina, CA 91790

2318 North Tustin Street, Suite C Orange, CA 92865

4516 Mission Boulevard, Suite D Pacific Beach, CA 92109

.114 W. Vallev Parkway Fscondido. CA 92025

(714)974-0395 (310)560-5333

A Lord Foods, LLC Greg & Keith Bradford

Benardout Enterprises, LLC Robert & Sue Benardout

FB Brentwood, LLC Robert Schuster

39256 10th St W Palmdale,CA 93551

17181 Redmond Way #100 Redmond, WA 98052

6220 E. Lake Sarnrnamish Parkway

SE,

UnitD

Issaquah, WA 98027

120BellevueWayNE Bellevue, WA 98004

18530 33"¹ Avenue W. Suite B r.vnwood. WA 98036

12005 Wilshire Blvd. Brentwood, CA 90025

(^AMD ^A5Z5-^AM

(425) ^A260-^A3359

(310) *780-^A0474

IKBIKalccTahrie.l,Tr ''' IfiSfi&t Scnustef ,r *

FB Colorado, Inc. Jack Hercher

14221 E. Cedar Avenue, Unit A Aurora, CO 80012

8255 S.Chester Street. Unit 100 Centennial. CO 80112

9344 Dorchester Street. Suite 101 Highlands Ranch. CO 80129

7465 North Academy Boulevard Colorado Springs. CO 80920

^ri i *>.

(303) 740-6069

LOSANGELES 253281 v8 61247-00001

Franchisee

Location

Telephone No.

Florida F.B.L.L.C.

James & Lorraine Peterson

'- ~ ~^C ^

J & A Foods, LLC Abel Alvidrez

Biggie's Burgers & More, LLC Richard & Judi Brown

J & R Enterprises, LLC John Turcic

LB^Ui^uLLL

AwUJiuu^ Lui^jjiuiv^ ilk, , liiuLJUiJijAsJjjly

y^iii-T,,i,>_Liv(..i,i₁.,.₁rNWlan^crneiit. ILL

BoWaf Burner: LLC

-2689 Gulf to Bav Blvd.. Suite 1820 (727) 944-4499

Clearwater. FL 33759

451 Paseo Dorotea Palm Springs, CA 92264

1017 S. El Camino Real San Clemente, CA 92672

6535 Robinson Centre Drive Pittsburgh, PA 15205

,"1

(760) 323-1492

(949)492-9182 (724) 940-7374

I'-lJJLl J.

MHI

jBb^j.ninLmiibL^. Ju^.Lit>.NJn-_'n2' , . ;.',■ _t * ■.

I'lt .i,.uhUiI1.( .Ml fr,y _mJi **_w\*t_m'

From July 1, ^A2004 to June 30, ^A2Q05. the following franchisees have had an outlet tenninated, cancelled, not renewed or otherwise voluntarily or involuntarily ceased to do business under the Franchise Agreement;

Ladera Culver Foods. Inc.

Howard L. Hughes

310 North San Fernando Road

Burhank.CA 91502 (7601798-9318

LOSANGELES 253281 v8 61247-00001

2223 N. Westshore Blvd.. FC Florida F.R.IJX. 2M

James & Lorraine Peterson Tampa. FL 33607

International Plaza (127) 944-4499

Both of these franchisees continue to he franchisees of Fatburger under one or more ise Agreements. No franchisee has failed to communtcate with us within 10 weeks of the IS.

Ilem_21 FINANCIAL STATEMENTS

Attached as Exhibit A are our audited financial statements for fiscal years ended June 30. 2003. June 30. 2004 and June 30. 2005.

ltemL22 CONTRACTS

The following agreements are attached as Exhibits^A. These are the only agreements which we will enter into with you in this state.

Exhibit Description

B. Franchise Agreement

C Guaranty, Indemnification and Acknowledgment ^A _

^AD. Application for Franchise License (Single Restaurant Applicant)

^AE Application for Franchise License (Multiple Restaurant Applicant)

^A. Site Evaluation and Approval Agreement

^A. Confidentiality and Non-Competition Agreement

^AH. Disclosure Questionnaire

^Al. Franchise Deposit Acknowledgment (Single Restaurant Applicant)

^AL Franchise Deposit Acknowledgment (Multiple Restaurant Applicant)

^A&. Lease Assignment

^AM- Management Agreement

^A^. General Release

LOSANGELES 25328W8 61247-00001

Ttem 23

RECEIPT

The last page of the offering circular (following the exhibits and attachments) is a document acknowledging your receipt of the offering circular (one copy for you and one to be signed for us).

LOSANGELES 25328W8 61247-00001

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