UFOC

Sample UFOC

pj--*^

RECEIVED

Nutritional Lifestyle Centers¹*³⁰^

Smoothie King Franchises, Inc. Uniform Franchise Offering Circular

<aoes->2006[^2flflz]

<200§->2006yflQZl

SMOOTHIE KING FRANCHISES, INC.

INFORMATION FOR PROSPECTIVE FRANCHISEES< ~~AND DEVELOPERS~~> REQUIRED BY 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 contracts carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor, like a lawyer or an accountant. If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law.

There may also be laws on franchising in your state. Ask your state agencies about them.

FEDERAL TRADE COMMISSION WASHINGTON, D.C. 20580

Smoothie King <2QQ5->20061-2007) rCP:1921925v4-3/28/06 DRAFT1

<2005->2006[₌2flfl21

FRANCHISE OFFERING CIRCULAR

FOR PROSPECTIVE FRANCHISEES< ~~AND DEVELOPERS~~>

Smoothie King Franchises, Inc.

A Louisiana Corporation

<24~~00 V~~e~~terans Memorial Blvd., Suit~~e ~~110~~>

<Kenne~~r, LA 70Q62~~>

<~~(50~~1)167 1~~0Q6~~>

,I.A 70433]

Nutritional Lifestyle Centers

www.smoothieking.com

The franchisee will operate a retail business offering smoothies and other nutritional drinks and general nutritional products under the name Smoothie King®.

The initial franchise fee is $25,000 for a Traditional location and $12,500 for a Non-Traditional location. The estimated initial investment required ranges from $<~~127.5QQ~~>[ 121.0001 to $<239_T©QO>[2LQ0J] for a Traditional location and $<4tQQO>[2L30J&3 to $<4344)00>[178.000] for a Non-Traditional location. The initial franchise fee for the sixth and each franchise thereafter is $20,000.

RISK FACTORS:

1. THE FRANCHISE AGREEMENT <PERMffS>fREOUIRES THAT ALL LITIGATION BETWEEN] THE FRANCHISEE ~~<TO AR~~BI~~TRATE WITH~~>[AMD] THE FRANCHISOR[_ TAKE PLACE] ONLY IN LOUISIANA. OUT OF STATE <~~ARBITRATION~~>[LITIGATION1 MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO <~~ARBiTR\T~~E>[LITIGATEl WITH THE FRANCHISOR IN LOUISIANA THAN IN YOUR HOME STATE. CERTAIN STATES HAVE LAWS THAT SUPERSEDE THE PROVISIONS DM THE FRANCHISE AGREEMENT REQUIRING YOU TO <~~ARBITRATE~~>[SUBMIT TO LITIGATION] IN LOUISIANA. (See Exhibit <*>{l])

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

3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Information comparing franchisors is available. Call the state administrators listed in Exhibit <K>[jI1 or your public library for sources of information.

Registration of this franchise by a state does not mean that the state recommends the franchise or has verified the information in this offering circular. If you learn that anything in the offering circular is untrue, contact the Federal Trade Commission and the state authorities for your state listed in Exhibit

<K>m.

Smoothie King <2OO5->2006[^2H]

111

The issuance date of this Offering Circular in non-registration states is March <JV

EFFECTIVE DATES

CALIFORNIA -< ~~March 17. 2Q0S~~>1 .20061

HAWAII -< ~~March 21. 2005~~>1 .2006 1

ILLINOIS -< ~~March 15. 2005>~~1 .20061

INDIANA - 1 . 20061

MARYLAND - I . 20061

MICHIGAN - <~~Scptembcr 19. 2005~~>lMarch 30. 20061

MINNESOTA -< ~~March 16. 2005~~M . 2006 1

NEW YORK -~~< March 2~~8~~. 2005~~M . 2006 1

RHODE ISLAND - <~~Mareh 17. 200~~5>f .20061

SOUTH DAKOTA - <~~Anril 30. 2005~~M . 20061

UTAH -< ~~Mav 14. 2005~~>1 March 30. 2006 1

VIRGINIA -<~~April 30, 2005~~>[__________. 2Q06]

WASHINGTON -I . 20061

WISCONSIN - I . 20061

Smoothie King <3005->2006fc2QQ2]

NOTICE REQUIRED

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 franchise 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 provisions 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 franchised 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.

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

(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 or ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:

Smoothie King <2QQ5->2006I-20071 rCP:mi92_S v4-3/28/06 DRAFT!

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

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

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

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

* * * *

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

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ITEM

TABLE OF CONTENTS

PAGE

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

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

3. LITIGATION....................................................................................................................................................................................................... 4

4. BANKRUPTCY................................................................................................................ ...................____..........................................5

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

6. OTHER FEES.........................................................._.............................................................................................................................................6

7. INITIAL INVESTMENT.............................................................................................................................................................................9

8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES .____..._..................... ..............................13

9. FRANCHISEE'S OBLIGATIONS...................................................................................................................................16

10. FINANCING.........................................................................................................................................................................................................17

11. FRANCHISORS OBLIGATIONS..................................................................................................................................................17

12. TERRITORY......................................._....................................................................................._.........................................................._.... .24

13. TRADEMARKS...........................................................................................................................................................................................26

14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION..............................................................27

15. OBLIGATION TO PARTICIPATE IN THE ACTUAL

OPERATION OF THE FRANCHISE BUSINESS..............................................................................................................28

16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL........................................... .......................29

17. RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION. .............................. 29

18. PUBLIC FIGURES......................................................................................................................................................................._...........33

19. EARNINGS CLAIMS...................................................................................................................._.............................................................34

20. LIST OF FRANCHISED OUTLETS..........._..........................................................._..............____.........................................34

21. FINANCIAL STATEMENTS................................................................................................................................................................38

22. CONTRACTS..................................................................................................._.......................................................____.........................J9

23. RECEIPT........................................................................................................................................._____....................................................39

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vii

Exhibits:

Exhib Exhib Exhib Exhib Exhib Exhib Exhib Exhib Exhib Exhib Exhib Exhib Exhib Exhib

tA tB tC tD tE tF tG

[List of ISmoothie King Franchisees

[List of Former ]Franchisees <De~~parted Last Ycar~~>

Audited Financial Statements

Franchise Agreement

Smoothie King Franchise Purchase Affidavit

■^~~Confid~~e~~ntialitv~~> [Guaranty] Agreement

<~~Guaranty Agr~~ee~~mont~~-x~~Exhibit H~~........._...................>Contingent Assignment of Lease

t <t>[H] Smoothie King Manuals-Table of Contents

t<J>[|] State Law Addendum

t <K>[J] State Agencies/Agents for Service of Process

t <fe>[K] Automatic Bank Draft

t <M>[L] Franchise Agreement Addendum - Non-Traditional Location

t <N>[M] Smoothnet Terms of Use Agreement

APPLICABLE STATE LAW MAY REQUIRE ADDITIONAL DISCLOSURES RELATED TO THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR. THESE ADDITIONAL DISCLOSURES, IF ANY, APPEAR IN EXHIBIT <>[!].

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VU1

UNIFORM FRANCHISE OFFERING CIRCULAR SMOOTHIE KING FRANCHISES, INC.

Iteml

THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

The Franchisor: To simplify the language in this offering circular "Smoothie King<->" or "we" means Smoothie King Franchises, Inc., the franchisor. "You" means the person(s) who signs the Franchise Agreement, including a corporation, partnership, Limited Liability Company or other legal business entity ("business entity")- You must enter into a Franchise Agreement for each store purchased. If you are a business entity, certain provisions of Smoothie King's Franchise Agreement will also apply to some of your owners. This offering circular will indicate when your owners are also covered by a particular provision.

The Smoothie King® concept and primary product was originated in 1973 by Stephen C. Kuhnau, Sr. Smoothie King is a Louisiana corporation incorporated on May 5, 1987. The corporation was originally incorporated under the name Original California Smoothie Bar Franchises, Inc. On April 6, 1989, the name of the corporation was changed to Smoothie King Home of the Muscle Punch Franchises, Inc. On January 2, 1997, the name of the Corporation was changed to Smoothie King Franchises, Inc. Smoothie King's principal place of business and current business address is <2400 ~~Vet~~e~~rans M~~e~~morial Boulevard, Suit~~e~~110. Konnor~~>IT21 Park Place_r Covington]. Louisiana, <7QQ6t>[70433.] Effective as of January 1, 1997, Smoothie King became a subsidiary of Smoothie King Systems, Inc. ("SKSI"). Except as noted below, Smoothie King has no predecessors or affiliates. A principal stockholder in <~~Smoothie King Syst~~e~~ms, Inc. C^~~SKSK^ owns a majority interest in an affiliate named Q-Knows, Inc., <~~which is~~ >a vendor that is approved to sell certain products to you<_r

~~currently~~ >[,__]Q-Knows, Inc.f currently develops and] sells smoothie <~~cxtras known as "Mirac~~le-

~~MSM." and "MSM~~ >renhancers known as "Joint and Tissue Repair." "MSM Hvdrating Powder." "MSM Hvdrating Lotion" and "^Caffeine Charge." Q-Knows, Inc. is a Louisiana corporation formed in April 1998, and its principal business address is 2725 Mississippi Avenue, Suite B, Metairie, Louisiana 70003. Q-Knows, Inc. has not offered franchises for this or any other business.<~~Eff~~e~~ctiv~~e ~~as of January 1, 1997, Smoothi~~e ~~King b~~e~~came a subsidiary of SKSI.~~> The principal stockholders of SKSI own all of the interest in an affiliate <names>rnamedl Smoothie King Nutritionals, Inc., a Louisiana corporation ("SKN"). SKN <~~will own, d~~eve~~lop, lic~~ense ~~and dir.tribut~~e>[owns. develops. licenses and distributes) SMOOTHIE KING® private label and other retail products. SKN was incorporated in Louisiana, and its principal business <~~is 2~~4~~00 Veterans Memorial Blvd, Suite 230,~~ Ketmef>[address is 121 Park Place. Covington]. Louisiana <?Q063r> 170433.1 SKN has not offered franchises for this or any other business. Smoothie King operates under its corporate name and under the service marks [^jSMOOTHIE KING®dJ and associated [marks and ]logos. Smoothie King's agent in this state for service of process, if applicable, is disclosed in Exhibit <K>[I].

Smoothie King offers you a franchise whose primary business is the sale of products under the name and service mark "SMOOTHIE KING®<>.] The type of business that you will operate <wiH-fee>[is3 referred to in this offering circular as a "Smoothie King Nutritional Lifestyle Center<®>[j]" <e^->"Unir"<,>r or "Smoothie Kino Business."!

Smoothie King has been offering franchises since May <ef->1988. Smoothie King owned and operated Smoothie King Nutritional Lifestyle Centers<®> from March 1, 1994 until January 1, 1997.[J Effective January 1, 1997, Smoothie King transferred all of the assets of its Smoothie King<®>

Smoothie King <3QQg->2006r-20071

Businesses to Smoothie King Co., Inc. ("SKCI"), which is also a subsidiary of SKSI.<> Smoothie King does not currently operate any Smoothie King<®> Businesses^:>. SKCI and Smoothie King Dallas, Inc. currently own and operate Smoothie King<®> Businesses under non-exclusive royalty-free licenses from Smoothie King. SKCI and Smoothie King Dallas, Inc. may own and operate more Smoothie King<®> Businesses in the future. Stephen C. Kuhnau, Sr,, co-founder of Smoothie King, has owned and operated Eclipse Enterprises, Inc. d/b/a Town & Country Health Foods/Smoothie King® since 1973, which also does business under the service mark "SMOOTHIE KING®." Mr, Kuhnau is the sole shareholder and owner of Eclipse Enterprises, Inc. d/b/a Town & Country Health Foods/Smoothie King® and continues to operate Eclipse Enterprises, Inc. d/b/a Town & Country Health Foods/Smoothie King® under a non-exclusive royalty-free license from Smoothie King. Smoothie King does not have any ownership interest in Town & Country Health Foods.

Smoothie King has not offered franchises in any other lines of business. Smoothie King does not have any other business activities. Neither SKSI nor <S~~KCO or~~ >SKCI provide goods or services to franchisees or offer franchises in any line of business.

[ IThe Franchise Opportunitv:<~~In 2003,~~>[_] Smoothie King< ~~made 30 years of being in~~>[_fa

which has been in operation for 33 vears. does! business on a national and<-new> international level. You will find the details of the stores developed in Item 20.

[ ]Smoothie King has been offering progressively more people a lifestyle solution which is unique

in and of itself because we offer two business segments in one friendly environment.

[ ]First, we offer our original Smoothie King® smoothies, a meal replacement item that is custom made to order. Smoothies are the heart and soul of the business consisting of all natural blends of real fruits, pure fruit juices, and fruit and vegetable purees combined with nutritional supplements that create a functional and nutritious beverage that benefits the consumer and ultimately delivers a distinctively, unique and refreshing taste.

[ ]Secondly, Smoothie King offers consumers the benefit of nutritional retail merchandise, which

<fflehtde>[includes]: vitamins, herbs, minerals, a myriad of supplements, and healthy snack items, among many others. Retail products<~~,-not on~~iy> can be <use~~d in conjunction~~>[hlended] with the classic Smoothie King® smoothies<~~. but al~~s~~o bv its~~o~~lfM~~ or used separately), offering <te->consumers even more options.

[ ]Smoothie King developed and owns a <umque₁->proprietary system ("System") that you will

<~~utili7.~~e ~~with~~>[use in operating] a Smoothie King Nutritional Lifestyle Center<®>. This System includes specialized hands-on training, marketing and advertising support, volume buying power, business synergy, on-going support and corporate integrity.

[ JSmoothie King also provides you with certain confidential information and methods for

managing a Smoothie King Nutritional Lifestyle Center<®>. You will use Smoothie King's trademarks, logos, brand and overall developed intellectual property including "SMOOTHIE KING®<->,] the "CROWN" [design ]and other product and service names and marks that <~~may~~ be des~~igna~~te~~d -by~~ >Smoothie King [mav designate ]to identify the System. These names and marks <~~will b~~e>[are] referred to in this offering circular as "Proprietary Marks<->.]

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Market and Competition: The market for the products sold in a Smoothie King Nutritional Lifestyle Center<®> is the general public. Although the market for the nutritional products carried in the Unit is more developed, the market(s) for "smoothies" <is deve~~loping rapidly and gaining recognition~~^~~How~~eve~~r, smoothi~~es still ~~mav b~~e-~~felativ~~e~~lvimknow~~R-in-e~~ertam~~'~~mark~~ets>[continues to develop and build on its growing recognition]. The market may be affected by general economic conditions and is seasonal in most areas. The market is highly competitive and you will be competing with other smoothie businesses, juice bars, national and local general nutrition businesses and health food businesses. National and local restaurants may also develop smoothie drinks as additional menu items and national and local supermarkets and other retailers may carry some of the same or similar product lines. If the Unit is located in a strip center or local or regional shopping mall, you <witt~ >typically <~~hav~~e ■ to>fwill") compete with businesses offering competitive goods or services within the same center or mall. Smoothie King believes that its emphasis on high quality nutritional drinks that taste good and its combination refreshment/general nutrition business and its operating system gives Smoothie King a competitive advantage over its competitors in the market.

Government Regulation: Local, state and federal laws and regulations will apply to the business operations of a Smoothie King Nutritional Lifestyle Center<®>. The Food and Drug Administration ("FDA") and Federal Trade Commission ("FTC") have certain laws and regulations that apply directly to how you market, sell and label your vitamins and supplements, and how you present nutritional information for your products. Food service, health and sanitation laws and regulations will also directly apply to the preparation of your smoothies and handling of other food products. In addition, certain general laws will apply to a Smoothie King Nutritional Lifestyle Center<®>. For example, you <~~wil~~l-~~hav~~e-to>fmustl comply with laws and local ordinances concerning permits, occupational licensing and the construction and operation of a Unit. There may be other general laws that apply to a Smoothie King Nutritional Lifestyle Center<®>, and you should make inquiries to find out about these regulations.

Item 2

BUSINESS EXPERIENCE

The following directors, officers, and other executives will have management responsibility in the operation of Smoothie King's business:

Co-Founder/Chairman of the Board/Chief Executive Officer/President/Treasurer/Senior Vice President of Concept Evolution: Stephen C. Kuhnau, Sr.

Stephen C. Kuhnau, Sr. is the co-founder of Smoothie King and has been Chairman of the Board of Directors since March 1994. Mr. Kuhnau has held various positions at Smoothie King since March 1994, including that of Chief Executive Officer, President, and Treasurer since February 2003, and Senior Vice President of Concept Evolution since September 1995. Mr. Kuhnau has served as a member of the Board of Directors, Secretary and Director of Concept Evolution of SKSI and SKCI since December <34_T->1996. Mr. Kuhnau is owner and operator of Eclipse Enterprises, Inc. d/b/a Town & Country Health Foods/Smoothie King® located in Metairie, Louisiana, and has been since 1973. Mr. Kuhnau also has been President and CEO/ owner of Q-Knows, Inc. since its inceptions [ in April 1998.] and President of SKN since[ March] 2004.

Co-Founder/Director/Senior Vice President of Nutrition and Retail/Secretary: Cynthia Lacoste Kuhnau

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Cynthia Lacoste Kuhnau is co-founder of Smoothie King and has served as Senior Vice President of Nutrition and Retail since September 1995. Mrs. <~~Kuhnau ha~~s ~~serv~~e~~d as a m~~e~~mber of the Board of Directors, Executive Vice Pr~~e~~sident and Director of Nutrition and R~~e~~tail of SKSI and SKCI~~ s~~inc~~e ~~Decemb~~e~~r 31, 1996. Mrs.~~ >Kuhnau was President and Director of Operations of Smoothie King from February 1994 to September 1995. She was Chairman of the Board from May 1993 until March 1994 and held the office of President from the inception of the company in May 1987 until May 1993. [Mrs. Kuhnau has served as a member of the Board of Directors. Executive Vice President and Director of Nutrition and Retail of SKSI and SKCI since December 1996. lMrs. Kuhnau also has been Vice President of SKN since 2004.

Executive Vice President of Business Deveiopment: Michael C. Powers

Michael <~~C. Powers joined Smoothie King Franchis~~e~~s in May 2000 as Director of Franchise Sal~~es:~~- Micha~~el->Powers has served as Executive Vice President <~~&Dir~~e~~oto~~r->of Business Development <e>[fjir.] Smoothie King since September 2001. Mr. Powers [served as Director of Franchising of Smoothie King from Mav 2000 to August 2001. His responsibilities include national and

international franchise recruitment and new business development.___Mr. Powers learned his

Certified Franchise Executive (CFE) designation from the Institute of Certified Franchise Executives (ICFE) in March 2005. <~~He also s~~e~~rved as Director of Franchising for Smoothi~~e ~~King from May 2000 to August 2001.Prior to May 2000, Mr. Pow~~e~~rs was employ~~e~~d by Benson Merc~~ede~~s Bcnz in M~~e~~tairic, Loui~~s~~iana from Jun~~e ~~1996 through May 2000 whore his r~~e~~sponsibiliti~~e~~s included sal~~es, le~~asing and financing .~~>

Executive Vice President of Development & Real Estate: Richard R. Leveille, Jr.

Richard R. Leveille, Jr. has served as Executive Vice President of Smoothie King since March 1994. Mr. Leveille <was->also[ was] Director of Franchise Sales with responsibility for franchise development and expansion and served as a member of the Board of Directors from 1996 through 2000.[_ Mr. Leveille earned his Certified Franchise Executive (CFE^ designation from the Institute of Certified Franchise Executives (XCFE\ in November 2005.]

tiect Mam

latherine Meariman ]

iriman has held several positions with Smoothie King since June 1998. ector of Project Management of Smoothie King since January 2Q05.]

[Director of Architectui

Glenn G. Harris joined Smoothie King in October 2003 as Director of Architectural Design struction. He previously worked for Smoothie King as an outside consultant from August 1993 through August 1996. He coordinates all architectural design, construction and real estate-Mr. Harris was Director of Architectural Design. Real Estate and Construction for Ruth'; Steakhouse in New Orleans from August 1999 to Mav 2003.1

Smoothie King <2QQ5->2006f-20071 /06 DRAFT1

[ Doug Freese joined Smoothie Kii

ictice with the CapeHa Law Firm from September 2004 through December 2005.

Jefferson Parish. Louisiana. He also served as a Special Assistant United States Att< Eastern District of Louisiana from November 1999 through February 2001.1

Smoothie King does not employ any franchise brokers.

[

Smoothie King <2QQS->2006[-20071

ffiPil?ai?2SY4-3CT06PRAm

litem 3

LITIGATION

Smoothie King periodically is a party to various commercial disputes in the ordinary course of business, some of which involve claims for litigation with current or former franchisees. Smoothie King is [flfiL]the subject of <~~the followin~~e>[anvl material pending cases<T>[i_]

<~~Smooth V~~e~~ntur~~e~~s. Inc.. David and Marchant Surfac~~e ~~v. Smoothie King Home of the Muscle Fun~~eh-~~Fran~~ehises~~, bo. n/k/a Smoo~~thie Kin~~g Fran~~c~~his~~e~~s. Inc.. Jason Luth~~e~~r and An~~gler-'s ~~Lur~~e~~, Inc~~-~~, (Four~~t~~h Judicial Circuit Court, Duval County Florida, Cas~~e ~~No. 2003 CA 1559, Division CV B). David and Marchant Surface, existing Florida based franchis~~ee~~s, and Smooth Ventur~~e~~s, Inc., an entity controlled by them (coll~~e~~ctively, the "Plaintiffs") and Smoothi~~e ~~King wer~~e ~~parties to a May 6, 1996, Area D~~eve~~lopment Agre~~e~~ment for a territory in the Jacksonvill~~e~~, Florida ar~~e~~a (the "ADA"). Jason Luth~~e~~r and Angl~~er's ~~Lure ("Luther") also ar~~e e~~xisting Florida based franchisees who operat~~e ~~Smoothi~~e ~~King®~~ s~~tores in a territory contiguous to Plaintiffs' claimed ADA territory. In June 2003, Plaintiff~~s ~~filed a complaint and motion for t~~e~~mporary injunction against Smoothie King and Luther s~~ee~~king to enjoin Smoothi~~e ~~King from allowing Luth~~e~~r to l~~e~~ase a location in a mall in Jacksonville, Florida that Plaintiffs contend is within th~~e e~~xclusiv~~e4e~~rrit0F~~y- ~~grant~~e~~d by t~~he ~~ADA~~^ ~~In th~~ei~~r comp~~l~~aint, P~~lai~~ntiff~~s -als~~o s~~eek-~~comp~~ens~~atory a~~nd' ~~punitiv~~e ~~damages for negligent misrepr~~ese~~ntation and tortious interf~~erence~~. W~~e ~~opposed Plaintiffs' motion and al~~s~~o filed our own motion to dismiss as to v~~enue~~. In August 2003, th~~e ~~court issu~~e~~d an ord~~e~~r denying Plaintiffs' motion for t~~e~~mporary injunction, holding that Plaintiffs failed to demonstrate a lik~~eli~~hood of~~ s~~ucc~~ess ~~on th~~e ~~merits oth~~e~~ir e~~-~~laim~~sr-s~~ino~~e the e~~vid~~ence ~~support~~e~~d o~~u~~r cont~~e~~ntion thaHh~~e ~~ADA had terminated pursuant to an August 10, 2000 L~~ette~~r of Understanding sign~~e~~d by David Surface. Th~~e ~~Court also d~~e~~nied our motion to dismiss the action. In Nov~~embe~~r 2003, w~~e ~~fil~~e~~d an answ~~e~~r and count~~e~~rclaim against th~~e ~~Plaintiffs, s~~ee~~king th~~e ~~damages we incurr~~e~~d due to th~~e ~~Plaintiffs' breach of the ADA, including attorneys f~~e~~es and costs. This cas~~e ~~is curr~~e~~ntly in the discovery phase.~~ >

During the ten years immediately preceding the date of this Offering Circular, Smoothie King has been the subject of the following concluded material matters:

< >Brian S. Pesterfield v. Richard Leveille and Smoothie King Franchises. Inc.. 24th Judicial District Court, Jefferson Parish, Louisiana, Case No. 537239. On August 23, 1999, Mr. Pesterfield ("Pesterfield"), a former Smoothie King developer who purchased a Smoothie King area development agreement from an existing Smoothie King developer in Tennessee, filed this action, claiming that Mr. Leveille and Smoothie King made negligent and/or fraudulent misrepresentations in their dealings with Pesterfield. The complaint also alleged that Smoothie King and Mr. Leveille conducted deceptive business practices, and violated the Federal Trade Commission trade regulation rule on franchising (the "FTC Rule") and the Louisiana Unfair and Deceptive Trade Practices Act in connection with the transfer of the area development agreement. Pesterfield sought damages of approximately $100,000, plus unspecified consequential damages, treble damages and attorneys' fees. Smoothie King has filed an answer denying Pesterfield's claims and a counterclaim against plaintiff for breach of contract and damages for lost franchise fees, royalties, advertising fees, profits, costs and attorney's fees. The court dismissed Pesterfield's claims relating to violation of the FTC Rule. In July 2001, the parties entered into a settlement agreement. Under the settlement agreement, the parties exchanged a release of claims, and Smoothie King paid Pesterfield $50,000.

Smoothie King Franchises. Inc. v. Michelle and Joey Willoughby (U.S.D.C. E.D. Arkansas, W.D., Court File No. 4-03-CV-00079 GTE). We commenced this action in February 2003 against former Arkansas-based franchisees for breach of contract, trademark infringement, unfair competition,

Smoothie King <3005->2006[^2fl21

misappropriation of goodwill, and damages due to the former franchisees' continued operation of a Smoothie King® store. We sought injunctive relief, monetary damages, costs and attorneys' fees against the former franchisees. Later in February 2003, the former franchisees filed an answer and counterclaim against Smoothie King, denying our claims and alleging breach of contract, breach of the duty of good faith and fair dealing and breach of the Arkansas Franchise Practices Act (Sections 4-72-204 and 206) for failing to provide on-going support and adequate advertising support and for wrongful termination of the franchise agreement. The former franchisees sought treble damages in an unspecified amount for all fees paid to us and lost profits, together with costs, attorneys' fees, and specific performance (respecting the repurchase of the former franchisees' business assets). In March 2003, the former franchisees consented to, and the court issued an order for, a preliminary injunction under which the former franchisees agreed, among other items, to cease operating their Smoothie King® store. In February 2004, we filed a motion for summary judgment, seeking dismissal of all of the former franchisees' claims. In March 2004, and before a court ruling on our motion for summary judgment, the parties entered into a settlement agreement. Under the settlement agreement, the parties agreed to a mutual release of all claims, the former franchisees agreed to the termination of the franchise agreement and a related area development agreement, the preliminary consent order was made permanent, the parties agreed to a non-disparagement covenant, and we agreed to pay the former franchisees $35,000 as consideration for their covenants under the settlement agreement.

[

Smooth Ventures. Inc.. David

Surface v. Smoothie King Home of the Muscle

Punch Franchises. Inc. n/k/a Smoothie King Franchises. Inc.. Jason Luther and Angler's l.ure. Inc.. fFonrth Judicial Circuit Court. Duval County Florida. Case No. 2003-CA-4.S59. Division CV-B). David and Mart-hunt Surface, existing F)orida-based franchisees, and Smooth Ventures. Inc.. an entity controlled hy them (collectively, the "Plaintiffs"^ and Smoothie King were parties to a Mav 6_r 1996_r Area Development Agreement for a territory in the Jacksonville. Florida area fthe "ADA"). Jason Luther and Angler's Lure ("Luther"! also are existing Florida-hased franchisees who operate Smoothie King® stores in a territory contiguous to Plaintiffs' claimed ADA territory. In June 2003_r Plaintiffs filed a complaint and motion for temporary injunction against Smoothie King and Luther seeking to enjoin Smoothie King from allowing Luther to lease a location in a mall in Jacksonville. Florida that Plaintiffs alleged was within the exclusive territory granted hv the ADA. In their complaint. Plaintiffs also sought compensatory and punitive damages for negligent misrepresentation and tortious interference. We opposed Plaintiffs' motion and also filed our own motion to dismiss as to venue. In August 2003. the court issued an order denying Plaintiffs' motion for temporary injunction, holding that Plaintiffs failed to demonstrate a likelihood of success on the merits of their claims and denied our motion^ to dismiss the action. In 2003. we filed an answer and counterclaim against the Plaintiffs, seeking the damages the Plaintiffs' breach of the ADA, including attorney's fees and costs. The parties resolved this dispute hv entering into a Settlement Agreement in Novemher 2005. Under the Settlement Agreement. Smoothie King clarified certain development rights and obligations of

granted Luther the right to develop (for a fee) one additional Unit and a right of first refusal respecting another potential Unit. The parties also agreed to a mutual release of claims]

Other than these three actions, no litigation is required to be disclosed in this offering circular.

Item 4

BANKRUPTCY

Smoothie King <2QQ5->200fir-20071 IGP:1921925v4-_V2S/06 DRAFT!

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

TRADITIONAL LOCATION

<~~Frnnehisc Fee~~: >You will pay a $25,000 lump sum[ initial] franchise fee when you sign the Franchise Agreement. Smoothie King will refund 50% of the initial franchise fee if your Agreement is terminated for failure to obtain financing within six months or failure to open a Unit within one year from the effective date of the Franchise Agreement. The initial franchise fee will not be partially or fully refunded under any other circumstances.

<~~Smoothic King's current policy i~~s ~~to s~~e~~t th~~e ~~initial franchise fee at $20,000 for~~ e~~ach franohio~~e aft«>[H] you have five [or more ]Smoothie King Nutritional Lifestyle Centers<®> open and operating<-~~for n~~o~~w franchis~~e ~~agr~~ee~~ments ent~~ere~~d into by you.This policy is subj~~e~~ct to change at any tim~~e.^^

Smoothie King <26Qg->2006[-20071 fGP:192192Sv4- 3/28/06 DRAFT!

]

NON-TRADITIONAL LOCATION

<~~Franchi~~s~~c Fee~~: >You will <FeffHt>[pjiyJ a lump sum [initiaLlfranchise fee of $12,500 when you sign the Franchise Agreement for a Non-Traditional location. The [initial Jfranchise fee is not refundable under any circumstances.

The above fees and payments as well as construction fees and site approval and evaluation fees [(described in Item 6 belowl 1 include all fees and payments for goods and/or services paid to Smoothie King before the Smoothie King <~~Nutritional Lifcntvl~~e Center><®>[Busincss1 opens. Smoothie King intends to pursue shared space arrangements, such as co-branding and franchising or licensing of its products, with franchisees of other food and retail concepts and franchises or licenses with major food service organizations, such as those that run university, hospital, arena and airport concessions. <~~Rocaur~~,~~Q ofo~~-fDue to changing,] market conditions, Smoothie King may enter into agreements with these franchisees and companies during the term of your franchise agreement that have different fees than those listed above and other terms that are materially different from your franchise agreement.

Item 6L1

OTHER FEES

[

Smoothie King <3065->20Q6f-2n071 ffiP:1921925v4- 3/28/06 DRAFT!

[NAME OF FEE

^AMOUNT

DUEDATE

■"&■;.>

<Qpe~~ra ting~~-Fee⁴

< ~~Within 6 day~~s ~~aft~~e~~r th~~e end-of-eaeh-~~fiH>nth~~>

< ~~Adv~~e~~rti~~s~~ing~~- Fees^?><a=System> <-b-.~~National~~>

<~~Local Mark~~e~~ting and Adv~~e~~rtising Coop~~e~~rativ~~e ~~Contribution~~⁴->

<~~Grand Op~~e~~ning~~>

<~~Up to 5% of gross sal~~es>

< ~~Minimum of 2% of~~-~~Gro~~s~~s Sal~~es>

~~< Minimum of $1,Q00~~>

< ~~Within 6 days aft~~er e~~nd of~~-e~~ach month~~>

< ~~Monthly~~-~~or a~~s-pe~~r th~~e-~~Coop~~e~~rativ~~e ~~By Laws~~>

<~~During on~~e ~~month b~~e~~for~~e and-wt~~thin thr~~ee ~~months aft~~er epemngr>

<~~Sit~~e ~~Appl~~i~~cation and Evaluation~~>

<~~No charg~~e-fer-~~fir~~st e~~valuation. Aft~~e~~r fir~~st eval~~uation, you will >thi~~e ~~King for it~~s

<As-~~incuff~~edr>

reasonable ~~actual~~ expense~~s incurred~~-~~in conduct~~i~~ng th~~e e~~valuation~~:--~~You~~-~~may b~~e ~~requir~~e~~d to~~-~~pay for an~~ i~~mpact~~ s~~tudy, ranging from $~~4~~_iQ~~Q-to-~~$6j00Q~~-i~~f your propo~~se~~d sit~~e~~^nay~~-~~aff~~ect sales-~~of anoth~~e~~r Smoothi~~e ~~King Nutritional Lif~~es~~tyl~~eCenterr>

<~~Int~~ere~~st on Lat~~e ~~Paym~~e~~irt~~s>

<~~18% p~~e~~r annum or maximum rat~~e ~~allowed by law, if less than 1~~8%.>

<~~Aft~~er-~~dat~~e ~~paym~~ents-are-

Training Fees^<4>Elⁱ

No charge for initial training programs. After first training program you may have to reimburse Smoothie King for <tts>|ilie] reasonable actual costs <i~~ncurr~~ed>fwe, incur] in conducting the samef. or other.] training <~~program~~>[prf)fframs] for other personnel.

As incurred<7>

Remodel Costs

$15,000 to $60,000;

None for Non-Traditional locations

during term of agreement.

After 5 years from date the Franchised Business opens for operation or upon transfer of store.

Audit Fees

Audit discrepancies and

reasonable actual costs of conducting

audit.

After audit and audit costs if gross sales are understated by 2% or more.

Transfer Fees^<"*^>['

30% - 50% of the then-current initial franchise fee.

30 days before transfer<T>

Securities Offering Fee

Up to $5,000.

Upon your review of Securities Offering.

Supplier Approval Fee^<JI>'*^]

<Re~~asonabl~~e >Actual costs of inspection and testing

Upon inspection and testing of products<T>[J

Monthly Financial Report Deviation Fee*^⁷'

Maximum of $<3QrOO>r_jQj per horn-

As incurred<r>

Smoothie King <2QQ5->2006f-?0071

Legal Fees/ Arbitration Costs <>

Reasonable expenses associated with enforcement of agreements.

Upon conclusion of legal proceedings<7>

Construction Plans for New <e?~ Rel~~ocat~~ed->S tores

Up to $<H5Q>{U2g\

Paid to < ~~Franchi~~se~~s, Ir~~ter>[as]

fiejoyated Stores]

Mln to $2.50111

Local Architect and Local Mechanical/Electrical (MEP) Engineer_________________

<~~Maximum~~>[ $<44)QQ>f1.S00toS7Ji001

<~~Out~~so~~urc~~e>[ A«; incurred]

NSF Checks or Draft

$50 for first occurrences

t_]$75 for each occurrence thereafter<-~~Smoothi~~e ~~King ha~~s the ~~right to~~>[ mav) change (this fee Ion notice.

As incurred<r>

Product and Service Purchases

VariesSee Item 8

As incurredSee Item <&r>[8]

Extra Operational and Marketing Supportf. Ineludii

Reimbursement of reasonable actual expenses.

As incurred<7>

<Re~~plac~~eme~~nt F~~ee ~~for Manuals~~>

~~<$500 for R~~o~~cip~~o ~~Maniial/Book.~~> <S~~250 for~~-e~~ach oth~~e~~r Manuak~~>

<Befete re~~pla~~eeme~~nt of~~-~~manual~~-~~for lo~~ss~~, th~~e~~ft or d~~e~~struction^~~

<~~POS Ca~~s~~h R~~egiste~~r R~~e~~porting~~ Fees>

<~~Not to~~ excee~~d-$75~~

<~~Thi~~s fee ~~is pa~~i~~d monthly at th~~e same ~~tim~~e ~~you pay th~~e ~~operating~~ -fee~~. S~~ee-Ite~~m 1~~4-:>

<Re~~location F~~ee>

<$47~~000~~-{site ~~packag~~e ~~and plans may b~~e-~~an a~~d~~ditionat~~-e~~harg~~e^>

<~~As incurred~~>

<Rene~~wal F~~ee>

<~~$S,QQ0~~>

<~~30 day~~s-be~~for~~e-rene~~wal~~>

<~~Monthly~~-~~Packag~~e-~~Report~~tft~~g Lat~~e-Fee^9>

~~<$25 $3Q0~~>

<~~As incurr~~ed>

<~~Lat~~e ~~incom~~e-~~portion~~-~~of paperwork~~ fee>

<$5~~0 or as~~

~~from tim~~e to-~~tim~~e>

~~ling adju~~sts

<As-4rt~~curred~~>

<R-e~~mark~~etiflg- Ass~~istanc~~e Fee^w>

<~~Great~~e~~r of $ 10,000 or 10% plus any adv~~e~~rti~~s~~ing co~~sts>_________

<~~As iacurr~~ed>

Smoothie King <3QO^->20Q61-20Q7]

General Comments: All fees are payable to Smoothie King and apply to the Franchise Agreement unless otherwise stated. The fees are non-refundable. During the term of the Franchise Agreement, Smoothie King may offer optional services not currently contemplated for which Smoothie King may charge a fee.

(1) <O~~pcrating~~ ~~Fec~~i~~You must pay 6% of yourmonthly Gross Sal~~e~~s to Smoothie King b~~e~~ginning the dat~~e ~~you open for buaincss>~~<(2)>Gross Sales: Gross Sales is defined as all products and services sold in or from the Unit. This includes concessions off premises, catering, and delivery. Gross sales does not include any excise or sales tax.

~~«3) Advcrtisin~~g>f2^ Marketing and Promotional) Fees: Excluding airports, You must pay <~~advGrtininp~~>[markerjnfl and promotional] fees beginning the date you open for business. You will pay up to 3% of your monthly Gross Sales to Smoothie King for the System <~~Advertising~~ >Fund. Smoothie King currently requires a 1% contribution to the System~~< Advcrtising~~> Fund. You also may be required to pay up to 1% of your monthly Gross Sales to Smoothie King for deposit to each of a Regional Fund or National Fund Fee. The combined amount contributed to the Regional Fund and the National Fund may be up to 2% of your Gross Sales or when combined with the System Fund fee, up to 5% of your Gross Sales.

(^<4>Q1) Local Advertising and Marketing: You must spend, on a continuing monthly basis, a minimum of 2% of monthly Gross Sales on local advertising and marketing. Except for special locations, Smoothie King may require you to pay all or any part of the local advertising and marketing fee to a local advertising cooperative if one is established in your area.

(^<S^>(41) Training Fees: You must pay all personal expenses <~~inourr~~e~~d by~~ >you and/or your team members <m>[incur to attend] training programs, including costs and expenses of transportation, lodging, meals, wages and employee benefits. Smoothie King reserves the right to charge reasonable fees for materials and participation in any training courses or seminars, but Smoothie King will not charge for the attendance by up to two persons representing you at the initial franchise management training program,

Smoothie King <2QQ5->2006r-20071

(<6>IS1)U Transfer Fee: The amount of the transfer fee depends upon whether you are transferring your interest to a current Smoothie King<®>[ Business] manager, franchisee or developer and whether the transfer will require a new location for the Business.

(<3>[I) Supplier Approval Fee: If you desire to purchase any items from an unapproved supplier, Smoothie King may impose a charge which the franchisee or the supplier must pay not to exceed the -tre~~asonabl~~e- >actual costs of its inspection and testing.

(<8>[21) Financial Report Deviation Fee: If Smoothie King must correct your financial reports because they do not meet Smoothie King's designated form, Smoothie King may charge a reasonable fee for its services that will not be more than $<30r00>[2fl] per hour.

(<9>[S1) Package Reporting Late Fee:<->[J If you are late in sending in the required monthly paperwork package, Smoothie King may charge between $25 and $300 for late or<-> non-submission of paperwork.

(<iO>[]) Remarketing Assistance Fee:<->[_JFrom time to time, Smoothie King may offer this optional program. If the program is chosen, offered, [vou (as ]the franchiseeQ] and[_Ui] prospective purchaser meet our then<->[Jcurrent qualifications, and <the ~~Franohis~~ee ~~agr~~ees>[you agree] to follow all specified guidelines, Smoothie King will assist in the sale of the< ~~franchi~~sod> Unit and collect the greater of $10,000 or 10% of the purchase price.

Item 7

INITIAL INVESTMENT

TRADITIONAL LOCATION

	* X Estimated Cost ^1 f Low,-High '-]	%~ Method of '% * *■ Payments?	' *>VhenDue v"	Vi^ToWhom^ i'Payment^rMade"
Initial Franchise Fee'	$<3#_TOOO>[?0₁0001 -$25,000	Lumpsum	Upon signing of franchise agreement	Smoothie King
First Month's Rental & Deposit²	$<5₇500>[fiJM]	As arranged	As arranged	Lessor
Equipment and Smallwares³	$25,000- $40,000	As arranged	As arranged	Approved suppliers
Opening Advertising	$500 - $2,500	As arranged	As arranged	Personnel and suppliers
Training Expenses⁴	$<0>[50S] -$<^OOO>r4.0001	As arranged	As arranged	Suppliers of lodging and transportation
Insurance⁵ (First year's premium)	$1,500-$2,500	Lump sum in advance or installments	Monthly, quarterly or yearly	Insurance company
Other prepaid expenses⁶	[$2^iLJ$5,000<-$7,500>	As arranged	Lump sum	Suppliers, government
Start-up supplies,	$5,000-$15,000	As arranged	As arranged	Approved

Smoothie King <3005->2006r-20071

rc;p:mmsv4-:

^ [Expenditures!	*.Estimated Cost '" ■;* ₃ ^;Lo\v-High**	Method of, Payment**	When Due;"	To Whom^sPayment Made-
inventory⁷				suppliers
Millwork, Fixtures/ Signage and Graphics	$22,000 - $34,000	As arranged	As arranged	Approved Suppliers
Leasehold improvements⁸	$20,000-$<78^00>[2fiJMl	As arranged	As arranged	Suppliers
Legal, accounting & organizational costs	$500-$3,000y	As arranged	As arranged	Government, attorneys, accountants
Miscellaneous costs⁹	$1,000- $<^000>[6»OM] (additional fees if drive-thru location)	As arranged	As arranged	Various suppliers
Additional funds3 months¹⁰	$20,000 - $20,000	As arranged	As arranged	Suppliers/ Line of Credit
TOTAL¹¹¹²	$251,000]

NON-TRADITIONAL LOCATION

	^Ai_t Estimated Cost \L '\;^J 'Low-High ' ?j	Method of Payment ;■■	¹ When Due"' \'	TojWhom "' Payment Made
Initial Franchise Fee¹	$12,500-$12,500	Lump sum	Upon signing of franchise agreement	Smoothie King
First Month's Rental & Deposit²	$500 - $5,000	As arranged	As arranged	Lessor
Equipment and Smallwares³	$25,000- $40,000	As arranged	As arranged	Approved suppliers
Opening Advertising	$500 - $2,500	As arranged	As arranged	Personnel and suppliers
Training Expenses⁴	$<0>[5fla]-$<^QQQ>r4.0Q01	As arranged	As arranged	Suppliers of lodging and transportation
Insurance⁵ (First year's premium)	$1,500-$2,000	Lump sum in advance or installments	Monthly, quarterly or yearly	Insurance company
Other prepaid expenses⁶	$1,000-$5,000	As arranged	Lump sum	Suppliers, government
Start-up supplies, inventory⁷	$5,000-$15,000	As arranged	As arranged	Approved suppliers
Fixtures/S ignage	$14,000-$18,000	As arranged	As arranged	Approved suppliers
Leasehold	$10,000-$45,000	As arranged	As arranged	Suppliers

Smoothie King <3QQ5->2006r-20071 1(^:1921925 v4-3/28/06 DRAFTl

	Estimated Cost Low - High	Method.of ~ Payment-.	_s , When Due¹	-_tffo Whom r' Payment Made
improvements⁸
Legal, accounting & organizational costs	$500 - $<3_TQQQ>[6.00Q]	As arranged	As arranged	Government, attorneys, accountants
Miscellaneous costs⁹	$500 - $3,000 (additional fees if drive-thru location)	As arranged	As arranged	Various suppliers
Additional funds3 months¹⁰	$20,000 - $20,000	As arranged	As arranged	Suppliers/ Line of Credit
TOTAL¹¹¹¹	&134_iOOQ>l91.500-Sf 178.0001

NOTES:

General Comments: The above figures are estimates of the complete investment in establishing a Smoothie King Nutritional Lifestyle Center<®> and it is possible to significantly exceed these costs in <anv>rmanv] of the areas listed above. Your actual investment will depend upon many different factors like location, amount of space leased, amount of leasehold improvements, and your ability to efficiently manage and coordinate the construction and opening of the Unit. The amounts paid to Smoothie King are non-refundable unless otherwise stated. The refundability of amounts paid to third parties depends upon your negotiations with these parties. The following notes are integral to the understanding of the financial commitment required to successfully establish and operate the Smoothie King Nutritional Lifestyle Center<®>. You should review the notes thoroughly.

(1) Initial Franchise Fee: <~~Curr~~e~~ntly we charg~~e ~~$25,000~~ >If you< ~~curr~~e~~ntly~~> have <&ve-~~Smoothic King Nutritional Lif~~e~~style Ccntorn~~><®>[5 Units'! °P^en ^and operating, and <if->you desire to open more Units under new franchise agreements, we currently charge $20,000 for each additional Unit.

(2) First Month's Rental and Deposit: Typical Traditional locations for Smoothie King Nutritional Lifestyle Centers<®> are shopping centers and suburban shopping areas. Typically, you would lease an existing location in a strip center or other commercial shopping center and remodel the location to conform to the current design specifications of Smoothie King Nutritional Lifestyle Centers<®>. You may also lease the land and an existing facility and convert the facility to a Smoothie King Nutritional Lifestyle Center<®> or enter into a build-to-suit lease under which lease the landlord agrees to construct a structure which is used as the Smoothie Nutritional Lifestyle Center<®> and lease the land and the building back to you. You may also purchase the land and build the facility yourself. The cost of land may vary dramatically depending upon a multitude of factors and it varies by city and region. Smoothie King has not included costs for land acquisition or the construction of a free-standing building. You must perform a thorough investigation in your local area concerning land, site, leasehold and construction costs. These costs may vary significantly from location to location and are dependent upon factors like the general cost, location and availability of commercial real estate in your market area and the amount of space desired.

Smoothie King <2QQg->20Q6[-20071 [C,P:192192S v4- 3/28/06 DRAFT1

Typical Non-Traditional locations for Smoothie King Nutritional Lifestyle Centers<®> are explained in Item 11 <~~of thir~~. ~~document~~>fhelow1 under Site Selection Methods. Non-Traditional locations will usually require remodeling of the existing premises.

Rental costs vary considerably depending upon regional and local factors and the type of lease <nn~~jrntiatQd hy~~ >vou[ negotiate]. For a typical Smoothie King Nutritional Lifestyle Center<®>, you must lease approximately 750 to 1,500 square feet of building space for a Traditional location and 250 to 750 square feet for a Non-Traditional location. Rental rates for a typical Unit may range from $1,000 to $4,000 per month ($12,000 to $48,000 per year) for a Traditional location and $500 to $2,500 per month ($6,000 to $30,000 per year) for a Non-Traditional, depending upon location and market demand for the property. The rate may be higher for regional mall sites or locations in high demand. Smoothie King estimates that the range given will cover a security deposit and first month's rent although^] in certain situations^] landlords <eeu44>rmavl require a larger security deposit.

(3) Equipment: Smoothie King will provide a complete list of equipment needs and specifications required for store equipment, fixtures, millwork, lighting and graphics. Also included in these costs are the costs of computer equipment.

(4) Training Expenses: Smoothie King provides instructors and instructional materials, but you must arrange for <yeu^-ewn->transportation, lodging, and meals for yourself and for any costs incurred by <~~n^r~~.~~noiaten~~>fvqur employees!. The costs will depend on the distance you must travel, the type of accommodations, the number of attendees and any wages <~~paid by~~ >you[_gayJ to <the-afir,~~ooiat~~es>|vour employees] attending training. The costs listed include estimates for reasonably priced transportation, lodging and meals for one person. The costs do not include additional wages paid for <~~anr~~,~~ociat~~er.>(emplovees] or team members attending training. You and <~~all signer franchi~~s~~ees on the Franchise A~~f~~n-G~~ome~~nt>~~^ranv designated Unit manager! must attend one day of orientation training <m-~~Kenn~~e~~r, Louisiana~~ >and <eleven>[14] days of management training <~~in M~~o~~tairio~~>[at our corporate headquarters in Covington]. Louisiana!, and at nearby remote locations!.

(5) Insurance: You must obtain comprehensive liability, property and other types of insurance coverage as provided in your Franchise Agreement<_T>Land] leased] and as required by law. The estimate given in the chart is for the first year's premium for a customary comprehensive general liability policy in the amount of $1 Million Dollars per occurrence and $1 Million Dollars aggregate with full replacement value of business contents coverage.

(6) Other Prepaid Expenses: These costs include installation charges and deposits for a business telephone line, utilities, occupational licensing, health and other permits, and, in some areas, zoning fees.

(7) Start-up Supplies, Inventory: <~~Smoothi~~e ~~King estimat~~e~~s that the range given will b~~e r,~~uffioient~~>|This is the estimated amount] to cover a supply of [smoothie ]ingredients[. paper products, cleaning supplies and retail inventory] for your Unit for at least two weeks to one month of business operations, depending upon your sales level. As further described in Item 8, Smoothie King® franchisees entering new markets will likely incur higher freight costs than franchisees in established markets.

(8) Leasehold Improvements: You must obtain construction drawings and make certain improvements and modifications to the particular building you lease to conform to the decor and design

Smoothie King <2005->2006k2MZ]

lanmrns v4- vm/at drafti

of other Smoothie King Nutritional Lifestyle Centers«©>.<-> Smoothie King has an in-house design department that will prepare construction drawings and specifications for your building. These plans will not include mechanical, plumbing or electrical specifications and^] in most but not all states[>] you will be required to hire a local licensed architect and mechanical/electrical/plumbing engineers to review, approve and complete the plans for proper permitting.< ~~The co~~a~~t of th~~e ~~architectural drawings typically ranges from $1,500 to $5,6~~80.> The cost of the improvements will vary depending upon the condition and type of building leased and the willingness of the lessor to contribute to the construction or remodeling of the Unit. Costs could exceed the estimates provided if remodeling is extensive and the lessor does not contribute significantly to the costs of remodeling the Unit.

(9) Miscellaneous Costs: Smoothie King recommends that you budget an additional amount of cash to cover miscellaneous costs incurred with the opening of the Unit. If you plan to have a drive-thru window, add approximately $20,000 to your investment.

(10) Additional Funds: This amount reflects the minimum amount of additional funds you will need for the first three months you operate a Smoothie King Nutritional Lifestyle Center<®>. This amount includes <~~thc following it~~emsn>salaries and wages, payroll taxes, advertising, product purchases, line of credit, payment of royalties, uniforms, utility bills, ongoing professional fees, freight, and other miscellaneous administrative and operating expenses. You <fnast->also[ must] secure and maintain a line of credit in a minimum amount of $20,000. Smoothie King will reasonably determine the amount to ensure that you will have sufficient financial means to purchase product and other items necessary to operate your Unit. Your lending institution may require a deposit to secure your line of credit. This deposit is generally refundable, although the costs incurred in obtaining a line of credit are generally non-refundable.

(11) Total Investment: Smoothie King relied on <~~its prior~~>[our 33 years ofl experience in this business to compile these estimates. You should review these figures carefully with a business advisor before making any decision to purchase the franchise. If <a>[the] Unit <is-te>|"wiir| have a drive-thru, add an additional $20,000 to the construction cost for exterior system, signage, special window, lighting, and other items.

(12) Financing: Smoothie King does not offer, either directly or indirectly, financing to you for any items.

Item 8

RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

Approved or Designated Suppliers and Specifications: To maintain the reputation, goodwill, high standards, quality and uniformity of our System, there are certain products that you must purchase directly from our approved or designated suppliers. You must purchase or lease all other goods and services under the specifications and guidelines issued by Smoothie King. Specifications may include minimum standards for building size, leasehold improvements, zoning, lease provisions, location criteria, qualifications of architects or contractors, security systems, signs, equipment, quality, quantity, delivery, performance, design, appearance, durability, style and other related restrictions. You must also use only the standard forms approved by Smoothie King and use and display sales, marketing, and promotional material provided in the manner and for the time periods designated by Smoothie King. You must ensure that all items and printed materials used in the Smoothie King Nutritional Lifestyle Center® bear the Proprietary Marks in the manner required by Smoothie King. Smoothie King considers these

Smoothie King <30QS->2QQ6r-20071 rC.P:192!92S v4- 3/28/06 DRAFT1

specifications to be of critical importance to the success of the System. These specifications are listed in the Manuals or are otherwise provided to you in writing and may be revised by Smoothie King. If a supplier does not meet our specifications stated in the Manuals or as provided to you in other written materials, we may require you to stop using that supplier.

Purchases From Smoothie King or Smoothie King Affiliates: You must use Smoothie King's design department to prepare or oversee the preparation of construction drawings and specifications for your Unit premises. [You will pav us $1.750 for ]these services< ~~generally coot $1,750. You are not~~ GtHeft4v>r. You mav incur additional costs (paid to third parties^ in completing construction drawings and specifications. You, currently are not] obligated to purchase any products, equipment, supplies or other items from Smoothie King. <~~Howcver,~~ >Smoothie King may[. however,] require you to purchase from us or our affiliates certain Smoothie King developed proprietary products in the future^ You must purchase certain Smoothie enhancers known as "Joint and Tissue Repair." "MSM Powder." "MSM Hvdrating Lotion" and "Caffeine Charge" from our affiliate. O-

Purchases From Designated Suppliers: You must purchase the following items from Smoothie King[I§] designated suppliers or their authorized distributors only: blenders, menu board, ice machine, water filtering system, small wares<~~, cleaning suppli~~os>, cash register, table and chairs, interior non-neon store signage, shelving, security system, equipment, inventory, fixtures, furniture, displays and certain retail product lines making up your initial inventory upon opening the Unit (See Item 16). Smoothie King may add other items that you must purchase from designated suppliers or their authorized distributors at any time in the future. We, an affiliate or a third-party vendor or supplier periodically may be the only designated or approved supplier for certain products. You must purchase your strawberries, purees and certain proprietary and confidential mixes manufactured for Smoothie King, other Smoothie King ingredients and most logo items, paper products and private label from [ROM A-a ]VISTAR</A-~~("VISTAR~~M Food Service Company ("ROMAIC or other approved vendors. <ISTAR>[RQMA] is Smoothie King's current authorized national distribution company, which allows the distribution of uniform product lines throughout the system and the ability to obtain discounts on volume purchasing from manufacturer sources. <Be~~caus~~e of>[Due to] minimum purchasing requirements and volume

discounts on some items, <~~as a practical matt~~er >it [likely ]will be to your benefit to purchase other approved products from <VIS~~TAR~~>[RQMA] even though Smoothie King does not require you to do so. Smoothie King may change its authorized national distribution company if it deems it necessary to do so. Except as noted above, neither Smoothie King nor persons affiliated with us are designated suppliers. Smoothie King reserves the right to designate specified suppliers from <whieh>rwhom1 franchisees can only purchase from in the future.

Purchases From Approved Suppliers: You must purchase or lease selected inventory, supplies, and other products and materials required for the operation of your Smoothie King® Business <~~in accordanc~~e>[consistent] with specifications set by Smoothie King or solely from suppliers who demonstrate the ability to meet Smoothie King's reasonable standards and specifications. You must purchase your vitamin and supplement inventory, signage, some paper goods, and other items from approved suppliers. All other items may be purchased or leased from suppliers whose products or services meet Smoothie King specifications, except for general office supplies and equipment and other general business items. <~~Smoothie King~~ e~~stimates that~~-~~your purchas~~e~~s from approv~~e~~d suppli~~e~~rs will b~~e ~~approximately 15 20% of your total initial investment and approximat~~e~~ly 20% of your ongoing~~ expe~~nse~~s ~~in the op~~e~~ration of th~~e ~~Smoothie King Nutritional Lif~~e~~style Cent~~er><@x>For your benefit, Smoothie King negotiates purchase arrangements, including favorable price terms, with approved suppliers. In addition, Smoothie King has designated Kendall Frozen Fruits, Inc. as our exclusive broker through

Smoothie King <2QQ5->2006r-20071 ir,P:1921925v4-V

which all fruit and fruit suppliers are selected. Smoothie King may receive rebates, management fees, other pay, or cooperative advertising contributions from select approved or designated suppliers ranging from less than <0>[1]% to as much as <-!-2>[lJj]% or more of the purchase price of certain products purchased by <rt^:s>[oju:] franchisees. Smoothie King plans on continuing to request that some suppliers contribute to <ite>[jmrj advertising funds, annual conventions and management costs to offset the associated costs of these activities. [Aside from possible favorable price terms. ]vou do not receive any material benefits from Smoothie King if you use designated or approved suppliers. However, purchasing or leasing from unapproved suppliers or using products that do not meet Smoothie King specifications is a default in your Franchise Agreement, and Smoothie King may terminate your Franchise Agreement or pursue <its>[ojrrJ other remedies available to <*t>[fis] under the Agreement. A default under your Franchise Agreement may also be cause for Smoothie King to not renew your Franchise Agreement or disqualify you from opening additional franchises.

You should be aware that there may be price increases in any or all of the items you must purchase from suppliers and other third parties. Costs of goods from <~~VISTAR~~>rRQMA] and other suppliers may fluctuate from month to month. Prices charged to you are determined by the volume of purchases, usage, vendor minimums, inventory turns, ingredient costs, market demand and other similar factors. Additionally, freight charges may not be uniform for all franchisees. Freight charges will depend upon the location of the Unit from the supplier's warehouse and the number of other Smoothie King <~~Nutritional Lif~~e~~styl~~e ~~Centers~~><®> [Businesses! in your area. Franchisees entering new markets should be aware that your freight costs may be higher than fthe costs ]Smoothie King® franchisees[_ incur] in other markets and you should adjust your cost projections accordingly-^~~. Smoothie King do~~e~~s not know of any pending pric~~e ~~incr~~ease~~s, but Smoothie King cannot guarante~~e ~~that increases will not~~

/*!/>f* ■ 1 t"*H>

UVVUl'.

Compliance with Specifications: If you desire to purchase any items from an unapproved supplier, you or the supplier must submit to Smoothie King a written request for approval in advance. The approval must be obtained in writing. Smoothie King <must>[will] advise you within a reasonable time whether these items meet its specifications. The time for written approval from Smoothie King may range from five business days to six months, depending upon the amount of research, testing, cooperation from suppliers, and other factors involved in approving the items. Smoothie King's written approval will not be unreasonably withheld although there are certain products <~~purchas~~ed>[that you must purchase] fromf us or our] designated suppliers< ~~that ar~~c ~~roquired~~>. Smoothie King may require that <its>rour] representatives be permitted to inspect the supplier's facilities and that samples from the supplier be delivered to Smoothie King or <its>[our] designee for testing. Smoothie King may impose a charge not to exceed the~~< r~~e~~asonabl~~e> actual costs of inspection and testing, which you or the supplier must pay. Smoothie King reserves the right to re-inspect the facilities and products of any previously approved supplier and to revoke its approval upon the supplier's failure to continue to meet any of Smoothie King's standards and specifications.

If you obtain services from third-party providers, Smoothie King will have the right to review the terms and conditions of your arrangements and require additional information about the business background and qualifications of the providers, including personal interviews with individuals providing the services. If any third party obtains access to confidential information and intellectual property,

Smoothie King <2005->2006k2HZl fCP:l92l925v4-3/28/06 DRAFT!

Smoothie King may require, as a condition of approval of the provider, the signing of confidentiality and non-competition agreements in a form satisfactory to Smoothie King. Smoothie King may disapprove any provider, upon written notice to you, who does not demonstrate an ability to comply with the standards established for the System and to meet the needs of Smoothie King® franchisees promptly and reliably. Smoothie King considers the following general criteria in determining whether a supplier will be approved: ability to produce or deliver the products, services, supplies or equipment in accordance with Smoothie King's standards and specifications for quality and uniformity; production and delivery capabilities and ability to meet supply commitments; integrity of ownership (to assure that the supplier's association with Smoothie King would not be inconsistent with Smoothie King's image or damage Smoothie King's goodwill); financial stability; meets minimum standards of licensing, insurance and regulatory requirements; and the negotiation of a mutually satisfactory agreement to protect Smoothie King's intellectual property. Smoothie King's criteria for specific types of suppliers are either made available to you in the Manuals or will be made available to you upon written request.

Smoothie King maintains a written list of approved supplies (generally identified by brand name) and suppliers, which is updated and issued to you on a regular basis. Smoothie King does not provide confidential specifications to you or suppliers, except on a limited basis. If a product, equipment or other item does not meet Smoothie King's specifications, however, Smoothie King will provide a written explanation within a reasonable amount of time, depending upon the testing involved as described above, as to why the product or equipment does not meet Smoothie King's specifications. Smoothie King establishes and modifies specifications and standards by periodically performing tests on its products and equipment in relation to new products and equipment.

During its last fiscal year ending December 31, <3004_T>[20j^₁] Smoothie King received approximately<-> S<~~7.199.61~~>[87.9001 in revenue from franchisees or suppliers that directly or indirectly provide products or services to franchisees to offset the costs of Smoothie King's annual

franchise conference, advertising and management and administration costs.<>[___jThis amount

represents <t44>[1^]% of Smoothie King's total revenues of SK~~6.24 A A 66.0Q~~>[6.979.256] as reflected on our audited financial statements attached to this Offering Circular.

rWe estimate

tr lease of equipment-

inventory. supplies

materials which meet our specificat tal purchase in estahli

represent approximat usiness and ai

to 60% of the cost to operate vour Smoothie King Business. There are no product purchasing or distribution cooperatives currently in existence.1

Smoothie King <3005->2006[^J22I]

litem 9

FRANCHISEE'S OBLIGATIONS

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

/''\ OBLIGATION ■ .* !-	/SECTION IN FRANCHISE ^r" AGREEMENT OR ADDENDUM - * e*	. ITEM IN OFFERING \ CIRCULAR
a. Site selection and acquisition/lease	Sections 1.2, 1.3, lu.2, <io.3.H a»d>[Ikli4.] 10.4, Exhibit H; Addendum Section 1	Items 6, 7, Hand 12
b. Pre-opening purchases/ leases	Sections 1.5, 3.8,9.4,10.2,10.3, 10.4, <4&6r>12.6; Article XIII; Exhibit H, Exhibit E; and Addendum Section 6	Items 5, 6, 7, 8, and 12
c. Site development and other pre-opening requirements	Sections 1.2, 1.3, 1.4,3.4,4.1,9.2, 9.3, 10.2, 12.6, and Attachments A andB	Items 6, 7, 11, and 12
d. Initial and ongoing training	Sections <2^6,>f2.2.6.] 4.1.4, 17.3; and Article IX	Items 6, 7, and 11
e. Opening	Sections 1.5,4.1.5, 10.3, 12.6, 18.3; and Addendum Section 6	Items 6, 7, 8, and 11
f. Fees and Payments	Articles HI, X, [XIJXII, XV, XVIII<^a>; Exhibits G and L; Sections 2.3.3, 9.4, <and->16.1.5; and Addendum Section 3	Items 6, 7, 8, and 11
g. Compliance with standards and policies/Operating Manual	Articles VI, VII, VIII, XIII, XIV, XVII, XVIII; and Sections <Or3T>r2.2.1 10.1. 10.2. 10.3,10.5, 11.1, 11.4, 15.5, 15.6, 21.3; and Exhibit I	Items 8, 16 and 17
h. Trademarks and proprietary information	Articles VI, VII, VIII, XVI, <and->XVII; Sections 10.1, 10.3.16, ri0.3.171and <11.1.8,>[H*LZ]; and Exhibits F and I; and Addendum Section 4	Items 13 and 14
i. Restrictions on products/services offered	Section 10.3	Items 8 and 16
j. Warranty and guest service requirements	Sections 10.3, 10.5, and 12.5	N/A
k. Territorial development and sales quotas	Articles I and Section 8.3.6; Addendum Sections 1,4 and 10; and Attachment A	Items 12 and 20
1. On-going product/ service purchases	<Sections 10.3.1, 10.3.S, 10.3.6, 10.3.9, 10.3.14, and	Items 8 and 16

Smoothie King <20OS->20O6[^fl22J Z8/06 DRAFT1

.. . , T 1 '..'' '_\. OBLIGATION -' I	I SECTION IN FRANCHISE.' ' AGREEMENT OR^fADDENDUM	* ITEM IN OFFERING \ CIRCULAR/ '
	4SA44>!Section 10.31
m. Maintenance, appearance and remodeling requirements	Sections <40.3, 2.3.5^>[2.2.5_t] 10.2, <44.1.3,and>[lJL3J 15.6.3; rand ]Addendum Section 5	Items 6, 7, 8 and 11
n. Insurance	Article XIII	Items 6 and 7
o. Advertising	Article XII; Sections 3.6, 3.7, 8.2.3, 8.2.8, 11.2, <ftn4>U.5; [ani. ]Addendum Section 6	Items 6, 7, and 11
p. Indemnification	Article XX; Sections 8.2.6 and 13.1.5	Items 6, 7, and 13
q. Franchisee's participation/ management and staffing	Article IX; and <Sections 10.3.10, 10.3.11, and 10.3.H>[SfiiUUL 10.3.111	Item 15
r. Records and reports	Article XI; Sections 5.1.3, 5.2, 5.3, 10.3.5, 13.3, <444^r>ri4.1.S.1 and <44^>[14a]	Items 6, 8 and 17
s. Inspections and audits	Sections <4^3T44r>10.3.12, 11.4, 11.5 and 11.6.	Items 6 and 11
t. Transfer	Article XV; Addendum Section 8; and Section <44^>ri4.41	Items 6 and 17
u. Renewal	Article II; Addendum Section 2	Items 6 and 17
v. Post-termination obligations	Article XVI; and Addendum Section 9	Item 17
w. Non-competition covenants	Article XVII	Item 17
x. Dispute resolution	Articles XXV and XXVI	Item 17
y. Personal Guaranty of all obligations of agreement	Exhibit G; and Section 5.4	Item 15

Item 10

FINANCING

Smoothie King does not offer direct or indirect financing. Smoothie King does not guarantee your loan, lease or any other obligation. You may be eligible for expedited Small Business Administration ("SBA") loan processing through the SBA's Franchise Registry Program, www.franchiseregistry.com.

Item 11

FRANCHISOR'S OBLIGATIONS

Except as listed below, Smoothie King need not provide any assistance to you. PRE-OPENING OBLIGATIONS

Smoothie King <3QQ5->2006f-20n71 rftP:192l92Sv4-3/28/0finRAFTl

Before you open a Smoothie King Nutritional Lifestyle Center<®>, Smoothie King will provide:

Site Location Assistance and Approval: Smoothie King will provide you with general site selection criteria and guidance in the selection of an acceptable site. You alone must locate an acceptable site for <~~n Smoothi~~e ~~Kinp Niitritinnnl I,ifontyle Centor~~>«&>[the Unit]. Smoothie King will evaluate and approve the location for the Unit if it meets Smoothie King's site criteria (Franchise AgreementSection 4.1.2).

Review of Lease: Smoothie King will review the tease for the location of the <~~Smoothic King Nutritional Lifestyl~~e ~~Con t~~er><®> [Unit] to ensure that provisions Smoothie King requires are included in the lease and that the terms of the lease are generally acceptable to Smoothie King. You alone must negotiate the business and financial terms of your lease and should have a local real estate attorney represent you in the negotiation (Franchise Agreement-Section 4.1.2). The Smoothie King Contingent Assignment of Lease (Exhibit <H>[G]) is required as an addendum of your lease document.

Plans and Specifications: Once Smoothie King receives as-built drawings (usually provided by the landlord or his architect), Smoothie King will prepare construction plans and specifications which includes: equipment, furnishings, decor and signs identified with Smoothie King® Businesses and approved suppliers and specifications for products and supplies (Franchise AgreementSection 4.1.1).<-> You <are ~~requir~~e~~d to~~>[niuxt] supply to Smoothie King <4^>a site plan of the center in which <vett>[the Unit] will be located, <>a floor plan of the leased space, <^>elevations of the building (front, side, and rear), and <4^>other drawings <~~an r~~e~~quired~~>[and information as we may require],

Review of Final Site and Construction Plans: Smoothie King will review your final site plans and construction plans <~~for conformity to th~~e>[to ensure thev comply with System] construction standards and specifications<-~~of th~~e-S~~yst~~em> (Franchise AgreementSection 4.1.3).

Manuals: Smoothie King will loan to you one copy of for provide electronic access to ]each of the Smoothie King confidential [pre-openinff. operations and marketing manuals and other manuals that Smoothie King makes available to all franchisees ([collectively, the "Manuals"^ ^Franchise AgreementSection 4.1.6). The table of contents of the Manuals is attached to this offering circular as Exhibit <I>[IQ.

Training: Smoothie King will train you and your Manager to operate the Smoothie King Nutritional Lifestyle Center<®> (Franchise AgreementSection 4.1.4). This training is described in detail later in this Item.

Other Resources and Assistance: Smoothie King will provide other resources and assistance as Smoothie King deems appropriate in opening <a~~Smoothi~~e~~KingNutritionalLif~~es~~tyle~~ efttef><®>[the Unit], including assistance by Smoothie King's personnel or its agents (Franchise AgreementSections 4.1.8 and 4.1.10).

OPENING/POST-OPENING OBLIGATIONS

During the operation of the Smoothie King Nutritional Lifestyle Center<®>, Smoothie King will provide:

On-Site Assistance: Smoothie King will provide you with on-site assistance upon the opening of the Smoothie King Nutritional Lifestyle Center®. During the opening of the Unit, Smoothie King will

Smoothie King <3OQg->2006[-2Q071 rr.P:l«1«Sv4-3fflW6PHAFT1

provide at least one Smoothie King representative to you at the Unit location to facilitate the opening of the Unit. The number of days of this on-site visit will vary, but a Smoothie King representative will normally be on-site <a-~~minimuffl of~~ seven>[2] days<-> (Franchise AgreementSection 4.1.5).

Grand Opening Promotion Assistance: Smoothie King will provide you with a marketing manual and guidance in marketing and promotions for your Grand Opening (Franchise Agreement ~ Section 4.1.7).

Marketing and Advertising Guidance and Approval: Smoothie King will provide you with a Marketing Manual and periodically provide you with materials and advice to support your marketing and advertising efforts (Franchise AgreementSection 4.1.7). Smoothie King will also approve or disapprove all advertising and promotional materials you propose to use (Franchise AgreementSection 12.4). Advertising is explained in more detail below.

Consultation: You may contact Smoothie King representatives on a periodic or as-needed basis to receive consultation and guidance concerning the operation of your Business (Franchise Agreement-Section 4.1.8). Smoothie King will also provide information to you about changes and modifications to the System and Manuals, advertising and marketing activities, and provide you with forms for required reports you must submit to Smoothie King. Smoothie King will periodically, as it considers necessary, inspect your supplies, merchandise, methods of service and merchandising and speak with you and your team members to ensure you are complying with your agreements, Manuals and the standards established for the System (Franchise AgreementSection 10.3.11).

Advanced Training: Smoothie King will periodically, as it considers necessary, provide you with advanced training in operating the <~~Smoothie King Nutritional Lif~~es~~tyle C~~enter><®>riJnitl (Franchise AgreementSection 4.1.4).

Regional Training:<-> Smoothie King provides a scheduled regional management training <feur-(>4<)->[₌]day course concerning [HaUJoperations< ~~of th~~e ~~Smoothi~~e ~~King Nutritional Lifestyl~~e Centerx®> (Franchise Agreement - Section 4.1.4).

New Products and Services: Smoothie King will evaluate and consider for approval the products or services you submit for approval for use in the Unit (Franchise AgreementSection 10.3.6).

Other Resources and Assistance: Smoothie King will provide you with other resources and assistance, which may be in the form of newsletters, bulletins, brochures, manuals, and reports on Smoothie King's policies, research, developments, and other resources and assistance as may be offered to all franchisees (Franchise AgreementSections 4.1.9 and 4.1.10).

SITE SELECTION METHODS<*>

[ ]The franchise is granted for a specific location. Smoothie King will approve an area for you to

search for a location. You must locate a site for your <~~Smoothic King~~x®x ~~BuGin~~esG>[IMtJ that Smoothie King will consent to. Smoothie King's consent will not be unreasonably withheld. Smoothie King will evaluate your proposed locations as soon as reasonably possible following the procedures in the <~~Smoothi~~o ~~Kine~~X®x ~~Confidential Pr~~e Ope~~ning Manual~~>[Manuals] or as Smoothie King may otherwise provide in writing. Factors considered by Smoothie King in reviewing and accepting proposed sites include population density, demographics, size of the space, rent, available parking, traffic count and patterns, ease of access, economic and population growth trends, <~~Smoothi~~e ~~King~~><®>[the] market

Smoothie King <3OOS->2Q0fil-2QQ71

penetration

_]and proximity to other businesses, including other Smoothie

King <~~Nutritionnl Lif~~e~~style CGnterr₁~~x@>[Businesses]. Smoothie King also considers whether the lessor will agree to the Smoothie King permitted use language and other required lease provisions. If Smoothie King determines that the location is not acceptable at that time or is too close to another Smoothie King <~~Nutritional Lifestyl~~e CenterX®>[Business]. Smoothie King will not consent to the proposed site and you must locate a new site for the Unit. See Item 5 for refund conditions.

Smoothie King considers all sites a Traditional location unless Smoothie King approves the location, in writing, as a Non-Traditionalf location]. Traditional locations are not determined by size and may or may not carry a full line of Smoothie King® products. Examples of these locations may include: strip centers, store fronts, enclosed mall spaces, mall food courts, airports, and other locations with street access or<-> medium to high population density in the trade area.

In certain situations, Smoothie King may offer franchises for Non-Traditional locations. If permitted, you may establish a <S~~moothi~~e ~~King Nutritional Lif~~e~~style Center~~><®>[llnit] in a Non-Traditional location. Non-Traditional locations are usually located within another business or dependent upon one main business or organization as its primary trade generator, normally have limited access by the general public, have a lower population density or traffic count in the location's trade area and the majority of its trade area is geographically limited, usually in relation to its primary trade generator. Non-Traditional locations are not determined by size, potential sales volume or whether you are sharing space with another concept and may or may not carry a full line of Smoothie King® products. For example, a location in a university with a small student population may be approved as a Non-Traditional location whereas the same location in another university with a larger student population may not. Other examples of these locations may include: small universities, small health clubs, small hospitals, small office buildings, small military bases, convention centers, grocery stores, movie theaters, convenience stores and locations within other retail and food businesses. Smoothie King has the sole and absolute discretion to determine whether to approve a Non-Traditional location.

The typical length of time between the signing of the Franchise Agreement or the first payment of any consideration for the franchise and the opening of a Smoothie King® Business at a Traditional location is six to twelve months and two to eight months for a Non-Traditional location as the location has typically been found at the time the franchise agreement is signed. Factors affecting this length of time include identification of a satisfactory site, lease negotiations, financing, zoning, building and other permits, construction delays (weather, labor, materials), and delivery and installation of equipment and signs. Problems or delays caused by any of these factors could delay the opening of the Unit beyond eight months.

Failure to obtain financing within 6 months or open for business within 1 year from the Effective

Date constitutes a default of the Franchise Agreement<-~~with a 30 day oure p~~e~~riod~~ >[.__](Franchise

AgreementSections 3.4 and 14.3.6)<t>

MANUALS<i->

The table of contents of all <~~Smoothi~~e ~~King~~X®x->Manuals< ~~and oot programs is describ~~e~~d b~~e~~low and~~> is attached to this offering circular as Exhibit <3>[fl].

TRAINING PROGRAMS

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[(1) JOrientation and Pre-Opening: You must attend Smoothie King's orientation and pre-opening training program as soon as reasonably possible after signing your Franchise Agreement and before beginning site selection. This program is

Smoothie King <3QOS->20Q61-20Q71

mandatory and held at Smoothie King's Home Office in <Kenner>rCovingtonl. Louisiana, and is scheduled as needed. It is designed to introduce you to the <~~Smoothi~~e feftg><®x->System, provide you with the <~~Smoothie King~~><®>< ~~Confidential~~ >Pre-Opening Manual and educate you to efficiently manage your site selection, marketing and pre-opening activities (see Exhibit <I^>[H]). You may or may not be required to attend orientation and pre-opening training for Non-Traditional locations if you are an existing franchisee.

(2) Initial Management Training: You must attend and complete, to Smoothie King's satisfaction, the initial management training program before you open a Unit. Smoothie King's initial management training program is mandatory for all franchisees and managers and conducted monthly, depending upon the number of attendees, at <S~~moothie King's company own~~ed>|our corporate office in Covington. Louisiana, and our corporate] store in Metairie, Louisiana. You <~~will bo sch~~e~~duled~~ io>rmiist1 attend the program after you complete site selection and within a reasonable time before your scheduled opening date. All permits must be in place before attending training. The initial management training course is 11 days, averaging <eight>[§] hours per day plus additional homework assignments. [We anticipate that in the future, the initial management training course mav be increased to 14 davs. ]Instructional materials will include written training modules, the <~~Smoothie King~~X®>< ~~Confid~~e~~ntial~~ Ope~~rati~~o~~ns Manu~~a4>TManuals] and actual products, books, and equipmenK (see ~~Exhibit~~

(3) Field Training: Smoothie King will send one Smoothie King representative to the Unit location, at no cost to you, for on-site training and assistance when you open the Unit. The length of time the representative is on-site may vary, but it is expected to be a minimum of <eight>[2] days. On-site training and assistance includes additional blending training, consultation and training on hiring of personnel, training of personnel, purchasing and inventory management, product promotion and merchandising, bookkeeping and reporting management, analysis of sales and product mix and other matters necessary to the opening and operation of the <~~Smoothi~~e ~~King Nutritional Lifestyle Ccnt~~cr><@>[X[nH].

Smoothie King may require any of your principals or team members who become actively involved in managing the <~~Smoothie King Nutritional Lifestyl~~e ~~Center~~><®>rilnitl to attend and satisfactorily complete the required training programs.

Smoothie King also offers additional optional regional management training programs, including refresher training, for you and your team members. Smoothie King may designate certain additional training courses for you or your team members as mandatory.

As discussed in Item 7, you must pay all personal expenses <~~incurrcd by~~ >you <er>[aadj your team members[Jfltux] in attending training programs, including costs and expenses of transportation, lodging, meals, wages and employee benefits, and any training fees. This applies for both mandatory and optional training programs. Smoothie King currently provides the materials and there is no fee for any mandatory or optional training program, except as described in Item 6. Smoothie King may, however, charge a reasonable fee in the future for training courses offered after the Unit opens.

Smoothie King <2QOS->20Q6f-2Q07] rGP:1921925 v4-3/28/06 DRAFT1

<~~Smoothi~~e ~~King's training staff includes the Director of Training, General Manag~~e~~r of th~~e ~~Corporat~~e ~~Stor~~e~~/ S~~e~~nior Op~~e~~rations Consultant, Store D~~e~~velopm~~e~~nt Manager, National Manag~~e~~r of R~~e~~tail Sal~~e~~s, Manager of Store D~~e~~sign & Construction, Ex~~e~~cutive Vice Presid~~e~~nt of D~~eve~~lopment & R~~e~~al Estat~~e ~~and Smoothie King Operation~~s ~~Consultants. An Operations Consultant will al~~s~~o train and assist you with your Smoothie King Nutritional Lifestyle Center~~><®><>

[Richard Leveille will oversee Smoothie King's training program.___Mr. Leveille's

biographical information is found in Item 2.1

ADVERTISING

<~~Advcrti~~sing>IMark,eting and Promotional] Funds: Except for [franchisees operating Smoothie fring Businesses at ]airports<T> [flas discussed in Item <6r>[61.1 you must pay up to 3% of your<-> monthly Gross Sales to Smoothie King's system <~~adv~~e~~rti~~r,~~ing~~>[marketing and promotional! fund ("System Fund"). Smoothie King currently requires its franchisees to contribute 1% of Gross Sales. In addition, we require that you pay up to<-> 1% of your monthly Gross Sales to<->[_a] regional <~~ndv~~c~~rtising~~>[marketing and promotional] fund ("Regional Fund"), and up to 1% of your Gross Sales to a national <~~advortisinp~~>[marketing and promotional] fund ("National Fund"). You will be obligated to pay up to 2% of your Gross Sales to a Regional Fund and National Fund combined. There are currently no Regional Funds in existence, and a National Fund has not been established. The System Fund, National Fund and Regional Funds will be referred to in this Item as the "Funds". You will not be obligated to pay more than 5% of your Gross Sales to <these>[thfi] Funds. Al! franchisees [generally ]must contribute the same amount to the Funds and their [local advertising ]cooperative<~~. unless~~ >[. ]Certain franchisees or licensees[ under past versions of] signed franchise or license agreements <in-par.~~t vearr~~, ~~that requirc~~>rmay pavl a different [or no jamount. <Be~~cause of~~>[In addition, due to] market conditions and location, certain <~~franchisc and license agr~~eeme~~nts with~~ franchisees or licensees with major food service organizations or atypical locations may <~~or may not require a contribution or the same amount of contribution~~>[he required to contribute a lesser or no amount] to the Funds. Smoothie King will at its sole discretion determine whether a location will be exempted from these Funds. Outside vendors and suppliers may contribute to the Funds or a Cooperative in exchange for promoting their products or using their services. These agreements are negotiated on an individual basis as the opportunity arises by Smoothie King or a representative of the Funds or Cooperative. <Your ~~specific obligations concerning adv~~e~~rtising arc discussed in Article XII of your~~ >[]Franchise

The Funds will be maintained and administered by Smoothie King or a third party designated by Smoothie King. Smoothie King will direct all advertising, promotional and marketing programs with sole discretion over the concepts, materials, and media used in the related programs and their placement allocation media purchases. Smoothie King has a National Franchise Advisory Council ("Council") made up of franchisees elected by the franchisee community. When developing the marketing strategy and allocating the use of the Funds, we consult with the Council<-~~as w~~e~~ll a~~s-~~with a franchis~~ee-~~mark~~e~~ting committ~~ee ~~(the "Marketing Committe~~e~~"), the m~~e~~mbers of which are s~~ele~~cted by th~~e ~~franchis~~e ~~community.~~ >{j] < ~~Both~~> The Council <~~and th~~e ~~Marketing Committee sorv~~e>[servesl in an advisory capacity role only to provide input on advertising programs and policies (the Council also provides input on other new and existing programs of Smoothie King). Smoothie King can change or dissolve the Council <~~and th~~e ~~Mark~~e~~ting Committ~~ee >at any time without reason. <These>rThe] Funds collected are intended to maximize general public recognition and acceptance of the Proprietary Marks and the overall brand awareness of the Smoothie King® name for the benefit of the System. In administering the Funds, Smoothie King is not obligated to ensure that you or any particular franchisee benefits directly or on a

Smoothie King <2QQ5->2006f-20071

prorated basis from expenditures by the Funds. Smoothie King does not have to spend any amount on advertising in your area. Smoothie King will not use any of the Funds primarily to advertise the sales of new franchises.

The Funds will be used exclusively to meet costs of administering and preparing advertising, promotional and marketing activities. These costs may include creating, producing, placing, and conducting television, radio, [internet. ]and print advertising campaigns; creating, producing, and distributing promotional materials for use in Smoothie King <~~NutritionalLif~~es~~tyl~~e ~~Con terr~~,x&> [Businesses]. such as signs and posters, direct mail, promotional brochures, and outdoor billboard advertising; marketing surveys and research; public relations activities; and employing advertising agencies and consultants. Smoothie King engages outside marketing, advertising and graphic design companies to perform and coordinate most of the marketing and advertising activities listed above for Smoothie King. In the year ending December 31, <2QQ4r>[2005.1 the System Fund was used as follows: direct mail placement (<~~39% of Syst~~e~~m Fund); administrative~~ e~~xpenses (1~~>[M1% of System Fund); promotion/rollout production «3>I27% of System Fundi: public relations survey (16% of System Fund): retainer for advertising agency (4% of System Fundi: administrative overhead ]% of System Fund); and other <~~(publio r~~e~~lations,~~ a~~peoial~~ eve~~nt and promotional supplies and~~

~~handling; mark~~e~~t r~~e~~search and consulting servic~~es:----25>[expenses (website, dues/subscriptions.

accounting, hank charges, miscellaneous creative_r promotion supplies: 14]% of System Fund).

All amounts you pay into the Funds will be kept in accounts separate from Smoothie King's general account and will not be used to defray any of Smoothie King's general expenses, except for reasonable administrative costs and overhead as Smoothie King may incur in activities reasonably included in administering and directing of the Funds and advertising programs for franchisees and the System.

An unaudited statement of the operations of each Fund as shown on its books will be prepared annually by an independent certified public accountant selected by Smoothie King and will be made available to you upon written request.

Local Advertising Cooperatives: Except for special locations, Smoothie King may designate any geographical area for the purpose of establishing a [local advertising ]cooperative[ (a "Cooperative")!. in which you may have to become a member. The geographical area will be defined generally on the basis of the area of dominant influence ("ADI") and the number of Smoothie King <~~Nutritional Lif~~e~~style C~~e~~nterr~~.x®>[Buxinesses] located within the ADI. Smoothie King may change the geographic area and membership of the Cooperative to reflect the reach of the proposed advertising to be conducted in the area. Each member of the Cooperative must contribute a percentage of its monthly Gross Sales, as designated by Smoothie King, up to 2%. Affiliates of Smoothie King that operate Smoothie King <~~Nutritional Lifestyle Centers~~><®>[Businesses] must contribute to the Cooperative on the same basis as other members. Cooperatives will be organized and governed in a manner approved in advance by Smoothie King in writing. Each Cooperative will be organized exclusively to place advertising and administer local advertising programs under plans previously approved by Smoothie King. No advertising or promotional plans or materials may be used by a Cooperative or furnished to its members without the prior approval of Smoothie King. A governing board of franchisee members is responsible for administering the Cooperative. Smoothie King representatives may be designated to serve on the governing board. The governing board may delegate some of the administrative duties to an advertising agency or other third party approved by Smoothie King. Cooperatives will make all written governing documents available for review by franchisees upon request. Cooperatives must prepare annual financial statements, which will be made available to

Smoothie King <2Q^Q5->2Q06f-20071 1GF:192192S v4- 3/28/06 DRAFT1

members or Smoothie King upon request. An audited statement is not required. Smoothie King has the power to form, change, dissolve, or merge Cooperatives.

Smoothie King anticipates that all contributions to and earnings of the Funds and Cooperatives will be spent during the taxable year in which the contributions and earnings are received. If any amounts in any Fund or Cooperative are not spent during the current year, they will remain in the Fund or Cooperative for use in the following year.

Local Advertising: You must spend a minimum of $<2-jGG0>[I₄iLQil] on grand opening advertising during the one-month period before opening and within <thfee>[2] months after you open a Smoothie King Nutritional Lifestyle Center<®> (See Items <~~6, 7, 9,~~>[] and <44>[2]). In addition, you must spend a minimum of 2% of Gross Sales on local marketing activities, A portion of this amount may be allocated to cooperative advertising (see Item 6).

All advertising, promotional and marketing activities that you conduct in your local market area will be subject to the prior approval of Smoothie King. You must submit to Smoothie King all local advertising, promotional and marketing plans and samples of all local advertising materials not prepared or previously approved by Smoothie King. If you do not receive written disapproval within 15 business days after the date of receipt by Smoothie King, your plans and materials will be deemed approved. If any plans or materials previously approved by Smoothie King are later disapproved, you must discontinue their use promptly upon notice from Smoothie King (see Item 8).

1CQMPW

rS/CASH REGISTER)

Cash Register: You must purchase a Uniwell SX7500F cash register with accessories for a Traditional or Non Traditional unit, or other cash register system that Smoothie King may require in the future. The current manufacturer and distributor of the cash register is Uniwell Systems USA, Inc., 3400-A Corporate Way, Duluth, GA 30096, 770-418-2161. The SX7500F cash register has been used in the Smoothie King® System since June 2002. <~~Prior to the SX7500F, Smoothi~~e ~~King r~~e~~quired a oimilar Sharp register and it had been in continuous us~~e ~~by franchise~~e~~s for over 5 years. Various models of Sharp have been used for over 10 years. Various manufacturers provid~~e re~~asonably equival~~e~~nt register systems that p~~e~~rform the sam~~e ~~functions; how~~e~~ver, Smoothi~~e ~~King must approv~~e ~~the us~~e ~~of any othe~~r-~~register in advance.~~ >Smoothie King is currently designing a new <~~internal managements~~[j system. The system will aid in <~~tho collection of~~> [collecting] data, provide intelligent reporting<_r~~provide compl~~ete>[_amlj inventory control, aid in the communication between <~~thc Franchis~~ee ~~and Franchisor, allow a national pift card pro~~ |~~gram~~>f franchisees and us], and provide better access to information. <~~Tho Franchisor~~ o~~xpocts~~>[We expect] this system to cost <~~tho Franchisee~~Xvou] a reasonable up-front cost of <~~four hundred nin~~e~~ty fiv~~e ~~dollars ($195). Smoothi~~e ~~King~~>[ We] will have unlimited independent access to your cash register receipts<-and>[j] sales fand other financial ]information (Franchise Agreement Article XI). <~~Smoothie King~~>[We] will provide you with specifications and initial training on your register system, but <ts->[axg] not obligated to assist you in obtaining the items described in this paragraph.

Computer System: LI Smoothie King requires that you have a personal computer and printer with the [latest yersion of the ]following software installed: Microsoft Windows, Microsoft Internet Explorer, and Microsoft Office. You must have internet access and<~~, upon 60 days' notic~~e ~~from u%~~>[,

itable. Smoothie Kin? will soon require you to have high

J You must participate in the Smoothie King® intranet system ("SmoothNet"). (Franchise Agreement Section 10.3.15). To participate in SmoothNet, you must accept the Smoothnet

Smoothie King <3QQ5->2006r-20Q71

Terms of Use Agreement attached to this Offering Circular as Exhibit <N>[M]. Through SmoothNet, you can access portions of our <~~confidcntial Policy and Procedur~~e ~~Manual~~>[Manuals1. corporate forms and news articles, as well as participate in discussion forums. Smoothie King doesn't charge a fee for your participation in SmoothNet. We will have independent access to the information and data that is electronically generated. We also reserve the right in the future to require you to install computerized management systems meeting our standards, as modified periodically in response to business, operations and marketing conditions. You may be required to license proprietary software and to pay for all future updates, licensing fees, supplements and modifications to the system.

Restrictions on Franchisee's Use of Electronic Media:______<~~The Franchisor~~>[ Smoothie

Kinsl restricts your right to use all electronic media including the internet in operating your <~~busin~~esG>[Unit]. You cannot conduct business over the internet or create your own website with which to conduct business without <the>[ojnrJ express written consent< ~~of the Franchisor~~^] (see Exhibit <N>[M1).

Item 12

TERRITORY

You can operate a Smoothie King Nutritional Lifestyle Center<®> only from a specified location approved by Smoothie King. Smoothie King may designate a general geographic area ("General Area") solely to limit the area within which you may seek a site location for <~~a Smoothi~~e-~~King Nutritional Lifestyl~~e ~~Cent~~erX&>[vour Unitl. Until you have secured a lease and a Protected Territory is designated, Smoothie King may establish franchised or company-owned Smoothie King <~~Nutritional Lif~~e~~style C~~e~~ntor~~r,x®>[pusine^ses] at any time in your General Area that may compete with the <~~Smoothi~~c ~~King~~X®><->Unit that you operate and limit your ability to seek a site in certain parts of your General Area. Smoothie King <fflay->also [injy_]grant development rights to others that may limit you from seeking a site in all or any part of your General Area.

Once you have secured your lease for a Smoothie King Nutritional Lifestyle Center<®>, Smoothie King will designate a geographical area surrounding the Unit that will be called your Protected Territory<-> (the "Protected Territory"). Subject to the following, Smoothie King will not establish or operate [a full-service jSmoothie King <~~Nutritional Lif~~e~~styl~~e Centers><®>fBusiness]. nor grant a franchise to any person other than you to establish or operate la full-service ISmoothie King <~~Nutritional Lifestyl~~e ~~Ccnters~~X®>[Business] in the Protected Territory< ~~unl~~ess ~~franchisee giv~~e~~s prior~~

~~written approval.How~~e~~ver,~~ >[,__]Smoothie King may< cs~~tablish~~>, ("however. ]operate<r> or grant a

franchise or license to others to operate Smoothie King <~~Nutritional Lifestyle Cent~~Q~~rr,~~x®>[Businesses] at any "Special" location. ]Special locations["] are defined as locations that Smoothie King determines have a restricted trade area< ~~("Special" locations)~~>. Examples of Special locations include locations in the following types of environments: malls, universities, schools, hospitals, military bases, casinos, convention centers, arenas, stadiums, airports, health and fitness facilities, office buildings, theme parks, amusement facilities and other locations that are not located on the street and the primary trade area is restricted to certain trade generators. Smoothie King <may->also [mav ]license or sell, at both wholesale and retail, product or service lines that are being sold in Smoothie King <~~Nutritional Lifestyle~~ entefs><®>^Businesses] under the <same-o^s~~imilar~~ >Proprietary Marks or <any->other<-~~propri~~e~~tary~~> marks, at any location or through other channels of distribution, within or outside the Protected Territory at any time (Franchise AgreementSection 1.4; Section 8.3.6). For Smoothie King <~~Nutritional Lif~~es~~tyl~~e ~~Centeni~~X®>[Businessesl that are not located at Special locations, the Protected Territory will be defined by identifiable boundaries and include a business, seasonal and/or residential population count of

Smoothie King <300§->2006[^fifl21

approximately 15,000 people, based upon Smoothie King site selection data available at that time. The boundaries of the Protected Territory may be shaped, at Smoothie King's sole discretion, to match the population criteria, street or walk by traffic patterns and natural geographic features, such as bodies of water, interstate highways and other features that normally define guest trip patterns. The Protected Territory may include a business, seasonal and/or residential population count of less than 15,000 people where there is less than 15,000 people within a 2 mile natural trade area of the location, based upon the criteria above, such as in suburban, rural, or beach communities (Franchise AgreementSection 1.4; Section 8.3.6).[_]

You will not receive a Protected Territory nor have any rights to an area or Protected Territory if the <~~SmnnrhiG Kiny Nutritional Lifestyl~~e ~~Ccnt~~Gr><®>rUnit] isf locatedl at a Non-Traditional or Special location. Smoothie King may locate a Smoothie King <~~Nutritional Lifestyle C~~e~~ntcr~~><®>[Business]. whether company-owned, franchised, licensed or otherwise at any location <~~it d~~ocms>[we deem] appropriate if you do not receive a Protected Territory (Franchise Agreement Addendum Sections 1 and 4).

Smoothie King may establish, operate or grant a franchise or license to others to operate Smoothie King <~~Nutritiona1 Lif~~e~~style C~~e~~ntorr,~~><®> [Bus in esses] at any location outside of your Protected Territory. Smoothie King may license or sell, at both wholesale and retail, product or service lines that are being sold in Smoothie King <~~Nutritional Lifestyl~~e ~~Ccnters~~><®>[Businesses]. including the Unit you operate, under the same or similar Proprietary Marks or any other proprietary marks, at any location or distribution point within and outside your Protected Territory< ~~without providing any right~~s ~~to you~~> (Franchise Agreement-Section 8.3.6).

Smoothie King has <~~provided~~>{ffranted. in certain situations in the past.] Protected Territories< ~~in th~~e ~~past>~~ for locations that typically are not granted Protected Territories <~~und~~c~~r c~~e~~rtain n~~e~~gotiat~~e~~d-t~~e~~rms~~ >and may do so in the future,< ~~If you ar~~e de~~signat~~e~~d a~~-~~Prot~~ected-Te~~rritOFy_ryou will k~~ee~~p it.~~ -> Upon renewal of your Franchise Agreement, however, Smoothie King has the option of redefining the boundaries of your Protected Territory< ~~at any tim~~e>, based on the criteria listed above (Franchise AgreementSection 2.3.8).

You will not have a right of first refusal to purchase an additional franchise in any area. Smoothie King is not obligated to contact you before granting a franchise in your General Area. You should not rely on any oral representations that you will be offered the first opportunity to expand in an area or that you have any other expansion rights. To the extent Smoothie King may consider granting additional franchises, you will not be considered for any franchise opportunity unless you are in good standing under each of your other Smoothie King® franchise agreements.

Relocation of the <~~Smoothio Kinp Nutritional Lifestyle Centers~~><®>[UnJt] requires the prior written approval of Smoothie King. Smoothie King will approve the relocation of the Unit only if you lose the right to do business at your location through no fault of your own or Smoothie King determines that it is in its best interest to allow the Unit to be relocated. You must enter into a new franchise agreement to establish additional Smoothie King <~~Nutritional Life~~s~~tyl~~e ~~Centers~~X&>[Businesses].

You may only offer products or services for retail sale from the premises of the <~~Smoothi~~e ~~King Nutritional Lifestyle C~~e~~ntG~~F><®>[Tfnit] that you operate (Franchise AgreementSection 10.3.4). You must obtain <the>[ourl prior approval <~~of Smoothie King~~ >for all advertising, promotional and marketing activities <~~conduct~~o~~d bv~~ >vou[ conduct] in your local market area (Franchise Agreement-Section 12.4).

Smoothie King <3005->2006[^2fiU

There are no other restrictions in the Franchise Agreement limiting activities of Smoothie King, you or other franchisees from advertising, marketing, soliciting sales or accepting orders in your Protected Territory or in any other specified area or region.

Smoothie King intends to pursue shared space arrangements, such as co-branding, and franchising or licensing of its products with franchisees of other food and retail concepts and franchises or licenses with major food service organizations, such as those that run university, hospital, arena and airport concessions. Although Smoothie King has no other plans to do so, Smoothie King reserves the right to establish alternative or other channels of distribution using Smoothie King<2s>® products and trademarks. Smoothie King also reserves the right to establish alternative or other channels of distribution; and operate or offer franchises in businesses that sell goods or services similar to or competitive with yours under different trade names or trademarks.

There is no minimum sales quota.

Item 13

TRADEMARKS

<~~Franchi~~s~~c Agree~~ment:>Smoothie King identifies <i*s>[the] System by means of certain trade names, trade dress, service marks, trademarks, and logos ("Proprietary Marks"). Smoothie King grants you the right to operate the Unit under the name and mark "SMOOTHIE KING®." Smoothie King may designate other Proprietary Marks to be used in the System. The principal Proprietary Marks, which you may use, are listed below. The following Proprietary Marks are registered on the principal register of the United States Patent and Trademark Office ("USPTO"):

";&

SMARI&

SMOOTHIE KING HOME OF THE MUSCLE PUNCH<®>

SMOOTHIE KING<®> *

SMOOTHIE KING<®> & DESIGN

[DESIGN ("CROWNS]

^%5REG!NO.

1633522

1840792

2036826

[236d532]

REG. DATE

January 29, 1991

June 21, 1994

February 11, 1997

* The Smoothie King® concept and primary product was originated in 1973 by Stephen C. Kuhnau, Sr. The name Smoothie King® was established to be the trade name of the franchising entity in 1987 with final registration by the USPTO in 1994.

All required affidavits and renewal registrations have been filed for the Proprietary Marks listed. Smoothie King also claims common law rights to all of its Proprietary Marks on the basis that these marks have been used in interstate commerce.

There <are->currentlvLare) no effective material determinations of the USPTO, Trademark Trial and Appeal Board, the trademark administrator of any state or court, any pending interference opposition or cancellation proceeding or any material litigation involving the Proprietary Marks listed in this Item which are relevant to their use in <the>[a] Smoothie King Nutritional Lifestyle <Ce~~ntors~~><&>rCenter].

Smoothie King <3QQ5->2006f-?007)

There <afe->currently[_^E] no agreements in effect which significantly limit the rights of Smoothie King to use or license the use of its Proprietary Marks in any manner material to <the>[a] Smoothie King Nutritional Lifestyle <Genter-s><®>[niej;].

Smoothie King will defend and hold you harmless from any claims of trademark infringement for the use of the Proprietary Marks if you promptly give written notice to Smoothie King and tender the full defense of the claims against you to Smoothie King. Smoothie King shall have complete control of the legal action and may settle the claims at any time without providing notice to you. Smoothie King will bear all costs of your defense. Smoothie King has taken and will take all steps reasonably necessary to preserve and protect the ownership and validity of the Proprietary Marks. You must sign any documents deemed necessary by Smoothie King or its counsel to obtain protection for the Proprietary Marks or to maintain their continued validity and enforceability. You may not contest the validity or ownership of the Proprietary Marks. If litigation involving the Proprietary Marks is instituted or threatened against you, you must promptly notify Smoothie King and must cooperate fully with Smoothie King in defending or settling the litigation,

Smoothie King does not warrant or guarantee that it has the exclusive right to use the mark "SMOOTHIE KING®" or any other of its Proprietary Marks. If for any reason it becomes necessary or desirable for Smoothie King to quit using the Proprietary Marks, Smoothie King may substitute different proprietary marks. Smoothie King and you may then operate under these other proprietary marks. Smoothie King is not obligated to provide you with any other remedy.

Smoothie King does not actually know of any superior prior rights or of any infringing uses that could materially affect your use or any Smoothie King® franchisee's use of the principal Proprietary Marks in any state. [

Smoothie King <3OQ5->2006l-2007)

]

Item 14

PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION

There are no patents that are material to the franchise. Smoothie King claims ownership of copyrights in the following Manuals: the Smoothie King Confidential Pre-Opening Manual, Art of Blending Manual, Smoothie Instruction Book, Marketing Manual, Management Training Manual, Operations Manual, Art of Supplements, and other manuals< ~~(the "Manuals")~~>. Smoothie King intends to claim ownership of copyright in any future manuals that are developed. Copyright applications have not been filed for any of the Manuals. The information contained in the Manuals is confidential and proprietary and part of Smoothie King's intellectual property. There are no other copyrights that are material to the franchise.

The Manuals and other materials Smoothie King possesses contain Smoothie King's confidential information and intellectual property. This information includes recipes for the Smoothie King drinks, formulas, methods of preparation, product content, specifications, standards, suppliers, systems, procedures, operational, sales and marketing methods, plans and other trade secrets of Smoothie King. You may not use Smoothie King's confidential information and intellectual property in an unauthorized manner either during or after the term of the Franchise Agreement and must< ~~tak~~e re~~asonabl~~e ~~steps to~~> prevent its disclosure to others. For example, you may not duplicate any part of the Recipe or other Manuals, remove them from the Unit location or fail to return them to Smoothie King when the term of your Franchise Agreement is over. Information or techniques developed by you or your team members under the System or the operation of the <~~Smoothio King Nutritional Lifestyle Cont~~or><®>[I2flit] is deemed a part of Smoothie King's confidential information and intellectual property protected under your Agreements. You must obtain and send to Smoothie King signed confidentiality agreements from all of your team members or agents who may have access to confidential information and intellectual property in a form satisfactory to Smoothie King.

There are currently no effective determinations of the Copyright Office (Library of Congress) or any court regarding any of the copyrighted materials. There are no agreements currently in effect, which significantly limit Smoothie King's right to use or authorize others to use the copyrighted materials. There are no infringing uses actually known to Smoothie King that could materially affect the use of the copyrighted materials in any state. Smoothie King is not required by any agreement to protect or defend copyrights or confidential information and intellectual property, although it intends to do so when it is in Smoothie King's best interests. Smoothie King may control any litigation that it participates in. You should notify Smoothie King of any claims or infringing uses of the copyrights or unauthorized use of confidential information. Smoothie King may modify the Manuals at any time. Smoothie King may require you to discontinue use of the information in the Manuals at any time as long as it provides you with alternative information or techniques if this information is critical to the Unit operations.

Smoothie King <3005->2006[^gfil] fCP:1921925 v4- 3/28/06 DRAFT1

Item 15

OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS

Participation in Business: As a <~~liccns~~ee ~~and op~~e~~rator of a~~ >Smoothie King< ~~Nutritional I.ifontvlo Cento~~f>®f franchisee], you do not have to conduct on-premises supervision or <te->personatly participate in the direct operation of the Unit. <Hewever_T->Smoothie King recommendsf. however_T] that you are actively involved in the operation of the UniK~~. You or your d~~e~~signated manag~~e~~r must dovote full time to the d~~e~~velopment of the Smoothi~~e ~~King Nutritional Lifestyl~~e Center><®>< ~~unl~~e~~ss otherwis~~e ~~approved in writing by Smoothi~~e ~~King.The Smoothi~~e ~~King Nutritional Lif~~e~~style Centor~~X^x ~~that~~ veu>[₁ as personal participation may enhance the likelihood of operating successfully. The Unit that vou develop and] operate must at all times be under the direct, full-time, on-location supervision of you or a trained and competent team member acting as a full-time manager who has satisfactorily completed Smoothie King's initial management training program. Your manager must sign a confidentiality agreement to maintain the confidentiality of the information described in Item 14, and may have to sign a non-compete agreement as further described in Item 17. If you are a business entity, your deve~~lopm~~e~~nt a~~ge~~nt o~~t^>manager need not have an ownership interest.

Personal Guaranty: If you are a business entity, each individual holding in excess of 15% of the total voting power of your ownership interests (including each individual holding in excess of 20%) of the total voting power of any business entity having a controlling interest in you) must personally guarantee your obligations under your Franchise Agreement. If you have personally signed the Franchise Agreement and wish to transfer your Agreement to a business entity, you must enter into a personal guaranty regardless of your ownership interest in the business entity. A personal guaranty is attached to this offering circular as Exhibit <~~G. Any p~~e~~rson holding an ownership interest in your busin~~ess e~~ntity may have to~~ e~~nter into a confidentiality agreem~~e~~nt and non compet~~e ~~agr~~ee~~ment as described in Items 1 <\ and 17.~~>[EJ

< >Item 16<->

< >RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL

You must offer and sell only those goods and services that Smoothie King has approved (see Item 8).

You must offer all goods and services at retail that Smoothie King designates as required for all franchisees, including new products or services that Smoothie King develops in the future. There are no limits on Smoothie King's right to change the types of goods and services or add new products or services. You may not offer or sell any other products or services without <the>[ojjr.3 prior written consent< ~~of Smoothi~~e ~~King~~>. You must follow all guidelines <ne~~t forth~~>[required] hv[ {he laws of] the state <~~laws~~ >in which your <~~Smoothi~~e ~~King~~ ><®x>Unit<~~fs1 resid~~e>[ is located] and as <set-fortft> [required] by Smoothie King in <its~~franchis~~e~~agr~~eeme~~nt.>~~[the] Manuals or <~~other dooum~~o~~nts~~>[otherwise]. You must discontinue offering any products or services, whether or not previously authorized by Smoothie King, promptly upon written notice from Smoothie King. You must provide for equipment or other items reasonably necessary to support new products or services introduced to enhance the value of the System. You are not restricted as to guests to whom you may offer goods and services.

Smoothie King <&05->2006f-20071

All Smoothie King ^~~Nutritional Lif~~on~~tvlo C~~e~~ntcrs~~X®>[Biisinesscs] must offer Smoothie King's proprietary smoothie line as designated in the Manuals or in other writings. Smoothie King designates the retail product lines and brands making up your initial inventory upon opening a Unit. After your opening order, the particular retail product lines that you may carry in the Unit are optional. You must, however, carry a representative inventory, depending upon the size of the Unit, of the following categories of products: vitamin formulas, mineral formulas, nutritional supplement formulas, sports nutrition products, diet products, herbs, nutritional candies, sport drinks, low fat and fat free items and natural food items. Each franchise will be required to implement [and maintain ]a core inventory of representative products as <~~set forth by >~~Smoothie Kinp[ directs]. Depending upon the circumstances and size of your Business, some categories of product lines may be added or omitted, but only upon <the>[flill] prior written consent< ~~of Smoothi~~e ~~King~~>. Smoothie King must approve the products and their suppliers (see Item 8). Smoothie King may require you to carry only specific product lines and certain brands in the future.

Item 17

RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION

These tables list important provisions of the franchise agreement and related agreements. You should read these provisions in the agreements attached to this offering circular.

-^;.j PROVISION f"

-T^tU. J&., - ,

Jfr

SECTIONIN -^ -% FRANCHISE., .^AGREEMENT OR,

U '

-ADDENDUM

?»-

>l MM LRY

Vfr

;.- -.j

w--

~m^r

a. Term of the franchise

Section 2.1; Addendum Section 2

Traditional location - 10 years. Non-traditional location -5 years under addendum or less at your election if your lease term is less than 5 years.

b. Renewal or extension of the term

Section 2.2; Addendum Section 2

You may renew your agreement for 3 additional terms of 5 years each.

c. Requirements for you to renew or extend

Section 2.2; Addendum Section 2

You must have a good record of compliance with the Operations Manual and be in compliance with the Franchise Agreement; satisfy all monetary obligations to Smoothie King; give written notice; remodel Unit; attend training; sign release; pay renewal fee; and sign new franchise agreement.

d. Termination by you

None

N/A

e. Termination by Smoothie King without cause

None

N/A

f. Termination by Smoothie King with cause

Article XIV; Addendum Section 7

Smoothie King can terminate only if you default.

g. "Cause" defined-defaults which can be cured

Sections 14.2 and 14.3; Addendum Section 7

hours to cure: failure to allow

violation of anv law, re "d relati

]You have 10 days to cure nonpayment of fees and failing to observe standards, recipes, ingredients or procedures; You have 30

J-

1. m.

vtr"*.--PROVISION "^X	" SECTION IN ;3 *FRANCHISE/ . % AGREEMENTOR '" -.! ADDENDUM. *
		days to cure: failure to submit reports, failure to obtain Smoothie King's required consent; failure to obtain execution of confidentiality and noncompete agreements; if you make an unauthorized transfer to a third party; failure to attend and complete the initial management training program to Smoothie King's satisfaction; fail to obtain financing within six months or open the Unit within one year; you do not substantially comply with any other Franchise Agreement obligations or carry out its terms in good faith; if you are in default under the terms of any other franchise agreement (Addendum).
h. "Cause" defineddefaults which cannot be cured	Sections 14.1	Non-curable defaults: insolvency, general assignment to creditors or file petition in bankruptcy; convicted of felony or liable in civil claim for practice that may have an adverse effect on the System; <threaH>r danger to-public health
h. "Cause" defineddefaults which cannot be cured	Sections 14.1	with covenants not to compete; unauthorized disclosure of Manuals or confidential information; knowingly maintain false books or records or knowingly submit false reports; abandonment of Unit (except for certain events not in your control); commit act that impairs goodwill of Proprietary Marks; non-curable default; violation of immigration laws or loss of immigration status to operate Business: repeated defaults even if cured; knowingly fail to comply with requirements concerning taxes, permits and indebtedness.
i. Your obligations on termination/ non-renewal	Article XVI; Addendum Section 9	Obligations include immediately ceasing to operate the Unit; discontinue use of Proprietary Marks; return Manuals, other materials and confidential information and intellectual property; assign telephone numbers if requested; payment of amounts due; assign lease if requested; de-identify Business; allow Smoothie King to purchase proprietary products at cost; maintain confidentiality of information (also see r. below).
j. Assignment of contract by Smoothie King	Section 15.10	No restriction on Smoothie King's right to assign.
k. "Transfer" by you definition	Section 15.1	Includes transfer of contract, assets or ownership interest.
1. Smoothie King's approval of transfer by franchisee	Section 15.5	You must obtain Smoothie King's consent to all transfers, except a transfer to an heir or beneficiary after your death or mental incapacity. Smoothie King will not unreasonably withhold

Smoolhie King <2QQ5->2006f-20071

[]

*¹ , PROVISION**	-., SECTION IN' FRANCHISE ^JAGREEMENT.OR , ADDENDUM,*	* -;- * -t,'¹"' SUMMARY** ' /■ -
		approval as long as cenam cunditiuns aie satisfied.
rrt Conditions for Smoothie King approval of transfer	Article XV; Addendum Section 8	You may transfer your interest to a corporation or other legal entity if you retain ownership of a majority of the total voting power. You may transfer to a third party if: Smoothie King does not exercise its right of first refusal; the transferee qualifies; all of your obligations are satisfied; you are in compliance with your Franchise Agreement; the transferee enters into a personal guaranty; you sign a release; you and the proposed transferee have complied with provisions regarding confidentiality and non-competition; the transfer fee is paid (see Item 6); transferee enters into a new franchise agreement, remodels the premises and completes training. If you are a business entity, your principals may transfer part of their ownership interest if they retain over 50% of the total voting power if prior notice is given, Smoothie King approves and confidentiality and non-compete agreements are obtained.
n. Smoothie King's right of first refusal to acquire the Unit	Section 15.4	Smoothie King can match any offer for the Unit.
o. Smoothie King's option to purchase the Unit	Sections 16.2 and 16.3	Smoothie King may conduct an inventory of your assets within 15 days and exercise its option to purchase your assets at fair market value within 30 days after the Franchise Agreement expires or is terminated. Also, Smoothie King may purchase any proprietary product you may have at fair market value.
p. Your death or disability	Section 15.3	Your estate must transfer your interest to your heirs or beneficiaries, or a third party approved by Smoothie King.
q. Non-competition covenants during the term of the franchise	Article XVII	No involvement in similar business anywhere; cannot divert business to a competitor; or employ team member of Smoothie King or another franchisee without consent.
r. Non-competition covenants after the franchise is terminated or expires	Article XVII	No involvement in similar business for two years within a 5 mile radius of the Unit location or any other franchisee or Smoothie King company-owned Business; cannot compete with or solicit guests of Smoothie King® or other franchisees; cannot divert business to competitor; or employ team member of Smoothie King or another franchisee without consent.
s. Modification of the	Article XXIII	No modifications generally but standards,

Smoothie King <2QQg->2QQ6[-20Q71 rCP:1921925 v4- V28/06 DRAFT!

^ !\ .PROVISION ' ^ ■ .

> T* ' .....

.'? *? -

?(*

SECTION IN > ; ^FRANCHISE 4i ¹ AGREEMENT OR '.ADDENDUM

'^! -fv.; &v SUMMARY . Y^f ,

Agreement

specifications, Manuals, products and services, Proprietary Marks and other items specified in the Franchise Agreement are subject to change.

t. Integration/ merger clause

Section 23.1

Only the information provided in the offering circular, and the terms of your Franchise Agreement and other agreements attached to this offering circular and signed by you are binding (subject to state law). Any other promises may not be enforceable.

<~~Exc~~e~~pt for Smoothi~~e ~~King's~~ r~~ight to s~~ee~~k injunctiv~~e-re lie~~f, all~~-~~disput~~es^-~~claims and controv~~ersie~~s will b~~e se~~ttl~~e~~d by arbitration in f~~effe~~rson~~-~~Pari~~sh.'~~Loui~~s~~iana~~>rNone1.

v. w.

w. x.

u. Dispute resolution by arbitration or mediation

<~~Articl~~e ~~XXV~~>[&angJ

v. Choice of Forum (Subject to

state law)

Section <2&3>[25*5]

li~~tigation~~-mus~~t b~~e -i~~n J~~effe~~rson Pari~~sh.>[AII disputes, claims and controversies will he brought in the Federal District Court for the pastern District of] Louisiana<, s~~ubj~~e~~ct to stat~~e law>.[J

w. Choice of Law (Subject to state law)

Section 26.1

Louisiana law applies, subject to state law.

These states have statutes which, subject to our right to challenge the validity, applicability or construction of such statutes, may supersede the Franchise Agreement in your relationship with Smoothie King including the areas of termination and renewal of your Agreement, franchise, and choice of law: ALASKA [Stat. Sections 45.45.700<>[-]45.45.790], ARKANSAS [Code Sections 4-72-201 -4-72-210], CALIFORNIA [Bus. & Prof. Code Sections 20000-<~~20043, Cod~~e ~~of Civil Procedure S~~e~~ction 12~~8~~1. and the Fed~~e~~ral Arbitration Act~~>[20Q43]1. CONNECTICUT [Gen. Stat. Sections 42-133e<->[.^J42-133h], DELAWARE [Code Sections 2551 - 2556], [FLORIDA TStat. Section 542.335], ]HAWA1T [Rev. Stat. Section 482E-6], IDAHO [Code Section 29-110], ILLINOIS [815 ILCS Sections 705/<4 ~~and 705/17~~-~~705/20~~>[l -44]]. INDIANA [Code Sections 23-2-2.7-1 -23-2-2.7-7], IOWA [Code Sections 523H.1 <->[=] 523H.17 and 537A.10], MICHIGAN [Stat. Section 19.854(27)], MINNESOTA [Stat. Sections 80C.14 and 80C.21], MISSISSIPPI [Code Sections 75-24-51 - 75-24-63], MISSOURI [Rev. Stat. Sections 407.400 - 407.413 and 407.420], NEBRASKA [Rev. Stat. Sections 87-401 - 87-410], NEW JERSEY [Rev. Stat. Sections 56:10-1 - 56:10-12], [NORTH CAROLINA [Gen. Stat. Section 22B-31: ]RHODF ISLAND [Stat. Sections 19-28.1-14 - 19-28. M6<s>[]] Section 19-28.1-14 of the Rhode Island Franchise Investment Act provides that "A provision in a franchise agreement restricting jurisdiction or venue to a forum outside this state or requiring the application of the laws of another state is void with respect to a claim enforceable under this Act"]<_T>[;] SOUTH DAKOTA [SDCL Sections 37-5A-51 and 37-5A-51.1], VIRGINIA [Code Sections 13.1-557 -13.1-574], WASHINGTON [Rev. Code Section 19.100.180], WISCONSIN [Stat. Sections 135.01 135.07]. [_]These and other states may have court decisions which may supersede the

Smoothie King <2QQ5->2006f-20071 fGPil9219«v4

Franchise Agreement in your relationship with Smoothie King, including the areas of termination and renewal of your franchise. For additional state law disclosures, refer to Exhibit J.

Item 18 PUBLIC FIGURES

Smoothie King does not use any public figure to promote its franchise.

Item 19

EARNINGS CLAIMS

Smoothie King does not furnish or authorize its salespersons to furnish any oral or written information concerning the actual or potential sales, costs, income or profits of a Smoothie King Nutritional Lifestyle Center<®>. Actual results vary from unit to unit and Smoothie King cannot estimate the results of any particular franchise.

Item 20

LIST OF FRANCHISED OUTLETS FRANCHISED UNITS STATUS SUMMARY FOR YEARS<-> [2fifi5Z]2004/2003</2003*^>(ii>¹

: State/Provinces':	' --3. . * /Transfer*	1*1 ■Xancclled<->; ? ^ Or<-> Terminated .	Not<-> Renewed*	Reacqu^m ■ .Smoothie^	A J-^Lcft the fl?.* System Other -	Total from Left^, Columns	■ Franchises Operating at >car EndWW
Alabama	IQ/QZ01	<- >[fl01/O</0>			<-QAW>	<- >[11/1<& >	<->U3aio/<- />8<-
Arkansas	mm	<-+/>0/l[/fll				<-^>o/iuo]	<->l/<2>[JL]/2
Arizona		<- >[2fll/0</0>			<-©/Q/9>	<- >[flfll/0</0 >	<->5/<6>[5]/6
California	UMfi]	<-m/Q>		<->	*<m&>*	<- >[1]0/0<S >	<->[2^6/3<^>
Colorado					*«mn>*	<-0/0A->	y] I/<-0/X)
Florida	<- >[2fl2/3</	<-			<- >[itf]0/l</6 >	<- >Kfl4/4^ 2>	<- >[4JZ]38/35</ 30>
Georgia	<- >[2fl2/4</ 0>	Q[\2/Q<14>			<-0/0/4>	<- >[5]4/4</S >	<- >U2i]28/29</ 34>
Illinois							<->[4i]3/2<&>
Indiana		[2MQJ			rflio/i<^>	<- >[2^]0/1</0 >	<->[2/]8/6<A>
Iowa							l/l/<0>[i]

Smoothie King <2Q05->20Q6r-20u71

rcp_:i92i92<;v4-.v2ft/n6nRAim

"State/Province .	Transfers	'" .J" Cancellcd<-> Or<-> * Terminatedi"	Not<-> Renewed	Reacquired ' Smoothie ' Kin*	Left the ' Sjstem Other	f' .^If^Total from /y Left [ "-Columns¹	Franchises Operating at Year End'"
Kansas							<^>[4J/3/3
Kentucky	<- >[flfll/0</ 0>				[Pi]0/1<^>	>tp/]i/i</o >	6/<->[&]3<M>
Louisiana<*>	<- >[Mll/5< /4>	<- >[ii]o/o<rt>	<->	<->	(4/0/0<³"	<- >[/JU/5</ 2>	<- >[Z3J]73/66</ S9>
Maine							<->I/l/l
Maryland	<->					<->	<->[86/6<#>
Massachusetts >		<-&W0>				<MMXJi>	<->
Michigan							<4>]/l/l
Mississippi	<- u>o/i[m	[Oi]i/0</o>				<- >[M]2/0<A- >	<-4>[8]/6/6
Missouri	<Qt>\/QUl ]	<W2>				<- >[i/jo/i</2->	<>[]/5/5
Nevada<*>	ri/o/oi	< fi/0/f)>			<-m&>	<- >{l/JO/</>0	<->2/<l>[l]/l
New Jersey							<->2/2/<+>U]
New Mexico							<-> 1/1/1
New York		n/o/oi			<->	<->n/o/oi	<->[4i]5/4<«>
North Carolina	<-&W2>	<0/©/2>				<-W0/4>	<- >[AQ/J9/8</>
Ohio							<->[Ifl7/5</2>
Oklahoma	2/<0>[2J/0					2/<a>[2]/o	<->3/<2>[2]/2
Pennsylvania		[HZ]i/o</a>				aai/o</o>	<->[Ji]l/2</+>
Rhode Island						<o/o/©>	<->0/<+>[0J/l
South Carolina	<-Q/0/6>	*<->WM\*			<- >0/<+>[OJ/l	<- >UZ]0/1<A->	<-2/>l/2[JJ
South Dakota	<-©/©a->				[Pi\|0/l</0>	<- >0/<±>[fi]/l	0/<->0/<4>[0J
Tennessee	>	op/o/oi			<0/0^>	<- >&Q0/1<A->	<- >f20J121/14</ 9>
Texas	<- >[2Z]5/6</ 7>	<- >[2)9/2</2->			<- >[fli]0/5</3 >	<- >Uii]14/13 <,44>	<- >Ufi2il 102/98
Virginia	[2/] I/0</0 >					[aai/o</o>	<->[2Z]8/7</4>

Smoothie King <260§->2006b22fl2]

rStatc/l'roviiice

' ,!-

¹ Transfers

Cancelled^

rOr<->- ^J.

Terminated,

■ No(<-> Renewed

Reacquired

' ^bvSmoothie

" ^Ki"g___

Left the System * Other

Total from , Left Columns

Franchises Operating at Year End"!

Washington DC

<->fl/0/01

<0/GM->

Q/]0/<-

OA->roi

<y->2/[M\2

Wisconsin

<~~o/i/o/o--~~

<->l/i</2->/l

>[flflO/I<W

TOTALS<³>

>[2^]25/2 0<^?>

>fZM18/2</ 44>

>[4j]0/<+3/

F45Z143/34<

/43>

rj23il369/<-

>332</2»*>ⁱ

=G>

<~~(1) All numb~~ers ~~for 2001 are as of January' 25, 2005, 2003 are as of January 21, 2001, and 2002 arc as of January 31, 2003. .^~~

The-~~tota~~l-~~numb~~e~~r of Bus~~inesses ope~~rating at y~~ear e~~nd includ~~es ~~Non Tr~~aditi~~ona~~l l~~ocat~~i~~ons ("NT's") and Cart locations, 21 NT's and 1 Cart op~~erati~~ng in 2002, 23NT's and 1 Cart op~~e~~rating in 2003, and 20 NT's and 0 Carts op~~e~~rat~~ing i~~n 2001.~~>

< ~~(3) The~~-~~numbcrs~~ i~~n th~~e ~~"Total~~s~~" co~~l~~umn may~~ excee~~d th~~e ~~numb~~e~~r of Bu~~sinesses ~~aff~~ecte~~d b~~e~~cau~~se several events ~~may hav~~e-~~aff~~ecte~~d the~~ same ~~Busin~~e~~ss. For exampl~~e~~, th~~e same ~~Busin~~ess ~~may have had mu~~l~~tip~~le ~~own~~ers. ■>

are as of January 31. 2006. 2004 numbers pre as of January 25. 200?

immbei

rm The total number of Businesses operating at year end includes Non-Traditional locations ("NT's"! and Cart locations. 23 NT's and 1 Cart operating in 2003. 20 NT's operating in 2004 and 21 NT's operating in 2005. 1

rf3t Four stores that closed due to Hurricane Katrina will not reopen.)

f (4) The numbers in the "Totals" column mav exceed the number nf Businesses affected because several events mav have

affected the same Business.

>er nt I iv have had multiple owners.)

STATUS OF COMPANY-OWNED UNITS FOR YEARS [lf^5Z]2004/2003<«OO3>[<2¹

^pBusineM.es^losed<g>._i 1 ^^J4rounng^jYear#^il\

^ Businesses'Open c"d<->~ M ■iDuring'Year *

Louisiana

0/0/0

1/1/1

TOTALS

0/0/0

1/<^1/1

Smoothie King <2QQ5->2006f-?0p7| m PRAFT)

PROJECTED OPENINGS AS OF DECEMBER 31, <3W4>[2M]

i* -.- -V " ., J t x. State - ^,,t ^J,. '	_r Franchise Agreements^' ^v -.Signed but Business Not . Open	Projectcd Franchiscd New *~5Businesses in the Next ..Fiscal Year	'Projected Company Owned Openings iu Next Fiscal Year . _
Alabama	<K13-	<3>U]-	0
Arizona	<0>[jL]	<2>[U	0
Arkansas	0	1	0
California	<4>[2]	<w>[ii]	0
Colorado	<^>[jl]	<4>[U-	0
Florida	<s>[M]	<*>ttfr-	0
Georgia	<+>Uffl	<*>[]-	0
Illinois	<Q>[1]	<+>[2]	0
Indiana	<*>[]	<2>fJJ-	0
<Iewa>	<9->	<^	<0>
Kansas	<+>[]	1-	0
Kentucky	0	<+>U]	0
Louisiana	9-	<4>[2]	0
^1 \A flin j*"^ ^n iLtntv^	<fr^	*<&>*	<e>
Maryland	<3>[fl]-	<4>[J]	0
Massachusetts	<o>aj-	<2>UL3-	0
Michigan	i	2	0
Mississippi	<4>ca-	<4->[l]-	0
Missouri	0	<z>m~	0
Nevada	<©>[!]	2	0
New Jersey	0-	<*>[!]	0
New Mexico	<©>[JU	2-	0
New York	<0>[JJ-	<4>fH-	0
North Carolina	i-	<+>[!]-	0
Ohio	2-	<2>QJ-	0
Oklahoma	<e>0]-	l-	0
Pennsylvania	0	<3>[1]	0
<Rhode Island>	<o^	<ft^	<©>
South Carolina	0-	<+>U]	0
<SouthDakota>	*<&>*	<&->	<0>
Tennessee	<3>tiU	<*>[!]-	0
Texas	<^>W-	<«>[]	0
Virginia	5-	<7>[4J	0

Smoothie King <2005->2006tJQpJ] fCP:l«>21925 v4- 3/28/Q6 DRAFT!

<; ;* fc$ Slate	Franchise Agreements «.' Signed but Business Not "Open -> . . >j	¹ Projected Kranchiscd Nevv"¹' Businesses in the Next* *, Fiscal Year.,	■ * >i , Projected Company, Owned Openings in Next - Fiscal Year
Washington, DC	0-	<*>U1	0
<Wisconsin>	<0^-	<o^	<0>
TOTALS	*<$%>\m-*	<90>[2JJ	0

LIST OF AREA DEVELOPMENT AGREEMENTS FOR YEAR <2004>(2005|

, State	%. DevelopinentAgreements ' Sighed	Total Number of.Businesses
Arkansas	1	2
Florida	5	10
Kentucky	1	2
Mississippi	1	1
Missouri	1	2
North Carolina	2	8
Ohio	1	2
Rhode Island	1	2
Tennessee	1	1
Texas	1	1
TOTALS	15	31

This chart only identifies Development Agreements for which a Franchisee must, in the future, develop one or more new Units and sign a Franchise Agreement for each of the Units to be developed. Currently, Smoothie King generally does not offer franchisees the right to enter into Development Agreements. <>

The names, addresses and telephone numbers of all franchisees currently operating under a Smoothie King® Franchise <an4>[ Agreement or] Development Agreement are attached to this offering circular as Exhibit A. In addition, you will find in Exhibit B the names, last known addresses and telephone numbers of each Smoothie King® franchisee or developer whose franchise or development agreement has, between January 1, <2QQ4>["2005 ]and December 31, <2004:>r2005.1 been terminated, cancelled, not renewed, or who has, during the same time period, otherwise voluntarily or involuntarily ceased to do business, or who has not communicated with us within 10 weeks of the date of this offering circular. (J

Item 21

FINANCIAL STATEMENTS

The audited consolidated financial statements of our parent SKSI and its subsidiaries for the periods ending December 31, 12005. December 31.12004. <Docombo~~r 31, 2003,~~ >and December 29, <2QQ2>r20031 are attached to this offering circular as Exhibit C[_rj together with the auditor's reports. <S~~KSI absolut~~e~~ly and unconditionally guarantees tho obligations of Smoothi~~o ~~King und~~e~~r your Franchis~~o ~~Agr~~e~~ement through a Guaranty of Performanc~~e ~~sign~~e~~d October 27, 2000.~~>

Smoothie King <2QQS->2QQ6r-20fl7)

Item 22 CONTRACTS

The following agreements are attached as exhibits to this Offering Circular.

Exhibit D Franchise Agreement

Exhibit E Smoothie King Franchise Purchase Affidavit

Exhibit <F ~~Confid~~e~~ntiality Agreement>~~<~~Exhibit G~~>[H] Guaranty Agreement

Exhibit <H>[I] Contingent Assignment of Lease

Exhibit <fc>[il] Automatic Bank Draft

Exhibit <M>[j] Franchise Agreement Addendum - Non-Traditional Location

Exhibit <N>[L] SmoothNet Terms of Use Agreement

<~~Exhibit O Mutual R~~c~~loa~~se>

Item 23

RECEIPT

< Tho ~~very last page of this off~~e~~ring circular, following all~~ e~~xhibits is th~~e ~~receipt, one of~~-

~~which you must sign and r~~e~~turn to Smoothie King.~~>

[ Two conies of an acknowledgment of vour receipt of this Offering Circular are

included at the end of this Offering Circular fExhihit Nl You should keep one copy as copy and return the second to us.]

Smoothie King <2QQ5->2006f-20071 IGP:192192Sv4-:

In>l:*%^

Document comparison done by DeltaView on Wednesday, March 29, 2006 2:33:40 PM

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PowerDocs://GPDOCS1/1921925/1

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The Free Franchise Resource Center

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