franchise disclosure document for smashburger franchising, llc

Smashburger

06/2012 FDD

1031.002.006/46510.2

®

FRANCHISE DISCLOSURE DOCUMENT ®

SMASHBURGER FRANCHISING LLC

a Delaware Limited Liability Company

1515 Arapahoe St.

Tower One, 10th Floor

Denver, CO 80202

(303) 633-1500

www.smashburger.com

[email protected]

The franchisor will grant the right to establish and operate one or more Smashburger restaurants

featuring hamburgers, sandwiches, salads, other food items and beverages.

The total investment necessary to begin operation of a SMASHBURGER RESTAURANT

ranges from $317,500 to $789,500. This sum includes the initial franchise fee of $40,000 and a

lease review fee of $1,500. The total investment necessary under the Multi-Unit Development

Agreement equals $20,000 multiplied by the total number of restaurants to be developed (except

for the first restaurant). This amount is payable to us. We credit the initial development fee

against the initial franchise fee for each restaurant after the first one. See Items 5-7 of this

Disclosure Document for further explanation concerning the total investment.

This Disclosure Document summarizes certain provisions of your franchise agreement and other

information in plain English. Read this Disclosure Document and all accompanying agreements

carefully. You must receive this Disclosure Document at least 14 calendar days before you sign

a binding agreement with, or make any payment to, the franchisor or an affiliate in connection

with the proposed franchise sale. Note, however, that no government agency has verified the

information contained in this document.

You may wish to receive your Disclosure Document in another format that is more convenient

for you. To discuss the availability of disclosures in different formats, contact Smashburger

Franchising LLC, 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado, 80202,

(303) 633-1500.

The terms of your contract will govern your franchise relationship. Don’t rely on this Disclosure

Document alone to understand your contract. Read all of your contract carefully. Show your

contract and this Disclosure Document to an advisor, like a lawyer or an accountant.

Buying a franchise is a complex investment. The information in this Disclosure Document can

help you make up your mind. More information on franchising, such as “A Consumer’s Guide

to Buying a Franchise,” which can help you understand how to use this Disclosure Document, is

available from the Federal Trade Commission. You can contact the FTC at 1-877-FTC-HELP or

by writing to the FTC at 600 Pennsylvania Avenue, NW, Washington, D.C. 20580. You can also

visit the FTC’s home page at www.ftc.gov for additional information. Call your state agency or

visit your public library for other sources of information on franchising.

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

ISSUANCE DATE: February 28, 2012; as amended June 14, 2012.

http://www.smashburger.com/

mailto:[email protected]

http://www.ftc.gov/

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STATE COVER PAGE

Your state may have a franchise law that requires a franchisor to register or file with a state

franchise administrator before offering or selling in your state. REGISTRATION OF A

FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS THE

FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE

DOCUMENT.

Call the state franchise administrator listed in Exhibit A for information about the franchisor, or

about franchising in your state.

MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW

UNCONDITIONALLY AFTER THE INITIAL TERM EXPIRES. YOU MAY HAVE TO

SIGN A NEW AGREEMENT WITH DIFFERENT TERMS AND CONDITIONS IN ORDER

TO CONTINUE TO OPERATE YOUR BUSINESS. BEFORE YOU BUY, CONSIDER

WHAT RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF ANY, AND WHAT

TERMS YOU MIGHT HAVE TO ACCEPT IN ORDER TO RENEW.

Please consider the following RISK FACTORS before you buy this franchise:

1. THE MULTI-UNIT DEVELOPMENT AGREEMENT AND FRANCHISE

AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US BY ARBITRATION

OR LITIGATION ONLY IN COLORADO. OUT OF STATE ARBITRATION OR

LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR

DISPUTES. IT MAY ALSO COST YOU MORE TO ARBITRATE OR LITIGATE WITH US

IN COLORADO THAN IN YOUR HOME STATE.

2. THE MULTI-UNIT DEVELOPMENT AGREEMENT AND FRANCHISE

AGREEMENT STATES THAT COLORADO 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. SOME STATE FRANCHISE LAWS PROVIDE THAT CHOICE OF LAW AND

CONSENT TO JURSIDICTION PROVISIONS ARE VOID OR SUPERSEDED. YOU MAY

WANT TO INVESTIGATE WHETHER YOU ARE PROTECTED BY A STATE FRANCHISE

LAW. YOU SHOULD REVIEW ANY ADDENDA OR RIDERS ATTACHED TO THIS

DISCLOSURE DOCUMENT FOR DISCLOSURES REGARDING STATE FRANCHISE

LAWS.

4. UNDER SERVICING AGREEMENTS DATED MARCH 5, 2008, OUR AFFILIATES,

SMASHBURGER SERVICING AND SMASHBURGER PURCHASING WILL PERFORM

CERTAIN OF OUR OBLIGATIONS UNDER FRANCHISE AGREEMENTS WE ISSUE.

5. YOU ARE NOT GRANTED AN EXCLUSIVE TERRITORY UNDER THE

FRANCHISE AGREEMENT.

6. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

We use the services of one or more franchise brokers or referral sources to assist us in

selling our franchise. A franchise broker or referral source represents us, not you. We pay

this person a fee for selling our franchise or referring you to us. You should be sure to do

your own investigation of the franchise.

Effective Date: See the next page for state effective dates.

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STATE EFFECTIVE DATES

The following states require that the Disclosure Document be registered or filed with the state, or be exempt from registration: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin.

This disclosure document is registered, on file or exempt from registration in the following states having franchise registration and disclosure laws, with the following effective dates:

Hawaii March 21, 2012; as amended ________, 2012

Illinois February 29, 2012; as amended June 15, 2012

Indiana February 29, 2012; as amended June 14, 2012

Maryland March 7, 2012; as amended ________, 2012

Michigan February 29, 2012; as amended June 14, 2012

Minnesota March 2, 2012; as amended ________, 2012

New York March 2, 2012; as amended ________, 2012

North Dakota March 8, 2012; as amended ________, 2012

Rhode Island March 30, 2012; as amended ________, 2012

South Dakota February 29, 2012; as amended June 14, 2012

Virginia February 29, 2012; as amended ________, 2012

Washington March 6, 2012; as amended ________, 2012

Wisconsin February 29, 2012; as amended June 15, 2012

In all other states that do not require registration, the effective date of this Disclosure Document

is the issuance date of February 28, 2012; as amended June 14, 2012.

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THE FOLLOWING APPLY TO TRANSACTIONS GOVERNED BY

MICHIGAN FRANCHISE INVESTMENT LAW ONLY

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.

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

(b) A requirement that a franchisee assent to a release, assignment, novation, waiver,

or estoppel which deprives a franchisee of rights and protections provided in the Michigan

Franchise Investment Act. This shall not preclude a franchisee, after entering into a franchise

agreement, from settling any and all claims.

(c) A provision that permits a franchisor to terminate a franchise prior to the

expiration of its term except for good cause. Good cause shall include the failure of the

franchisee to comply with any lawful provision of the franchise agreement and to cure such

failure after being given written notice thereof and a reasonable opportunity, which in no event

need be more than 30 days, to cure such failure.

(d) A provision that permits a franchisor to refuse to renew a franchise without fairly

compensating the franchisee by repurchase or other means for the fair market value at the time of

expiration of the franchisee’s inventory, supplies, equipment, fixtures, and furnishings.

Personalized materials which have no value to the franchisor and inventory, supplies, equipment,

fixtures, and furnishings not reasonably required in the conduct of the franchise business are not

subject to compensation. This subsection applies only if: (i) the term of the franchise is less

than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from

continuing to conduct substantially the same business under another trademark, service mark,

trade name, logotype, advertising, or other commercial symbol in the same area subsequent to

the expiration of the franchise or the franchisee does not receive at least 6 months advance notice

of franchisor’s intent not to renew the franchise.

(e) A provision that permits the franchisor to refuse to renew a franchise on terms

generally available to other franchisees of the same class or type under similar circumstances.

This section does not require a renewal provision.

(f) A provision requiring that arbitration or litigation be conducted outside this state.

This shall not preclude the franchisee from entering into an agreement, at the time of arbitration,

to conduct arbitration at a location outside this state.

(g) A provision which permits a franchisor to refuse to permit a transfer of ownership

of a franchise, except for good cause. This subdivision does not prevent a franchisor from

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

limited to:

(i) The failure of the proposed transferee to meet the franchisor’s then current

reasonable qualifications or standards.

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

subfranchisor.

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(iii) The unwillingness of the proposed transferee to agree in writing to comply

with all lawful obligations.

(iv) The failure of the franchisee or proposed transferee to pay any sums owing

to the franchisor or to cure any default in the franchise agreement existing at the time of

the proposed transfer.

(h) A provision that requires the franchisee to resell to the franchisor items that are

not uniquely identified with the franchisor. This subdivision does not prohibit a provision that

grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same

terms and conditions as a bona fide third party willing and able to purchase those assets, nor does

this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a

franchise for the market or appraised value of such assets if the franchisee has breached the

lawful provisions of the franchise agreement and has failed to cure the breach in the manner

provided in subdivision (c).

(i) A provision which permits the franchisor to directly or indirectly convey, assign,

or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless

provision has been made for providing the required contractual services.

If the franchisor’s most recent financial statements are unaudited and show a net worth of

less than $100,000, the franchisor shall, at the request of a franchisee, arrange for the escrow of

initial investment and other funds paid by the franchisee until the obligations to provide real

estate, improvements, equipment, inventory, training, or other items included in the franchise

offering are fulfilled. At the option of the franchisor, a surety bond may be provided in place of

escrow.

THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE

ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION,

OR ENFORCEMENT BY THE ATTORNEY GENERAL.

Any questions regarding this notice should be directed to:

State of Michigan

Consumer Protection Division

Attn: Franchise

670 G. Mennen Williams Building

525 West Ottawa

Lansing, Michigan 48933

Telephone Number: (517) 373-7117

Note: Despite subparagraph (f) above, we intend, and we and you agree to fully enforce the

arbitration provisions of the Multi-Unit Development Agreement and Franchise Agreement. We

believe that paragraph (f) is unconstitutional and cannot preclude us from enforcing these

arbitration provisions. You acknowledge that we will seek to enforce this section as written.

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TABLE OF CONTENTS

ITEM Page

ITEM 1 THE FRANCHISOR AND ANY PARENTS, PREDECESSORS, AND

AFFILIATES .................................................................................................................1

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

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

ITEM 4 BANKRUPTCY ..........................................................................................................12

ITEM 5 INITIAL FEES.............................................................................................................12

ITEM 6 OTHER FEES ..............................................................................................................13

ITEM 7 ESTIMATED INITIAL INVESTMENT .....................................................................18

ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES ......................23

ITEM 9 FRANCHISEE’S OBLIGATIONS .............................................................................25

ITEM 10 FINANCING................................................................................................................27

ITEM 11 FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND

TRAINING ..................................................................................................................27

ITEM 12 TERRITORY ...............................................................................................................35

ITEM 13 TRADEMARKS ..........................................................................................................38

ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION ......................40

ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE

FRANCHISE BUSINESS ...........................................................................................41

ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL ..............................42

ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION.........42

ITEM 18 PUBLIC FIGURES ......................................................................................................52

ITEM 19 FINANCIAL PERFORMANCE REPRESENTATIONS ...........................................52

ITEM 20 OUTLETS AND FRANCHISEE INFORMATION ...................................................53

ITEM 21 FINANCIAL STATEMENTS .....................................................................................59

ITEM 22 CONTRACTS ..............................................................................................................59

ITEM 23 RECEIPTS ...................................................................................................................59

EXHIBIT A State Administrators/Agents for Service of Process

EXHIBIT B Multi-Unit Development Agreement

EXHIBIT C Franchise Agreement

EXHIBIT D List of Franchisees

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EXHIBIT E List of Franchisees Who Have Left the System or Not Communicated

EXHIBIT F Financial Statements

EXHIBIT G Table of Contents to Standards of Operations Manual

EXHIBIT H Representations and Acknowledgement Statement

EXHIBIT I Sample General Release

EXHIBIT J State Addenda and Agreement Riders

EXHIBIT K Receipts

APPLICABLE STATE LAW MIGHT REQUIRE ADDITIONAL DISCLOSURES RELATED

TO THE INFORMATION CONTAINED IN THIS DISCLOSURE DOCUMENT, AND

MIGHT REQUIRE A RIDER TO THE FRANCHISE AGREEMENT. THESE ADDITIONAL

DISCLOSURES AND RIDERS, IF ANY, APPEAR IN EXHIBIT J.

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ITEM 1

THE FRANCHISOR, AND ANY PARENTS, PREDECESSORS, AND AFFILIATES

The Franchisor. The Franchisor is Smashburger Franchising LLC. To simplify the

language in this franchise disclosure document (this “Disclosure Document”), we use the terms

“Franchisor,” “we,” “us,” “Company,” or “SMASHBURGER” to refer to Smashburger

Franchising LLC. When we refer to our affiliates, we will refer to them by their names. “You”

means the person or entity that buys the franchise. If you are a corporation, partnership, limited

liability company or other entity, certain provisions of the Franchise Agreement (defined below),

Multi-Unit Development Agreement (defined below) and related agreements will also apply to

your owners.

We were originally formed in the State of Delaware on March 5, 2008 and began offering

franchises of the type described in this Disclosure Document as of April 8, 2008. We do

business under our corporate name and as “Smashburger.” We do not do business under any

other name. Our principal business address is 1515 Arapahoe Street, Tower One, 10th

Floor,

Denver, Colorado 80202, (303) 633-1500. Our agents for service of process in certain states are

listed in Exhibit A.

Our Parent, Predecessors and Affiliates. In December 2010, we went through an

internal corporate reorganization, which resulted in Smashburger Master LLC, a Delaware

limited liability company formed on January 3, 2008 (“Smashburger Master”), becoming our

parent. Smashburger Master has been licensed the right to use and sublicense the use of the

Marks (defined below) from our affiliate, Icon Burger Development Company LLC, parent of

Smashburger Master and a Delaware limited liability company formed on September 13, 2006

(“Icon Burger”). Icon Burger owns the trademarks and other intellectual property used in the

operation of SMASHBURGER RESTAURANTS (defined below). Smashburger Master has, in

turn, licensed us the right to use and sublicense the use of the Marks. Our affiliate, The

Smashburger Servicing Company LLC, a subsidiary of Smashburger Master and a Delaware

limited liability company formed on March 5, 2008 (“Smashburger Servicing”), under a

servicing agreement dated March 5, 2008 with us, will perform certain of our obligations under

Franchise Agreements we issue, including negotiating supplier contracts for certain services sold

to franchisees. Our affiliate, Smashburger Purchasing Company LLC (“Smashburger

Purchasing”), a subsidiary of Smashburger Master and a Delaware limited liability company

formed on April 5, 2010, negotiates supplier contracts for certain goods and products sold to

franchisees.

In connection with providing these services to us, Smashburger Servicing and

Smashburger Purchasing use the services of certain individuals and employees associated or

employed with our affiliates, Icon Burger Acquisition LLC (“IBA”), a subsidiary of

Smashburger Master, formed September 13, 2006, and Consumer Capital Partners Management

LLC (“CCP”), formed October 9, 2008. Those individuals or employees that have management

responsibility for the sale or operation of the franchises offered by this Disclosure Document are

listed in Item 2. Our affiliate, Smashburger AFT Inc. (formed December 18, 2008) is the trustee

of the Smashburger Marketing Fund (see Item 11). Our affiliate, Smashburger Gift Card LLC,

an Arizona limited liability company formed on August 29, 2008, provides stored value card

services to franchisees. Our parent and all of the affiliates described above share our principal

business address and phone number. We have no predecessors.

Agents for Service of Process. We disclose our agents for service of process in

Exhibit A.

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Prior Experience. We have developed and operate using certain specified and distinct

business formats, methods, procedures, signs, designs, layouts, standards, specifications and

marks (the “Franchise System”) for the establishment, development and operation of restaurants

with a menu featuring gourmet burgers, sandwiches, salads, other food items, shakes, floats, and

other beverages in a casual atmosphere (“SMASHBURGER RESTAURANTS”).

We have not operated SMASHBURGER RESTAURANTS such as the ones being

franchised in this Disclosure Document. Our affiliates have operated SMASHBURGER

RESTAURANTS since June 18, 2007, and, as of January 1, 2012, operated 59

SMASHBURGER RESTAURANTS. (See Item 20) Other than as provided above, we and our

affiliates do not engage in, or offer franchises for, any other business activities.

The Franchises We Offer. We will primarily offer the right to enter into a Multi-Unit

Development Agreement which grants you the right to acquire, and under which you agree to

acquire, multiple franchises to develop and operate an agreed upon number of SMASHBURGER

RESTAURANTS within a specifically described geographic territory according to a

development schedule (the “Multi-Unit Development Agreement”). The form of Multi-Unit

Development Agreement you will sign is attached as Exhibit B to this Disclosure Document.

Your obligation to acquire franchises may be satisfied by you or by an entity controlled by you

or your owners that meets our then applicable standards and requirements for franchise owners

(an “Approved Affiliate”). To acquire a franchise, either you or an Approved Affiliate must

enter into our then current form of Franchise Agreement (the “Franchise Agreement”). Our

current form of Franchise Agreement is attached as Exhibit C to this Disclosure Document.

Each SMASHBURGER RESTAURANT that you or an Approved Affiliate develops and

operates (each a “Restaurant”) must be governed by a Franchise Agreement signed by you or

the Approved Affiliate. We may choose not to enter into a Franchise Agreement with single unit

operators. However, we may consider it under limited circumstances, such as for Special Venue

Restaurants. For purposes of this Disclosure Document, a “Special Venue Restaurant” is (1)

any kiosk, mobile facility or similar location or type of operation which, because of its inherent

operational limitations, is required to offer a limited menu or have a materially different

operating format as compared to a traditional SMASHBURGER RESTAURANT, (2) any

location in which foodservice is or may be provided by a master concessionaire, (3) any location

which is situated within or as part of a larger venue or facility (other than a mall or shopping

center) and, as a result, is likely to draw the predominance of its customers from those persons

who are using or attending events in the larger venue or facility (for example,

colleges/universities, convention centers, airports, hotels, sports facilities, theme parks, hospitals,

transportation facilities, convenience stores, and other similar captive market locations), or (4)

any distribution channel other than a SMASHBURGER RESTAURANT (including the Internet,

grocery stores, supermarkets, and mail order) through which products and services associated

with or sold through SMASHBURGER RESTAURANTS are or may be sold.

Market Competition. The market for food products and services SMASHBURGER

RESTAURANTS offer is highly competitive, as is the market for obtaining locations for

SMASHBURGER RESTAURANTS. Your competition includes all restaurant concepts,

particularly quick service restaurants serving hamburgers. However, we believe we offer a

unique opportunity in the restaurant industry. SMASHBURGER RESTAURANTS offer high

quality hamburgers, which are smashed and grilled, and other food and beverages.

Regulations. You should consider that certain aspects of the restaurant business are

heavily regulated by federal, state and local laws, rules and ordinances. The U.S. Food and Drug

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Administration, the U.S. Department of Agriculture, and various state and local departments of

health and other agencies have laws and regulations concerning the preparation of food and

sanitary conditions and restaurant facilities. State and local agencies routinely conduct

inspections for compliance with these requirements. Certain provisions of these laws impose

limits on emissions resulting from commercial food preparation. You will need to understand

and comply with these laws in operating the Restaurant. You must also obtain a liquor license to

sell wine and beer, and you may have liability imposed on you by Dram Shop Laws. There may

be other laws applicable to your business. We urge you to make further inquiries about these

laws.

Financial Requirements. You must maintain, and prove to us that you have, sufficient

working capital reserves, as we determine to be necessary and appropriate to comply with your

obligations under each Franchise Agreement. We may periodically designate the maximum

amount of debt that we will allow franchisees to service. In addition, the 1st and 2

nd

SMASHBURGER RESTAURANTS developed pursuant to Franchise Agreements signed under

a Multi-Unit Development Agreement must be developed with cash equity and without the

proceeds from any loans made by the franchisee (or its owners), its affiliates (or their owners) or

any other third party. Further, under the Multi-Unit Development Agreement, a developer must

always maintain sufficient liquidity to meet its obligations under the Multi-Unit Development

Agreement and, in any event, the liquidity of the developer and all of its affiliates who sign

Franchise Agreements, combined, must not at any time fall below the amount identified in Item

7 as the total estimated initial investment to open one Restaurant ($789,500). (See Item 10) We

reserve the right to review these liquidity requirements, and you must comply with such

minimum liquidity requirements that we reasonably impose.

ITEM 2

BUSINESS EXPERIENCE

Chief Executive Officer: David Prokupek

Mr. Prokupek became our Chief Executive Officer in February 2010. From November

2007 to February 2010, he served as our Chief Investment Officer. He has also served as the

chief executive officer of Smashburger Master LLC, Icon Burger Acquisition LLC, and other

related entities, all located in Denver, Colorado, since February 2010 and their President from

July 2010 to October 2011. Since July 2009, he has also been the Chairman of Icon Burger

Development Company, LLC located in Denver, Colorado. He has also been the Chief

Investment Officer of The Cervantes Holding Company (“Cervantes”) and CCP, and other

related entities, all located in Denver, Colorado, since November 2007 and their President since

January 2010. He was also appointed the Managing Director of Cervantes and CCP in January

2010. From July 2002 to December 2009, he was the Chief Executive Officer and owner of

Geronimo Financial in Denver, Colorado. Mr. Prokupek also served as a member of the Board of

Managers of QCE Holding LLC (“QCEH”) from December 2007 to October 2011.

President: Greg Creighton

Mr. Creighton is employed by our affiliate, Icon Burger Acquisition LLC, and has been

our President since July 2011. From June 2010 to June 2011, Mr. Creighton was our Chief

Operating Officer; from May 2009 to June 2010, he was our Executive Vice President of

Operations; and from September 2008 through April 2009, he served as our Regional Vice

President. From March 2007 to September 2008, Mr. Creighton was self employed as a

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consultant in Minneapolis, Minnesota. From January 1998 to March 2007, he was President and

Chief Operating Officer of Leann Chin, Inc. in Bloomington, Minnesota.

Chief Development Officer: Scott Crane

Mr. Crane is employed by our affiliate, CCP, and has been our Chief Development

Officer since December 2011. From November 2007 to June 2010, Mr. Crane was our

President. Mr. Crane has also been President of IBA in Denver, Colorado, since November

2007. From April 2007 to October 2007 and from June 2005 to December 2005, he was a real

estate developer for Cook Properties in Wichita, Kansas. From January 2006 to March 2007, he

was a consultant for Ted’s Montana Grill in Atlanta, Georgia.

Chief Legal Officer: Patrick Meyers

Mr. Meyers is employed by our affiliate, CCP, and has been our Chief Legal Officer

since March 2012. He has held the same position with Icon Burger Development Company

LLC, Smashburger Master LLC and other related entities, all located in Denver, Colorado, since

March 2012. He also has served as the Chief Legal Officer, Executive Vice President and a

member of the Board of Directors of CCP and its predecessor, Cervantes, located in Denver,

Colorado, since May 2006. From May 2006 to January 2012, he served as a member of the

Board of Managers of QCEH, and from October 2000 to January 2012, he served in various

executive roles with QFA Royalties LLC, the franchisor of the Quiznos concepts and its various

affiliated and predecessor companies (“QFA”), including General Counsel and a member of the

board of directors.

Chief Accounting Officer: Christina Carlson

Ms. Carlson is employed by our affiliate, Icon Burger Acquisition LLC, and has been our

Chief Accounting Officer since April 2012. From June 2005 to March 2012, she was Vice

President and Controller of Red Robin Gourmet Burgers in Greenwood Village, Colorado.

Operating Partner/Vice President of Training: Janice Branam

Ms. Branam is employed by our affiliate, Icon Burger Acquisition LLC, and has been our

Operating Partner and Vice President of Training in Denver, Colorado since January 2009 and

has also been employed by our affiliate, IBA in Denver, Colorado, since that time. Prior to

joining us, from August 1996 to March 2008, Ms. Branam has held various positions with

Quizno’s in Denver, Colorado, including Senior Vice President, Training; Vice President, Small

Market Development; Vice President, Development and Ops; Senior Vice President, AD

Development; Senior Vice President, Curriculum Development; Senior Vice President, Ops

Systems and Training; Vice President, Corporate Ops and Training; Vice President, Training and

Director of Training. Ms. Branam was an independent consultant in Boulder, Colorado from

March 2008 to January 2009.

Sr. Vice President of Finance and Strategy: Christopher Chang

Mr. Chang is employed by our affiliate, CCP, and has been our Sr. Vice President of

Finance and Strategy since June 2011. From November 2008 to June 2011, he was Vice

President of CCP in Denver, Colorado. From March 2007 to November 2008, Mr. Chang was

Director of Corporate Development for Vail Resorts in Broomfield, Colorado. From March

2006 to March 2007, he was a Director of Western Union in Centennial, Colorado.

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Sr. Vice President of Marketing & Consumer Insights: Jeremy Morgan

Mr. Morgan is employed by our affiliate, Icon Burger Acquisition LLC, and has been our

Sr. Vice President of Marketing & Consumer Insights since May 2011. From June 2010 through

April 2011, he served as our Vice President – Strategy. From October 2006 to May 2010, Mr.

Morgan was Case Team Leader for Bain & Co. in Chicago, Illinois.

Sr. Vice President of Franchise Sales: Brett Willis

Mr. Willis is employed by our affiliate, Icon Burger Acquisition LLC, and has been our

Sr. Vice President of Franchise Sales since May 2012. From May 2011 to May 2012, he was

Vice President of Franchise Sales for The Johnny Rockets Group in Aliso Viejo, California.

From October 2005 to May 2011, he served in various capacities (most recently as Vice

President of Franchise Development) for Arby’s Restaurant Group in Atlanta, Georgia.

Vice President of Real Estate: Jesse Yuran

Mr. Yuran is employed by our affiliate, Icon Burger Acquisition LLC, and has been our

Vice President of Real Estate since August 2011. From February 2002 to August 2011, he was

Vice President for Legend Retail Group, LLC in Denver, Colorado.

Vice President of Real Estate: Michael Ganzle

Mr. Ganzle is employed by our affiliate, Icon Burger Acquisition LLC, and has been our

Vice President of Real Estate since April 2012. From August 2007 to March 2012, he was Vice

President/Director of Real Estate for J.P. Morgan Chase in Denver, Colorado. From September

2005 to July 2007, he was Development Manager for Starbucks in Denver, Colorado.

Vice President of Real Estate: Jesse Heathcock

Mr. Heathcock is employed by our affiliate, Icon Burger Acquisition LLC, and has been

our Vice President of Real Estate since April 2012. From March 2008 to April 2012 he was

Vice President for Jones Lang LaSalle in Chicago, Illinois. From August 1998 to February 2008

he was Real Estate Manager for Brinker International in Dallas, Texas.

OTHER INDIVIDUALS WITH MANAGEMENT RESPONSIBILITY

The following individuals do not hold any office with us, but they do have certain management

responsibility in connection with the sale and operation of Franchises offered by this Disclosure

Document. The offices shown are offices they hold with the designated entity.

Richard E. Schaden

Richard E. Schaden is one of our investors and is neither employed by us nor holds an

office with us. From May 2006 to October 2010, he was the Chief Executive Officer of CCP and

its predecessor, Cervantes, in Denver, Colorado. From October 2000 to October 2010, Mr.

Schaden served in various roles (including Chief Executive Officer) for QFA.

Managing Partner and Chief Concept Officer: Thomas Ryan

Mr. Ryan has been the Chief Concept Officer of CCP and its predecessor, Cervantes, in

Denver, Colorado since May 2007. He was a member of the Board of Managers of QCEH from

August 2008 to January 2012 and from July 2003 to May 2007, he was Executive Vice President

- Branding for Quizno’s in Denver, Colorado.

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ITEM 3

LITIGATION

PENDING:

There is no pending litigation against us, our officers (as designated in Item 2 above) or

involving the Smashburger Franchise System. The litigation referred to below relates to certain

persons who, while not our officers, directors or employees, are listed in Item 2 as having

management responsibility for the sale or operation of franchises.

MKJA, Inc., et al. v. 123 Fit Franchising, LLC et al. and DOES 1-25, Case No. GIN055734

(Superior Court of California, County of San Diego, North District). On September 27, 2006,

MKJA, Inc. and certain current and former 123 Fit franchisees and their principals, filed a

statement of claim against 123 Fit Franchising, LLC, 123 Fit Services, LLC and Richard E.

Schaden (referred to in the remainder of this Item 3 as “Schaden”), among others, asserting

claims for failure to comply with the disclosure requirements of the California Franchise

Investment Law, breach of contract, breach of the implied covenant of good faith and fair

dealing, violation of the California Business and Professions Code, and fraud in the inducement.

Plaintiffs alleged that these claims arose out of failure by the defendants to disclose, among other

things, information relating to the initial investment required for the franchise. The claim seeks

an unspecified amount of damages, injunctive relief, attorneys’ fees, and costs. On October 31,

2007, the court ordered the parties to arbitrate this dispute. On September 10, 2009, the court

lifted the stay which would allow the suit to proceed before the court rather than in arbitration.

On January 4, 2011, the California Court of Appeals reversed the court’s order lifting the stay of

the lawsuit, and on April 20. 2011, the California Supreme Court denied plaintiffs’ petition for

review of that decision. Although the case remains on the Superior Court’s docket, the parties

are awaiting the plaintiffs’ initiation of arbitration in Colorado, but no formal action has yet been

taken in that respect. The defendants intend to defend this lawsuit if arbitration is initiated.

Ballwin Food Beverage, Inc., et al., v. Quiznos Franchising II LLC, et al, Case No.

2010CV3711 (District Court, City and County of Denver, State of Colorado). Between May 7,

2010 and October 12, 2010, the following 18 separate complaints were filed by current and

former QUIZNOS franchisees against QFA and certain of its affiliates, Schaden, Patrick E.

Meyers (our Chief Legal Officer) (referred to in the remainder of this Item 3 as “Meyers”) and

certain current and former QUIZNOS officers, directors and employees: Neptune Group Inc., et

al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv3716, District Court, City and County

of Denver, State of Colorado, filed May 7, 2010 and amended June 4, 2010); Harry G. Pappas

III. v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s Corporation, et al. (Case No.

2010cv3740, District Court, City and County of Denver, State of Colorado, filed May 7, 2010

and amended June 9, 2010); SK7 Inc., et al. v. Quizno’s Franchising II LLC, et al. (Case No.

2010cv4484, District Court, City and County of Denver, State of Colorado; filed and amended

June 3, 2010); BC-Q LLC, et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv03920,

District Court, City and County of Denver, State of Colorado, filed and amended June 3, 2010);

SAP & NSD Inc., et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv4551, District

Court, City and County of Denver, State of Colorado, filed and amended June 4, 2010); O.T.I.S.

Enterprise LLC, et al. v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s Corporation,

et al. (Case No. 2010cv4540, District Court, City and County of Denver, State of Colorado, filed

June 4, 2010); Too Bee Foods LLC, et al. v. Quizno’s Franchising LLC, et al. (Case No.

2010cv4571, District Court, City and County of Denver, State of Colorado, filed June 7, 2010);

Ballwin Food & Beverage Inc., et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv3711,

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District Court, City and County of Denver, State of Colorado, filed June 8, 2010); Dr. P’s LLC,

et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv3714, District Court, City and County

of Denver, State of Colorado, filed and amended May 9, 2010); K.R. & K Enterprises LLC, et al.

v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s Corporation, et al. (Case No.


Sub-Thing Great Inc., et al. v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s

Corporation, et al. (Case No. 2010cv3905, District Court, City and County of Denver, State of

Colorado, filed and amended June 10, 2010); Lop Duk Wong v. Quizno’s Franchising II LLC, et

al. (Case No. 2010cv4797, District Court, City and County of Denver, State of Colorado, filed

June 14, 2010); VDS LLC, et al. v. Quizno’s Franchising II LLC, et al. (Case No. 2010cv4906,

District Court, City and County of Denver, State of Colorado, filed June 15, 2010); Cascade

Enterprises L.C., et al. v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s

Corporation, et al. (Case No. 2010cv4871, District Court, City and County of Denver, State of

Colorado, filed June 16, 2010); College Park Foods Inc., et al. v. The Quizno’s Franchise

Company LLC f/k/a The Quizno’s Corporation, et al. (Case No. 2010cv4889, District Court,

City and County of Denver, State of Colorado, filed June 17, 2010); Abi-Sam Foods LLC, et al.

v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s Corporation, et al. (Case No.


Michael Gatas, et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010CV8128, District Court,

City and County of Denver, State of Colorado, filed October 12, 2010); and Mark Rosenberg, et

al. v. Quizno’s Franchising LLC, et al. (Case No. 2010CV8129, District Court, City and County

of Denver, State of Colorado, filed October 12, 2010). In each of the above 18 lawsuits, at least

one party in the plaintiff group has claimed to have opted out of the Siemer v. The Quizno’s

Franchise Company LLC national class action settlement agreement that was granted final

approval by the United States District Court for the Northern District of Illinois on August 13,

2010.

Except where noted below, all of the 18 lawsuits allege the following claims: (1)

violations of the Colorado Organized Crime Control Act, C.R.S. 18-17-101 et seq., including

fraudulent scheme to sell mandated essential goods at inflated prices, fraudulent scheme to sell

franchise agreements, and unlawful control over franchisees through a pattern of racketeering

activity; (2) violation of the Colorado Consumer Protection Act; (3) conspiracy to violate the

Colorado Consumer Protection Act; (4) aiding and abetting the violation of the Colorado

Consumer Protection Act; (5) breach of contract; (6) breach of the implied covenant of good

faith and fair dealing; (7) unjust enrichment; (8) fraud in the inducement; (9) conspiracy to

commit fraud in the inducement; (10) aiding and abetting fraud in the inducement; (11)

promissory fraud; (12) conspiracy to commit promissory fraud; (13) aiding and abetting

promissory fraud; (14) illusory contract; (15) breach of fiduciary duty; (16) conspiracy to breach

fiduciary duty; (17) aiding and abetting breach of fiduciary duty; (18) declaratory judgment; (19)

violation of Colorado’s Civil Theft Act; (20) conspiracy to commit civil theft; and (21) aiding

and abetting civil theft. The Cascade Enterprises L.C., Abi-Sam Foods LLC, Pappas, Ballwin

Food & Beverage Inc., and Dr. P’s LLC lawsuits add an additional claim for economic duress.

All 18 lawsuits seek preliminary and permanent injunction relief, an order declaring

certain provisions of the plaintiffs’ franchise agreements unconscionable and therefore

unenforceable, an order declaring the plaintiffs’ franchise agreements illusory, compensatory,

consequential and statutory damages, disgorgement of defendants illegally-obtained profits,

attorneys’ fees and costs, and rescission of plaintiffs’ franchise agreements.

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On July 27, 2010, the QUIZNOS entities filed motions to dismiss the above lawsuits

(except for the Gatas and Rosenberg lawsuits which were filed subsequent to the QUIZNOS

entities’ motions to dismiss) in their entirety and also filed separate motions to dismiss the

individual defendants from these 16 lawsuits. On November 22, 2010, the court granted the

QUIZNOS entities’ motions to strike plaintiffs’ jury demand and motion to dismiss with respect

to plaintiffs’ claim for economic duress, but denied the QUIZNOS entities’ motions to dismiss

with respect to plaintiffs’ remaining claims. In accordance with the court’s orders on September

13, 2010 and November 29, 2010, the above 18 lawsuits, including the Gatas and Rosenberg

lawsuits, have been consolidated under the Ballwin Food & Beverage Inc. lawsuit for pre-trial

purposes only. Consequently, the QUIZNOS entities’ motions and the court’s orders with

respect to such motions apply to all 18 cases, including the subsequently filed Gatas and

Rosenberg lawsuits. On December 14, 2010, the QUIZNOS entities (excluding the individually

named defendants) filed an answer to each lawsuit, and for the following lawsuits filed a

counterclaim against plaintiff(s) and certain additional parties who acted as guarantors for breach

of contract arising out of the closure of their QUIZNOS Restaurant: Neptune Group Inc.;

Pappas; BC-Q LLC; SAP & NSD Inc.; Too Bee Foods LLC; Ballwin Food & Beverage Inc.; Dr.

P’s LLC; Wong; VDS LLC; Cascade Enterprises L.C.; College Park Foods Inc.; Abi-Sam Foods

LLC; Gatas; and Rosenberg. Plaintiffs in the previously listed cases filed an answer to the

QUIZNOS entities’ counterclaims on January 11, 2011. On January 25, 2011, the court denied

the QUIZNOS entities’ motions to dismiss the individual defendants. On February 8, 2011, the

individually named defendants filed an answer to each of the 18 lawsuits. On June 12, 2012, the

QUIZNOS entities and the other defendants filed motions for summary judgment as to the claims

of all 18 plaintiff groups. Trial for all lawsuits has been set for September 2012. Defendants

intend to defend these lawsuits and prosecute their counterclaims.

COMPLETED:

Thin N’ Out Fitness Inc., et al, v. 123 Fit Franchising LLC, et al, No. 75 114 00131

08 (American Arbitration Association, Seattle, Washington). On April 10, 2008, claimants, a

former 123 Fit franchisee and its principals, filed a demand for arbitration against 123 Fit

Franchising LLC, Schaden, and certain other unaffiliated entities and individuals, asserting

claims for violation of the Washington Franchise Investment Practices Act. The demand sought

rescission of the plaintiffs’ franchise agreement, or in the alternative, an unspecified amount of

damages, fees, and costs. The parties signed a settlement agreement and the case was dismissed

in February 2010. The terms of the settlement, which included mutual general releases, required

123 Fit to cause a payment to the plaintiffs in the amount of $27,826.

William H. Nickerson, et al v. The Quizno’s Corporation, et al., Case No. 04 CV

04CV0455 (District Court for the City and County of Denver, Colorado). On January 20, 2004,

plaintiff, a former shareholder of The Quizno’s Corporation (“TQC”), filed suit against TQC and

its board of directors seeking damages allegedly arising in connection with TQC’s

November 2000 tender offer to purchase all outstanding shares of its common stock at a price of

$8.00 per share. Plaintiff alleged that TQC’s board of directors breached its fiduciary duties to

TQC’s shareholders, that TQC was unjustly enriched at the expense of its shareholders, and that

defendants violated certain Colorado state securities laws. The case was settled, and as part of

the settlement, on June 14, 2004, TQC disbursed $5.8 million to shareholders who submitted a

valid claim. The court approved the settlement on September 27, 2004, and the settlement

became effective on November 15, 2004.

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Moiez Al-Harazi and Sawson Shoraan v. The Quizno’s Canada Restaurant

Corporation, et al., Court File No. 05-CV-302670 (Ontario Superior Court of Justice). On

January 5, 2006, 2 franchisees of Quizno’s Canada Restaurant Corporation (“QCRC”) without

open QUIZNOS Restaurants, filed an amended statement of claim on behalf of themselves and

other similarly-situated franchisees against QCRC and certain of its affiliates, Schaden, Meyers,

and certain current and former employees of QCRC, asserting claims for violation of the Wishart

Act. The claim sought compensation for loss of income and foregone opportunity cost or

damages. A settlement was reached between the representative plaintiffs and defendants. 164

members of the class were entitled to a partial refund of the initial franchise fee (in which case

their underlying franchise agreements were terminated) ranging from 25% to 50% of the initial

franchise fee paid by the class member (approximately $6,500CAD and $13,000CAD).

Alternatively, a class member could remain a QCRC franchisee, which election had to be

approved by QCRC, and the class member was entitled to receive a $26,630CAD credit toward

the purchase price of equipment and supplies necessary to open a QUIZNOS Restaurant. On

July 7, 2007, the class was certified for settlement purposes only and the terms of the settlement

were approved by the court.

Edward C. Sebesta, et al v. The Quizno’s Corporation, Case No. 01CV6281 (District

Court for the City and County of Denver, Colorado). On November 13, 2001, a shareholder of

TQC, filed suit against TQC and its board of directors seeking to prevent a proposed transaction

by which TQC would become a private company and all publicly-traded shares of TQC would

be repurchased. Plaintiffs alleged that TQC’s board of directors breached its fiduciary duties to

TQC’s shareholders. The case settled, and the trial court entered judgment for approval of the

settlement on April 15, 2004. The maximum aggregate amount that could be received by the

plaintiffs in this case is approximately $1.8 million. A hearing was held on July 17, 2008,

whereby the court granted approval to distribute a settlement amount to the class members of

approximately $293,600, which was completed at the end of the 3rd

quarter of 2008.

Esmat “Sam” Elhilu and Haytham Kafouf, et al. v. Quizno’s Franchising Company,

LLC, et al., Case No. CV 06 7855 FMC (CTx) (United States District Court for the Central

District of California), filed in California state court (and subsequently removed) on

November 14, 2006, as a putative class action by 2 QUIZNOS franchisees. The defendants are

QFA and certain of its affiliates including Schaden. Plaintiffs asserted claims for violation of the

California Franchise Investment Law, conspiracy based on alleged misrepresentations relating to

site selection and violations of the California unfair competition and false advertising laws. The

complaint sought, among other things, an unspecified amount of damages, costs, and attorneys

fees. The parties entered into a settlement agreement on March 30, 2009, which was approved

by the court on December 8, 2009. Under the settlement, approximately 260 members of the

class who have non-terminated QUIZNOS franchise agreements are entitled to payments

between $50 and $8,175 in exchange for a termination of their franchise agreements.

Alternatively, franchisees in this group can elect to remain franchisees and receive a credit equal

to the initial franchise fee toward equipment and other purchases. Another 300 class members

whose franchise agreements had been terminated were entitled to payments ranging from $250 to

$500.

Gause v. Geronimo Financial, Inc. and David Prokupek, Civil Action No. 08CV1458

(District Court for the City and County of Denver, Colorado). On March 4, 2008, Marshall

Gause, a former employee of Geronimo Financial, Inc. (“Geronimo”), filed a complaint against

Geronimo and David Prokupek, asserting several claims related to the termination of his

employment, and he later amended his complaint to include a claim that debt re-payments made

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by Geronimo to Mr. Prokupek constituted a fraudulent conveyance. Without admitting liability,

the parties entered into a Confidential Settlement and Release Agreement on September 3, 2009,

in which Gause agreed to dismiss the lawsuit against Geronimo and Mr. Prokupek in exchange

for a payment of $300,000.

On August 13, 2010, the United States District Court for the Northern District of Illinois

granted final approval of the settlement agreement the parties in the following 4 cases entered

into on October 27, 2009 affecting all 4 cases:

Raymond Bonanno, et al., individually and on behalf of others similarly

situated v. The Quizno’s Master LLC, et al., Civil Action No. 1:06-cv-2358-WYD-

BNB (United States District Court for the District of Colorado), (filed on February 16,

2006, as a putative class action by 6 QUIZNOS franchisees who never opened

Restaurants. The defendants were QFA and certain of its affiliates, Schaden and certain

former QUIZNOS employees. The plaintiffs asserted claims for fraudulent inducement,

violation of the covenant of good faith and fair dealing, duty, unjust enrichment, breach

of contract, violation of the Colorado Consumer Protection Act, common law conspiracy

and economic duress. The complaint sought, among other things, an unspecified amount

of damages, rescission of plaintiffs’ franchise agreements, and injunctive relief to prevent

future sales of QUIZNOS franchises in New Jersey.

Fred N. and Michana A. Westerfield, et al. v. The Quizno’s Franchise

Company LLC, et al., Case No. 06-C-1210 (United States District Court for the Eastern

District of Wisconsin, Green Bay Division), originally filed, as a putative class action, on

November 20, 2006 by 12 current and former QUIZNOS franchisees. The defendants

were QFA and certain of its affiliates, Meyers, Cervantes, Cervantes Master LLC,

Schaden, and Richard F. Schaden. The complaint asserted claims for violation of the

federal RICO statute, Section 1 of the Sherman Act, the Wisconsin Fair Dealership Law,

the Wisconsin Deceptive Trade Practices Act, Wisconsin Statute Section 895.446

(property damage or loss), Wisconsin Statute Section 134.01 (injury to business), the

Wisconsin Franchise Investment Law, fraud in the inducement, breach of contract,

fraudulent concealment, breach of the implied covenant of good faith and fair dealing,

unjust enrichment, promissory fraud, strict liability misrepresentation, economic duress,

illusory contract, breach of fiduciary duty, and declaratory judgment, all allegedly arising

out of the sale of franchises and the subsequent sale to franchisees of certain products or

services. The complaint sought unspecified preliminary and permanent injunctive relief,

and an unspecified amount of damages.

Ilene Siemer, et al. v. The Quizno’s Franchise Company LLC, et al., Case No.

07 CV 2170 (United Stated District Court for the Northern District of Illinois), filed on

April 19, 2007, as a putative class action by 5 current and former QUIZNOS franchisees.

The defendants were QFA and certain of its affiliates, Meyers, Cervantes and Cervantes

Master LLC, Schaden and Richard F. Schaden. The plaintiffs asserted claims for

violation of the federal RICO statute, the Illinois Franchise Disclosure Act, the Illinois

Consumer Fraud and Deceptive Business Practices Act, conspiracy, unjust enrichment,

promissory fraud, economic duress, illusory contract, breach of fiduciary duty, and

declaratory judgment and for fraud in the inducement, breach of contract, and breach of

the covenant of good faith and fair dealing, all allegedly arising out of the sale of

franchises and the subsequent sale to franchisees of certain products or services. The

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complaint sought unspecified preliminary and permanent injunctive relief, and an

unspecified amount of damages.

Bonnie Brunet, et al. v. The Quizno’s Franchise Company LLC, et al., Case

No. 1:07-cv-01717-EWN-KLM (United States District Court for the District of

Colorado), filed on August 14, 2007, as a putative class action by 15 current and former

QUIZNOS franchisees. The defendants were QFA and certain of its affiliates, Cervantes

Capital LLC, Schaden, Richard F. Schaden, Meyers, Cervantes and Cervantes Master

LLC. The complaint asserted claims for violation of the federal RICO statute, the

Colorado Consumer Protection Act, common law fraud, breach of contract, breach of the

implied covenant of good faith and fair dealing, economic duress declaratory judgment,

unjust enrichment, promissory fraud, illusory contract, and breach of fiduciary duty. The

complaint sought unspecified preliminary and permanent injunctive relief, declaratory

relief, and unspecified compensatory, consequential and statutory damages and

exemplary, punitive and treble damages.

By the terms of the settlement agreement, putative class members of Bonnano v. The

Quizno’s Master LLC (the “SNO Class Action”) who previously executed a release against

QUIZNOS are entitled to receive a settlement payment between $250 to $500. Settlement

payments for the remaining putative SNO Class Action members who choose to exit the system

range from approximately $500 to $8,175, representing 5% to 32.7% of the initial franchise fee

paid. Alternatively, putative SNO Class Action members who elect to remain franchisees are

entitled to receive a credit towards equipment and supplies for their QUIZNOS Restaurant in an

amount equal to the amount of the initial franchise fee paid. Settlement payments for putative

class members of Westerfield v. The Quizno’s Franchise Company LLC, Siemer v. The Quizno’s

Franchise Company LLC, and Brunet v. The Quizno’s Franchise Company LLC range from $475

to $3,150 per franchise agreement. In addition to the above settlement payments to qualified

class members, under the settlement agreement, QUIZNOS agreed to make certain modifications

to its franchise model and business practices. The above cases were dismissed with prejudice on

August 18, 2010 (Bonanno), August 17, 2010 (Westerfield), August 16, 2010 (Brunet) and

August 13, 2010 (Siemer), respectively.

Joe Martrano, et al, v. The Quizno’s Franchise Company LLC, et al, Case No. 08-cv-

00932 (United States District Court for the Western District of Pennsylvania), filed by 7 current

and former QUIZNOS franchisees on July 3, 2008, as a putative class action. The defendants

were QFA and certain of its affiliates, Cervantes Capital LLC, Schaden, and Richard F. Schaden.

The complaint asserted claims for violation of the federal RICO statute, Section 1 of the Sherman

Act, certain Pennsylvania statutes, for fraud in the inducement, breach of contract, and for breach

of the covenant of good faith and fair dealing, all allegedly arising out of the sale of franchises

and the subsequent sale to franchisees of certain products or services. The complaint sought

unspecified preliminary and permanent injunctive relief, and an unspecified general, multiple,

and treble amount of damages. On June 15, 2009, the court denied defendants’ motion to

dismiss plaintiff’s second amended complaint. Defendants filed counterclaims against plaintiffs

for breach of contract on July 14, 2009. On June 8, 2010, plaintiffs filed a motion to withdraw

class certification, which motion was granted on June 9, 2010. Defendants filed amended

counterclaims against plaintiffs on December 31, 2010. In February 2011, the parties stipulated

to the dismissal of 1 of the 13 plaintiff parties, and in June 2011, the defendants filed motions for

summary judgment with respect to all claims of each of the 12 remaining plaintiffs, and the

plaintiffs filed a motion for summary judgment against the defendants’ counterclaims. On

January 4, 2012, defendants entered into a settlement agreement with 11 of the plaintiff parties,

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which included mutual general releases, and defendants additionally agreed to pay such plaintiff

parties $500,000. Also on January 4, 2012, defendants entered into a settlement agreement with

the remaining plaintiff party, which included mutual general releases, and defendants also agreed

to waive the post-termination covenant not to compete contained in the plaintiff party’s franchise

agreement. On January 6, 2012, the court dismissed the plaintiff parties’ and defendants’ claims

against each other with prejudice.

Other than the above disclosed actions, no litigation is required to be disclosed in this

Item.

ITEM 4

BANKRUPTCY

No bankruptcy is required to be disclosed in this Item.

ITEM 5

INITIAL FEES

Development Fee. Under the Multi-Unit Development Agreement, you agree to pay us a

multi-unit development fee upon signing the Multi-Unit Development Agreement. The multi-

unit development fee (“Development Fee”) equals $20,000 multiplied by the number of

Restaurants (other than the first Restaurant) required to be developed under the Multi-Unit

Development Agreement. Typically, a Multi-Unit Developer should expect to develop 2 to 25

Restaurants, depending on the size of the Development Area, and the range of the Development

Fee for the developed Restaurants will range from $40,000 to $520,000. We credit the

Development Fee, in $20,000 increments, toward the initial franchise fee that is due as Franchise

Agreements are signed (excluding the first Franchise Agreement) until the aggregate amount of

such credits equals the Development Fee. Depending on the number of Restaurants to be

developed, the Multi-Unit Developer will have between 3 to 5 years to complete the

Development Schedule. We will fully earn the Development Fee when you pay it, and you must

pay us the fees in one lump sum. These fees are non-refundable.

Initial Franchise Fees. When you sign the Multi-Unit Development Agreement, you

also sign the Franchise Agreement and pay the initial franchise fee of $40,000 for the first

Franchise that you are required to acquire under the Multi-Unit Development Agreement. For

each other Restaurant, once we approve the site and before you execute a lease or otherwise gain

possession of the site, you or an Approved Affiliate must sign the Franchise Agreement and pay

an initial franchise fee. Under your Multi-Unit Development Agreement, the amount of the

initial franchise fee for each Franchise Agreement you enter into with us during the original term

of the Multi-Unit Development Agreement will be the lower of our then-current initial franchise

fee or the standard initial franchise charged by us as of the date you sign the Multi-Development

Agreement. We will fully earn the initial franchise fee due under each Franchise Agreement

when you pay it, and you must pay us the fee in one lump sum. These fees are non-refundable.

If you are executing a Franchise Agreement for an existing SMASHBURGER

RESTAURANT that you are buying from another franchisee, we will not charge an initial

franchise fee, but you or the seller of the existing SMASHBURGER RESTAURANT must pay

the transfer fee due under the seller’s Franchise Agreement.

Lease Review Fee. Under the Franchise Agreement, you must pay us or our designated

supplier (which may be an affiliate of ours) a lease review fee of $1,500. If you fail or you

refuse to sign the approved lease and then submit one or more subsequent leases for us to review

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and approve, for each such subsequent lease, you will pay an additional Lease Review Fee of $1,500. The Lease Review Fee covers the expenses incurred to review and negotiate your lease (if we choose to do so). Our approval of your lease is required and the Lease Review Fee is not refundable under any circumstances.

ITEM 6 OTHER FEES

TYPE OF FEE1 AMOUNT DUE DATE REMARKS

Royalty5 Paid at 5% of Gross Sales subject to the following adjustment: (1) if Gross Sales during a fiscal year exceed $1,200,000, the Royalty rate, as of the 1st day of the immediately succeeding fiscal year, will be 6% of Gross Sales; and (2) if Gross Sales during a fiscal year are $1,200,000 or less, the Royalty rate, as of the 1st day of the immediately succeeding fiscal year, will be 5% of Gross Sales6

Weekly, but with the quarterly adjustment (if any) due within 10 days after the end of the calendar quarter

“Gross Sales” include all revenue derived from operating the Restaurant, but (1) excludes sales, use, or service taxes and (2) documented refunds, credits and discounts to customers and employees. Gift certificate, gift card or similar program payments are included when the gift certificate, gift card, other instrument or applicable credit is redeemed. Gross Sales also include all insurance proceeds received for loss of business due to a casualty to or similar event.

Lease Review Fee $1,500 As incurred Fee for review and if we choose, the negotiation of certain provision of premises lease. Fee is charged for each subsequent lease review, if you refuse to sign the approved lease and, as a result, we are required to review additional leases.

Proprietary Software Fee

We do not currently charge this fee. We estimate that this fee will range between $150 to $250 per month if implemented

Monthly If developed, fee for proprietary software or technology licensed to you. The amount shown is merely an estimate as we currently do not have proprietary software that we license to you.

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On-site Opening

Assistance

$1,000 to $5,500 As incurred We will bear the expenses for the 1st

two SMASHBURGER

RESTAURANT opened by you or

your affiliates; if, in our judgment, we

determine it to be necessary to also

send a representative to the site to

provide grand opening assistance for

the third or subsequent Restaurants,

you will be responsible for

reimbursing us the costs and expenses

incurred by our representative,

including the costs of travel, lodging,

meals and a per diem to cover the

representative’s salary.

Marketing Fund 1% to 4% of Gross Sales2 Weekly

Local Advertising

Cooperative3

Up to 3% of Gross Sales Weekly Co-op will administer advertising

programs and develop advertising,

marketing and promotional materials

for an area with more than 2

SMASHBURGER RESTAURANTS.

The total amount that you will be

required to spend for Marketing Fund,

local advertising and Local

Advertising Cooperative will not

exceed 5% of Gross Sales.

Website

Maintenance Fee

We do not currently charge

this fee. We estimate that

this fee will be $50 per month

if implemented.

Monthly You must provide required

information and updates. If you are in

default of the Franchise Agreement,

your website may be removed until

defaults are cured.

Interest on Late

Payment

2% per month or the

maximum rate allowed by

applicable state law,

whichever is lower.

$100 per returned check

As incurred You pay interest on amounts owed

after due date. Service fee of $100 per

occurrence for checks returned due to

insufficient funds.

Transfer Fee –

Franchise

Agreement

50% of then-current initial

franchise fee for each

Restaurant

As incurred See Section 12.C (9) of the Franchise

Agreement.

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Transfer Fee –

Multi-Unit

Development

Agreement

(i) the greater of 10% of the

purchase price or $35,000,

plus applicable goods and

services taxed thereon; or (ii)

the greater of 5% of the

purchase price or $25,000,

plus applicable goods and

services taxed thereon4

As incurred See Section 6(A)(1)(h) of the Multi-

Unit Development Agreement.

Renewal Fee 50% of then-current initial

franchise fee

Upon renewal See Section 13 of the Franchise

Agreement.

Inspection and

Audit Fee

Costs of inspection

(estimated to be between

$1,000 to $15,000)

Within 15

days of report

receipt

You pay fee if examination was done

because you failed to provide required

reports or reveals a Royalty or

Marketing Fund contribution

understatement exceeding 2% of the

amount that you actually reported.

Management Fee 10% of Gross Sales plus costs

and expenses

As incurred We may assume management of your

Restaurant, if: (1) you abandon or fail

to actively operate your Restaurant;

(2) you fail to comply with any

provision of this Agreement or any

System Standard and do not cure the

failure within the specified time

period; or (3) this Agreement expires

or is terminated and we are deciding

whether to exercise our option to

purchase your Restaurant. We will

exercise our right to assume

management in 90-day increments,

renewable for up to 1 year, in the

aggregate. We will periodically

discuss with you the results of

operation during the time we manage

the Restaurant.

Product testing Variable (estimated to be

between $0 to $250)

As incurred Fee charged for testing samples of

proposed new suppliers.

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Additional training Then-current per diem

charge, currently $250

As incurred Initial training is provided for up to 3

people. However, if additional

training is required or re-training is

required, you must pay additional

training fee. We may charge you for

training newly-hired personnel; for

refresher training courses; and for

additional or special assistance or

training you need or request.

Recruiting Fee 200% of the annual salary of

such person recruited

As incurred Fee is due to us if you recruit or hire

any person then employed, or who was

employed within the immediate

preceding 24 months, as a general

manager or assistant manager at any

SMASHBURGER RESTAURANT or

as our district manager, regional

manager or corporate executive. See

Section 7(c) of the Franchise

Agreement.

Insurance $5,000 to $15,000 As incurred If you fail to obtain and maintain

insurance, we may, at our option,

obtain or reinstate the insurance for

you and you must promptly reimburse

us for the cost of the insurance plus a

reasonable fee for our services and our

out of pocket expenses.

Indemnification Will vary under

circumstances

As incurred You must reimburse us and our

affiliates if any of us are held liable for

claims related to your Restaurant’s

operations.

Costs and

Attorneys’ Fees

Will vary under

circumstances

As incurred Payable only if you do not comply

with the Franchise Agreement or

Multi-Unit Development Agreement.

Marketing Will vary under

circumstances

As incurred We may, with your approval,

advertise, market and promote your

Restaurant on your behalf. In the

event that we undertake such

activities, you must reimburse us for

all costs we incur.

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Music Fee Currently ranges from $37.95

to $47.95 (plus applicable

taxes) per month

Monthly For music services provided by the

required vendor to your Restaurant.

Smashburger Purchasing pays the

vendor directly, then initiates an ACH

from your bank account to reimburse

it for the amount owed.

Pest Control

Services

Currently ranges from $46.95

to $77.95 (plus applicable

taxes) per month

Monthly For pest control services provided by

the required vendor to your

Restaurant. Smashburger Purchasing

pays the vendor directly, then initiates

an ACH from your bank account to

reimburse it for the amount owed.

Customer Survey Currently $40 per month Monthly For customer survey services provided

by the required vendor to your

Restaurant. Smashburger Purchasing




Gift Card Service Currently $80 to $90 per

month

Monthly The cost of managing the gift card

program and replenishing your supply

of gift cards. Smashburger Purchasing




NOTES

1. All fees are imposed by and payable to us. All fees are non-refundable. These fees may

not be uniform for franchisees signing the Franchise Agreement. Unless otherwise indicated, fees

are due under the Franchise Agreement.

2. Initially, you will contribute 1% of Gross Sales to the Marketing Fund. However, at any

time and on notice to you, we may increase the amount you must contribute to the Marketing

Fund, up to 4% of Gross Sales, provided that in no event will you be required to contribute or

spend, in the aggregate, more than 5% of Gross Sales on Marketing Fund contributions, local

marketing requirement, and the required contribution to a Local Advertising Cooperative

contributions.

3. If a Local Advertising Cooperative is established for a geographic area that includes the

Restaurant, you must contribute to it. Generally, the maximum you would be required to

contribute to a Local Advertising Cooperative is 3% of Gross Sales. However, we reserve the

right, on notice, to require you to pay to us or our designee any monies you are required to spend

on local marketing, in which case, we or our designee would spend those monies, in accordance

with local Restaurant marketing guidelines and programs we develop from time to time, to

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advertise and promote the Restaurant on your behalf. We also have the right to contribute those

monies to the Marketing Fund or to a Local Advertising Cooperative.

4. If the sale is completed prior to the 3rd

anniversary of the effective date of the Multi-

Unit Development, the amount calculated under clause (i) would be due; if the sale is completed

on or after the 3rd

anniversary of the effective date of the Multi-Unit Development Agreement,

the amount calculated under clause (ii) would be due.

5. If you sign a Multi-Unit Development Agreement, the amount of the royalty for each

Franchise Agreement you or an Approved Affiliate signs during the original term of the Multi-

Unit Development Agreement will be the lower of our then-current royalty or the standard

royalty charged by us as of the date you signed the Multi-Unit Development Agreement.

6. If the Restaurant begins operation on or after November 1 of a calendar year, its Gross

Sales shall not be considered for purposes of adjustment until the 2nd full fiscal year after it

began operations.

ITEM 7

ESTIMATED INITIAL INVESTMENT1

YOUR ESTIMATED INITIAL INVESTMENT

(MULTI-UNIT DEVELOPMENT AGREEMENT)

TYPE OF

EXPENDITURE AMOUNT

METHOD OF

PAYMENT WHEN DUE

TO WHOM

PAYMENT IS

MADE

Initial Fee for first

Restaurant

$40,000 As incurred When you sign

the Multi-Unit

Development

Agreement.

Us

Fee for Multiple

Restaurants (See

Item 5)1

$20,000 multiplied

by the number of

Restaurants under

the Development

Schedule (less the

first Restaurant)

Lump Sum When you sign

the Multi-Unit

Development

Agreement.

Us

Total Estimated

Initial Investment2

$80,000

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NOTES

1. Your actual costs will depend on the number of Restaurants you are to develop under the

Development Schedule. Assuming you are to develop and open 3 Restaurants, the total

estimated initial investment equals $80,000 ($40,000 for first restaurant plus the sum of $20,000

multiplied by 2 additional Restaurants). We apply this fee, in $20,000 increments, toward the

Initial Franchise Fee due under each Franchise Agreement (excluding the first Franchise

Agreement) signed by you or an Approved Affiliate in accordance with the Development

Agreement.

2. We make no representation that your costs will come within the ranges estimated and

cannot guarantee that you will not incur additional expenses entering into a Multi-Unit

Development Agreement.

YOUR ESTIMATED INITIAL INVESTMENT

(FRANCHISE AGREEMENT)

TYPE OF

EXPENDITURE AMOUNT

METHOD

OF

PAYMENT

WHEN DUE

TO WHOM

PAYMENT IS TO BE

MADE

Initial Franchise Fee1 $40,000 Upon signing

Franchise

Agreement

Lump Sum Us

Leasehold

Improvements2

$100,000 –

$325,000

As Invoiced As arranged Landlord/Affiliates

/Contractors

Furniture, Fixtures

and Equipment3

$100,000 –

$180,000

Before

Opening

As Invoiced Affiliate or Approved

Supplier

Signage $8,000 –

$20,000

Before

Opening


Supplier

IT, POS System $15,000 –

$30,000

Before

Opening


Supplier

Three Month’s Rent4 $6,000 -

$33,000

Landlord

Security Deposit,

Business Licenses5, 8

$5,000 –

$15,000

As incurred As invoiced Landlord and

Suppliers,

Professional Svc.

Firms

Opening Inventory

and Supplies6

$5,000 –

$10,000

Before

Opening


Supplier

Grand Opening

Advertising7

$10,000 -

$25,000

Before

Opening


Supplier

Training Expenses8, 9

$5,000 –

$35,000

Before

Opening


Supplier

Miscellaneous

Opening Costs9

$500 –

$10,000

Before

Opening


Supplier

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TYPE OF EXPENDITURE

AMOUNT METHOD

OF PAYMENT

WHEN DUE TO WHOM

PAYMENT IS TO BE MADE

Professional Fees $5,000 – $15,000

Before Opening

As Invoiced Affiliate or Approved Supplier

Insurance Premium10 $5,000 – $15,000

Before Opening

As Invoiced Insurance Carrier

Liquor Licensing11 $1,500 – $15,000

Before Opening

As Invoiced Affiliate or Approved Supplier

Lease Review Fee $1,500 Before Opening

Upon Submission of Lease for Review

Us, Affiliate or Approved Supplier

Additional Funds - 3 months12

$10,000 – $20,000

As incurred As invoiced Suppliers and Employees

TOTAL ESTIMATED INITIAL INVESTMENT13

$317,500 - $789,500

NOTES

1. The initial franchise fee is non-refundable under the terms of the Franchise Agreement (See Item 5).

2. Our estimate for leasehold improvements does not include any tenant improvement allowance that may be granted by landlords towards leasehold improvements. Tenant improvement allowances are site specific and dependent upon several variables, including rent, occupancy levels and local market conditions, which are beyond our control.

3. This estimate includes freight, installation, and applicable state and local taxes.

4. The cost of acquiring or leasing a location for your Restaurant will vary significantly depending upon the market in which the proposed site is located. A suitable building for a free standing Restaurant will range in size from approximately 1,600 square feet to 2,200 square feet and will likely cost from $15 to $60 per square foot per year. Local market conditions, changes in the economy and inflation will all contribute to your real property costs. The location of the parcel of real property, its relationship to and the nature of any adjoining uses, and its accessibility will affect both its size and price. Lease agreements vary, but usually require the lessee to pay for maintenance, insurance, taxes and any other charges or expenses for the land and building and the operation of the Restaurant or they may require that the Lessee reimburse the Lessor for its proportionate share of these payments (plus interest) made on behalf of the lessee and pay minimum monthly rent or percentage rent. You must get our approval of your proposed lease before signing it.

5. The rent deposit may be refundable under the terms of the lease.

6. Due to differences in local laws, prices, suppliers, geography and commercial practices, you may elect to carry a larger inventory. Local costs will greatly affect this investment.

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7. You must spend a minimum of $10,000 on an approved grand opening advertising

program, but we reserve the right to require you to spend up to $25,000 on the grand opening

advertising program depending on factors such as whether your Restaurant is located in an urban

or rural location.

8. This estimate covers the associated cost for payroll of management and staff training

before the opening of your Restaurant. This includes 4 weeks of training for a managing owner

and a non-owner manager. In addition, for the first 2 SMASHBURGER RESTAURANTS

opened by you or your affiliates, we will send a training team (the identity and composition of

which will be in our discretion) to your Restaurant to assist with the grand opening. We will

bear the expense of providing that representative. If, in our judgment, we determine it to be

necessary to also send a representative to the Restaurant to provide grand opening assistance for

the third or subsequent Restaurants, you will be responsible for reimbursing us the costs and

expenses incurred by our representative, including the costs of travel, lodging, meals and a per

diem to cover the representative’s salary. The estimated budget also takes into consideration the

travel budget for training. Salaries will vary substantially by geographic areas and local market

conditions. The estimated initial investment is subject to substantial variance due to delays and

the securing of the required permits and license to train and operate the business as well as

geographic location (See Item 11).

9. Typical pre-opening expenses include salaries and living expenses for you and your

managers in training, training expenses incurred for staff, pre-opening training menus, related

pre-opening marketing and personnel ads. Additionally, you will likely have to prepay or make

deposits for various utilities such as gas, electricity, sewer, water, telephone, and garbage

disposal. We estimate that these prepaid expenses and deposits will be between $500 and

$5,000. You must obtain state and local licenses, including liquor licenses (see Note 11),

business licenses, vending machine licenses, and games licenses. You may have to post bonds in

order to obtain certain governmental permits.

10. You must, at your own expense, keep in force insurance policies for each Restaurant. We

reserve the right to change types and amounts of coverage. This estimate is based on our current

requirements which are: comprehensive business owners coverage (including contents insurance,

loss of business income, employee dishonesty, money coverage, comprehensive general liability

and liquor liability) for a minimum of $1 million per occurrence and $2 million in the aggregate;

hired/non owned auto liability for a minimum of $1 million; employee practices liability for a

minimum of $1 million; boiler and machinery coverage with a coverage rating of $500,000;

umbrella coverage for a minimum of $1 million; building coverage for at least 80% of

replacement costs (amount dependent upon building value, construction value, and whether

owned or leased property) for building of leased/owned premises; and auto liability for a

minimum of $1 million. You also must maintain workers’ compensation insurance for your

employees. You must provide us with a certificate of insurance naming us and our designated

affiliates as additional insureds and provide us with 30 days prior written notice of material

changes to or cancellation of the policy. Your lease agreement may require higher insurance

limits than those stated above. You will likely have to prepay all or a portion of the first year’s

premiums for insurance.

11. The cost to obtain a liquor license varies greatly depending on the licensing authority

involved and the local liquor license resale market, if any. In our recent experience with our

affiliate-owned restaurants, the cost to obtain a liquor license has run between $1,500 and

$15,000 (including legal fees). Generally, liquor-licensing systems fall into two categories: (a)

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quota-based systems, and (b) non-quota-based systems. In quota-based systems, the total

number of licenses available in a municipality, county or other defined territory is set according

to the number of people within the territory. For example, state law may limit the total number

of licenses available to one per every two thousand persons. Once the licensing authority has

issued the total number of licensees according to the population, the licensing agency will not

issue any additional new licenses until a new census is taken that shows an increase in population

or until an existing permit expires or is revoked. Most often in quota-based systems, parties

seeking licenses will not wait for the next census or wait for a license to expire. Instead, they

will purchase a license from an existing licensee. In such situations, the cost of obtaining a

license can be substantially greater than the cost of obtaining a license directly from the licensing

authority. The new licensee will not only pay fixed license fees to the state, but it will also pay

the purchase price to the transferor plus fees for attorney’s services and service providers. The

licensing agency may or may not regulate the price. The price may simply be set by the market

for licenses in a particular location, and that could inflate the price significantly. You should

carefully review the system of liquor licensing in your state and review the expected range of

costs, if your Restaurant is located in a quota state. In state systems that are not quota-based, the

cost of obtaining a state license is usually limited to the fee prescribed by statute or

administrative regulation, plus fees for attorney’s services and service providers. However, there

may be additional costs imposed by a need to obtain a municipal and/or county liquor license,

conditional use permit or other governmental approval. There are also Federal tax permits

required.

12. Our estimates of the amounts needed to cover your expenses for the start-up phase (i.e., 3

months from the date the Restaurant opens for business) of your business include: replenishing

your inventory, lease payments, initial advertising and promotional expenditures, payroll for

managers and other employees, uniforms, utilities and other variable costs. These figures are

estimates and we cannot assure you there will not be additional expenses. Your actual cost will

depend on factors including management skill, experience, business acumen, local economic

conditions, local market for casual dining, prevailing wage rates, competition and the sales level

reached during the start-up phase. These amounts do not include any estimates for debt service

on loans that you obtain to finance your business.

13. We make no representation that your costs will come within the ranges estimated and

cannot guarantee that you will not incur additional expenses starting a SMASHBURGER

RESTAURANT. Your actual costs will depend on factors such as: geography, the availability of

sites; your Restaurant size and location; construction costs; your discretionary expenditures; the

availability of leasing or financing arrangements; your credit rating; and other factors.

The estimated initial investment figures shown above for constructing and opening a

Restaurant are based primarily on the costs incurred by our affiliates in opening

SMASHBURGER RESTAURANTS in the past four and a half years. Because these figures are

only estimates, it is possible both to reduce and to exceed costs in any of the areas listed above.

Actual costs will vary depending on physical size and current condition of the premises. In

addition, actual costs may substantially exceed these estimates in a major metropolitan market.

To avoid excessive construction costs, we require that you pick contractors carefully by

obtaining several competitive bids beforehand. These estimates do not include extensive exterior

renovations. You should review all figures in this Item 7 carefully with a business advisor

before you decide to purchase the franchise. Neither we nor our affiliates offer financing directly

or indirectly for any part of the initial investment. The availability and terms of financing

depend on the availability of financing generally, your creditworthiness and collateral, and

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lending policies of financial institutions. The estimate does not include any finance charge,

interest, or debt service obligation.

ITEM 8

RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

In order to maintain the quality and uniformity of all food products, menu items,

ingredients, services, products, materials, forms, items, supplies, fixtures, furnishings and

equipment utilized in or by SMASHBURGER RESTAURANTS, you must purchase all food

products, ingredients, condiments, fixtures, furnishings, equipment, decor items and signage

from suppliers approved by us in writing. We may designate ourselves or an affiliate as an

approved supplier of food and related products and services. We will provide a list of approved

suppliers and approved food products, ingredients and condiments, including designation by

brand and our standards and specifications, as contained in the Standards of Operations Manual

(see Item 11) or otherwise in writing. You must strictly comply with the standards and

specifications and comply with all required purchases of products and services from approved

suppliers and in conformity with our standards and specifications. All menu items and food

products must be prepared in strict compliance with the recipes and the procedures we specify in

the Standards of Operations Manual, or otherwise in writing. You must offer and sell all, and

you are permitted to offer and sell only, those food products and menu items and services that we

have specifically approved in writing. You may not deviate from our approved menu items

without prior written approval from us. As of the date of this Disclosure Document, none of our

officers owns an interest in any approved suppliers.

In constructing and operating the Restaurant, you must use only those types of food

items, condiments, construction and decorative materials, fixtures, equipment, furniture and

signs (“Operating Assets”) that we have approved according to our specifications and standards

for appearance, function and performance. We develop the specifications and standards in our

sole discretion. We will not issue to you or to our approved suppliers (except as we deem

necessary for purposes of production) the specifications and standards for proprietary Operating

Assets. We will communicate the approved Operating Assets to you in the prototype

architectural plans for a SMASHBURGER RESTAURANT, in the Standards of Operations

Manual, and otherwise in writing.

You may purchase approved Operating Assets from (and only from) any supplier

approved or designated by us (which may include us or our affiliates). You must purchase

computer hardware and software from our designated suppliers. We, our affiliates or our officers

are not currently designated suppliers of approved Operating Assets, but we reserve the right to

do so in the future. We or our affiliates may derive revenue or profit from such transactions. We

maintain approved supplier criteria; however, we do not issue these criteria to you.

If you propose to purchase any unapproved Operating Assets from any supplier or any

item which has not been specifically approved by us in writing, you must first notify us in

writing, using our vendor approval process and application, and submit to us sufficient

specifications, photographs, drawings and other information or samples for us to determine

whether the proposed Operating Assets comply with our specifications and standards, and the

supplier meets our approved supplier criteria, which determination will be made and

communicated in writing to you within a reasonable time, typically within 30 days after receipt

of the information from you or from the proposed supplier. We may charge you a fee for testing

and evaluating suppliers and may impose limits on the number of approved suppliers. We will

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make an effort to communicate our approval or denial within a reasonable time after completion

of the investigation of the proposed supplier/vendor.

We have developed and may continue to develop for use by SMASHBURGER

RESTAURANTS certain products that are prepared from confidential secret recipes and other

proprietary products that bear our Marks. If those products become a part of the Franchise

System, we may require you to purchase those items solely from us, our affiliate or from another

designated supplier. We and our affiliates do not currently sell any products to franchisees, but

we reserve the right to do so in the future.

In order to standardize and enhance the customers’ experience in SMASHBURGER

RESTAURANTS, we require you to use our designated vendors (i) for music services, (ii) pest

control services, (iii) customer satisfaction surveys, and (iv) gift card management services. In

each case, we or our affiliates have negotiated system-wide agreements with the vendors for an

agreed upon price per restaurant. We or our affiliates pay the vendors directly, then ACH your

bank account for your restaurant’s respective cost.

In some cases, we or our affiliates will negotiate purchase arrangements, including prices

and terms, with designated and approved suppliers on behalf of SMASHBURGER

RESTAURANTS. We or our affiliates may derive revenue from those arrangements, typically

in the form of marketing support payments or rebates based on purchases made by us, our

affiliates or our franchisees of the products or services supplied by the approved supplier. The

basis for rebates paid to us or our affiliates will depend on the type of product or service

supplied, but currently they range from $0.02 to $6.25 per unit (that is, a case, gallon, container

or other purchase unit) for food, beverage and other products and services, and from $100 to

$1,300 per piece of equipment purchased for use in the development and operation of the

restaurant. During 2011, our total revenue was $6,851,000, and we did not receive any revenue

or other consideration from purchases made by our franchisees from approved vendors.

However, during this period, our affiliate, Smashburger Purchasing, received $1,973,444 in

rebates from approved vendors and, in turn, contributed $237,635 back to franchisees under its

franchisee rebate programs. In addition, during 2011, our approved vendors contributed

$245,149 to the Marketing Fund.

As of the date of this Disclosure Document, there are no purchasing or distribution

cooperatives for any of the items described above. All advertising and promotional materials,

signs, decorations, paper goods (including menus and all forms and stationery used in the

Restaurant) and other items we designate must bear the Marks (see Item 13) in the form, color,

location and manner we prescribe. No unauthorized logos, symbols or marks may be placed,

used or displayed on any advertising, menus or promotional items without our express written

consent. Before you may use any advertising or promotional materials, you must submit them to

us and we must approve them in writing.

We estimate that 95% to 100% of your initial investment and 95% to 100% of your

ongoing expenditures will be directed to purchase products and services that will be restricted by

us in some manner. Except as disclosed above, we do not currently receive or derive revenue or

other material consideration from vendors as a result of purchases or leases we require

franchisees to make.

Other than as described above, we do not provide any material benefits to franchisees

based on their use of designated or approved suppliers.

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ITEM 9

FRANCHISEE’S OBLIGATIONS

This table lists your principal obligations under the franchise and other agreements.

It will help you find more detailed information about your obligations in these agreements

and in other items of this Disclosure Document.

OBLIGATION SECTION IN AGREEMENTS

ITEM IN

DISCLOSURE

DOCUMENT

A. Site selection and

acquisition/lease

Section 2 in Multi-Unit Development Agreement.

Sections 2.A and 2.B in Franchise Agreement

Items 8 and 11

B. Pre-opening

purchases/leases

Not applicable

Sections 2.E and 2.F in Franchise Agreement.

Items 5, 7, 8, and 11

C. Site development

and other pre-

opening

requirements


Section 2 in Franchise Agreement.

Items 7, 8, and 11

D. Initial and ongoing

training

Section 4.A in Franchise Agreement. Item 11

E. Opening Section 2.F in Franchise Agreement. Item 11

F. Fees Section 3 in Multi-Unit Development Agreement.


Items 5, 6 and 7

G. Compliance with

standards and

policies/ Standards

of Operations

Manual

Sections 4.B, 4.C and 8 in Franchise Agreement. Items 8, 11 and 14

H. Trademarks and

proprietary

information



Items 13 and 14

I. Restriction on

products/services

offered

Section 8.B in Franchise Agreement. Items 8 and 16

J. Warranty and

customer service

requirements

Section 10.C in Multi-Unit Development

Agreement.

Section 8.E in Franchise Agreement.

None.

K. Territorial

development and

sales quotas

Sections 2.C and 2.D in Multi-Unit Development

Agreement

Item 12

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OBLIGATION SECTION IN AGREEMENTS

ITEM IN

DISCLOSURE

DOCUMENT

L. Ongoing

product/service

purchases

Sections 8.B and 8.D in Franchise Agreement. Item 8

M. Maintenance,

appearance and

remodeling

requirements

Sections 8.A and 8.I in Franchise Agreement. Item 11

N. Insurance Section 8.F in Franchise Agreement. Item 7

O. Advertising Section 9 in Franchise Agreement. Items 6, 8 and 11

P. Indemnification Sections 8.B and 9.B in Multi-Unit Development

Agreement

Sections 5.E, 16.D and 17.J in Franchise

Agreement.

Item 6

Q. Owner’s

participation,

management, and

staffing

Section 1.D in Multi-Unit Development

Agreement.

Section 8.C in Franchise Agreement.

Items 11 and 15

R. Records/reports Section 2.E in Multi-Unit Development

Agreement.


Items 6 and 11

S. Inspections/audits Section 11 in Franchise Agreement. Items 6 and 11

T. Transfer Section 6 in Multi-Unit Development Agreement.


Items 6 and 17

U. Renewal Section 1.B in Multi-Unit Development

Agreement.


Item 17

V. Post-termination

obligations

Sections 7.B and 7.C in Multi-Unit Development

Agreement.


Item 17

W. Non-competition

covenants

Section 7.C in Multi-Unit Development

Agreement.

Sections 7 and 15.D in Franchise Agreement.

Item 17

X. Dispute resolution Section 9 in Multi-Unit Development Agreement.


Item 17

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ITEM 10 FINANCING

We do not offer direct or indirect financing. We do not guarantee your promissory notes, mortgages, leases or other obligations.

Under the Multi-Unit Development Agreement and Franchise Agreement, you agree that we may periodically designate the maximum amount of debt that SMASHBURGER RESTAURANTS may service and you (and any Approved Affiliates that execute Franchise Agreements) agree not to borrow more than any such prescribed maximum allowed debt. Currently, the maximum amount of debt we allow a franchisee to service is up to 50% of the estimated total initial investment amount. We periodically may change this amount for SMASHBURGER RESTAURANTS. In addition, you agree that the first 2 SMASHBURGER RESTAURANTS developed pursuant to Franchise Agreements signed under the Multi-Unit Development Agreement must be developed with cash equity and without the proceeds from any loans made by you (or your owners), your affiliates (or their owners) or any other third party. We impose this requirement because excess debt and debt service will adversely affect a SMASHBURGER RESTAURANT’s operational results.

If you sign a Multi-Unit Development Agreement, you must always maintain sufficient liquidity to meet your obligations under the Multi-Unit Development Agreement and, in any event, the liquidity of you and all of our affiliates who sign Franchise Agreements, combined, must not at any time fall below the amount shown in Item 7 of this Disclosure Document as the total estimated initial investment to open one Restaurant ($789,500). We reserve the right to review these liquidity requirements from time to time, and you must comply with such minimum liquidity requirements that we reasonably impose.

ITEM 11 FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND

TRAINING

Except as listed below, we are not required to provide you with any assistance.

Our Assistance:

We will devote resources to fulfill our obligations to you. However, except as listed below, we need not provide any assistance to you.

Our Pre-opening Obligations.

Before you open the Restaurant, we will provide you the following assistance:

1) Consultation on and approval of sites (Franchise Agreement – Section 2.A; Multi-Unit Development Agreement - Section 2.A)

2) Review and approval of the lease (Franchise Agreement – Section 2.B)

3) Initial training up to 3 persons (including your Designated Manager (defined in Item 15)) at our headquarters or another location designated by us. This training will last at least 4 weeks. (Franchise Agreement – Section 4.A).

4) For the first 2 SMASHBURGER RESTAURANTS opened by your or your affiliates, we will send a training team (the identity and composition of which will be in our discretion)

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to your Restaurant to assist with the grand opening. We will bear the expense of providing

that representative. If, in our judgment, we determine it to be necessary to also send a

representative to the Restaurant to provide grand opening assistance for the third or

subsequent Restaurants, you will be responsible for reimbursing us the costs and expenses

incurred by our representative(s), including the costs of travel, lodging, meals and a per diem

to cover the representative’s salary. (Franchise Agreement – Section 4.A)

5) One set of our Standards of Operations Manuals (as defined below) (Franchise

Agreement – Section 4.C)

6) Specifications for all required equipment (including computer system), furniture,

fixtures, and signs and lists of approved suppliers or vendors (Franchise Agreement –

Sections 2.B, 4.B and 8.D)

Our Post-Opening Obligations.

During the operation of your Restaurant:

1) we will provide you with standards, specifications (for non-proprietary Operating

Assets), and operating procedures and methods that SMASHBURGER RESTAURANTS use

(Franchise Agreement – Section 4.B)

2) we will advise you of what purchasing is required and what authorized Operating

Assets and other products and services are required (Franchise Agreement – Section 4.B)

3) we will provide you assistance with advertising and marketing materials and

programs and approve the same (See “Advertising and Promotion” below) (Franchise

Agreement – Sections 4.B and 9.A through D)

4) we will maintain a website for the promotion of SMASHBURGER RESTAURANTS

(Franchise Agreement – Section 9.E)

5) we will provide you with a list of authorized vendors and suppliers for the products,

goods, merchandise, supplies, signs, furniture, fixtures, equipment and services (Franchise

Agreement – Section 8.D)

Our affiliate, Smashburger Servicing, will perform certain of our obligations listed above.

Advertising and Promotion:

A. Marketing Fund.

You must contribute to a marketing fund for SMASHBURGER RESTAURANTS

(the “Marketing Fund”) an amount equal to 1% of your Gross Sales, payable in the same

manner as the royalty. However, we have the right, at any time and on notice to you, to

increase the amount you must contribute to the Marketing Fund, to up to 4% of Gross Sales.

However, in no event will you be required to contribute or spend, in the aggregate, more than

5% of Gross Sales on Marketing Fund contributions, local marketing requirement, and Local

Advertising Cooperative contributions (defined below). SMASHBURGER

RESTAURANTS that we or our affiliates own in the United States do not contribute to the

appropriate Marketing Fund on the same percentage basis as franchisees. In 2011, our

affiliate, Smashburger Master, made voluntary contributions to the Marketing Fund in the

amount of $1,048,571. We or our affiliates may, but will not be required to, make this kind

of voluntary contribution in the future. During 2011, the Marketing Fund was used to pay for

media production such as website, menu development and branding (16%), media placement

such as promotions, advertising, sponsorships and marketing (71%), other expenses such as

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research (3%) and administrative expenses (10%). No portion of the Marketing Fund was

used to solicit new franchisees. At the end of our fiscal year 2011, there were no excess

funds in the Marketing Fund.

We or our affiliates or other designees will direct all programs that are developed or

presented by the Marketing Fund, with sole control over the creative concepts, materials, and

endorsements used and their geographic, market, and media placement and allocation. The

Marketing Fund may pay for preparing and producing video, audio, and written materials and

electronic media; developing, implementing, and maintaining a Franchise System website

and related strategies; administering regional and multi-regional marketing and advertising

programs, including purchasing trade journal, direct mail, and other media advertising and

using advertising, promotion, and marketing agencies and other advisors to provide

assistance; and supporting public relations, market research, and other advertising,

promotion, and marketing activities. The Marketing Fund will give you samples of

advertising, marketing, and promotional formats and materials at no cost. We will sell you

multiple copies of these materials at our direct cost of producing them, plus any related

shipping, handling, and storage charges.

We will account for the Marketing Fund separately from our other funds and not use

the Marketing Fund for any of our general operating expenses. However, we may use the

Marketing Fund to reimburse ourselves or our affiliates for the reasonable salaries and

benefits of personnel who manage and administer the Marketing Fund, the Marketing Fund’s

other administrative costs, travel expenses of personnel while they are on Marketing Fund

business, meeting costs, overhead relating to Marketing Fund business, and other expenses

that we incur in activities reasonably related to administering or directing the Marketing

Fund and its programs, including conducting market research, public relations, preparing

advertising, promotion, and marketing materials, and collecting and accounting for

Marketing Fund contributions.

The Marketing Fund will not be our asset. We do not owe any fiduciary obligation to

you for administering the Marketing Fund or any other reason. We will hold all Marketing

Fund contributions for the benefit of the contributors. The Marketing Fund may spend in any

fiscal year more or less than the total Marketing Fund contributions in that year, borrow from

us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use.

We will use all interest earned on the Marketing Fund contributions to pay costs before using

the Marketing Fund’s other assets. We will prepare an annual, unaudited statement of

Marketing Fund collections and expenses and give you the statement upon written request.

We may have the Marketing Fund audited annually, at the Marketing Fund’s expense, by an

independent certified public accountant. We may incorporate the Marketing Fund or operate

it through a separate entity whenever we deem appropriate.

We intend for the Marketing Fund to promote recognition of the applicable Marks

and patronage of SMASHBURGER RESTAURANTS generally. Although we will try to

use the Marketing Fund to develop advertising and marketing materials and programs, and to

place advertising and marketing, that will benefit all SMASHBURGER RESTAURANTS

contributing to the Marketing Fund, we need not ensure that Marketing Fund expenditures in

or affecting any geographic area are proportionate or equivalent to Marketing Fund

contributions by SMASHBURGER RESTAURANTS operating in that geographic area or

that any SMASHBURGER RESTAURANT benefits directly or in proportion to its

Marketing Fund contribution from the development of advertising and marketing materials or

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the placement of advertising and marketing. We have the right, but no obligation, to use

collection agents and institute legal proceedings to collect Marketing Fund contributions at

the Marketing Fund’s expense. We also may forgive, waive, settle, and compromise all

claims by or against the Marketing Fund. Except as provided in the Franchise Agreement,

we assume no direct or indirect liability or obligation to you for collecting amounts due to,

maintaining, directing, or administering the Marketing Fund.

We may at any time defer or reduce contributions of a SMASHBURGER

RESTAURANT franchise owner and, upon 30 days’ prior notice to you, reduce or suspend

Marketing Fund contributions and operations for one or more periods of any length and

terminate (and, if terminated, reinstate) the Marketing Fund. If we terminate the Marketing

Fund, we will distribute all unspent monies to our franchise owners who contribute to the

Marketing Fund, and to us and our affiliates, in proportion to their, and our, respective

Marketing Fund contributions during the preceding 12 month period.

B. Cooperative Advertising.

We or our affiliates may establish or direct the establishment of a local advertising

cooperative (“Local Advertising Cooperative”) in geographical areas in which 2 or more

SMASHBURGER RESTAURANTS are operating. The Local Advertising Cooperative will

be organized and governed by written documents in a form and manner, and begin operating

on a date, that we determine in advance. Such written documents will be available for

participating franchisees to review. We may change, dissolve and merge Local Advertising

Cooperatives. Each Local Advertising Cooperative’s purpose is, with our approval, to

administer advertising programs and develop advertising, marketing and promotional

materials for the area that the Local Advertising Cooperative covers. If, as of the time you

sign the Franchise Agreement, we have established a Local Advertising Cooperative for the

geographic area in which your Restaurant is located, or if we establish a Local Advertising

Cooperative in that area during the Franchise Agreement’s term, you must sign the

documents we require to become a member of the Local Advertising Cooperative and to

participate in the Local Advertising Cooperative as those documents require.

If we establish a Local Advertising Cooperative in your geographic area, you must

pay us a weekly Local Advertising Cooperative contribution of up to 3% of your Gross Sales.

Your Local Advertising Cooperative contribution is payable in the same manner as the

royalty. These contributions may be capped based on the provisions of the by-laws adopted

by the local advertising cooperative, subject to our approval. You will pay these monies to

us electronically and we will remit them periodically to the Local Advertising Cooperative.

SMASHBURGER RESTAURANTS that we or our affiliates own in the United States do not

contribute to the appropriate Local Advertising Cooperative on the same percentage basis as

franchisees.

Each SMASHBURGER RESTAURANT contributing to a Local Advertising

Cooperative will have 1 vote on matters involving the activities of the particular Local

Advertising Cooperative. The Local Advertising Cooperative may not use any advertising,

marketing or promotional plans or materials without our prior written consent. We will assist

in the formulation of marketing plans and programs, which will be implemented under the

direction of the Local Advertising Cooperative. Subject to our approval, the Local

Advertising Cooperative will have sole discretion over the creative concepts, materials and

endorsements used by it. The Local Advertising Cooperative assessments may be used to

pay the costs of preparing and producing video, audio and written advertising and direct sales

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materials for SMASHBURGER RESTAURANTS in your geographic area; purchasing direct

mail and other media advertising for SMASHBURGER RESTAURANTS in that geographic

area; and implementing direct sales programs, and employing marketing, advertising and

public relations firms to assist with the development and administration of marketing

programs for SMASHBURGER RESTAURANTS in such geographic area.

The monies collected by us on behalf of a Local Advertising Cooperative will be

accounted for separately by us from our other funds received by us under the Franchise

Agreement and will not be used to defray any of our general operating expenses. You must

submit to us and the Local Advertising Cooperative any reports that we or the Local

Advertising Cooperative requires. Local Advertising Cooperatives are not required to

prepare annual financial statements, nor are they required to provide any prepared financial

statements to participating franchisees for their review.

You understand and acknowledge that your Restaurant may not benefit, either

directly or in proportion to its contribution to the Local Advertising Cooperative, from the

development and placement of advertising and the development of marketing materials.

Local Advertising Cooperatives for SMASHBURGER RESTAURANTS will be developed

separately and no cooperative will be intended to benefit the others. We will have the right,

but not the obligation, to use collection agents and to institute legal proceedings to collect

amounts owed to the Local Advertising Cooperative on behalf of and at the expense of the

Local Advertising Cooperative and to forgive, waive, settle and compromise all claims by or

against the Local Advertising Cooperative. Except as expressly provided in the Franchise

Agreement, we assume no direct or indirect liability or obligation to you with respect to the

maintenance, direction or administration of the Local Advertising Cooperative.

C. Other Advertising Obligations.

You must list and advertise your Restaurant on all major internet search engines (for

example, Google Local and CitySearch) and on all major internet consumer review websites

(for example, Yelp and Urban Spoon) listed in the Standards of Operations Manual and in at

least 1 recommended online or classified telephone directory distributed within the market

area of your Restaurant (in the business classifications we prescribe from time to time) and to

use the form of classified telephone directory advertisement approved by us. If other

SMASHBURGER RESTAURANTS are located within the directory’s distribution area, we

may require you to participate in a collective advertisement with those other

SMASHBURGER RESTAURANTS and to pay your share of that collective advertisement.

You must spend, beginning after you complete your grand opening advertising obligations

discussed below, at least 1% of your Gross Sales each calendar quarter to advertise and

promote your Restaurant (this may include costs of yellow pages advertising); provided,

however, that if you operate 2 or more Restaurants, you must spend at least 3% of your Gross

Sales each calendar quarter to advertise and promote your Restaurants. Any amount of Local

Advertising Cooperative contribution you make will be set off against amounts required to be

spent by you for local advertising. Within 30 days after the end of each month, you must

send to us, in the manner we prescribe, an accounting of your expenditures for local

advertising and promotion during the preceding month. Your local advertising and

promotion must follow our guidelines.

We reserve the right, at any time, to issue you a notice that the amounts required to be

spent by you toward local marketing shall, instead, be paid to us or our designee. If we

exercise this option, we or our designee will spend such amounts, in accordance with local

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SMASHBURGER RESTAURANT marketing guidelines and programs that we develop

from time to time, to advertise and promote the Restaurant on your behalf. We may, in our

discretion, contribute any of these amounts to the Marketing Fund or to a Local Advertising

Cooperative, in which case, the offsets described above will not be applicable.

Your advertising, promotion, and marketing must be completely clear, factual, and

not misleading and conform to both the highest standards of ethical advertising and

marketing and the advertising and marketing policies that we prescribe from time to time. At

least 20 days before you use them, you must send to us for approval samples of all

advertising, promotional, and marketing materials which we have not prepared or previously

approved. If you do not receive written disapproval within 10 days after we receive the

materials, they are deemed to be disapproved. Once we approve the materials, you are

permitted to use them. However, we may, in our discretion, withdraw our approval if a

regulatory or other issue arises that, in our opinion, makes such withdrawal in our or the

Franchise System’s best interest. You may not use any advertising, promotional, or

marketing materials that we have not approved or have disapproved. In addition to your

other advertising obligations, you must spend at least $10,000 and may be required to spend

up to $25,000 (depending on factors such as whether your Restaurant is located in an urban

or rural location) for a grand opening marketing program for your Restaurant to take place on

the dates we designate before and after your Restaurant opens. You must use the media and

materials we develop or approve in connection with the grand opening advertising program.

You may not engage in any promotional or similar activities, directly or indirectly, through

or on the Internet, the World Wide Web, or any other similar proprietary or common carrier

electronic delivery system unless approved by us.

We do not have a franchisee advisory council that advises us on advertising policies,

though we reserve the right to establish such a council in the future.

Computer Hardware and Software

You must purchase an entire computing system approved by us and used by us and other

franchisees to ensure compliance with the standards we specify from time to time in the

Standards of Operations Manual (the “System Standards”). The system currently consists of

software, POS terminals, cash drawers, printers, a personal computer including Microsoft Office,

kitchen video monitors, remote printers, magnetic swipe cards, and DSL or other high speed

connections, firewall, and office printer, related cabling and a maintenance contract.

You must purchase all of the above items from our approved vendor, and currently there

is only one approved vendor, BEC, who is located at 5610 Ward Rd. Suite 200, Arvada, CO

80002, (303) 623-1143. Your computer system will enable you to collect information about

customer orders, sales by hour/day/period and inventory. We will have the ability to access your

cash system and computer. There are no contractual limitations on our and our affiliates’ right to

access this information and data.

Your cost to purchase the entire system will range between $15,000 and $30,000,

depending on many factors. A one year warranty is currently included in the initial purchase.

You will be responsible for paying for access to Menulink and Aloha Help desk for an annual

amount of approximately $1,300 per year. The annual cost of hosting from Menulink will be

approximately $780 per year, although this amount may change from time to time.

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You must upgrade your hardware and software when we decide it to be necessary and at your own cost. We reserve our right to update System Standards, which includes computer hardware and software from time to time and there are no contractual limitations on these rights.

Standards of Operations Manual

We provide guidance through manuals and bulletins, including the operations manual (the “Standards of Operations Manual”), which may include one or more separate manuals as well as audiotapes, videotapes, compact discs, computer software, information available on an Internet site, other electronic media, or written materials. The current Standards of Operations Manual is comprised of 680 pages. The table of contents to the current Standards of Operations Manual is attached as Exhibit G.

Opening of Your Restaurant

You must open your Restaurant within 150 days after you sign a lease for the premises of your Restaurant or one year after you sign the Franchise Agreement, whichever occurs first. If you fail to open your Restaurant within this time, we may terminate the Franchise Agreement and retain the entire franchise fee. Factors that affect this time include obtaining a satisfactory site, financing arrangements, lease negotiations, local ordinances, liquor license, delivery and installation of equipment, and renovation of the premises.

Site Selection

You must obtain and maintain a site acceptable to us for your Restaurant. We will consult with you on a site, which we will approve or disapprove based on factors such as business count, traffic count, accessibility, parking, visibility, competition and liquor license availability. When you have given us all the necessary information on the site you have selected, we generally will approve or disapprove the site within 30 days. Once we approve, and before you obtain possession of the site, you must sign a Franchise Agreement. If you fail to sign a Franchise Agreement within a reasonable time after our approval, we may revoke approval of the site. We will assist you by reviewing the lease and making recommendations regarding terms in the lease, but we recommend that you retain an attorney to assist you. You may not sign a lease without our approval. Our approval of a site or lease is not a guarantee of the success or profitability of the site. If you do not locate and sign a lease or purchase document for an acceptable site within 180 days of signing the Franchise Agreement, we may terminate the Franchise Agreement. We typically do not own or lease the site where your Restaurant is located.

Training

The initial training program involves approximately 4 weeks of training at one of our principal offices (currently, Denver Colorado) or at another location we designate and, for the first Restaurant opened by you or your affiliates, on-site training at your Restaurant immediately before the scheduled opening. We may change the location of the initial training program to another location we designate. You must complete the initial training program before you open your Restaurant. We may lengthen, shorten or restructure the contents of this program. The on-site training at your Restaurant will not commence until all improvements have been completed, a certificate of occupancy has been issued and the required liquor license has been applied for.

The initial training program is mandatory for you and your Designated Manager or your Designated Manager and 1 additional manager. Training materials include management training program materials, team member training materials and the Standards of Operations Manuals.

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You and your Designated Manager or your Designated Manager and 1 additional manager, must

complete the program to our satisfaction. We will schedule the program based on your and our

availability and the projected opening date for your Restaurant. Your expenditures for such

mandatory training will vary depending on the cost of hotel and travel at the time such training

occurs.

The initial training program is designed to cover all phases of the operation of

SMASHBURGER RESTAURANTS. Any individual attending the training who has not signed

the form of Guarantee and Assumption of Obligations attached to the Franchise Agreement must

execute a confidentiality agreement in the form provided by us.

We may require you (or Designated Manager and 1 additional manager) and previously

trained and experienced employees to attend and satisfactorily complete various training courses

that we periodically choose to provide at times and locations that we designate. We will not

require attendance at more than 2 such courses, or for more than a total of 5 business days,

during any calendar year. Besides attending these courses, you agree to attend an annual

meeting of all SMASHBURGER RESTAURANT franchise owners at a location we designate.

Attendance will not be required for more than 3 days during any calendar year.

We do not charge a fee for your Designated Manager, 1 additional manager and 1

additional person (total of 3) for your first 2 SMASHBURGER RESTAURANTS to attend our

initial training program. You will be solely responsible for the compensation, travel, lodging and

living expenses you and your managers incur while attending our initial training program or any

refresher training course.

As of the date of this Disclosure Document, we provide the following initial training:

TRAINING PROGRAM

SUBJECT

Hours of

Classroom

Training

Hours of On-

The-Job

Training

Location

Restaurant

Operations

Listed

below

Listed below At training facility we

designate

Orientation/Training

Overview

5 0 At training facility we

designate

Back of House

Functional Training

N/A 42 At training facility we

designate

Front of House

Functional Training


designate

Restaurant

Management Training


designate

POS/Menulink Training N/A 15 At training facility we

designate

New Restaurant

Opening Procedures


designate

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The hours devoted to each manager positions are estimates and may vary based on how

quickly trainees learn the material, their prior experience with the subject, and scheduling.

On-the-job training includes cross training in all subject areas of the business.

Janice Branam will oversee all training programs. Ms. Branam has been associated with

us and our affiliate, Icon Burger Acquisition LLC since January 2009. She has 26 years of

experience in restaurant operations and 17 years experience in training the subjects taught.

Certain other employees of ours and of our affiliates may also participate in the training

programs.

In addition to the training schedule provided above, for the first 2 SMASHBURGER

RESTAURANTS opened by your or your affiliates, we will send a training team (the identity

and composition of which will be in our discretion) to your Restaurant to assist with the grand

opening. We will bear the expense of providing that representative. If, in our judgment, we

determine it to be necessary to also send a representative to the Restaurant to provide grand

opening assistance for the third or subsequent Restaurants, you will be responsible for

reimbursing us the costs and expenses incurred by our representative, including the costs of

travel, lodging, meals and a per diem to cover the representative’s salary.

ITEM 12

TERRITORY

MULTI-UNIT DEVELOPMENT AGREEMENT

The Multi-Unit Development Agreement grants you the right to acquire franchises to

develop, own and operate SMASHBURGER RESTAURANTS within a designated geographic

area (the “Development Area”) to be described in Exhibit A attached to the Multi-Unit

Development Agreement. However, your Multi-Unit Development Agreement rights do not

include the right to acquire franchises for Special Venue Restaurants, unless we provide our

separate prior written consent with respect to each such proposed Special Venue Restaurant. The

boundaries of the Development Area will be described by counties, states, or other boundaries

when appropriate, or by an area encompassed within a circle having a radius of a specific length.

We will determine in our discretion the Development Area we will offer to you before you sign

the Multi-Unit Development Agreement. We determine the size of the Development Area based

on multiple factors, including demographics, traffic patterns, competition, your capacity to

recruit and provide services in the Development Area, and site availability among other

economic and market factors. The Multi-Unit Development Agreement expires on the required

opening date specified on the Development Schedule for the last Restaurant you are required to

develop under the Multi-Unit Development Agreement. When the Multi-Unit Development

Agreement expires or is terminated, the grant of Multi-Unit Development rights, including the

area protection conferred by the Multi-Unit Development Agreement, terminates. Your right to

use the Franchise System will be limited to those SMASHBURGER RESTAURANTS operating

under Franchise Agreements you (or an Approved Affiliate) may have entered into before the

expiration or termination of the Multi-Unit Development Agreement.

Unless otherwise indicated in the Multi-Unit Development Agreement, you will not

receive an exclusive or protected territory with respect to the Development Area. You may face

competition from other franchisees, from SMASHBURGER RESTAURANTS that we own or

from other channels of distribution or competitive brands that we control. We will be free,

within the Development Area, to grant development rights to others, to grant franchises to others,

and to ourselves to own or operate SMASHBURGER RESTAURANTS, in any event, without

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regard to whether such rights will be in competition with the rights granted to you. Without such

exclusivity, you may be in competition with us or with others to whom we have granted or may

in the future grant development rights or franchises for the Development Area, including with

respect to locating and securing sites for the development of SMASHBURGER

RESTAURANTS.

However, we may in certain circumstances, grant franchisees exclusivity with respect to

the development rights in the Development Area. In the event we grant you such exclusivity, we

will not, except as provided below, establish or license others to establish SMASHBURGER

RESTAURANTS within your Development Area during the term of the Multi-Unit

Development Agreement, so long as you are in compliance with the Multi-Unit Development

Agreement and all your Franchise Agreements. Your failure to comply with the Development

Schedule will be a material breach of the Multi-Unit Development Agreement, which may result

in our terminating the Multi-Unit Development Agreement. You may not engage in any

promotional or similar activities, directly or indirectly, through or on the Internet without our

consent.

Under the Multi-Unit Development Agreement, in addition to our rights described above

if you have not been granted exclusivity, we and our affiliates retain the right to (1) establish,

operate and license others to establish and operate anywhere in the world, Special Venue

Restaurants using the name “Smashburger” and Marks (defined in Item 13 below) and the

Franchise System and System Standards in which SMASHBURGER RESTAURANTS are

developed and operated, offering products and services which are identical or similar to products

and services offered by SMASHBURGER RESTAURANTS, (2) establish, operate and allow

others to establish and operate, SMASHBURGER RESTAURANTS using the Marks and the

Franchise System, at any location outside the Development Area on such terms and conditions

we deem appropriate; (3) establish, operate, and allow others to establish and operate,

restaurants, that may offer products and services which are identical or similar to products and

services offered by SMASHBURGER RESTAURANTS, under other trade names, trademarks,

service marks and commercial symbols different from the Marks; (4) operate or license others to

operate a SMASHBURGER RESTAURANT that we or our designee acquires from a franchisee

as a result of the exercise of our right of first refusal or right to purchase as provided in the

Franchise Agreement, and (5) establish, operate and allow others to establish and operate other

businesses and distribution channels (including, but not limited to, the Internet), wherever

located or operating and regardless of the nature or location of the customers with whom such

other businesses and distribution channels do business, that operate under the Marks or any other

trade names, trademarks, service marks or commercial symbols that are the same as or different

from SMASHBURGER RESTAURANTS, and that sell products or services that are identical or

similar to, or competitive with, those that SMASHBURGER RESTAURANTS customarily sell.

In addition, we specifically retain the right under the Multi-Unit Development Agreement to (1)

acquire the assets or ownership interests of one or more businesses including Competitive

Businesses (as defined in Item 17), and franchising, licensing or creating similar arrangements

with respect to such businesses once acquired, wherever these businesses (or the franchisees or

licensees of these businesses) are located or operating (including in the Development Area), (2)

be acquired (whether through acquisition of assets, ownership interests or otherwise, regardless

of the form of transaction), by any Competitive Business, even if such business operates,

franchises or licenses such businesses in the Development Area, (3) operate or grant a third party

the right to operate any SMASHBURGER RESTAURANTS that we or our designees acquire as

a result of an exercise of a right of first refusal or purchase right under a Franchise Agreement,

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and(4) engage in all other activities not expressly prohibited by the Multi-Unit Development

Agreement.

We are not required to pay you if we exercise any of the rights specified above inside or

outside your Development Area.

FRANCHISE AGREEMENT

You will not receive an exclusive or protected territory. You may face competition from

other franchisees, from SMASHBURGER RESTAURANTS that we own or from other channels

of distribution or competitive brands that we control. The Franchise Agreement grants you the

right to operate a SMASHBURGER RESTAURANT at a single location, within the

Development Area granted you by the Multi-Unit Development Agreement, that you select and

we approve. You must operate the Restaurant only at the approved location and may not

relocate the Restaurant without first obtaining our written consent. You may not establish or

operate another Restaurant unless you enter into a separate Franchise Agreement for that

Restaurant.

SMASHBURGER RESTAURANTS, whether franchised or company-owned, are free to

advertise, solicit and accept orders from any customers regardless of the location of your

Restaurant. We do not grant you any exclusive rights or territorial protection for your

Restaurant. You may not engage in any promotional or similar activities, directly or indirectly,

through or on the Internet without our consent.

Under the Franchise Agreement, we retain the right to (1) establish and operate, and

allow others to establish and operate, SMASHBURGER RESTAURANTS using the Marks and

the Franchise System, at any location on such terms and conditions we deem appropriate; (2)

establish and operate, and allow others to establish and operate, restaurants, that may offer

products and services which are identical or similar to products and services offered by

SMASHBURGER RESTAURANTS, under other trade names, trademarks, service marks and

commercial symbols different from the Marks; (3) establish, and allow others to establish, other

businesses and distribution channels (including the Internet), wherever located or operating and

regardless of the nature or location of the customers with whom such other businesses and

distribution channels do business, that operate under the Marks or any other trade names,

trademarks, service marks or commercial symbols that are the same as or different from

SMASHBURGER RESTAURANTS, and that sell products or services that are identical or

similar to, or competitive with, those that SMASHBURGER RESTAURANTS customarily sell;

(4) acquire the assets or ownership interests of one or more businesses, including Competitive

Businesses, and franchising, licensing or creating similar arrangements with respect to such

businesses once acquired, wherever these businesses (or the franchisees or licensees of these

businesses) are located or operating; (5) be acquired (whether through acquisition of assets,

ownership interests or otherwise, regardless of the form of transaction), by any other business,

including a Competitive Business, even if such business operates, franchises or licenses such

businesses in close proximity to the Restaurant; (6) operate or grant any third party the right to

operate any Smashburger Restaurant that we or our designees acquire as a result of the exercise

of a right of first refusal or purchase right that we have under this Agreement, any other franchise

agreement or any other agreements; and (7) engage in all other activities not expressly prohibited

by the Franchise Agreement.

While we are not required to do so, we will consider your request to incorporate a right of

first refusal with respect to any sites we might desire to develop or have developed as a

SMASHBURGER RESTAURANT during the term of the Franchise Agreement that fall within

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an agreed upon distance from your Restaurant (the distance would vary depending primarily on

whether your Restaurant is located in a rural or an urban market). If we agree to incorporate that

right into your Franchise Agreement, it will be subject to your being in compliance with the

Franchise Agreement, your being able to acquire the right to occupy the proposed premises, and

your timely execution of our then-current form of franchise agreement and payment of the

required initial franchise fee.

If, at any time during the term of the Franchise Agreement, you determine that, despite

using your good faith efforts, it is no longer economically feasible to operate the Restaurant at

the previously approved location, we will consider, in good faith, your request to relocate the

Restaurant to a new site within the Development Area described in the Multi-Unit Development

Agreement. However, we will not be required to consider any request to relocate the Restaurant

if you are not then in compliance with the Franchise Agreement. Any right to relocate the

Restaurant shall be subject to our approval of the proposed new site, and your development of

the new Restaurant at the new approved site in accordance with the terms and conditions of the

Franchise Agreement and in accordance with a timetable to which we agree at the time we grant

our approval (including a timetable for closing of the Restaurant at the existing location and re-

opening the Restaurant at a new site.) Any request for relocation and any approvals we grant in

connection must be in writing.

We are not required to pay you if we exercise any of the rights specified above inside or

outside the Development Area.

ITEM 13

TRADEMARKS

We grant you the non-exclusive right and obligation to use the trademarks under the

Franchise Agreement. By “trademark” we mean trade names, trademarks, service marks and

logos we authorize to identify SMASHBURGER RESTAURANTS (the “Marks”). You must

use the Marks as we require. You may not use any of the Marks as part of your firm or corporate

name. You may not use the Marks in the sale of unauthorized products or services or in any

manner we do not authorize. You may not use the Marks in any advertising for the transfer, sale

or other disposition of the SMASHBURGER RESTAURANT or any interest in the franchise.

The Marks are owned by our affiliate, Icon Burger, which, under an Intellectual Property License

Agreement, dated March 5, 2008, granted a license to our affiliate, Smashburger Master, to use

and sublicense the use of the Marks. That license agreement has a term of 99 years from March

5, 2008, and can be terminated on 30-days’ notice if Smashburger Master fails to maintain

certain minimum quality standards or ceases to be an affiliate of Icon Burger. Smashburger

Master has, in turn, granted us a license to use and sublicense the use of the Marks. Under our

Intellectual Property and Products Designation License Agreement with Smashburger Master,

dated March 5, 2008 (the “License Agreement”), Smashburger Master exclusively licensed us

the right to use and to sublicense the use of the Marks in granting new SMASHBURGER

RESTAURANT franchises to our franchisees in the United States and Puerto Rico. The License

Agreement has a term of 99 years from March 5, 2008. We must maintain minimum quality and

usage standards for the Marks. The License Agreement may be terminated before the end of its

99-year term if we cease to be an affiliate of Smashburger Master (resulting in the loss of our

right to use and to sublicense the use of the Marks). All rights in and goodwill from the use of

the Marks accrue to us and our affiliates.

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The following table sets forth the status of registrations and applications with the U.S.

Patent and Trademark Office (“PTO”) for federal registration of our principal trademarks. All

Marks are registered or have applications for registration pending on the Principal Register.

Mark Registration

Number Registration Date

Smashburger logo

3,531,758 November 11, 2008

SMASH BURGER 3,531,675 November 11, 2008

SMASH.SIZZLE.SAVOR 3,432,241 May 20, 2008

3,648,448 June 30, 2009

SMASH 3,644,558 June 23, 2009

HOME OF THE SMASHBURGER 4,045,713 October 25, 2011

All required affidavits of use have been filed in a timely manner.

We may establish new Marks in the future and you must use and display these marks in

accordance with specifications and bear all costs associated with changes to Marks or

introduction of new Marks. You must follow our rules when you use these Marks. You cannot

use a Mark as part of a corporate name or with modifying words, designs or symbols except with

our consent which we may withhold in our absolute discretion. You may not use our Marks in

the sale of an unauthorized product or service or in any manner we do not authorize in writing.

You may not use any other mark, name, commercial symbol or logotype in connection with the

operation of the Restaurant. You may not use the Marks as part of any user name, screen name

or profile in connection with any social networking sites or blogs.

There is presently no effective determination of the PTO, the Trademark Trial and

Appeal Board, the trademark administrator of any state, or any court, nor (except as noted below)

any pending infringement, opposition or cancellation proceeding or any pending material

litigation involving our principal trademarks, service marks, trade names, logo-types or other

commercial symbols.

You must not contest, directly or indirectly, our ownership of the Marks, trade secrets,

methods and procedures that are a part of the Franchise System. You must not register, seek to

register or contest our sole right to register, use and license others to use the Marks, names,

information and symbols.

Any goodwill associated with Marks, including any goodwill which might be deemed to

have arisen through your activities, inures directly and exclusively to the benefit of

SMASHBURGER.

There are no agreements currently in effect which significantly limit the rights of

SMASHBURGER to use or license the use of any trademarks, service marks, trade names, logo-

types or other commercial symbols.

You must notify us immediately in writing of any apparent infringement of or challenge

to your use of any Mark, or claim by any person of any rights in any Mark or any similar trade

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name, trademark or service mark of which you become aware. You may not communicate with

any person other than SMASHBURGER and its counsel regarding any infringement, challenge

or claim. We have sole discretion to take any action we deem appropriate and we have the right

to exclusively control any litigation, PTO proceeding or other administrative proceeding arising

out of any infringement, challenge or claim or otherwise relating to any Mark. You must execute

all documents, render assistance and do such things as we deem or our counsel deems advisable

to protect and maintain our interests.

Under the Franchise Agreement, we must indemnify you against, and reimburse you for,

all damages for which you are held liable in any proceeding in which your use of any Mark in

compliance with the Franchise Agreement is held to constitute trademark infringement, unfair

competition or dilution, and for all reasonable costs you incur in the defense of any claim

brought against you or in any proceeding in which you are named as a party, only if you have

timely notified us of the claim or proceeding and have otherwise complied with the Franchise

Agreement and only if you have given us the opportunity to defend the claim. If we defend the

claim, we have no obligation to indemnify or reimburse you for any fees or disbursements to any

attorney retained by you.

If it becomes advisable, in our opinion, at any time for us to require you to modify or

discontinue use of any Mark, or to use one or more additional or substitute trademarks or service

marks, you must comply within a reasonable time after notice by us, and our sole obligation in

such event shall be to reimburse you for the out-of-pocket costs of complying with this

obligation.

Other than as stated above, we do not know of any superior rights or infringing uses that

could materially affect your use of the Marks in this state or in any state where the Restaurant is

to be located.

ITEM 14

PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION

PATENTS AND COPYRIGHTS

We do not now own any rights to any patent that is material to the franchise. However,

our affiliate, Smashburger Master, is the applicant under a provisional patent application, bearing

the title “System and Method for Preparing Food,” for a process that is used in the operation of

Smashburger Restaurants. The application was filed with the PTO on April 11, 2012 (numbers

61/622,839) by Tom Ryan, who is described in Item 2 of this Disclosure Document and who has

assigned the application to Smashburger Master.

We or our affiliates claim copyright protection for the Standards of Operations Manual

and for any other written materials we develop to assist you in the development and operation of

the Restaurant. There are no determinations of the U.S. Copyright Office (Library of Congress)

or any court, nor are there any pending infringement, opposition or cancellation proceedings or

material litigation, involving the copyrighted materials which are relevant to their use by our

franchisees. No agreements limit our right to use or license the use of our copyrighted materials.

We are not obligated under any agreement to protect or defend our copyrights, although we

intend to do so. We do not know of any infringing uses of or superior rights in our copyrighted

materials.

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CONFIDENTIAL INFORMATION

We possess, develop and will continue to develop certain proprietary and confidential

information, including trade secrets relating to the operation of SMASHBURGER

RESTAURANTS. This proprietary and confidential information includes processes, methods,

techniques, recipes, ingredients, training materials, checklists and other information that is

valuable and treated by SMASHBURGER as confidential information. Much of this

confidential information is included or referenced in our Operation Manual. You and your

owners will not acquire any interest in the confidential information other than the right to use it

in operating the Restaurant. You must maintain the absolute confidentiality of the confidential

information during and after the expiration or termination of the Franchise Agreement. You and

your owners can divulge this confidential information only to individuals or entities specifically

authorized by us in advance, or to your employees or contractors who must have access to it to

operate the Restaurant, however, such individuals or entities must be under a duty of

confidentiality no less restrictive than your obligations to us under the Franchise Agreement. We

may require you to have your employees and contractors execute individual undertakings and

shall have the right to regulate the form of and be a party to or third-party beneficiary under any

such agreements. Neither you nor your owners are permitted to make unauthorized copies,

record or otherwise reproduce the materials or information or make them available to any

unauthorized person.

ITEM 15

OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION

OF THE FRANCHISE BUSINESS


Either you or, if you are at any time a corporation, a limited liability company, a general,

limited or limited liability partnership, or another form of business entity, an individual that

directly or indirectly owns at least 25% of the ownership interest in you (the “Managing

Owner”), approved by us must devote an amount of his or her business time and efforts to the

operation, promotion and enhancement of the business under the Multi-Unit Development

Agreement which is reasonable given your undertakings in this Agreement and in light of the

business that the Multi-Unit Development Agreement contemplates. You or the Managing

Owner must supervise the development and operations of SMASHBURGER RESTAURANTS

franchised under the Multi-Unit Development Agreement.

FRANCHISE AGREEMENT

The Restaurant must be, at all times, under the day-to-day, full-time management

supervision of the person you designate to assume primary responsibility for managing the

Restaurant (“Designated Manager”). The Designated Manager must assume responsibilities on

a full-time basis and may not engage in any other business or other activity, directly or indirectly,

that requires any significant management responsibility, time commitment, or otherwise may

conflict with his or her obligations to operate and manage the Restaurant.

Your Managing Owner must supervise the management and operation of the Restaurant

and continuously exert best efforts to promote and enhance the Restaurant.

If, at any time, the Restaurant is not being managed by a Designated Manager who has

satisfactorily completed the training program, we may, but are not required to, immediately

appoint a manager to manage the operation of the Restaurant on your behalf. Our appointment

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of a manager of the Restaurant will not relieve you of your obligations under the Franchise

Agreement or constitute a waiver of our right to terminate the franchise. We are not liable for

any debts, losses, costs or expenses you incur in the operation of the Restaurant while it is

managed by our appointed manager. We also will have the right to charge a reasonable fee for

our management services and we may cease to provide such management services at any time, in

our sole discretion.

If you are a legal entity, each owner must sign a guaranty of the franchise entity’s

obligations under the Multi-Unit Development Agreement and all Franchise Agreements signed

under the Multi-Unit Development Agreement and the Franchise Agreement (the forms are

attached as exhibits to the Multi-Unit Development Agreement and Franchise Agreement). Each

person signing a guaranty assumes and agrees to discharge all of your obligations (i.e., the

developer’s or franchisee’s) under each of the Multi-Unit Development Agreements and

Franchise Agreements. If you are an individual, your spouse must consent in writing to your

execution of the guaranty. Each person signing the guaranty agrees to be bound to provisions of

the agreement applicable to such person.

ITEM 16

RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL

You must sell or offer for sale all menu items, food products, beverages, and other

products and services we require, in the manner and style we require. You must sell only

approved menu items, and other products and services that we expressly authorize in the

Standards of Operations Manual or otherwise in writing. You must not deviate from our

standards and specifications without first obtaining our written consent. You must discontinue

selling and offering for sale any unapproved menu items, products or services. We have the right

to change the authorized menu items, products and services and their respective standards,

specifications and requirements in our sole discretion. We may periodically set the maximum

and minimum price that you may charge for services and products. You must promptly comply

with such changes.

ITEM 17

RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION

THE FRANCHISE RELATIONSHIP

This table lists certain important provisions of the Franchise Agreement and related

agreements. You should read these provisions in the agreements attached to this

Disclosure Document.

PROVISION SECTION IN

AGREEMENT SUMMARY

a. Length of the

franchise term

Section 1.B in Multi-Unit

Development Agreement

Section 1.D in Franchise

Agreement

Term in Multi-Unit Development Agreement ends on the

scheduled opening date of the last Restaurant as specified

on the Development Schedule.

Term of Franchise Agreement is 15 years.

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AGREEMENT SUMMARY

b. Renewal or

extension of the term

Section 1.F in Multi-Unit


Section 13.A in Franchise

Agreement

If you are granted exclusivity with respect to your

development rights, you will be allowed to extend the term,

subject, in each case, to, among other things, our agreeing

on a new Development Schedule for the renewal term and

your paying a new Development Fee. The length of the

extension term will depend on the number of Restaurants

that you and we agree will be opened during the extension

term.

If you are in substantial compliance with the Franchise

Agreement, you may extend the term for 15 years.

c. Requirements for

franchisee to renew

or extend

Section 1.F in Multi-Unit


Section 13 in Franchise

Agreement

You must have complied with the Development Schedule

and complied with all other obligations; you must give us

written notice by the earlier of (i) 30 days following the

opening of the Restaurant which causes you to achieve 80%

of the openings required under the Development Schedule

or (ii) the start of the second-to-last development period;

you and we must agree on a new Development Schedule;

you must pay a new Development Fee; and you and your

owners must sign a general release.

You must give at least 180 days, but no more than 270 days

notice, repair, replace and update equipment and Restaurant

premises to our current standards, not be in breach of any

agreement with us or our affiliates, satisfy all monetary

obligations, have the right to remain in possession of the

Restaurant premises, pay a renewal fee of 50% of then-

current franchise fee, execute then-current Franchise

Agreement and general release (unless prohibited by law)

and comply with current qualifications and training

requirements. The then-current Franchise Agreement may

contain terms and conditions materially different from those

in your previous Franchise Agreements, such as different

fee requirements.

d. Termination by

franchisee

Not Applicable in Multi-

Unit Development

Agreement


Agreement

You may terminate Franchise Agreement if we materially

breach the agreement and do not cure default after notice

from you.

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AGREEMENT SUMMARY

e. Termination by

franchisor without

cause

Not applicable We may not terminate the Franchise Agreement or the

Multi-Unit Development Agreement without cause.

f. Termination by

franchisor with cause

Section 7.A in Multi-Unit


AND

Section 14.B in Franchise

Agreement

Only if you or your owners commit one of several

violations.

g. “Cause” defined –

curable defaults




Agreement

Under Multi-Unit Development Agreement, you have 5

days to cure monetary defaults; 10 days to cure failure to

furnish reports, financial statements, tax returns or any other

documentation required; and 7 days to cure any failure to

observe, perform or comply with any other of the terms of

conditions of the Multi-Unit Development Agreement; and

applicable cure period for defaults under Franchise

Agreement.

Under Franchise Agreement, you have 10 days to cure

monetary defaults and failure to maintain required

insurance; 30 days to cure operational defaults and other

defaults not listed in (h) below; 15 days to cure quality

assurance audits; and applicable cure period for monetary

defaults owed to third parties.

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AGREEMENT SUMMARY

h. “Cause” defined –

non-curable defaults



Non-curable defaults under the Multi-Unit Development

Agreement include ceasing or threatening to cease to carry

on the business; liquidation of your assets; failure to pay

any debts or other amounts incurred by you in operating the

business when such debts or amounts are due and payable;

failure to comply with the development schedule; an

assignment for the benefit of creditors; appointment of a

trustee or receiver; 3 or more repeated violations during any 12-

month period; 2 or more repeated violations during any 6 month

period; in the event you are an entity, liquidation or

dissolution or amalgamation; or if you lose your charter by

expiration, forfeiture or otherwise; material

misrepresentations or omissions; conviction of a felony;

dishonest or unethical conduct; and unapproved transfers of

the Multi-Unit Development Agreement or an ownership

interest in you.


Agreement

Non-curable defaults under the Franchise Agreement

include material misrepresentations or omissions; failure to

secure site for the Restaurant within 180 days after

Franchise Agreement’s effective date; failure to open your

Restaurant within 150 days after you sign a lease for your

premises or one year after the Franchise Agreement’s

effective date, whichever is first; failure to complete

training; abandonment; unapproved transfers; conviction of

a felony; dishonest or unethical conduct; unauthorized use

or disclosure of the Standards of Operations Manual or

other confidential information; failure to pay taxes;

understating Gross Sales; repeated defaults (even if cured);

an assignment for the benefit of creditors; appointment of a

trustee or receiver; failure to comply with anti-terrorism

laws; and failure to comply with other agreements with us

or our affiliate and do not correct such failure within the

applicable cure period, if any.

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AGREEMENT SUMMARY

i. Franchisee’s

obligations on

termination/non-

renewal



Section 15 in Franchise

Agreement

Under the Multi-Unit Development Agreement, you must:

cease using the Marks and Franchise System; return all

forms, documents and information; completely de-identify

the business; cancel all fictitious or assumed names; cease

operating a similar restaurant; notify telephone company of

termination of rights to use telephone number; return the

Standards of Operations Manual and software and other

proprietary materials; comply with confidentiality

requirements; and at our option, sell or assign to us your

rights in the Restaurant premises and the assets used in the

business.

Under the Franchise Agreement, you must: cease operating

the Restaurant and using the Marks and Franchise System;

return all forms, documents and information; completely de-

identify the business within 30 days; cancel all fictitious or

assumed names; cease operating a similar restaurant; notify

telephone company of termination of rights to use telephone

number and transfer number to our designee; return the

Standards of Operations Manual and software and other

proprietary materials; comply with confidentiality

requirements; and at our option, sell or assign to us your

rights in the Restaurant premises and the assets used in the

business.

j. Assignment of

contract by franchisor

Section 6 in Multi-Unit


AND


Agreement

No restriction on our right to assign.

k. “Transfer” by

franchisee-definition



AND


Agreement

Includes voluntary or involuntary sale, assignment,

subdivision, sub-franchising; grant of mortgage, charge, lien

or security interest; merger or consolidation; sale or

exchange of voting securities; or transfer caused by divorce

or death.

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AGREEMENT SUMMARY

l. Franchisor’s

approval of transfer

by franchisee

Sections 6.A in Multi-

Unit Development

Agreement

AND

Sections 12.B and 12.C in

Franchise Agreement

We have the right to approve all transfers by you or your

owners but will not unreasonably withhold or delay

approval. However, transfers among current owners of

ownership interests only require prior notice so long as

Managing Owner remains the same and there is no change

in control.

m. Conditions for

franchisor approval

of transfer

Section 6.A(1) in Multi-

Unit Development

Agreement

Section 12.C in Franchise

Agreement

Transferee must meet qualifications; satisfactorily complete

training and pay required fee; have no financial or other

interest in Competitive Business; enter into all then-current

forms of agreement required by us; you must have fulfilled

all your financial obligations; must execute general release;

pay expenses and applicable fees; you must repair your

place of business

Transferee must meet qualifications; all monetary

obligations must be paid; you must not be in default of any

provisions of agreement; transferor and its owners (and

transferee and its owners) must sign general release (unless

prohibited by law); transferee must not have any ownership

interest in Competitive Business; landlord must transfer

lease to the Premises; upgrade Restaurant to current

specifications within 120 days; at our request, transferee

signs then-current forms of agreements; transferee or

designated manager must satisfactorily complete training at

its own expense; pay transfer fee; transferor must execute

non-compete agreement; we approve purchase price,

amount of debt and payment terms; transferor agree to

subordinate its rights against the assignee to our rights

against the assignee.

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AGREEMENT SUMMARY

n. Franchisor’s right

of first refusal to

acquire franchisee’s

Franchised Business



Section 12.G in Franchise

Agreement

If you receive and offer to sell or transfer an interest, direct

or indirect, in the Multi-Unit Development Agreement, your

business operated under the Multi-Unit Development

Agreement or an ownership interest in you, we have a right

of first refusal to purchase such interest offered for the price

and on the terms and conditions contained in the offer with

certain provisions; if this right is not exercised within 30

days of our receipt of notice of such intention to sell or

transfer, then you may sell or transfer in accordance with

items k through m of this Table.

If you receive and offer to sell or transfer an interest, direct

or indirect, in the Franchise Agreement, your Restaurant or

an ownership interest in you, we have a right of first refusal

to purchase such interest offered for the price and on the

terms and conditions contained in the offer with certain

provisions; if this right is not exercised within 30 days of

our receipt of notice of such intention to sell or transfer,

then you may sell or transfer in accordance with items k

through m of this Table. If your Restaurant has been used

as collateral for an SBA-guaranteed loan (which requires

our prior consent), we will not, while such loan remains

unpaid, exercise our right of first refusal with respect to a

transfer of part of the ownership interests in you unless in

connection with our exercise of the right of first refusal we

are paying off the SBA-guaranteed loan; however, we

reserve the right to assign our right of first refusal with

respect to such transfers to an unaffiliated third-party.

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AGREEMENT SUMMARY

o. Franchisor’s

option to purchase

franchisee’s business

Sections 6.A, B and E of

Multi-Unit Development

Agreement

Section 15.E in Franchise

Agreement.

In the case of your default, we may purchase any of your

existing SMASHBURGER RESTAURANTS within 30

days of your receipt of our notice of your default.

We may purchase the assets of your Restaurant upon the

expiration of the Franchise Agreement and any successor

franchise granted to you, or the termination of the Franchise

Agreement by you without cause or by us with cause

(except where the sole cause for termination was your or

your Approved Affiliate’s failure to comply with the

development schedule set forth in the Multi-Unit

Development Agreement) (each a “Termination Event”). In

the case of a Termination Event, we have 30 days from the

Termination Event to provide you with written notice of our

election to purchase your Restaurant. We also have the

right to purchase the assets of your Restaurant upon a

termination of the Multi-Unit Development Agreement, a

change in control of us, or if there is a public offering of our

(or certain of our affiliates’ or parents’) securities (each a

“Control Event”). Control Event also includes when the

Multi-Unit Development Agreement expires because you

are permitted to extend, but fail to timely complete the

extension requirements, unless the sole reason for your not

completing such requirements is that we would grant you

the extension only if you agreed to open during the

extension term more than 40% of the total number of

Restaurants required to be open during the expiring term.

In the case of a Control Event, we have until the 3rd

anniversary of the occurrence of a Control Event to provide

you with written notice of our election to purchase your

Restaurant. If we elect to purchase your Restaurant upon a

Control Event, we will do so only if we also exercise our

similar options to purchase under the other Franchise

Agreements entered into by you or your Approved

Affiliates under the Multi-Unit Development Agreement.

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AGREEMENT SUMMARY

p. Death or

disability




Agreement

Death of franchisee (or any of its owners) is a transfer

requiring our consent. See (k) above. However, our

approval will not be unreasonably withheld or delayed so

long as at least one of the Managing Owners continues to be

the designated Managing Owner. If, as a result of the death

or incapacity of the transferor, a transfer is proposed to be

made to the transferor’s spouse, and if we do not approve

the transfer, the trustee or administrator of the transferor’s

estate will have 9 months after our refusal to consent to the

transfer to the transferor’s spouse within which to transfer

the transferor’s interests to another party whom we approve.

q. Non-competition

covenants during the

term of the franchise

Section 5.A and 5.B in

Multi-Unit Development

Agreement

AND

Section 7 Franchise

Agreement

Neither you, nor any of your owners or their immediate

family members, may have any involvement, directly or

indirectly, in a “Competitive Business.” “Competitive

Business” means any restaurant, food service or other

business (other than a SMASHBURGER RESTAURANT):

(i) whose gross receipts from the sale of hamburgers

represent, at any time, at least 10% of the business’ total

gross receipts (excluding receipts from the sale of alcoholic

beverages), (ii) whose menu, concept, business model or

method of operation is similar to that employed by

restaurant units operated, franchised or licensed by us, (iii)

that offers or sells goods or services that are generally the

same as or similar to the goods or services being offered by

businesses owned, operated, franchised or licensed by us, or

(iv) that grants franchises or licenses for the operation of

any of the foregoing or provides services to the franchisor

or licensor of any of the foregoing. In addition, without our

prior consent, you must not operate, directly or indirectly,

any business marketed by a franchisor or chain under a

locally, regionally, or nationally known or registered

trademark or service mark. Further, you may not, without

permission: recruit or hire general manager or assistant

manager of ours, our affiliates, franchisees or developers, or

district or regional manager or any of our or our affiliates’

officers; nor interfere with vendor/supplier/consultant

relationships nor engage in activities that would harm our

Marks or Franchise System

Smashburger

06/2012 FDD 1031.002.006/46510.2

51


AGREEMENT SUMMARY

r. Non-competition

covenants after the

franchise is

terminated or expires

Section 7.C in Multi-Unit


Section 15.D in Franchise

Agreement

You may not have any involvement, directly or indirectly,

in a Competitive Business for 24 months in developer’s

Development Area, Development Area of any other

SMASHBURGER developer, or within a 5 mile radius of

any SMASHBURGER RESTAURANT in existence or

under development at time of termination or expiration of


You may not have any involvement, directly or indirectly,

in a Competitive Business for 24 months within 5 mile

radius of the premises of your Restaurant or any

SMASHBURGER RESTAURANT in existence or under

development at time of termination or expiration of

Franchise Agreement.

s. Modification of

the agreement

Section 10.L in Multi-

Unit Development

Agreement

AND

Section 17.L in Franchise

Agreement

No modifications except in writing and signed by both you

and us.

t. Integration/

merger clause

Section 10.L in Multi-

Unit Development

Agreement

Section 17.O in Franchise

Agreement

Only the written terms of the agreement are binding (subject

to state law). Any other promises are not enforceable.

Any representation or promises outside of the Disclosure

Document, Multi-Unit Development Agreement and

Franchise Agreement may not be enforceable. However,

nothing in the Franchise Agreement is intended to disclaim

the representations we made in the Disclosure Document

that we furnished to you.

u. Dispute

resolution by

arbitration or

mediation



Section 17.G in Franchise

Agreement

We and you must arbitrate all disputes at a location in or

within 50 miles of our current principal place of business

(currently, Denver, Colorado) (subject to state law).

Smashburger

06/2012 FDD 1031.002.006/46510.2

52


AGREEMENT SUMMARY

v. Choice of forum Section 9.A in Multi-Unit


AND

Section 17.I in Franchise

Agreement

You must sue us in the state where our corporate

headquarters are located (currently Colorado) (subject to

state law).

w. Choice of law Section 10.F in Multi-

Unit Development

Agreement

AND

Section 17.H in Franchise

Agreement

Colorado law (subject to state law)

In addition to the provisions noted in the charts above, the Multi-Unit Development Agreement

and Franchise Agreement contain a number of provisions that may affect your legal rights,

including a waiver of a right to a jury trial, waiver of punitive damages or exemplary damages,

and limitations on whether claims may be raised. (Multi-Unit Development Agreement –

Sections 9.B and 9.C; Franchise Agreement – Sections 17.J and 17.K). We recommend that you

carefully review all of these provisions, and the entire contract, with a lawyer.

ITEM 18

PUBLIC FIGURES

We do not use any public figure to promote the Franchise System.

ITEM 19

FINANCIAL PERFORMANCE REPRESENTATIONS

The FTC’s Franchise Rule permits a franchisor to provide information about the actual or

potential financial performance of its franchised and/or franchisor-owned outlets, if there is a

reasonable basis for the information, and if the information is included in the Disclosure

Document. Financial performance information that differs from that included in Item 19 may be

given only if: (1) a franchisor provides the actual records of an existing outlet you are

considering buying; or (2) a franchisor supplements the information provided in this Item 19, for

example, by providing information about possible performance at a particular location or under

particular circumstances.

As of January 1, 2012 (the end of our fiscal year), there were 142 SMASHBURGER

RESTAURANTS in operation, 87 of which had been in operation for the entire 2011 fiscal year

(excluding transfers). Of the 87 locations, 41 were owned and operated by our affiliates, and 46

were owned and operated by unaffiliated franchisees. The following is a chart of certain

financial performance information for the 87 SMASHBURGER RESTAURANTS that were

operating for the full 2011 fiscal year.

Smashburger

06/2012 FDD 1031.002.006/46510.2

53

NUMBER OF

LOCATIONS

AVG. ANNUAL SALES FOR

FISCAL YEAR 2011

87 $1,024,847

NOTES:

(1) 41 of the 87 SMASHBURGER RESTAURANTS (47%) met or exceeded the

Average Annual Sales number, and 46 of the 87 SMASHBURGER RESTAURANTS (53%)

were below the average. The 87 SMASHBURGER RESTAURANTS used to compute the

Average Annual Sales had a range of Annual Sales for the period of $541,717 to $1,979,485.

(2) “Annual Sales” was calculated in the same manner as “Gross Sales” (as defined

in the Franchise Agreement) would be calculated and on which your Royalty would be paid.

(3) These numbers do not reflect either gross or net profits.

(4) The sales data for SMASHBURGER RESTAURANTS owned by unaffiliated

franchisees was obtained through polling the franchisees’ point of sales systems in the normal

course. We have not audited or verified the accuracy of that information.

We will provide written substantiation for these financial performance representations to

prospective franchisees upon reasonable request. Except as disclosed in this Item 19, we do not

furnish or authorize our sales persons to furnish any oral or written information concerning the

actual or potential sales, costs, income or profits of a SMASHBURGER RESTAURANT.

Actual results vary from restaurant to restaurant and we cannot estimate the results of any

particular franchise restaurant location. Location is always a determining factor in the success of

a restaurant, as are day-to-day management skill, business skill, and marketing, advertising and

public relations initiatives of the franchisee.

NEW FRANCHISEES’ FINANCIAL RESULTS ARE LIKELY TO DIFFER

FROM THE FINANCIAL INFORMATION CONTAINED IN THIS ITEM 19. THERE

IS NO ASSURANCE THAT YOU WILL DO AS WELL, AND THE INFORMATION

CONTAINED IN THIS ITEM 19 SHOULD NOT BE CONSIDERED TO BE THE

ACTUAL OR PROBABLE RESULTS THAT YOU WOULD REALIZE.

ITEM 20

OUTLETS AND FRANCHISEE INFORMATION

TABLE NO. 1

SYSTEMWIDE SMASHBURGER RESTAURANTS SUMMARY FOR

YEARS 2009 to 20111

Outlet Type Year

SMASHBURGER

RESTAURANTS at

the Start of the Year

SMASHBURGER

RESTAURANTS at

the End of the Year Net Change

Franchised 2009 0 13 +13

2010 13 52 +39

2011 52 83 +31

Company Owned or

Managed2

2009 10 30 +20

2010 30 41 +11

2011 41 593 +18

Smashburger

06/2012 FDD 1031.002.006/46510.2

54

Outlet Type Year

SMASHBURGER

RESTAURANTS at

the Start of the Year

SMASHBURGER

RESTAURANTS at

the End of the Year Net Change

Total Businesses 2009 10 43 +33

2010 43 93 +50

2011 93 142 +49

1/ The numbers in this table are for the 12 month periods ended January 1, 2012, December

26, 2010, and December 27, 2009.

2/ Company-owned includes affiliate-owned or managed.

3/ As of January 1, 2012, our affiliates owned and operated 59 SMASHBURGER

RESTAURANTS.

TABLE NO. 2

TRANSFERS OF SMASHBURGER RESTAURANTS FROM FRANCHISEES TO

NEW OWNERS (OTHER THAN FRANCHISOR OR AN AFFILIATE)

FOR YEARS 2009 to 20111

State Year Number of Transfers

Total 2009 0

2010 2

2011 0


26, 2010, and December 27, 2009.

TABLE NO. 3

STATUS OF FRANCHISED SMASHBURGER RESTAURANTS


State Year

SMASHBURGER

RESTAURANTS

at Start of Year

SMASHBURGER

RESTAURANTS

Opened Terminations

Non-

Renewals

Reacquired

by

Franchisor

Ceased

Operations-

Other Reasons

SMASHBURGER

RESTAURANTS

at End of Year

AZ 2009 0 1 0 0 0 0 1

2010 1 4 0 0 0 0 5

2011 5 2 0 0 0 0 7

CA 2009 0 0 0 0 0 0 0

2010 0 3 0 0 0 0 3

2011 3 5 0 0 0 0 8

CO 2009 0 2 0 0 0 0 2

2010 2 1 0 0 0 1 2

2011 2 1 0 0 0 2 1

Smashburger

06/2012 FDD 1031.002.006/46510.2

55

State Year

SMASHBURGER

RESTAURANTS

at Start of Year

SMASHBURGER

RESTAURANTS

Opened Terminations

Non-

Renewals

Reacquired

by

Franchisor

Ceased

Operations-

Other Reasons

SMASHBURGER

RESTAURANTS

at End of Year

FL 2009 0 0 0 0 0 0 0

2010 0 0 0 0 0 0 0

2011 0 1 0 0 0 0 1

GA 2009 0 0 0 0 0 0 0

2010 0 0 0 0 0 0 0

2011 0 5 0 0 0 0 5

IA 2009 0 2 0 0 0 0 2

2010 2 0 0 0 0 0 2

2011 2 1 0 0 0 0 3

KS 2009 0 0 0 0 0 0 0

2010 0 6 0 0 0 1 5

2011 5 0 0 0 2 2 1

KY 2009 0 0 0 0 0 0 0

2010 0 2 0 0 0 0 2

2011 2 2 0 0 0 0 4

LA 2009 0 0 0 0 0 0 0

2010 0 1 0 0 0 0 1

2011 1 1 0 0 0 0 2

MI 2009 0 0 0 0 0 0 0

2010 0 1 0 0 0 0 1

2011 1 3 0 0 0 0 4

MO 2009 0 0 0 0 0 0 0

2010 0 0 0 0 0 0 0

2011 0 2 0 0 0 0 2

NC 2009 0 0 0 0 0 0 0

2010 0 0 0 0 0 0 0

2011 0 1 0 0 0 0 1

ND 2009 0 0 0 0 0 0 0

2010 0 1 0 0 0 0 1

2011 1 0 0 0 0 0 1

NE 2009 0 2 0 0 0 0 2

2010 2 1 0 0 0 0 3

2011 3 0 0 0 0 0 3

NJ 2009 0 1 0 0 0 0 1

2010 1 4 0 0 0 0 5

2011 5 2 0 0 0 0 7

Smashburger

06/2012 FDD 1031.002.006/46510.2

56

State Year

SMASHBURGER

RESTAURANTS

at Start of Year

SMASHBURGER

RESTAURANTS

Opened Terminations

Non-

Renewals

Reacquired

by

Franchisor

Ceased

Operations-

Other Reasons

SMASHBURGER

RESTAURANTS

at End of Year

NV 2009 0 0 0 0 0 0 0

2010 0 4 0 0 0 0 4

2011 4 0 0 0 0 0 4

NY 2009 0 0 0 0 0 0 0

2010 0 0 0 0 0 0 0

2011 0 1 0 0 0 0 1

OH 2009 0 1 0 0 0 0 1

2010 1 2 0 0 0 0 3

2011 3 3 0 0 0 0 6

OK 2009 0 0 0 0 0 0 0

2010 0 0 0 0 0 0 0

2011 0 2 0 0 0 0 2

TX 2009 0 4 0 0 0 0 4

2010 4 10 0 0 0 0 14

2011 14 4 0 0 0 0 18

UT 2009 0 0 0 0 0 0 0

2010 0 1 0 0 0 0 1

2011 1 0 0 0 0 0 1

Totals 2009 0 13 0 0 0 0 13

2010 13 41 0 0 0 2 52

2011 52 37 0 0 2 4 83


26, 2010, and December 27, 2009.

TABLE NO. 4

STATUS OF AFFILIATE-OWNED SMASHBURGER RESTAURANTS1


State Year

Affiliate-Owned

SMASHBURGER

RESTAURANTS

at Start of Year

Affiliate-Owned

SMASHBURGER

RESTAURANTS

Opened

Affiliate-Owned

SMASHBURGER

RESTAURANTS

Reacquired from

Franchisee

Affiliate-Owned

SMASHBURGER

RESTAURANTS

Closed

Affiliate-Owned

SMASHBURGER

RESTAURANTS

Sold to

Franchisee

Affiliate-Owned

SMASHBURGER

RESTAURANTS

at End of Year

CA 2009 0 0 0 0 0 0

2010 0 2 0 0 0 2

2011 2 2 0 0 0 4

CO 2009 8 5 0 0 0 13

2010 13 2 0 0 0 15

2011 15 0 0 0 0 15

Smashburger

06/2012 FDD 1031.002.006/46510.2

57

State Year

Affiliate-Owned

SMASHBURGER

RESTAURANTS

at Start of Year

Affiliate-Owned

SMASHBURGER

RESTAURANTS

Opened

Affiliate-Owned

SMASHBURGER

RESTAURANTS

Reacquired from

Franchisee

Affiliate-Owned

SMASHBURGER

RESTAURANTS

Closed

Affiliate-Owned

SMASHBURGER

RESTAURANTS

Sold to

Franchisee

Affiliate-Owned

SMASHBURGER

RESTAURANTS

at End of Year

FL 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 2 0 0 0 2

ID 2009 0 1 0 0 0 1

2010 1 1 0 0 0 2

2011 2 0 0 0 0 2

IL 2009 0 0 0 0 0 0

2010 0 1 0 0 0 1

2011 1 9 0 0 0 10

KS 2009 1 1 0 0 0 2

2010 2 0 0 0 2 0

2011 0 0 2 0 0 2

MN 2009 0 4 0 0 0 4

2010 4 2 0 0 0 6

2011 6 2 0 0 0 8

OK 2009 0 2 0 0 0 2

2010 2 0 0 0 0 2

2011 2 0 0 0 0 2

TX 2009 1 5 0 0 0 6

2010 6 3 0 0 0 9

2011 9 1 0 0 0 10

UT 2009 0 2 0 0 0 2

2010 2 2 0 0 0 4

2011 4 0 0 0 0 4

Totals 2009 10 20 0 0 0 30

2010 30 13 0 0 2 41

2011 41 16 2 0 0 59

1/ These businesses were owned by our affiliates.


26, 2010, and December 27, 2009.

Smashburger

06/2012 FDD 1031.002.006/46510.2

58

TABLE NO. 5

PROJECTED OPENINGS

AS OF JANUARY 1, 2012 FOR 2012

State

Franchise Agreements

Signed But Franchised

Business Not Opened

Projected New

Franchised Businesses in

the Next Fiscal Year

Projected New Affiliate-

Owned Franchised

Businesses in the Next

Fiscal Year

Alabama 1 1 0

Arizona 0 5 0

California 0 5 4

Colorado 0 1 0

Connecticut 1 3 0

Florida 0 0 2

Georgia 0 1 0

Illinois 0 1 0

Kentucky 0 4 0

Louisiana 0 2 0

Minnesota 0 0 1

Michigan 0 1 0

New Jersey 0 3 0

New York 1 2 0

Nevada 0 3 0

North Carolina 0 1 0

Pennsylvania 2 1 0

Tennessee 1 1 0

Texas 1 8 6

Utah 0 1 0

Totals 7 44 13

Exhibit D is a list of the names of all Franchisees and the addresses and telephone

numbers of their Restaurants as of January 1, 2012. Exhibit D also includes Franchisees who

had not opened a Restaurant as of January 1, 2012. Exhibit E is a list of the names, cities and

states and business telephone numbers (or, if unknown, the last known home telephone numbers)

of every Franchisee who had an outlet terminated, cancelled, not renewed, or who otherwise

voluntarily or involuntarily ceased to do business under a Franchise Agreement during the period

from December 26, 2010 through January 1, 2012, or who has not communicated with us within

10 weeks of the issuance date of this Disclosure Document.

If you buy this franchise, your contact information may be disclosed to other buyers

when you leave the franchise system.

Smashburger

06/2012 FDD 1031.002.006/46510.2

59

If you buy this franchise, your contact information may be disclosed to other buyers

when you leave the franchise system. There is no trademark-specific organization associated

with the franchise system being offered.

In some instances, current and former franchisees sign provisions restricting their ability

to speak only about their experience with Smashburger Franchising LLC. You may wish to

speak with current and former franchisees, but be aware that not all such franchisees will be able

to communicate with you.

ITEM 21

FINANCIAL STATEMENTS

Attached as Exhibit F are the audited financial statements of Smashburger Franchising

Company LLC as of January 1, 2012 and December 26, 2010, and for the 53 weeks ended

January 1, 2012, the 52 weeks ended December 26, 2010, and the 52 weeks ended December 27,

2009. Our fiscal year is 52 or 53 weeks ending on the Sunday closest to December 31. Fiscal

year 2011 included 53 weeks and fiscal years 2010 and 2009 included 52 weeks.

ITEM 22

CONTRACTS

The following contracts are attached as exhibits to this Disclosure Document:

Exhibit B – Multi-Unit Development Agreement

Exhibit C - Franchise Agreement

Exhibit H – Representations and Acknowledgment Statement

Exhibit I – Sample General Release

ITEM 23

RECEIPTS

Exhibit K contains detachable documents acknowledging your receipt of this Disclosure

Document.


2012 Ex. A – State Agencies 1031.002.006/46338.1

EXHIBIT "A"

STATE AGENCIES/AGENTS FOR SERVICE OF PROCESS


2012 Ex. A – State Agencies 1031.002.006/46338.1

EXHIBIT “A”

STATE AGENCIES/AGENTS FOR SERVICE OF PROCESS

STATE REGISTRATION EFFECTIVE DATES

Listed here are the names, addresses and telephone numbers of the state agencies having

responsibility for the franchising disclosure/registration laws. We may not yet be registered to sell

franchises in any or all of these states.

CALIFORNIA

Department of Corporations:

1 (866) 275-2677

Los Angeles

Suite 750

320 West 4th Street

Los Angeles, California 90013

(213) 576-7505

Sacramento

1515 K Street, Suite 200

Sacramento, California 95814-4052

(916) 445-7205

San Diego

1350 Front Street

San Diego, California 92101

(619) 525-4044

San Francisco

One Sansome Street, Ste. 600

San Francisco, CA 94104

(415) 972-8559

HAWAII

(state administrator)

Business Registration Division

Department of Commerce and Consumer Affairs

P.O. Box 40

Honolulu, Hawaii 96810

(808) 586-2722

(agent for service of process)

Commissioner of Securities of the

Department of Commerce and Consumer Affairs

335 Merchant Street

Honolulu, Hawaii 96813

(808) 586-2722

ILLINOIS

Franchise Bureau

Office of the Attorney General

500 South Second Street

Springfield, Illinois 62706

(217) 782-4465

INDIANA


Indiana Secretary of State

Securities Division, E-111

302 West Washington Street

Indianapolis, Indiana 46204

(317) 232-6681


2012 Ex. A – State Agencies

1031.002.006/46338.1

2


Indiana Secretary of State

201 State House

200 West Washington Street

Indianapolis, Indiana 46204

(317) 232-6531

MARYLAND


Office of the Attorney General

Securities Division

200 St. Paul Place

Baltimore, Maryland 21202-2021

(410) 576-6360


Maryland Securities Commissioner

at the Office of the Attorney General

Securities Division

200 St. Paul Place

Baltimore, Maryland 21202-2021

(410) 576-6360

MICHIGAN


Consumer Protection Division

Antitrust and Franchise Unit

Michigan Department of Attorney General

670 G. Mennen Williams Building, 1st Floor

525 West Ottawa


(517) 373-7177


Michigan Department of Commerce,

Corporations and Securities Bureau

P.O. Box 30054

6546 Mercantile Way


MINNESOTA

Minnesota Department of Commerce

85 7th Place East, Suite 500

St. Paul, Minnesota 55101

(651) 296-6328

NEW YORK


New York State Department of Law

Bureau of Investor Protection

and Securities

120 Broadway

New York, New York 10271

(212) 416-8000


Secretary of State of New York

41 State Street

Albany, New York 12231

(518) 474-4750

NORTH DAKOTA

North Dakota Securities Department

600 East Boulevard Avenue

State Capitol - Fifth Floor

Bismarck, North Dakota 58505

(701) 328-4712

OREGON

Department of Insurance and Finance

Corporate Securities Section

Labor and Industries Building

Salem, Oregon 97310

(503) 378-4387

RHODE ISLAND

Division of Securities

1511 Pontiac Avenue

Cranston, Rhode Island 02920

(401) 462-9582


2012 Ex. A – State Agencies

1031.002.006/46338.1

3

SOUTH DAKOTA

Department of Labor and Regulation


445 East Capitol

Pierre, South Dakota 57501

(605) 773-4013

VIRGINIA


State Corporation Commission


and Retail Franchising

1300 East Main Street, Ninth Floor

Richmond, Virginia 23219

(804) 371-9051


Clerk, State Corporation Commission

1300 East Main Street, 1st Floor

Richmond, Virginia 23219

(804) 371-9733

WASHINGTON


Department of Financial Institutions

Securities Division

P.O. Box 9033

Olympia, Washington 98507-9033

(360) 902-8760


Director

Department of Financial Institutions

Securities Division

150 Israel Road, S.W.

Tumwater, Washington 98501

WISCONSIN

Securities and Franchise Registration

Wisconsin Securities Commission

345 West Washington Avenue, 4th Floor

Madison, Wisconsin 53703

(608) 266-3431

Smashburger – 06/2012 FDD

Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6

EXHIBIT "B"






MULTI-UNIT DEVELOPER

DATE OF AGREEMENT

_____________________________

DEVELOPMENT AREA



TABLE OF CONTENTS

Page

1. Preambles and Grant of Rights. ...........................................................................................1 A. Preambles. ................................................................................................................1

B. Grant of Rights; Exclusivity; Term..........................................................................1 C. Rights We Reserve. ..................................................................................................2 D. Best Efforts/Business Entity. ...................................................................................3 E. Financing; Maximum Borrowing Limits; Liquidity. ...............................................4 F. Extension Of Term; Trigger Of Option To Purchase. .............................................5

2. Exercise Of Development Rights.........................................................................................6 A. Proposed Sites For Smashburger Restaurants..........................................................6

B. Execution Of Franchise AgreementS.......................................................................6 C. Development Schedule. ...........................................................................................7 D. Failure to Comply With Development Schedule. ....................................................7 E. Records And Reporting............................................................................................7

3. Fees. .....................................................................................................................................8 A. Your Initial Fee To Us. ............................................................................................8

B. Method of Payment. .................................................................................................8

4. Confidential Information. ....................................................................................................9

5. Exclusive Relationship During Term...................................................................................9 A. Covenants Against Competition. .............................................................................9

B. Non-Solicitation and Non-Interference. .................................................................10 C. Covenants from Others. .........................................................................................10 D. Innovations. ............................................................................................................11

6. Transfer. .............................................................................................................................11 A. Sale or Encumbrance. ............................................................................................11

B. First Right of Refusal. ............................................................................................14 C. Public or Private Offerings. ...................................................................................14

7. Termination of Agreement. ................................................................................................15 A. Events of Termination............................................................................................15

B. Effects of Termination. ..........................................................................................16 C. Covenant Not to Compete / Non-Solicitation. .......................................................17 D. Survival of Covenants. ...........................................................................................18

8. Relationship of the Parties/Indemnification. ......................................................................18

A. Independent Contractors. .......................................................................................18 B. Indemnification. .....................................................................................................18

9. Enforcement; Arbitration. ..................................................................................................19

A. Arbitration ..............................................................................................................19

Page

ii Smashburger – 06/2012 FDD


B. Consent to Jurisdiction. ..........................................................................................21 C. Waiver of Punitive Damages and Jury Trial. .........................................................21 D. Injunctive Relief.....................................................................................................21 E. Limitation of Claims. .............................................................................................22

F. Attorney’s Fees And Costs. ...................................................................................22

10. MISCELLANEOUS. .........................................................................................................22 A. Joint and Several Obligation. .................................................................................22 B. Severability. ...........................................................................................................22 C. No Warranty or Representation. ............................................................................22

D. Notice. ....................................................................................................................23

E. Headings. ...............................................................................................................23

F. Applicable Law. .....................................................................................................23 G. Time of Essence. ....................................................................................................23 H. Waiver. ...................................................................................................................23 I. Assignment by Us. .................................................................................................24

J. Agreement Effective. .............................................................................................24 K. Further Assurances.................................................................................................24

L. Entire Agreement. ..................................................................................................24 M. Lawful Attorney. ....................................................................................................24 N. Acknowledgments..................................................................................................25

O. Binding Agreement. ...............................................................................................25

EXHIBITS

EXHIBIT A - DEVELOPMENT AREA AND DEVELOPMENT SCHEDULE

EXHIBIT B - OWNERS AND MANAGING OWNER

EXHIBIT C - GUARANTY AND ASSUMPTION OF OBLIGATIONS





THIS MULTI-UNIT DEVELOPMENT AGREEMENT (this “Agreement”) is made and

entered between SMASHBURGER FRANCHISING LLC, a Delaware limited liability company

with its principal business address at 1515 Arapahoe Street, Tower One, 10th

Floor, Denver, Colorado

80202 (“we,” “us” or “our”), and _______________________________, whose principal business

address is __________________________________ (“you” or “your”), as of the date signed by us

and set forth below our signature on this Agreement (the “Effective Date”).

1. PREAMBLES AND GRANT OF RIGHTS.

A. PREAMBLES.

(1) We grant franchises (each a “Franchise”), to persons or entities who we

determine meet our qualifications, for the development and operation of specialty restaurants

operating under the name Smash Burger® (each a “Smashburger Restaurant”). Each

Franchise is granted solely pursuant to a written franchise agreement and related documents

and agreements signed by us and a franchisee (each a “Franchise Agreement”).

(2) We also grant rights, to persons or entities who we determine meet certain

additional qualifications and who are willing to commit, to acquire multiple Franchises for the

development and operation of Smashburger Restaurants within a defined area (the

“Development Area”) pursuant to an agreed upon schedule (the “Development Schedule”).

(3) You and, if you are an Entity (defined below), your owners have requested that

we grant you such rights, and we are willing to do so in reliance on all of the information,

representations, warranties and acknowledgements you and, if applicable, your owners have

provided to us in support of your request, and subject to the terms and conditions set forth in

this Agreement.

B. GRANT OF RIGHTS; EXCLUSIVITY; TERM.

We grant you the right, and you undertake the obligation, either yourself or through your

approved Affiliates (defined below), to acquire Franchises to develop, own and operate Smashburger

Restaurants (the “Development Rights”). The Development Rights must be exercised in strict

compliance with the Development Schedule and may only be exercised during the Term (defined

below) and for Smashburger Restaurants to be developed and operated within the Development Area.

The Development Rights do not include the right, and may not be exercised to acquire Franchises for,

Special Venue Restaurants unless we provide our separate prior written consent with respect to each

such proposed Special Venue Restaurant. A “Special Venue Restaurant” is (1) any kiosk, mobile

facility or similar location or type of operation which, because of its inherent operational limitations, is

required to offer a limited menu or have a materially different operating format as compared to a

traditional Smashburger Restaurant, (2) any location in which foodservice is or may be provided by a

master concessionaire, (3) any location which is situated within or as part of a larger venue or facility

(other than a mall or shopping center) and, as a result, is likely to draw the predominance of its

customers from those persons who are using or attending events in the larger venue or facility (for

example, colleges/universities, convention centers, airports, hotels, sports facilities, theme parks,

hospitals, transportation facilities, convenience stores, and other similar captive market locations), and

2 Smashburger –06/ 2012 FDD


(4) any distribution channel other than a Smashburger Restaurant (including, but not limited to, the

Internet, grocery stores, supermarkets, and mail order) through which products and services associated

with or sold through Smashburger Restaurants are or may be sold.

Unless otherwise indicated on Exhibit A, you are not granted any exclusivity with respect to the

Development Area, and we will be free, within the Development Area, to grant Development Rights to

others, to grant Franchises to others, and to ourselves own or operate Smashburger Restaurants, in any

event, without regard to whether such rights will be in competition with the Development Rights

granted to you. Without such exclusivity, you may be in competition with us or with others to whom

we have granted or hereafter grant Development Rights or Franchises for the Development Area,

including with respect to locating and securing sites for the development of Smashburger Restaurants.

You agree that this lack of exclusivity will not excuse your failure to comply with the Development

Schedule.

If, as indicated on Exhibit A, we have granted you exclusivity with respect to the Development

Rights in the Development Area, then, except as described in Section 1.C below, and provided you and

your Affiliates are in full compliance with this Agreement and all Franchise Agreements and other

agreements with us (or any of our affiliates), we will not, during the Term, (1) own and operate

Smashburger Restaurants in the Development Area or (2) grant or authorize the grant to any other

person or entity of Development Rights for the Development Area.

An “Affiliate” is an Entity (defined below) in which you or your owners (i) own more than

51% of the issued and outstanding ownership interest and voting rights or (ii) have the right and power

to control and determine the Entity’s management and policies.

The Development Rights may be exercised from the Effective Date and, unless sooner

terminated as provided herein, continuing through the earlier of (1) the date on which the last

Smashburger Restaurant which is required to be opened in order to satisfy the Development Schedule

opens for regular business or (2) the last day of the last Development Period (the “Term”).

C. RIGHTS WE RESERVE.

You acknowledge and agree that the Development Rights are limited to the rights to acquire

Franchises in accordance with this Agreement as described in Section 1.B. You acknowledge that the

rights to develop Smashburger Restaurants and to use the Marks and any copyrights, inventions, and

patents owned by us or our affiliates are granted only pursuant to individual Franchise Agreements,

and you agree that the Development Rights do not include any such rights. You also acknowledge that

we grant rights only pursuant to the expressed provisions of written agreements and not in any other

manner, including, without limitation, orally or by implication, innuendo, extension or extrapolation.

Without limiting the foregoing and in addition to the rights we have as described in Section 1.B above

if the rights granted hereunder are not exclusive, we specifically reserve the right to do, and you

acknowledge and agree that the Development Rights do not include the right to do, the following:

(1) establish, operate and license others to establish and operate, anywhere in the

world, Special Venue Restaurants using the name and mark Smash Burger® and any other

marks that are licensed under Franchise Agreements (collectively, the “Marks”) and the

system and system standards under which Smashburger Restaurants are developed and



operated (the “Franchise System”), offering products and services which are identical or

similar to products and services offered by Smashburger Restaurants;

(2) establish, operate and allow others to establish and operate Smashburger

Restaurants using the Marks and the Franchise System, at any location outside the

Development Area on such terms and conditions we deem appropriate;

(3) establish, operate and allow others to establish and operate restaurants, that may

offer products and services which are identical or similar to products and services offered by

Smashburger Restaurants, under trade names, trademarks, service marks and commercial

symbols which are different from the Marks;

(4) establish, operate and allow others to establish and operate other businesses and

distribution channels (including, but not limited to, the Internet), wherever located or operating

and regardless of the nature or location of the customers with whom such other businesses and



Smashburger Restaurants, and that sell products and/or services that are identical or similar to,

and/or competitive with, those that Smashburger Restaurants customarily sell;

(5) acquire the assets or ownership interests of one or more businesses, including

Competitive Businesses (defined below), and franchising, licensing or creating similar

arrangements with respect to such businesses once acquired, wherever these businesses (or the

franchisees or licensees of these businesses) are located or operating (including in the

Development Area);

(6) be acquired (whether through acquisition of assets, ownership interests or

otherwise, regardless of the form of transaction), by any other business, including a

Competitive Business, even if such business operates, franchises and/or licenses such

businesses in the Development Area; and

(7) operate or grant any third party the right to operate any Smashburger Restaurant

that we or our designees acquire as a result of the exercise of a right of first refusal or purchase

right that we have under this Agreement or any Franchise Agreement.

We have the right to engage in all other activities not expressly prohibited by this Agreement.

D. BEST EFFORTS/BUSINESS ENTITY.

You must at all times faithfully, honestly and diligently perform your obligations and fully

exploit the Development Rights during the Term and throughout the entire Development Area. You

must perform all of your obligations under this Agreement, and you may not subcontract or delegate

any of those obligations to any third parties. If you are at any time a corporation, a limited liability

company, a general, limited, or limited liability partnership, or another form of business entity

(collectively, an “Entity”), you agree and represent that:

(1) your organizational documents, operating agreement, or partnership agreement

will recite that this Agreement restricts the issuance and transfer of any ownership interests in



you, and all certificates and other documents representing ownership interests in you will bear a

legend referring to this Agreement’s restrictions;

(2) Exhibit B to this Agreement lists all of your owners and their interests in you as

of the Effective Date and that you and your owners will sign and deliver to us a revised

Exhibit B to reflect any permitted changes in the information that Exhibit B now contains;

(3) such persons as we designate at any time during the Term, which may include

each of your owners and their spouses, will execute an agreement, in the form set forth in

Exhibit C to this Agreement, under which such persons undertake personally to be bound,

jointly and severally, by all provisions of this Agreement and any ancillary agreements between

you and us. We confirm that a spouse who signs Exhibit C solely in his or her capacity as a

spouse (and not as an owner) is signing that agreement merely to acknowledge and consent to

the execution of the guaranty by his or her spouse and to bind the assets of the marital estate as

described therein and for no other purpose (including, without limitation, to bind the spouse’s

own separate property);

(4) the business that this Agreement contemplates and the Smashburger Restaurants

you and your Affiliates operate under Franchise Agreements, will be the only businesses you

operate (although your owners may have other, non-competitive business interests);

(5) an individual whom we approve (the “Managing Owner”) must directly or

indirectly own at least 25% of the ownership interests in you and must devote an amount of his

or her business time and efforts to the operation, promotion and enhancement of the business

under this Agreement which is reasonable given your undertakings in this Agreement and in

light of the business that this Agreement contemplates. The Managing Owner’s name is listed

on Exhibit B; and

(6) the Managing Owner is authorized, on your behalf, to exercise the Development

Rights and perform your other obligations under this Agreement and to deal with us in respect

of all matters whatsoever which may arise in respect of this Agreement; any decision made by

the Managing Owner will be final and binding upon you, and we will be entitled to rely solely

upon the decision of the Managing Owner in any such dealings without the necessity of any

discussions with any other party named in this Agreement as you; and we will not be held

liable for any actions taken by you or otherwise, based upon any decision or actions of the

Managing Owner.

E. FINANCING; MAXIMUM BORROWING LIMITS; LIQUIDITY.

You acknowledge and agree that:

(1) we may from time to time designate the maximum amount of debt that

Smashburger Restaurants may service, and you will ensure that you and your Affiliates that

execute Franchise Agreements pursuant to this Agreement will comply with such limits;

(2) we require that the first (1st) two (2) Smashburger Restaurants developed under

Franchise Agreements executed pursuant to this Agreement be developed with cash equity and

without proceeds from any loans made by you, your owners, your Affiliates or their owners, or



any other third party. You will ensure that you and your Affiliates who sign Franchise

Agreements pursuant to this Agreement will have sufficient cash, through equity capital

contributed to you by your or your Affiliates’ owners, to comply with this requirement; and

(3) we have granted the Development Rights to you based, in part, on your

representations to us, and our assessment of, your levels of liquidity as of the Effective Date.

You will ensure that, throughout the Term, you will maintain sufficient liquidity to meet your

obligations under this Agreement and, in any event, will not permit the liquidity of you and

your Affiliates who have signed Franchise Agreements pursuant to this Agreement, in the

aggregate, at any time to fall below the amount identified in Item 7 of our most current

Franchise Disclosure Document as the total estimated initial investment to open one

Smashburger Restaurant. We reserve the right review these liquidity requirements from time to

time, and you agree to comply with such minimum liquidity requirements that we reasonably

impose.

F. EXTENSION OF TERM; TRIGGER OF OPTION TO PURCHASE.

If the Development Rights are exclusive as to the Development Area (as indicated on Exhibit

A) and you have been in compliance with the Development Schedule and your other obligations under

this Agreement throughout the Term (regardless of whether we exercised our right to issue a notice of

default or termination), you may, at your option and subject to your compliance with the provisions of

this Section 1.F, extend the Term for successive terms as follows:

(1) If you wish to exercise your option to extend the Term, you must provide us

with written notice by the earlier of (i) 30 days following the opening of the Restaurant which

causes you to achieve 80% of the openings required under the Development Schedule or (ii) the

start of the second-to-last Development Period;

(2) Within 15 days following our receipt of your notice, we will advise whether and

on what basis we believe that you have failed to qualify for an extension if any;

(3) By not later than the last day of the Term:

a. You and we must agree on a new development schedule

for the extended term;

b. You and your owners must have executed a general

release and non-disparagement agreement, in form satisfactory to us, of

any and all claims against us and our affiliates, and our and their

respective members, managers, officers, directors, employees and

agents; and

c. You must have paid a new Development Fee for the

extended term, calculated as described in our then-current multi-unit

program.



(4) All fees due under Franchise Agreements signed during the extended term will

be as set forth in our multi-unit program at the time of completion of the requirements for the

extension as described above; and

(5) The length of the extension term will depend on the number of Restaurants that

you and we agree will be opened during the extension term, with one Restaurant being required

to open each 6-month period unless you and we agree otherwise.

If you are not entitled to an extension of the Term or if you and we do not timely complete the

requirements described in paragraph (3) above, the Term will expire as provided in Section 1.B above.

If you are entitled to an extension of the Term but fail to timely complete the requirements described in

paragraph (3) above, the expiration of this Agreement will be deemed a “Control Event,” and we will

have the option to purchase all Restaurants, as set forth in Section 15.E. of the Franchise Agreements

executed pursuant to this Agreement, unless the sole reason for your not completing such requirements

is that we would grant you the extension only if you agreed to open during the extension term more

than 40% of the total number of Restaurants required to be open during the expiring term.

All of the foregoing provisions shall be applicable to each extended term and shall govern your

right to each such extension.

2. EXERCISE OF DEVELOPMENT RIGHTS.

A. PROPOSED SITES FOR SMASHBURGER RESTAURANTS.

You agree to give us all information and materials we request to assess each proposed

Smashburger Restaurant site as well as your and your proposed Affiliate’s financial and operational

ability to develop and operate each proposed Smashburger Restaurant. We have the absolute right to

disapprove any site or any Affiliate (a) that does not meet our criteria or (b) if you or your Affiliates

are not then in compliance with any existing Franchise Agreements executed pursuant to this

Agreement or operating your or their Smashburger Restaurants in compliance with the System

Standards (as defined in the Franchise Agreement). We agree to use our reasonable efforts to review

and approve or disapprove the sites you propose within 30 days after we receive all requested

information and materials. If we approve a proposed site, you or your approved Affiliate must sign a

separate Franchise Agreement as described in Section 2.B. If you or your approved Affiliate fails to

do so within 15 days after we provide you with an execution copy of the Franchise Agreement, we

may withdraw our approval.

B. EXECUTION OF FRANCHISE AGREEMENTS.

Simultaneously with signing this Agreement, you or an approved Affiliate must sign and

deliver to us a Franchise Agreement and related documents representing the first Franchise you are

obligated to acquire under this Agreement. You or your approved Affiliate must thereafter open and

operate a Smashburger Restaurant according to the terms of that Franchise Agreement. Thereafter,

once we have approved a site, and prior to signing a lease or to otherwise securing possession of the

site, you or an approved Affiliate must sign our then-current form of Franchise Agreement and related

documents, the terms of which, with the exceptions provided hereunder, may differ substantially from

the terms contained in the Franchise Agreement in effect on the Effective Date. The Initial Fee and

Royalty rate provided for in the Franchise Agreement shall not exceed the amounts reflected in the



standard Franchise Agreement in use by us as of the Effective Date. The Franchise Agreement will

govern the development and operation of the Smashburger Restaurant at the approved site identified

therein.

C. DEVELOPMENT SCHEDULE.

Exhibit A to this Agreement sets forth the Development Area and the Development Schedule.

Each period described in the Development Schedule is a “Development Period.” You or your

approved Affiliates must acquire Franchises and open and operate Smashburger Restaurants in the

Development Area pursuant to the Franchise Agreements as necessary to satisfy the requirements of

each Development Period, but you shall not be required to open, in total, more than the cumulative

number of Smashburger Restaurants shown for the last Development Period. The Development

Schedule is not our representation, express or implied, that the Development Area can support, or that

there are or will be sufficient sites for, the number of Smashburger Restaurants specified in the

Development Schedule or during any particular Development Period. We are relying on your

representation that you have conducted your own independent investigation and have determined that

you can satisfy the development obligations under each Development Period of the Development

Schedule.

We will count a Smashburger Restaurant toward the Development Schedule only if it actually

is operating in the regular course within the Development Area and substantially complying with the

terms of its Franchise Agreement as of the end of the Development Period. However, a Smashburger

Restaurant which is, with our approval or because of fire or other casualty, permanently closed during

the last 90 days of a Development Period, after having been open and operating, will be counted

toward the development obligations for the Development Period in which it closed, but not thereafter.

D. FAILURE TO COMPLY WITH DEVELOPMENT SCHEDULE.

Time is of the essence with respect to your agreement to comply with the Development

Schedule. If you fail to comply with the Development Schedule as of the end of any Development

Period, in addition to terminating this Agreement, as provided under Section 7, we may (but need not)

elect either or both of the following:

(1) terminate the exclusivity of the rights granted under Section 1.B; and/or

(2) reduce the Development Area to a lesser area that we determine.

E. RECORDS AND REPORTING.

You agree to provide us with the following records and reports:

(1) within 60 days after the Effective Date, you must prepare and give us, a business

plan covering your projected revenues, costs and operations under this Agreement. This

business plan will include your detailed projections of costs for Smashburger Restaurant

development and detailed revenue projections for your activities under this Agreement and

Smashburger Restaurants. Within 60 days after the start of each calendar year during the Term,

you must update the business plan each year to cover both actual results for the previous year

and projections for the then current year. You acknowledge and agree that, while we may



review and provide comments on the business plan and any updates you submit to us,

regardless of whether we approve, disapprove, require revisions or provide other comments

with respect to the business plan or any updated business plan, we take no responsibility for

and make no guarantees or representations, expressed or implied, with respect to your ability to

meet the business plan or to achieve the results set forth therein. You bear the entire

responsibility for achievement of the business plan you develop;

(2) within 7 days after the end of each month during the Term, you must send us a

report of your business activities during that month, including information about your efforts to

find sites for Smashburger Restaurants in the Development Area and the status of development

and projecting openings for each Smashburger Restaurant under development in the

Development Area;

(3) within 28 days after the end of each calendar quarter, you must provide us with a

balance sheet and profit and loss statement for you and your Affiliates covering that quarter and

the year-to-date; and

(4) within 60 days after the end of each calendar year, you must provide us with an

annual profit and loss and source and use of funds statements and a balance sheet for you and

your Affiliates covering the previous year.

Each of the foregoing shall be in the form and format that we reasonably specify, shall be delivered to

us in the manner we specify, and shall be certified as correct by you or, if you are not a natural person,

by your Managing Owner.

3. FEES.

A. YOUR INITIAL FEE TO US.

In addition to paying the Initial Fee due under the first Franchise Agreement referenced in

Section 2.B, you must pay us, on your execution of this Agreement and in consideration of the grant of

the Development Rights, a nonrecurring and nonrefundable development fee in an amount equal to (1)

$20,000 multiplied by (2) the number of Smashburger Restaurants required to be opened pursuant to

the Development Schedule, less one (the “Development Fee”). The Development Fee is fully earned

by us when you and we sign this Agreement and is nonrefundable. We will apply the Development

Fee as a credit against the Initial Fees due under each Franchise Agreement (subsequent to the first

Franchise Agreement) which you or your Affiliates execute pursuant to this Agreement, subject to a

maximum credit under any Franchise Agreement of $20,000 and a maximum credit for all such

Franchise Agreements, in the aggregate, equal to the total Development Fee.

B. METHOD OF PAYMENT.

All amounts payable by you pursuant to this Agreement will, unless otherwise directed in

writing by us, be paid by way of certified check or bank draft delivered to us at the address set out

herein or at such other place as we designate in writing.



4. CONFIDENTIAL INFORMATION.

All information furnished to you by us, whether orally or by means of written material,

including without limitation the Franchise Agreements, this Agreement, the Franchise System, plans,

specifications, financial or business data or projections, all documents, data, information, materials,

reports, proposals, procedures, financial information, compensation information, job descriptions,

employee biographies, recipes, proposed advertising, advertising and marketing plans, operations

manuals, formulas, samples, improvements, models, drawings, programs, compilations, devices,

methods, designs, techniques and specifications, inventions, know-how, processes, recipes, business

plans, marketing techniques, customer information, purchasing techniques, supplier lists, supplier

information, advertising strategies, operations, our trade secrets, or any other forms of business

information, whether or not marked as confidential (the “Proprietary Information”): (i) shall be

deemed proprietary and shall be held by you in strict confidence; (ii) shall not be disclosed or revealed

or shared with any other person except to your employees or contractors who have a need to know

such Proprietary Information for purposes of this Agreement and who are under a duty of

confidentiality no less restrictive than your obligations hereunder, or to individuals or entities

specifically authorized by us in advance; and (iii) shall not be used except to the extent necessary to

exercise the Development Rights or as permitted under Franchise Agreements, and then only in

circumstances of confidence and in accordance with the obligations set forth in the Franchise

Agreements. You will protect the Proprietary Information from unauthorized use, access, or disclosure

in the same manner as you protect your own confidential or proprietary information of a similar nature

and with no less than reasonable care.

All such Proprietary Information will at all times remain our sole property. You shall return to

us or destroy, at our election, all Proprietary Information in your possession or control and

permanently erase all electronic copies of such Proprietary Information promptly upon our request or

upon the expiration or termination of this Agreement, whichever comes first. At our request, you will

certify in writing signed by one of your officers that you have fully complied with the foregoing

obligations.

In the event of your alleged or actual breach of any of the provisions of this Section 4, we shall

be entitled to equitable relief, including in the form of injunctions and orders for specific performance,

in addition to all other remedies available at law or equity.

The obligations under this Section 4 shall survive any expiration or termination of the

Agreement.

5. EXCLUSIVE RELATIONSHIP DURING TERM.

A. COVENANTS AGAINST COMPETITION.

You acknowledge that we have granted you the Development Rights in consideration of and

reliance upon your agreement to deal exclusively with us. You therefore agree that, during the Term,

neither you, your Affiliates nor any of your or their owners or the immediate family members of any of

the foregoing will:

(a) have any direct or indirect interest as an owner – whether of record, beneficially,

or otherwise – in a Competitive Business (defined below), wherever located or operating, other



than equity ownership of less than 5% of a Competitive Business whose stock or other forms of

ownership interest are publicly traded on a recognized United States stock exchange;

(b) perform services as a director, officer, manager, employee, consultant,

representative, or agent for a Competitive Business, wherever located or operating;

(c) divert or attempt to divert any actual or potential business, sites or customers of

your business associated with this Agreement to a Competitive Business; or

(d) directly or indirectly, appropriate, use or duplicate the Franchise System or any

portion thereof, in any business in which such person may have any interest of any kind

(whether directly or indirectly) or in which such person is otherwise employed.

The term “Competitive Business” means any restaurant, food service or other business (other

than a Smashburger Restaurant): (i) whose gross receipts from the sale of hamburgers represent, at any

time, at least 10% of the business’ total gross receipts (excluding receipts from the sale of alcoholic

beverages), (ii) whose menu, concept, business model or method of operation is similar to that

employed by restaurant units operated, franchised or licensed by us, (iii) that offers or sells goods or

services that are generally the same as or similar to the goods or services being offered by businesses

owned, operated, franchised or licensed by us, or (iv) that grants franchises or licenses for the

operation of any of the foregoing or provides services to the franchisor or licensor of any of the

foregoing.

B. NON-SOLICITATION AND NON-INTERFERENCE.

You further agree that, during the Term, neither you nor any of your owners, your or your

owners’ Affiliates, or the officers, directors, managers or immediate family members of any of the

foregoing, will:

(a) without obtaining the employer's or former employer’s prior written permission,

recruit or hire any person who is then or was, within the immediately preceding 24 months,

employed by us, any of our affiliates, or a franchise owner as (1) a general manager or assistant

manager at any Smashburger Restaurant, (2) a district or regional manager or any other such

person having responsibility for overseeing or supervising the operation of multiple

Smashburger Restaurants or (3) any of our or our affiliates’ officers; or

(b) interfere with the relationships we have from time to time with vendors,

suppliers or consultants; or

(c) engage in any other activity which might injure the goodwill of the Marks

and/or the Franchise System.

C. COVENANTS FROM OTHERS.

You agree to obtain similar covenants from the personnel we specify, including officers,

directors, managers, and other employees attending our training program or having access to

Proprietary Information. We have the right to regulate the form of agreement that you use and to be a

third party beneficiary of that agreement with independent enforcement rights. You must require all

employees performing managerial or supervisory functions and all employees receiving training from



us to execute non-disclosure and non-solicitation covenants similar to those set out in this Section 5, in

the form supplied or approved by us. Contemporaneously with the signing this Agreement, you must

deliver to us, properly executed non-disclosure, non-solicitation and non-competition covenants similar

to those as set out in this Section 5, in the form supplied or approved by us, from all of your partners,

directors, officers, shareholders and Affiliates and from all partners, directors, officers, and

shareholders of such Affiliates who, in each case, are not a party to this Agreement or who have not

signed the Guaranty and Assumption of Obligations attached hereto as Exhibit C. In addition, you

must cause each new Affiliate of yours and each new partner, director, officer and shareholder of yours

and such Affiliates to deliver to us properly executed non-disclosure, non-solicitation and

non-competition covenants similar to those set out in this Section 5 immediately upon their becoming a

shareholder or partner, or upon their appointment or election as a director or officer, of you or such

Affiliate.

D. INNOVATIONS.

As between the parties, you acknowledge and agree that we are the sole owner of all right, title,

and interest in and to the Franchise System and any Proprietary Information. All improvements,

developments, derivative works, enhancements, or modifications to the Franchise System and any

Proprietary Information (collectively, “Innovations”) made or created by you, your employees or your

contractors, whether developed separately or in conjunction with us, shall be owned solely by us. You

represent, warrant, and covenant that your employees and contractors are bound by written agreements

assigning all rights in and to any Innovations developed or created by them to you. To the extent that

you, your employees or your contractors are deemed to have any interest in such Innovations, you

hereby agree to assign, and do assign, all right, title and interest in and to such Innovations to us. To

that end, you shall execute, verify, and deliver such documents (including, without limitation,

assignments) and perform such other acts (including appearances as a witness) as we may reasonably

request for use in applying for, obtaining, perfecting, evidencing, sustaining, and enforcing such

ownership rights in and to the Innovations, and the assignment thereof. Your obligation to assist us

with respect to such ownership rights shall continue beyond the expiration or termination of this

Agreement. In the event we are unable for any reason, after reasonable effort, to secure your signature

on any document needed in connection with the actions specified in this Section 5.D, you hereby

irrevocably designate and appoint us and our duly authorized officers and agents as your agent and

attorney in fact, which appointment is coupled with an interest and is irrevocable, to act for and on

your behalf to execute, verify, and file any such documents and to do all other lawfully permitted acts

to further the purposes of this Section 5.D with the same legal force and effect as if executed by you.

The obligations of this Section 5.D shall survive any expiration or termination of the Agreement.

6. TRANSFER.

A. SALE OR ENCUMBRANCE.

You acknowledge that we have granted you the rights pursuant to this Agreement based upon,

among other things, the character, background and other qualifications and abilities personal to you or,

if applicable, your owners. Accordingly, you agree that this Agreement, ownership interests in you or,

any interests in this Agreement, the Development Rights or all or any part of the business operated

under this Agreement will not be sold, assigned, donated or otherwise transferred, including as a result

of death (each a “Sale”), to any person or Entity (hereinafter referred to specifically in this Section 6 as

the “Recipient”) without our prior written consent; provided, however, that transfers among your



current owners of ownership interests in you will require prior notice to us but will not require our

consent as long as the Managing Owner and Control of you are not changed as a result of such transfer.

For purposes of the preceding sentence, “Control” means the right and power to direct or cause the

direction of your management and policies You further agree that you will not enter into any proposed

mortgage, pledge, hypothecation, encumbrance or giving of a security interest in or which affects the

Development Rights and your other rights under this Agreement (a “Security Interest”) without our

prior written consent. The Development Rights may not be transferred separate and apart from the

entirety of this Agreement, and a proposed transfer of this Agreement may not be made separately

from or independently of a transfer to the same Recipient of all of the Franchise Agreements (and the

Smashburger Restaurants operated pursuant thereto) executed pursuant to this Agreement.

Our approval of a transfer of ownership interests in you as a result of the death or incapacity of

the proposed transferor will not be unreasonably withheld or delayed so long as at least one of the

Managing Owners designated on Exhibit A continues to be the designated Managing Owner. If, as a

result of the death or incapacity of the transferor, a transfer is proposed to be made to the transferor’s

spouse, and if we do not approve the transfer, the trustee or administrator of the transferor’s estate will

have nine months after our refusal to consent to the transfer to the transferor’s spouse within which to

transfer the transferor’s interests to another party whom we approve in accordance with this Section

6.A.

We may withhold our consent to a Sale or grant of a Security Interest for any reason, and we

will not be required to consider a proposed Sale or Security Interest unless you comply with the

following requirements either at the time the request is made or, if applicable, by the completion of the

Sale or grant of the Security Interest:

(1) with respect to any proposed Sale:

(a) you must submit an application in writing to us requesting our consent.

Such application must set out: (i) the exact terms of the proposed Sale and a copy of a

duly signed bona fide written offer; (ii) information relating to the business reputation

and qualifications of the Recipient to carry on business; (iii) suitable credit and financial

information of the Recipient to allow us to make a reasonable decision as to the credit

worthiness and financial position of the Recipient and such information will include as

an appendix thereto, a personal net worth statement of the Recipient or in the event the

Recipient is an Entity, a personal net worth statement of its controlling shareholder(s) or

member(s); (iv) such other information as you may have knowledge and would

reasonably be considered of a relevant nature to us in determining whether or not to

grant our consent, and (v) such other information as we may require;

(b) the Recipient must arrange for and successfully complete to our

satisfaction, all or such training in the operations of the multi-unit development business

and a Smashburger Restaurant, at its or your sole expense, as we deem necessary; prior

to the commencement of the training by the Recipient, you must deliver to us, the sum

of $2,500 by means of cash or certified check, which amount will be non-refundable,

except that if the Sale is successfully completed, the entire amount will be applied by us

against the amount payable by you pursuant to Section 6.A(1)(h) below, or such other

amounts as may be owing by you to us pursuant to this Agreement;



(c) the Recipient and its immediate family members (and, if it is not a

natural person, its owners and immediate family members of its owners) must not have

an interest or be engaged in activities which would violate the restrictions regarding

Competitive Businesses as described in Sections 5.A and 5.B;

(d) the Recipient must enter into any and all agreements and covenants

(including a new multi-unit development agreement) which we are then requiring of

new multi-unit developers, and if the Recipient is an Entity, the Recipient must provide

such personal guarantees or other assurances of its shareholders or members or others as

we may require;

(e) you must have discharged and/or satisfied all of your obligations

(financial or otherwise) to us and our affiliates incurred in connection with the business

operated under this Agreement, as of the date of the completion of the said Sale;

(f) you, and if you are an Entity, your partners, officers, directors,

shareholders or members, will execute and deliver to us and our officers, directors,

shareholders, employees and our and their heirs, executors, administrators, successors

and assigns, a general release in a form approved by us, releasing us and the

aforementioned from all claims, demands, liabilities, actions, damages, costs or

expenses which you and any of your officers, directors, shareholders or members and

your heirs, executors, administrators, successors and assigns, may have as a result of

this Agreement, the business operated hereunder, or the relationship between you and us

created by this Agreement;

(g) you must pay all of our expenses incurred in connection with the Sale,

whether or not such Sale is completed, up to a maximum amount of $3,000 plus

disbursements and applicable taxes thereon; in this regard, you must deliver to us

together with the original application submitted for approval of the Sale, the sum of

$1,500 towards such expenses plus applicable goods and services taxes thereon and pay

the balance upon completion of the approved Sale;

(h) you must pay to us, an amount equal to the following: (a) if the Sale is

completed prior to the 3rd

anniversary of the Effective Date, you must pay to us, an

amount equal to the greater of (i) 10% of the purchase price to be paid and/or other

consideration to be received from and/or debt to be assumed by the Recipient, or (ii)

$35,000, plus, in either case, applicable goods and services taxed thereon; or (b) if the

Sale is completed on or after the 3rd

anniversary of the Effective Date, you must pay to

us, an amount equal to the greater of (i) 5% of the purchase price to be paid and/or other

consideration to be received from and/or debt to be assumed by the Recipient, or (ii)

$25,000, plus, in either case, applicable goods and services taxes thereon; and

(i) we must first agree, in writing, on the date of the completion of the Sale;

(2) with respect to any proposed grant of a Security Interest:

(a) you must submit an application in writing to us, requesting our consent.

Such application must set out the proposed business terms and any security to be given



by you, and must include a copy of any loan agreements, security agreements or other

documents proposed to be executed by or on your behalf;

(b) the purpose of the giving of such security must be to obtain financing for

use in the business operated hereunder; and

(c) you may not at the time of giving any security be in default of any of the

terms and conditions of this Agreement.

B. FIRST RIGHT OF REFUSAL.

Notwithstanding anything contained in this Section 6, in the event you make or receive (and

intend to accept) an offer of Sale, without in any way derogating from our right to grant or not grant

our consent thereto, we will have the option, to be exercised by notice in writing delivered to you

within 30 days of receipt of your application referred to in Section 6.A.(1)(a) hereof, to acquire the said

rights and the business operated hereunder upon the same terms and conditions as set out in the said

application except as provided hereinafter. If we exercise our option, we will complete the Sale upon

the same terms and conditions as set out in the said application save and except that we will be entitled

to deduct from the purchase price (i) the amount of any sales or other commissions (if any) which

would have been payable by you had the Sale been completed with the Recipient and (ii) an amount

equal to that amount to which we are entitled pursuant to Section 6.A.(1)(h) hereof, and save and

except we will have the right to substitute cash for any other form of consideration specified in the

offer accompanying the application and the right to pay in full, the entire amount of the purchase price

at the time of closing. If we do not exercise our option, we may then, in our discretion, determine if

we will consent to the proposed Sale to the Recipient; we will notify you of our decision within 30

days of receipt of said application. The sale, assignment, transfer, donation or other dealing must be

completed within 60 days of the receipt by us of your original application, failing which, you must

again make application to us in the manner set out in Section 6.A.(1)(a) hereof, and in all such events

the provisions of this Section 6.B. will apply anew, and such procedure will continue to be repeated so

often as you desire to complete any Sale. If we do not notify you of our intention to consent within

such 30-day period, we will be deemed not to have given our consent.

C. PUBLIC OR PRIVATE OFFERINGS.

You acknowledge that the publication or dissemination of written information used to raise or

secure funds can reflect upon us and the Franchise System. Therefore, you acknowledge and agree

that you may not engage in a public offering of securities without our prior written consent. If you

desire to request that we consent to any such event, you must submit any written information intended

to be used for that purpose to us before inclusion in any registration statement, prospectus or similar

offering memorandum. Should we object to any reference to us or our affiliates or any of our business

in the offering literature or prospectus, the literature or prospectus shall not be used until our objections

are withdrawn or resolved.



7. TERMINATION OF AGREEMENT.

A. EVENTS OF TERMINATION.

Notwithstanding anything otherwise contained in this Agreement, we will have the right to

terminate this Agreement at any time and without notice, upon the happening of any one or more of the

following events:

(1) if default is made in the payment of any amount payable under this Agreement

or any Franchise Agreement with us when and as same becomes due and payable, and such

default continues for a period of 5 days after written notice thereof has been given by us to you;

(2) if you cease or threaten to cease to carry on the business granted to you under

this Agreement, or take or threaten to take any action to liquidate your assets, or if you do not

pay any debts or other amounts incurred by you in operating the business hereunder when such

debts or amounts are due and payable;

(3) if you fail to comply with the Development Schedule;

(4) if you make or purport to make a general assignment for the benefit of creditors;

or if you hereto institute any proceeding under any statute or otherwise relating to insolvency or

bankruptcy, or should any proceeding under any such statute or otherwise be instituted against

you; or if a custodian, receiver, manager or any other person with like powers is appointed to

take charge of all or any part of the business granted hereunder or of the shares or documents of

title owned by any of your shareholders or title holders; or if you commit or suffer any default

under any contract of conditional sale, mortgage or other security instrument in respect of the

business being operated hereunder or of the shares or documents of title owned by any of your

shareholders or title holders; or if any of your goods, chattels or assets or of the business are

seized or taken in execution or in attachment by a creditor, or if a writ of execution is issued

against any of such goods, chattels, or assets; or if a judgment or judgments for the payment of

money in amounts in excess of $20,000, is rendered by any court of competent jurisdiction

against you;

(5) if you fail to furnish reports, financial statements, tax returns or any other

documentation required by the provisions of this Agreement and do not correct such failure

within 10 days following notice;

(6) if you are an Entity, (i) if an order is made or a resolution passed or any

proceedings taken towards your winding up or liquidation or dissolution or amalgamation; or

(ii) if you lose your charter by expiration, forfeiture or otherwise;

(7) if you or any of your owners have made any material misrepresentation or

omission in your or their application and the documents and other information provided to us to

support your or their application to acquire the rights granted in this Agreement;

(8) if you or your owners transfer or attempt to transfer any interest in the business

operated hereunder, you, or this Agreement, without complying with the transfer provisions

contained in Section 6;



(9) if you (or any of your owners) are (a) convicted of or plead guilty or “no-

contest” to a felony, (b) convicted of or plead guilty or “no contest” to any crime or other

offense likely to adversely affect the reputation of Smashburger Restaurants or the goodwill of

the Marks, or (c) engage in any conduct which, in our opinion, adversely affects or, if you were

to continue as a multi-unit developer under this Agreement, is likely to adversely affect the

reputation of the business you conduct pursuant to this Agreement, the reputation and goodwill

of Smashburger Restaurants generally or the goodwill associated with the Marks;

(10) we provide written notice of your (or any of your owners’) failure (a) on three

(3) or more separate occasions within any 12 consecutive month period to comply with this

Agreement, or (b) on two (2) or more separate occasions within any six (6) consecutive month

period to comply with the same obligation under this Agreement, in any case, whether or not

you correct the failures after our delivery of notice to you; or

(11) if you or your Affiliates fail to comply with any provision of any Franchise

Agreement and do not cure such failures within the applicable cure period, if any; or

(12) if you fail to observe, perform or comply with any other of the terms or

conditions of this Agreement not listed in items (1) through (11) above, and such failure

continues for a period of 7 days after written notice thereof has been given by us to you.

Further, in Section 15.E of each Franchise Agreement, we have a separate, distinct right to

purchase the Restaurant identified therein under certain circumstances delineated in that

Section (the “Call Right”). We have agreed that, if we exercise the Call Right under one

Franchise Agreement, we will do so with respect to all Franchise Agreements under which we

have the right to do so. If we exercise the Call Right as to all Franchise Agreements then in

effect and executed pursuant to this Agreement, this Agreement will, automatically and without

further action, expire as of the Closing of our purchase under the Call Right (as defined in the

Franchise Agreement).

B. EFFECTS OF TERMINATION.

(1) Effects. Upon the termination of this Agreement for any reason whatsoever, the

following provisions apply:

(a) all of your rights under this Agreement, including without limitation, the

Development Rights, will cease, and thereafter you must cease conducting the business

granted hereunder or holding yourself out to the public as being a developer of

Smashburger Restaurants except as permitted under Franchise Agreements;

(b) you must deliver to us, all forms, documents, or information provided to

you pursuant to this Agreement together with all copies thereof;

(c) you must cease use of all telephone numbers and listing services in any

way connected with the business you currently operate hereunder, and subject to our

direction, you must immediately cancel such numbers and listings or direct that same be

transferred to us, at which time we will then have the exclusive right to use such

numbers and listings and/or authorize others to use same; you hereby irrevocably



appoint us as your lawful attorney to instruct the telephone company or listing service to

cancel or transfer all such numbers or listings to us or as we may direct; and

(d) without limiting any other rights or remedies to which we may be

entitled, you must pay all amounts owing to us pursuant to this Agreement up to the

date of termination.

C. COVENANT NOT TO COMPETE / NON-SOLICITATION.

(1) Non-Competition. Upon termination or expiration of this Agreement, you and

your owners agree that, for 2 years beginning on the effective date of termination or expiration

or the date on which all persons restricted by this Section 7.C begin to comply with this Section

7.C, whichever is later, neither you nor your Affiliates, nor any of your or their owners (or your

or their immediate family members) will have any direct or indirect interest as an owner

(whether of record, beneficially, or otherwise), investor, partner, director, officer, employee,

consultant, representative, or agent in any Competitive Business (as defined in Section 5 above)

located or operating:

(a) within the Development Area; and

(b) within a 5-mile radius of any Smashburger Restaurant in operation or

under construction on the later of the effective date of the termination or expiration of

this Agreement or the date on which all persons restricted by this Section 7.C begin to

comply with this Section 7.C.

These restrictions also apply after transfers, as provided in Section 6 above. If any

person restricted by this Section 7.C refuses voluntarily to comply with these obligations, the 2-

year period for that person will commence with the entry of a court order enforcing this

provision. You expressly acknowledge that you, your Affiliates, your and their owners and the

immediate family members of each possess skills and abilities of a general nature and have

other opportunities for exploiting these skills. Consequently, our enforcing the covenants made

in this Section 7.C will not deprive you or them of any personal goodwill or ability to earn a

living.

(2) Non-Solicitation. You further agree that, for two (2) years beginning on the

effective date of termination or expiration, neither you nor any of your owners, your or your

owners’ Affiliates, or the officers, directors, managers or immediate family members of any of

the foregoing, will:

(a) recruit or hire any person who is then or was, within the immediately

preceding 24 months, employed by us, any of our affiliates, or a franchise owner as (a)

a general manager or assistant manager at any Smashburger Restaurant, (b) a district or

regional manager or any other such person having responsibility for overseeing or

supervising the operation of multiple Smashburger Restaurants or (c) any of our or our

affiliates’ officers;

(b) interfere or attempt to interfere with our or our affiliates’ relationships

with any vendors or consultants; or



(c) engage in any other activity which might injure the goodwill of the

Marks and/or the Franchise System.

If you fail to comply with paragraph (a) above, you agree to pay us an amount equal to

200% of the annual salary of such person.

D. SURVIVAL OF COVENANTS.

Notwithstanding the termination or other expiration of this Agreement for any reason

whatsoever, or any Sale, all covenants and agreements to be performed or observed by you will survive

any such termination, expiration or Sale.

8. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.

A. INDEPENDENT CONTRACTORS.

We and you hereby acknowledge and agree that each of us is an independent contractor, that

neither of us is considered to be the agent, representative, master or servant of the other for any

purpose whatsoever, and that neither of us has any authority to enter into any contract, to assume any

obligations or to give any warranties or representations on behalf of the other. Nothing in this

Agreement may be construed to create a relationship of partners, joint venturers, fiduciaries, agency or

any other similar relationship between us and you.

B. INDEMNIFICATION.

You agree to indemnify, defend, and hold harmless us, our affiliates, and our and their

respective shareholders, members, directors, officers, employees, agents, successors, and assignees

(the “Indemnified Parties”) against, and to reimburse any one or more of the Indemnified Parties for,

all claims, obligations, and damages directly or indirectly arising out of the operation of the business

you conduct under this Agreement, or your breach of this Agreement, including, without limitation,

those alleged to be caused by the Indemnified Party’s negligence, unless (and then only to the extent

that) the claims, obligations, or damages are determined to be caused solely by the Indemnified Party’s

intentional misconduct in a final, unappealable ruling issued by a court with competent jurisdiction.

For purposes of this indemnification, “claims” include all obligations, damages (actual, consequential,

or otherwise), and costs that any Indemnified Party reasonably incurs in defending any claim against it,

including, without limitation, reasonable accountants’, arbitrators’, attorneys’, and expert witness fees,

costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of

litigation or alternative dispute resolution, regardless of whether litigation or alternative dispute

resolution is commenced. Each Indemnified Party may defend any claim against it at your expense

and agree to settlements or take any other remedial, corrective, or other actions. This indemnity will

continue in full force and effect subsequent to and notwithstanding this Agreement’s expiration or

termination. An Indemnified Party need not seek recovery from any insurer or other third party, or

otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against you

under this subparagraph. You agree that a failure to pursue a recovery or mitigate a loss will not

reduce or alter the amounts that an Indemnified Party may recover from you under this Section 8.B.



9. ENFORCEMENT; ARBITRATION.

A. ARBITRATION

We and you agree that all controversies, disputes, or claims between us and our affiliates, and

our and their respective shareholders, officers, directors, agents, or employees, and you (or your

owners, guarantors, Affiliates, or employees) arising out of or related to:

(1) this Agreement or any other agreement between you (or your owners) and us (or

our affiliates);

(2) our relationship with you; or

(3) the scope or validity of this Agreement or any other agreement between you (or

your owners) and us (or our affiliates) or any provision of any of such agreements (including

the validity and scope of the arbitration obligation under this Section 9.A, which we and you

acknowledge is to be determined by an arbitrator, not a court),

must be submitted for binding arbitration, on demand of either party, to the American Arbitration

Association. The arbitration proceedings will be conducted by one arbitrator and, except as this

Section otherwise provides, according to the then-current Commercial Arbitration Rules of the

American Arbitration Association. All proceedings will be conducted at a suitable location chosen by

the arbitrator in or within 50 miles of our then-current principal place of business (currently, Denver,

Colorado). All matters relating to arbitration will be governed by the Federal Arbitration Act (9 U.S.C.

§§ 1 et seq.). Judgment upon the arbitrator’s award may be entered in any court of competent

jurisdiction.

The arbitrator shall issue only a standard decision and not a reasoned decision. The arbitrator

has the right to award or include in his or her award any relief which he or she deems proper,

including, without limitation, money damages (with interest on unpaid amounts from the date due),

specific performance, injunctive relief, and attorneys’ fees and costs, provided that the arbitrator may

not declare any of the trademarks owned by us or our affiliates generic or otherwise invalid or, except

as expressly provided in this Article 9, award any punitive, exemplary, or multiple damages against

either party (we and you hereby waiving to the fullest extent permitted by law, except as expressly

provided in this Article 9, any right to or claim for any punitive, exemplary, or multiple damages

against the other).

We and you agree to be bound by the provisions of any limitation on the period of time in

which claims must be brought under applicable law or under this Agreement, whichever expires

earlier. We and you further agree that, in any arbitration proceeding, each party must submit or file

any claim which would constitute a compulsory counterclaim (as defined by Rule 13 of the Federal

Rules of Civil Procedure) within the same proceeding as the claim to which it relates. Any claim

which is not submitted or filed as required is forever barred. The arbitrator may not consider any

settlement discussions or offers that might have been made by either you or us.

We reserve the right, but have no obligation, to advance your share of the costs of any

arbitration proceeding in order for such arbitration proceeding to take place and by doing so shall not



be deemed to have waived or relinquished our right to seek the recovery of those costs in accordance

with the Attorneys’ Fees and Costs provisions of this Agreement (Section 9.F below).

We and you agree that arbitration will be conducted on an individual, not a class-wide, basis

and that an arbitration proceeding between us and our affiliates, and our and their respective

shareholders, officers, directors, agents, or employees, and you (or your owners, guarantors, affiliates,

or employees) may not be commenced, conducted or consolidated with any other arbitration

proceeding between us and any other person. Notwithstanding the foregoing or anything to the

contrary in this Section, if any court or arbitrator determines that all or any part of the preceding

sentence is unenforceable with respect to a dispute that otherwise would be subject to arbitration under

this Section, then all parties agree that this arbitration clause shall not apply to that dispute and that

such dispute shall be resolved in a judicial proceeding in accordance with the dispute resolution

provisions of the Agreements.

Despite our and your agreement to arbitrate, we and you each have the right in a proper case to

seek temporary restraining orders and temporary or preliminary injunctive relief from a court of

competent jurisdiction; provided, however, that we and you must contemporaneously submit our

dispute for arbitration on the merits as provided in this section.

You and we agree that, in any arbitration arising as described in this Section, requests for

documents shall be limited to documents that are directly relevant to significant issues in the case or to

the case’s outcome; shall be restricted in terms of time frame, subject matter and persons or entities to

which the requests pertain; and shall not include broad phraseology such as “all documents directly or

indirectly related to.” You and we further agree that there shall be no interrogatories or requests to

admit. With respect to any electronic discovery, you and we agree that:

(a) production of electronic documents need only be from sources used in the ordinary

course of business. No such documents shall be required to be produced from back-up servers,

tapes or other media;

(b) the production of electronic documents shall normally be made on the basis of generally

available technology in a searchable format which is usable by the party receiving the documents

and convenient and economical for the producing party. Absent a showing of compelling need, the

parties need not produce metadata, with the exception of header fields for email correspondence;

(c) the description of custodians from whom electronic documents may be collected shall

be narrowly tailored to include only those individuals whose electronic documents may reasonably

be expected to contain evidence that is material to the dispute; and

(d) where the costs and burdens of electronic discover are disproportionate to the nature of

the dispute or to the amount in controversy, or to the relevance of the materials requested, the

arbitrator shall either deny such requests or order disclosure on condition that the requesting party

advance the reasonable cost of production to the other side, subject to allocation of costs in the

final award as provided herein.

In any arbitration arising out of or related to this Agreement, each side may take three

discovery depositions. Each side’s depositions are to consume no more than a total of 15 hours. There



are to be no speaking objections at the depositions, except to preserve privilege. The total period for

the taking of depositions shall not exceed six weeks.

The provisions of this Section are intended to benefit and bind certain third party non-

signatories and will continue in full force and effect subsequent to and notwithstanding the expiration

or termination of the Agreements.

Any provisions of this Agreement below that pertain to judicial proceedings shall be subject to

the agreement to arbitrate contained in this Section.

B. CONSENT TO JURISDICTION.

SUBJECT TO THE AGREEMENT TO ARBITRATE (SECTION 9.A ABOVE) AND

THE PROVISIONS BELOW, YOU AND YOUR OWNERS AGREE THAT ALL ACTIONS

ARISING UNDER THIS AGREEMENT OR OTHERWISE AS A RESULT OF THE

RELATIONSHIP BETWEEN YOU AND US MUST BE COMMENCED IN A COURT OF

GENERAL JURISDICTION NEAREST TO OUR THEN CURRENT PRINCIPAL PLACE OF

BUSINESS (CURRENTLY DENVER, COLORADO), AND YOU (AND EACH OWNER)

IRREVOCABLY SUBMIT TO THE JURISDICTION OF THAT COURT AND WAIVE ANY

OBJECTION YOU (OR THE OWNER) MIGHT HAVE TO EITHER THE JURISDICTION

OF OR VENUE IN THAT COURT.

C. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.

EXCEPT FOR YOUR OBLIGATION TO INDEMNIFY US FOR THIRD PARTY

CLAIMS UNDER SECTION 8.B., AND EXCEPT FOR PUNITIVE, EXEMPLARY OR

MULTIPLE DAMAGES AVAILABLE TO EITHER PARTY UNDER UNITED STATES

FEDERAL LAW, WE AND YOU (AND YOUR OWNERS) WAIVE TO THE FULLEST

EXTENT PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE,

EXEMPLARY OR MULTIPLE DAMAGES AGAINST THE OTHER AND AGREE THAT, IN

THE EVENT OF A DISPUTE BETWEEN US AND YOU, THE PARTY MAKING A CLAIM

WILL BE LIMITED TO EQUITABLE RELIEF AND TO RECOVERY OF ANY ACTUAL

DAMAGES IT SUSTAINS.

WE AND YOU IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION,

PROCEEDING, OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT

BY EITHER PARTY.

D. INJUNCTIVE RELIEF.

Nothing in this Agreement bars our right to obtain specific performance of the provisions of

this Agreement and injunctive relief against conduct that threatens to injure or harm us, our or our

affiliates’ trademarks, or the Franchise System, under customary equity rules, including applicable

rules for obtaining restraining orders and preliminary injunctions. You agree that we may obtain such

injunctive relief. You agree that we will not be required to post a bond to obtain injunctive relief and

that your only remedy if an injunction is entered against you will be the dissolution of that injunction,

if warranted, upon due hearing, and you hereby expressly waive any claim for damages caused by such

injunction.



E. LIMITATION OF CLAIMS.

EXCEPT FOR CLAIMS ARISING FROM YOUR NON-PAYMENT OR

UNDERPAYMENT OF AMOUNTS YOU OWE TO US PURSUANT TO THIS AGREEMENT,

ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR

OUR RELATIONSHIP WITH YOU WILL BE BARRED UNLESS A JUDICIAL

PROCEEDING IS COMMENCED WITHIN ONE (1) YEAR FROM THE DATE ON WHICH

THE PARTY ASSERTING SUCH CLAIM KNEW OR SHOULD HAVE KNOWN OF THE

FACTS GIVING RISE TO SUCH CLAIMS.

THE PARTIES AGREE THAT ANY PROCEEDING WILL BE CONDUCTED ON AN

INDIVIDUAL, NOT A CLASS-WIDE, BASIS.

YOU AND YOUR OWNERS AGREE THAT OUR AND OUR AFFILIATES’ OWNERS,

DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS SHALL NOT BE PERSONALLY

LIABLE NOR NAMED AS A PARTY IN ANY ACTION BETWEEN US OR OUR

AFFILIATES AND YOU OR YOUR OWNERS.

F. ATTORNEYS’ FEES AND COSTS.

If either party initiates an arbitration, judicial or other proceeding, the party prevailing in such

proceeding shall be entitled to recovery of its costs and expenses, including reasonable attorneys’ fees.

10. MISCELLANEOUS.

A. JOINT AND SEVERAL OBLIGATION.

If either you or we are comprised of more than one individual, or Entity, the obligations of each

such individual and Entity will be joint and several.

B. SEVERABILITY.

If for any reason whatsoever, any term or condition of this Agreement is, to any extent declared

to be invalid or unenforceable, all other terms and conditions of this Agreement, other than those as to

which it is held invalid or unenforceable, will not be affected thereby and each term and condition of

this Agreement will be separately valid and enforceable to the fullest extent permitted by law.

C. NO WARRANTY OR REPRESENTATION.

You hereby acknowledge that we and our agents, affiliates, officers, directors, shareholders,

employees and other representatives have not made or given to you any warranties, representations,

undertakings, commitments, covenants or guarantees respecting the subject matter of this Agreement

except as expressly stated in this Agreement, and specifically without limiting the generality of the

foregoing, you hereby acknowledge and agree that we and our agents, affiliates, officers, directors,

shareholders, employees and other representatives have not made or given any warranty,

representation, undertaking, commitment, covenant or guarantee in respect of sales or profit to be

derived or costs or expenses to be incurred by you and that you are not relying upon any warranties,

representations, undertakings, commitments, covenants or guarantees of us and our officers, directors,

shareholders, employees and other representatives except as provided in this Agreement.



D. NOTICE.

All notices, consents, approvals, statements, documents or other communications required or

permitted to be given hereunder must be in writing, and must be delivered personally or mailed by

registered mail, postage prepaid, to the said parties at their respective addresses set forth in the opening

paragraph of this Agreement to the attention of the person indicated below:

If to us: Attention: Legal Department

If to you: Attention:

or at any such other address or addresses as the party to whom such notice, consent approval,

statement, documentation or other communication is to be given, may designate by notice in writing so

given to the other parties hereto as provided hereinbefore. If any one of the said parties is comprised

of more than one person or Entity, any notice, consent, approval, statement, document or other

communication may be given by or to any one thereof, and it will have the same force and effect as if

given by or to all thereof. Any notices, consents, approvals, statements, documents or other

communications, if mailed will be deemed to have been given on the second business day (except

Saturdays and Sundays) following such mailing, or, if delivered personally, will be deemed to have

been given on the day of delivery.

E. HEADINGS.

Headings preceding the text, sections and subsections hereof have been inserted solely for

convenience of reference and will not be construed to affect the meaning, construction or effect of this

Agreement.

F. APPLICABLE LAW.

This Agreement will be construed and interpreted under the laws of the State of Colorado,

without regard to its conflicts of laws rules, except to the extent governed by the United States

Trademark Act of 1946 (Lanham Act, 15 U.S.C. Section 1051 et seq.).

G. TIME OF ESSENCE.

Time is of the essence of this Agreement and of each and every part hereof.

H. WAIVER.

The waiver by either you or us, of a breach of any term or condition contained in this

Agreement will not be deemed to be a waiver of such term or condition or any subsequent breach of

the same or any other term or condition herein contained unless such waiver is expressly set forth in

writing. Our failure to exercise any right of ours to demand your exact compliance, nor any custom of

practice of you and us at variance with the terms and conditions of this Agreement will constitute a

waiver of our right to demand exact compliance with the terms and conditions hereof. Our subsequent

acceptance of any amount payable hereunder, will not be deemed to be a waiver of any preceding

breach of any term or condition of this Agreement, other than the failure to pay the particular amount

so accepted, regardless of our knowledge of such preceding breach at the time of acceptance of such

amount.



I. ASSIGNMENT BY US.

In the event of a sale, transfer or assignment by us of our interest in this Agreement or any

interest herein, to the extent that the purchaser or assignee assumes our covenants and obligations

under this Agreement, we will thereupon and without further agreement, be freed and relieved of all

liabilities with respect to such covenants and obligations. In no event will anything, including without

limitation, anything contained in this Agreement, prevent us from selling, transferring or assigning any

interest we may have in the Franchise System or the Marks or any part thereof, and notwithstanding we

have no obligations to you under or pursuant to this Agreement, if for any reason it is determined

otherwise by a governmental authority, legislative act, court of competent jurisdiction or in any other

manner whatsoever, upon completion of any such sale, transfer or assignment, we will be freed and

relieved of all your liability whatsoever.

J. AGREEMENT EFFECTIVE.

This Agreement shall not be effective until accepted by us as evidenced by dating and signing

by an officer or other duly-authorized representative of ours. Notwithstanding that this Agreement

shall not be effective until signed by us, we reserve the right to make the effective date of this

Agreement the date on which you signed the Agreement.

K. FURTHER ASSURANCES.

You and we agree to execute and deliver such further and other agreements, assurances,

undertakings, acknowledgements or documents, cause such meetings to be held, resolutions passed and

by-laws enacted, exercise our vote and influence and do and perform and cause to be done and

performed any further and other acts and things as may be necessary or desirable in order to give full

effect to this Agreement and every part hereof.

L. ENTIRE AGREEMENT.

This Agreement and all schedules attached hereto constitute the entire agreement of the parties

hereto and all prior negotiations, commitments, representations, warranties, agreements and

undertakings made prior hereto are hereby merged. There are no other inducements, representations,

warranties, agreements, undertakings, or promises, (oral or otherwise) among you and us relating to the

subject matter of this Agreement. No subsequent alteration, amendment, change or addition to this

Agreement or any schedules will be binding upon the parties hereto unless reduced to writing and

signed by us and you or our and your respective heirs, executors, administrators, successors or assigns.

Nothing contained herein shall be deemed a waiver of any right you may have to rely on the franchise

disclosure document.

M. LAWFUL ATTORNEY.

Notwithstanding anything otherwise contained in this Agreement, if you do not execute and

deliver any documents or other assurances so required of you pursuant to this Agreement and/or if we

take over the management or operation of the business operated hereunder on your behalf for any

reason, you hereby irrevocably appoint us as your lawful attorney with full power and authority, to

execute and deliver in your name any such documents and assurances, and/or to manage or operate the

business on your behalf, and/or to do all other acts and things, all in such discretion as we may desire,



and you hereby agree to ratify and confirm all of our acts as your lawful attorney and to indemnify and

save us harmless from all claims, liabilities, losses, or damages suffered in so doing. You also hereby

appoint us as your attorney-in-fact to receive and inspect your confidential sales and other tax records

and hereby authorize all tax authorities to provide such information to us for all tax periods during the

term of this Agreement.

N. ACKNOWLEDGMENTS.

You acknowledge and agree that you have conducted an independent investigation of all

aspects relating to the business being granted hereunder and recognize that the business venture

contemplated by this Agreement involves business risks and that its success will be largely dependent

upon your skills and ability as an independent business person or organization. You acknowledge that

you have received, read and understand this Agreement, the attachments hereto and agreements

relating hereto, and that we have accorded you ample time and opportunity to consult with advisors of

your own choosing about the potential benefits and risks of entering into this Agreement.

O. BINDING AGREEMENT.

This Agreement will inure to the benefit of and be binding upon us and our successors and

assigns and will be binding upon you and your heirs, executors, administrators, successors and

authorized assigns.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement in

Denver, Colorado, effective as of the Effective Date.

SMASHBURGER FRANCHISING

LLC, a Delaware limited liability

company

By:

Name: ____________________________

Title:

*Date:____________________________ *(This is the Effective Date)

MULTI-UNIT DEVELOPER:

[Name]

By:

Name: ____________________________

Title: _____________________________

Dated:

A-1 Smashburger – 06/2012 FDD


EXHIBIT A

DEVELOPMENT AREA AND DEVELOPMENT SCHEDULE

1. THE DEVELOPMENT RIGHTS GRANTED HEREIN ARE (INSERT

“EXCLUSIVE” OR “NOT EXCLUSIVE” AS APPLICABLE): _____________________.

2. The Development Area is comprised of: _

, as depicted on the map attached hereto. If the Development Area is identified by

counties or other political subdivisions, political boundaries will be considered fixed as of the

date of this Agreement and will not change, notwithstanding a political reorganization or change

to the boundaries or regions.

3. The Development Schedule is as follows:

Development Period

Number of New Smashburger

Restaurants to be Opened

During Development Period

Cumulative Number of

Smashburger Restaurants to

be Operating by End of

Development Period

Effective Date to ____ __________ __________

_____ to _____ __________ __________

_____ to _____ __________ __________

_____ to _____ __________ __________

_____ to _____ __________ _____ ____

SMASHBURGER FRANCHISING LLC,

a Delaware limited liability company

By:

Name: ____________________________

Title:

Date: _____________________________


[Name]

By:

Name: ____________________________

Title: _____________________________

Date:

A-2 Smashburger – 06/2012 FDD


MAP OF DEVELOPMENT AREA

B-1 Smashburger – 06/2012 FDD


EXHIBIT B

OWNERS AND MANAGING OWNER

1. Business Form of Developer.

(a) Individual Proprietorship. Your owner(s) (is) (are) as follows:

(b) Corporation, Limited Liability Company or Partnership. You were

incorporated or formed on _________, 20__, under the laws of the State of

_____________. You have not conducted business under any name other than your

corporate, limited liability company, or partnership name unless indicated in the

following: _______________.

2. Owners. The following identifies the owner that you have designated as, and that

we approve to be, the Managing Owner and lists the full name of each person who is one of your

owners and fully describes the nature of each owner’s interest.

Owner’s Name Type and %-age of Interest

Managing Owner: ___%

Other Owners: ___%

___%



By:

Name: ____________________________

Title:

Date: _____________________________


[Name]

By:

Name: ____________________________

Title: _____________________________

Date:

C-1 Smashburger – 06/2012 FDD


EXHIBIT C

GUARANTY AND ASSUMPTION OF OBLIGATIONS

THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this _____

day of ______________, 20__, by the persons indicated below who have executed this

Agreement.

In consideration of, and as an inducement to, the execution of that certain Multi-Unit

Development Agreement (the “Agreement”) on this date by Smashburger Franchising LLC, a

Delaware limited liability company (“we,” “us,” or “our”), each of the undersigned personally

and unconditionally (a) guarantees to us and our successors and assigns, for the term of the

Agreement (including extensions) and afterward as provided in the Agreement, that

_____________________________ (“Developer”) will punctually pay and perform each and

every undertaking, agreement, and covenant set forth in the Agreement (including any

amendments or modifications of the Agreement) and (b) agrees to be personally bound by, and

personally liable for the breach of, each and every provision in the Agreement (including any

amendments or modifications of the Agreement), both monetary obligations and obligations to

take or refrain from taking specific actions or to engage or refrain from engaging in specific

activities, including the non-competition, confidentiality, and transfer requirements.

Each of the undersigned consents and agrees that: (1) his or her direct and immediate

liability under this Guaranty will be joint and several, both with Developer and among other

guarantors; (2) he or she will render any payment or performance required under the Agreement

upon demand if Developer fails or refuses punctually to do so; (3) this liability will not be

contingent or conditioned upon our pursuit of any remedies against Developer or any other

person; (4) this liability will not be diminished, relieved, or otherwise affected by any extension

of time, credit, or other indulgence which we may from time to time grant to Developer or to any

other person, including, without limitation, the acceptance of any partial payment or performance

or the compromise or release of any claims (including the release of other guarantors), none of

which will in any way modify or amend this Guaranty, which will be continuing and irrevocable

during the term of the Agreement (including extensions), for so long as any performance is or

might be owed under the Agreement by Developer or its owners, and for so long as we have any

cause of action against Developer or its owners; and (5) this Guaranty will continue in full force

and effect for (and as to) any extension or modification of the Agreement and despite the transfer

of any interest in the Agreement or Developer, and each of the undersigned waives notice of any

and all renewals, extensions, modifications, amendments, or transfers.

Each of the undersigned waives: (i) all rights to payments and claims for reimbursement

or subrogation which any of the undersigned may have against Developer arising as a result of

the undersigned’s execution of and performance under this Guaranty; and (ii) acceptance and

notice of acceptance by us of his or her undertakings under this Guaranty, notice of demand for

payment of any indebtedness or non-performance of any obligations hereby guaranteed, protest

and notice of default to any party with respect to the indebtedness or nonperformance of any

obligations hereby guaranteed, and any other notices to which he or she may be entitled.

C-2 Smashburger – 06/2012 FDD


Each of the undersigned acknowledges and represents that he or she has had an

opportunity to review the Agreement and agrees that the provisions of Article 9 (Enforcement;

Arbitration) have been reviewed by the undersigned and are incorporated, by reference, into and

shall govern this Guaranty and Assumption of Obligations and any disputes between the

undersigned and us. Nonetheless, each of the undersigned agrees that we may also enforce this

Guaranty and Assumption of Obligations and awards in the courts of the state or states in which

he or she is domiciled.

By signing below, the undersigned spouse of the Guarantor indicated below,

acknowledges and consents to the guaranty given herein by his/her spouse. Such consent also

serves to bind the assets of the marital estate to Guarantor’s performance of this Guaranty. We

confirm that a spouse who signs this Guaranty solely in his or her capacity as a spouse (and not

as an owner) is signing that merely to acknowledge and consent to the execution of the Guaranty

by his or her spouse and to bind the assets of the marital estate as described therein and for no

other purpose (including, without limitation, to bind the spouse’s own separate property).

IN WITNESS WHEREOF, each of the undersigned has affixed his or her signature on

the same day and year as the Agreement was executed.

GUARANTOR(S) SPOUSE(S)

#1:

Name: ___________________________

Sign:

#1:

Name:

Sign:

#2:

Name: ___________________________

Sign:

#2:

Name:

Sign:

#3:

Name: ___________________________

Sign:

#3:

Name:

Sign:

Smashburger –06/2012 FDD

Ex. C – Franchise Agreement 1031.002.006/46339.6

EXHIBIT "C"

FRANCHISE AGREEMENT




FRANCHISE AGREEMENT

Franchisee:

Developer (if different):

Store Number:

Store Address:

Smashburger –06/2012 FDD Ex. C – Franchise Agreement

1031.002.006/46339.6

i

TABLE OF CONTENTS

Page

1. Preambles, Acknowledgments, and Grant of Franchise. .....................................................1

A. Preambles. ................................................................................................................1

B. Acknowledgements. .................................................................................................2

C. Corporation, Limited Liability Company, or Partnership. .......................................3

D. Grant of Franchise....................................................................................................4

E. No Exclusivity and Reservation of Rights. ..............................................................4

F. The Exercise of our Judgment. ................................................................................5

2. Site Selection, Lease of Premises, and Development and Opening of Your

Restaurant. ...........................................................................................................................6

A. Site Selection. ..........................................................................................................6

B. Lease of Premises. ...................................................................................................6

C. Development of Your Restaurant. ...........................................................................7

D. Financing; Maximum Borrowing Limits; Liquidity. ...............................................7

E. Operating Assets. .....................................................................................................8

F. Computer System. ....................................................................................................8

G. Business Opening.....................................................................................................9

3. Fees. .....................................................................................................................................9

A. Initial Fees. ...............................................................................................................9

B. Royalty Fee. .............................................................................................................9

C. Definition of “Gross Sales”. ..................................................................................10

D. Interest on Late Payments. .....................................................................................10

E. Application of Payments. .......................................................................................10

F. Method of Payment. ...............................................................................................11

G. Change in Law. ......................................................................................................11

4. Training and Assistance. ....................................................................................................11

A. Training. .................................................................................................................11

B. General Guidance...................................................................................................13

C. Standards of Operations Manual. ...........................................................................13

D. Delegation of Performance. ...................................................................................14

5. Marks. ................................................................................................................................14

A. Ownership and Goodwill of Marks........................................................................14

B. Limitations on Your Use of Marks. .......................................................................14

C. Notification of Infringements and Claims. ............................................................15

D. Discontinuance of Use of Marks............................................................................15

E. Indemnification for Use of Marks..........................................................................15

6. Confidential Information. ..................................................................................................15

7. Exclusive Relationship During Term.................................................................................17

TABLE OF CONTENTS

(Continued)

Page


1031.002.006/46339.6

ii

A. Covenants Against Competition: Branded Business. ............................................17

B. Non-solicitation and Non-Interference. .................................................................18

8. Business Operations and System Standards. .....................................................................18

A. Condition and Appearance of Your Restaurant. ....................................................18

B. Products and Services Your Restaurant Offers. .....................................................19

C. Management of Your Restaurant. ..........................................................................19

D. Approved Products, Services, and Suppliers. ........................................................19

E. Compliance with Laws and Good Business Practices. ..........................................20

F. Insurance. ...............................................................................................................21

G. Pricing. ...................................................................................................................21

H. Restaurant Telephone Numbers and Listings. .......................................................22

I. Compliance with System Standards.......................................................................22

9. Marketing. ..........................................................................................................................23

A. Grand Opening Advertising. ..................................................................................23

B. Marketing Fund. .....................................................................................................23

C. Local Marketing Expenditures. ..............................................................................25

D. Local Advertising Cooperative. .............................................................................26

E. Franchise System Website. ....................................................................................27

10. Records, Reports, and Financial Statements. .....................................................................28

11. Inspections and Audits. ......................................................................................................29

A. Our Right to Inspect Your Restaurant. ..................................................................29

B. Our Right to Audit. ................................................................................................29

12. Transfer. .............................................................................................................................30

A. By Us. ....................................................................................................................30

B. By You. ..................................................................................................................30

C. Conditions for Approval of Transfer. ....................................................................31

D. Transfer to a Wholly-Owned Corporation or Limited Liability Company............33

E. Effect of Consent to Transfer. ................................................................................33

F. Public or Private Offering. .....................................................................................33

G. Our Right of First Refusal......................................................................................34

13. Expiration of this Agreement. ............................................................................................35

A. Your Right to Acquire a Successor Franchise. ......................................................35

B. Grant of a Successor Franchise. .............................................................................36

C. Agreements/Releases. ............................................................................................37

14. Termination of Agreement. ................................................................................................37

A. By You. ..................................................................................................................37

B. By Us. ....................................................................................................................37

C. Assumption of Management. .................................................................................39

TABLE OF CONTENTS

(Continued)

Page


1031.002.006/46339.6

iii

15. Our and your Rights and Obligations Upon Termination or Expiration of this

Agreement. .........................................................................................................................40

A. Payment of Amounts Owed to Us. ........................................................................40

B. De-Identification. ...................................................................................................40

C. Confidential Information. ......................................................................................41

D. Covenant Not to Compete / Non-Solicitation. .......................................................41

E. Our Right to Purchase Your Restaurant.................................................................42

F. Remedies. ...............................................................................................................46

G. Continuing Obligations. .........................................................................................46

16. Relationship of the Parties/Indemnification. ......................................................................46 A. Independent Contractors. .......................................................................................46 B. No Liability To Or for Acts of Other Party. ..........................................................46 C. Taxes. .....................................................................................................................47

D. Indemnification. .....................................................................................................47

17. Enforcement. ......................................................................................................................47

A. Security Interest. ....................................................................................................47

B. Severability and Substitution of Valid Provisions. ................................................48

C. Waiver of Obligations. ...........................................................................................48

D. Costs and Attorneys‟ Fees. ....................................................................................49

E. You May Not Withhold Payments Due to Us. ......................................................49

F. Rights of Parties are Cumulative. ..........................................................................49

G. Arbitration. .............................................................................................................49

H. Governing Law. .....................................................................................................51

I. Consent to Jurisdiction. ..........................................................................................52

J. Waiver of Punitive Damages and Jury Trial. .........................................................52

K. Injunctive Relief.....................................................................................................52

L. Binding Effect. .......................................................................................................53

M. Limitations of Claims. ...........................................................................................53

N. Agreement Effectiveness. ......................................................................................53

O. Construction. ..........................................................................................................53

P. Lawful Attorney. ....................................................................................................55

18. Notices and Payments. .......................................................................................................55

19. Electronic Mail...................................................................................................................55

EXHIBIT A Listing of Ownership Interests

EXHIBIT B Addendum to Lease

EXHIBIT C Collateral Assignment of Telephone Numbers, Telephone Listings and

Internet Addresses

EXHIBIT D Guaranty and Assumption of Obligations




FRANCHISE AGREEMENT

THIS FRANCHISE AGREEMENT (this “Agreement”) is made and entered into by

and between SMASHBURGER FRANCHISING LLC, a Delaware limited liability company

with its principal business address at 1515 Arapahoe Street, Tower One, 10th

Floor, Denver,

Colorado 80202 (“we,” “us,” or “our”), and

, whose principal business address is

(“you” or “your”), as of the date signed by us and set forth below our signature on this Agreement

(the “Effective Date”).

1. PREAMBLES, ACKNOWLEDGMENTS, AND GRANT OF FRANCHISE.

A. PREAMBLES.

(1) We and our affiliates have developed (and will continue to develop and

modify) a system for the operation of restaurants featuring hamburgers, sandwiches,

salads, other food items and beverages, and related products and services authorized by us

from time to time (individually, a “Smashburger Restaurant” and collectively,

“Smashburger Restaurants”). Smashburger Restaurants are developed and operate

using certain specified and distinct business formats, methods, procedures, designs,

layouts, standards, and specifications, all of which we may improve, further develop, or

otherwise modify from time to time.

(2) We and our affiliates use, promote, and license others to use and promote

certain trademarks, service marks, and other commercial symbols in operating

Smashburger Restaurants, including, without limitation, the Smash Burger®

marks, and

may create, use, and license other trademarks, service marks, and commercial symbols to

identify Smashburger Restaurants and the products and services offered by Smashburger

Restaurants (collectively, the “Marks”).

(3) We grant to persons who we determine satisfactorily meet our

qualifications, and who confirm their willingness to undertake the investment and effort, a

franchise to own and operate a Smashburger Restaurant offering the products and services

we authorize and using our and our affiliates‟ business formats, methods, procedures,

signs, designs, layouts, standards, specifications, and Marks (the “Franchise System”).

(4) You have applied for a franchise to own and operate a Smashburger

Restaurant and have provided us with certain information in support of your application.


1031.002.006/46339.6

2

B. ACKNOWLEDGEMENTS.

You acknowledge that:

(1) you have independently investigated this franchise opportunity and

recognize that, like any other business, the nature of the business a Smashburger

Restaurant conducts may, and probably will, evolve and change over time.

(2) we do not guarantee the success of Smashburger Restaurants, and being

part of a franchise system does not alter the fact that an investment in a Smashburger

Restaurant involves business risks that could result in the loss of a significant portion or all

of your investment.

(3) among other things, your business abilities and efforts are vital to your

success and the success of your Restaurant (as defined in Section 1.D).

(4) attracting customers for your Restaurant will require you to make consistent

marketing efforts in your community through various methods, including media

advertising, direct mail advertising and networking, and display and use of in-store

promotional materials.

(5) retaining customers for your Restaurant will require you to have a high

level of customer service and to adhere strictly to the Franchise System and our System

Standards (as defined in Section 4.C) and that you are committed to maintaining System

Standards.

(6) you have not received from us, and are not relying upon, any

representations or guarantees, express or implied, as to the potential volume, sales, income,

or profits of a Smashburger Restaurant, that any information you have acquired from other

Smashburger Restaurant franchise owners regarding their sales, profits, or cash flows was

not information obtained from us, and that we make no representation about that

information‟s accuracy.

(7) in all of their dealings with you, our officers, directors, employees, and

agents act only in a representative, and not in an individual, capacity and that business

dealings between you and them as a result of this Agreement are deemed to be only

between you and us.

(8) you have represented to us, to induce our entry into this Agreement, that all

statements you have made and all materials you have given us are accurate and complete

and that you have made no misrepresentations or material omissions in obtaining the

franchise.

(9) you (and your owners) meet the requirements to obtain a liquor license for

the Smashburger Restaurant you will operate under this Agreement.

(10) you have read this Agreement and our Franchise Disclosure Document and

understand and accept that this Agreement‟s terms and covenants are reasonably necessary


1031.002.006/46339.6

3

for us to maintain our high standards of quality and service, as well as the uniformity of

those standards at each Smashburger Restaurant, and to protect and preserve the goodwill

of the Marks.

(11) we have not made, and you have not relied on, any representation, warranty,

or other claim regarding this franchise opportunity, other than those made in this

Agreement and our Franchise Disclosure Document, and that you have independently

evaluated this opportunity, including by using your business professionals and advisors,

and have relied solely upon those evaluations in deciding to enter into this Agreement.

(12) you have been afforded an opportunity to ask any questions you have and to

review any materials of interest to you concerning this franchise opportunity.

(13) you have been afforded an opportunity, and have been encouraged by us, to

have this Agreement and all other agreements and materials we have given or made

available to you reviewed by an attorney and have either done so or elected not to do so.

(14) you have a net worth which is sufficient to make the investment in the

franchise opportunity represented by this Agreement, and you will have sufficient funds to

meet all of your obligations under this Agreement.

C. CORPORATION, LIMITED LIABILITY COMPANY, OR

PARTNERSHIP.

If you are at any time a corporation, limited liability company, or partnership (each, an

“Entity”), you agree and represent that:

(1) You will have the authority to execute, deliver, and perform your

obligations under this Agreement and all related agreements and are duly organized or

formed and are and will, throughout this Agreement‟s term, remain validly existing and in

good standing under the laws of the state of your incorporation or formation;

(2) Your organizational documents, operating agreement, or partnership

agreement, as applicable, will recite that this Agreement restricts the issuance and transfer

of any ownership interests in you, and all certificates and other documents representing

ownership interests in you will bear a legend referring to this Agreement‟s restrictions;

(3) Exhibit A to this Agreement completely and accurately describes all of your

owners and their interests in you as of the Effective Date;

(4) Each of your direct and indirect owners during this Agreement‟s term and

your and their spouses will execute a guaranty in the form we prescribe undertaking

personally to be bound, jointly and severally, by all provisions of this Agreement and any

ancillary agreements between you and us. Our current form of guaranty is attached herein

as Exhibit D. We confirm that a spouse who signs Exhibit D solely in his or her capacity as

a spouse (and not as an owner) is signing that agreement merely to acknowledge and

consent to the execution of the guaranty by his or her spouse and to bind the assets of the

marital estate as described therein and for no other purpose (including, without limitation,


1031.002.006/46339.6

4

to bind the spouse‟s own separate property). Subject to our rights and your obligations

under Section 12, you and your owners agree to sign and deliver to us revised Exhibits A to

reflect any permitted changes in the information that Exhibit A now contains;

(5) You must identify on Exhibit A one of your owners who is a natural person

with at least 25% ownership interest and voting power in you and who will have the

authority of a chief executive officer (the “Managing Owner”). You agree to deliver to us

a revised Exhibit A to accurately identify the Managing Owner should the identity of that

person change during the term of this Agreement as permitted hereunder.

(6) The Managing Owner is authorized, on your behalf, to deal with us in

respect of all matters whatsoever which may arise in respect of this Agreement. Any

decision made by the Managing Owner will be final and binding upon you, and we will be

entitled to rely solely upon the decision of the Managing Owner in any such dealings

without the necessity of any discussions with any other party named in this Agreement, and

we will not be held liable for any actions taken by you or otherwise, based upon any

decision or actions of the Managing Owner.

D. GRANT OF FRANCHISE.

You have applied for a franchise to own and operate a Smashburger Restaurant at the

specific location which has been or will be approved by us pursuant to Section 2 of this Agreement

(the “Premises”) and identified in paragraph 4 of Exhibit A. If the Premises have not been

approved when you sign this Agreement, you and we will revise Exhibit A to identify the Premises

once approved. Subject to this Agreement‟s terms, we grant you a franchise (the “Franchise”) to

operate a Smashburger Restaurant solely at the Premises (your “Restaurant”), and to use the

Franchise System in its operation, for a term beginning on the Effective Date and expiring 15 years

from that date, unless sooner terminated under Section 14.

You agree to, at all times, faithfully, honestly, and diligently perform your obligations

under this Agreement and to use your best efforts to promote your Restaurant. You may use the

Premises only for your Restaurant. You agree not to conduct the business of your Restaurant at

any location other than the Premises and to conduct delivery and catering services pursuant to

terms authorized by us from time to time. You may not promote or sell any products or services,

whether directly or indirectly, through or on the Internet, the World Wide Web, or any other

similar proprietary or common carrier electronic delivery system.

E. NO EXCLUSIVITY AND RESERVATION OF RIGHTS.

You acknowledge and agree that you have no exclusive rights and no territorial protection

for your Restaurant. You further acknowledge that we grant rights only by expressed provisions of

written agreements and not by implication, inference or innuendo. We (and our affiliates) retain

the right at all times during and after this Agreement‟s term to engage in any and all activities that

we (and they) deem appropriate and that have not been expressly granted to you in this Agreement,

wherever and whenever we (and they) desire, and whether or not such activities compete with your

Restaurant, including, without limitation, the right to:


1031.002.006/46339.6

5

(1) establish and operate, and allow others to establish and operate,

Smashburger Restaurants using the Marks and the Franchise System, at any location on

such terms and conditions we deem appropriate;

(2) establish and operate, and allow others to establish and operate, restaurants,

that may offer products and services which are identical or similar to products and services

offered by Smashburger Restaurants, under other trade names, trademarks, service marks

and commercial symbols different from the Marks;

(3) establish, and allow others to establish, other businesses and distribution

channels (including, but not limited to, the Internet), wherever located or operating and

regardless of the nature or location of the customers with whom such other businesses and



Smashburger Restaurants, and that sell products or services that are identical or similar to,

or competitive with, those that Smashburger Restaurants customarily sell;

(4) acquire the assets or ownership interests of one or more businesses,

including Competitive Businesses (defined below), and franchising, licensing or creating

similar arrangements with respect to such businesses once acquired, wherever these

businesses (or the franchisees or licensees of these businesses) are located or operating;

(5) be acquired (whether through acquisition of assets, ownership interests or

otherwise, regardless of the form of transaction), by any other business, including a

Competitive Business, even if such business operates, franchises or licenses such

businesses in close proximity to the Restaurant; and

(6) operate or grant any third party the right to operate any Smashburger

Restaurant that we or our designees acquire as a result of the exercise of a right of first

refusal or purchase right that we have under this Agreement, any other franchise agreement

or any other agreements.

We may, at our option, engage in all other activities not expressly prohibited by this Agreement.

F. THE EXERCISE OF OUR JUDGMENT.

We have the right to operate, develop, and change the Franchise System in any manner that

is not specifically prohibited by this Agreement. Whenever we have reserved in this Agreement a

right to take or to withhold an action, to grant or decline to grant you a right to take or withhold an

action, or to provide or withhold approval or consent, we may, except as otherwise specifically

provided in this Agreement, make our decision or exercise our rights based on information readily

available to us and on our judgment of what is in our or the Franchise System‟s best interests at the

time our decision is made.


1031.002.006/46339.6

6

2. SITE SELECTION, LEASE OF PREMISES, AND DEVELOPMENT AND

OPENING OF YOUR RESTAURANT.

A. SITE SELECTION.

If you have not yet located a site for the Premises as of the Effective Date, then, within 180

days after the Effective Date, you agree to purchase, or sign a lease for, a suitable site for your

Restaurant. You agree to obtain our written approval of a proposed site for your Restaurant before

signing any lease, sublease, or other document for the site. Our determination to approve or

disapprove a site may be based on various criteria which may change from time to time in our

discretion. You agree to send us information we require for the proposed site. You may operate

your Restaurant only at the Premises.

You acknowledge and agree that, if we recommend or give you information regarding a

site for the Premises, that is not a representation or warranty of any kind, express or implied, of the

site‟s suitability for a Smashburger Restaurant or any other purpose. Our recommendation

indicates only that we believe that the site meets our then acceptable criteria which have been

established for our own purposes and are not intended to be relied on by you as an indicator of

likely success. Applying criteria that have appeared effective with other sites and premises might

not accurately reflect the potential for all sites and premises, and demographic or other factors

included in or excluded from our criteria could change, even after our approval of the Premises or

your development of the Restaurant, altering the potential of a site and premises. The uncertainty

and instability of these criteria are beyond our control, and we are not responsible if a site and

premises we recommend fail to meet your expectations. You acknowledge and agree that your

acceptance of the Franchise and selection of the Premises are based on your own independent

investigation of the site‟s suitability for the Premises.

B. LEASE OF PREMISES.

We have the right to approve the terms of any lease or sublease for the Premises (the

“Lease”) before you sign it. The Lease shall contain certain provisions we require, including

without limitation, collateral assignment of lease, pursuant to the form of lease addendum attached

as Exhibit B hereto. You acknowledge and agree that any of our involvement in the lease

negotiations, review and approval of locations are for our sole benefit and the benefit of the

Franchise System. You agree that you are not relying on our lease negotiations, lease review or

approval, or site approval for your benefit. You further acknowledge that you have been advised

to obtain the advice of your own professional advisors before you sign a lease. If you do not agree

with the lease provisions that we have approved or negotiated, you may elect not to sign the lease,

but you would have to find another suitable site for the Premises. If you reject a site we approve

because you do not agree with the lease provisions that we or our representatives have negotiated,

we may permit another franchisee to enter into a lease for such site, whether on the terms you

rejected or on other terms. You will then have to search for another suitable site. You must not

enter into a lease or any other contract for the premises of your Smashburger Restaurant without

our prior written consent.

Upon submission of a proposed Lease for the Restaurant, you must pay us or our

designated supplier (which may be our affiliate) a lease review fee of One Thousand Five Hundred


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Dollars ($1,500) ("Lease Review Fee"). The Lease Review Fee pays the expenses incurred to

review and (if we so choose) to negotiate certain provisions of the Lease. You are not a third-party

beneficiary of any lease negotiation or review that we conduct. You agree that we do not

guarantee that the terms, including rent, will represent the most favorable terms available in that

market. We will charge you only one (1) Lease Review Fee unless you refuse to sign a Lease that

we have certified as acceptable for the Premises, and we then are required to engage in one or more

additional lease reviews for the Premises (or for a different location if you refuse to sign any lease

for the first proposed Premises). In such event, you will pay us or our designated supplier a Lease

Review Fee for the first lease review as well as a Lease Review Fee for each additional lease

review.

C. DEVELOPMENT OF YOUR RESTAURANT.

Within 150 days after the date you sign a lease for the Premises or one year after the

Effective Date, whichever occurs first, you agree at your expense to do the following: (a) obtain

and submit to us for approval detailed construction plans and specifications and space plans for

your Restaurant that comply with any design specifications provided by us and all applicable

ordinances, building codes, permit requirements, and lease requirements and restrictions; (b)

obtain all required zoning changes, planning consents, building, utility, sign and business permits

and licenses, liquor license and any other consents, permits and licenses necessary to lawfully

open and operate your Restaurant; (c) construct all required improvements in compliance with

construction plans and specifications approved by us; (d) decorate your Restaurant in compliance

with plans and specifications approved by us; (e) purchase and install all required equipment

(including the Computer System (as defined in Section 2.F below)), furniture, fixtures and signs

(collectively the “Operating Assets”); and (f) obtain all customary contractors‟ sworn statements

and partial and final waivers of lien for construction, remodeling, decorating and installation

services. You agree to use the vendor(s) we select, if any (which may include us or our affiliates),

for design, engineering, construction management and purchasing services in connection with the

development of your Restaurant.

D. FINANCING; MAXIMUM BORROWING LIMITS; LIQUIDITY.

You acknowledge and agree that:

(1) you will, at all times, maintain sufficient working capital reserves as

necessary and appropriate to comply with your obligations under this Agreement. On our

request, you will provide us with evidence of working capital availability. We reserve the

right, from time to time, to establish certain levels of working capital reserves, and you will

comply with such requirements;

(2) we may from time to time designate the maximum amount of debt that

Smashburger Restaurants may service, and you will ensure that you will comply with such

limits; and

(3) we require that the first two Smashburger Restaurants developed by our

franchisees and their affiliates be developed with cash equity and without proceeds from

any loans made by such franchisees, their owners, their affiliates, their affiliates‟ owners or


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any other third party. You will ensure that, if the Restaurant to be developed under this

Agreement is the 1st or 2

nd Smashburger Restaurant developed by you or your Affiliates,

you will have sufficient cash, through equity capital contributed to you by your owners, to

comply with this requirement. As used in this Agreement, an “Affiliate” is a person or

other legal entity in which you or your owners (i) own more than 51% of the issued and

outstanding ownership interest and voting rights or (ii) have the right and power to control

and determine the Affiliate‟s management and policies.

E. OPERATING ASSETS.

You agree to use in operating your Restaurant only those Operating Assets we approve for

Smashburger Restaurants as meeting our specifications and standards for quality, design,

appearance, function, and performance. You agree to place or display at the Premises (interior and

exterior) only the signs, emblems, lettering, logos, and display materials we approve from time to

time. You agree to purchase or lease approved brands, types, or models of Operating Assets only

from suppliers we designate or approve (which may include or be limited to us or our affiliates).

F. COMPUTER SYSTEM.

You agree to obtain and use specified integrated computer hardware and software,

including an integrated computer-based order-entry system (the “Computer System”). We may

modify specifications for, and components of, the Computer System. You also agree to maintain a

functioning e-mail address and all specified points of high-speed Internet connection. Our

modification of specifications for the Computer System, and other technological developments or

events, might require you to purchase, lease, or license new or modified computer hardware or

software and to obtain service and support for the Computer System. Although we cannot estimate

the future costs of the Computer System or required service or support, and although these costs

might not be fully amortizable over this Agreement‟s remaining term, you agree to incur the costs

of obtaining the computer hardware and software comprising the Computer System (or additions

and modifications) and required service or support. We have no obligation to reimburse you for

any Computer System costs. Within 60 days after you receive notice from us, you agree to obtain

the Computer System components that we designate and to ensure that your Computer System, as

modified, is functioning properly.

You agree that we or our affiliates may condition any license of proprietary software to

you, or your use of technology that we or our affiliates develop or maintain, on your signing a

software license agreement or similar document that we or our affiliates prescribe to regulate your

use of, and our and your respective rights and responsibilities with respect to, the software or

technology. We and our affiliates may charge you a monthly or other fee for any proprietary

software or technology that we or our affiliates license to you and for other maintenance and

support services that we or our affiliates provide during this Agreement‟s term.

Although you agree to buy, use, and maintain the Computer System according to our

standards and specifications, you will have sole and complete responsibility for: (1) the

acquisition, operation, maintenance, and upgrading of the Computer System; (2) the manner in

which your Computer System interfaces at our specified levels of connection speed with our and


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any third party‟s computer system; and (3) any and all consequences if the Computer System is not

properly operated, maintained, and upgraded.

G. BUSINESS OPENING.

You agree not to open your Restaurant until:

(1) we notify you in writing that your Restaurant meets our standards and

specifications;

(2) you have obtained all applicable licenses and permits, including, without

limitation, a liquor license;

(3) you and, if you will not be supervising the day-to-day management of the

Restaurant, the person you have designated to assume primary responsibility for the

day-to-day supervision of the operation of the Restaurant (the “Designated Manager”)

satisfactorily complete training;

(4) you pay the initial franchise fee and other amounts then due to us; and

(5) you give us certificates for all required insurance policies.

Subject to your compliance with these conditions, you agree to open your Restaurant for business

within 150 days after you sign a lease for the Premises or the one year anniversary of the Effective

Date, whichever occurs first.

3. FEES.

A. INITIAL FEES.

You agree to pay us a nonrecurring and, except as specifically provided in this Agreement,

nonrefundable initial franchise fee of $40,000. If you are signing this Agreement pursuant to a

multi-unit development agreement with us and this is not the first Franchise Agreement signed

pursuant thereto, the nonrefundable deposit you paid under such multi-unit development

agreement for this Franchise shall be applied to the initial franchise fee payable hereunder as

described therein. If you are purchasing an existing Smashburger Restaurant in connection with

the execution of this Agreement, you are not required to pay the initial franchise fee, provided that

you or the seller of the Smashburger Restaurant pay the transfer fee required under the seller‟s

franchise agreement. You acknowledge that the initial franchise fee is due, and fully earned by us,

when you sign this Agreement and not refundable to you after it is paid.

B. ROYALTY FEE.

You agree to pay us on or before Tuesday of each week, in the manner

provided below (or as the Standards of Operations Manual otherwise prescribes), a

weekly royalty fee (the “Royalty”) equal to five percent (5%) of the weekly Gross

Sales (defined in Section 3.C below) during the preceding week (beginning on


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Monday and ending on Sunday), subject to the possibility of adjustments annually

as follows:

(1) if the Gross Sales of the Restaurant during a fiscal year

exceed $1,200,000, the Royalty rate shall, as of the 1st day of the

immediately succeeding fiscal year, be six percent (6%) of the weekly

Gross Sales of the Restaurant; and

(2) if the Gross Sales of the Restaurant during a fiscal year are

$1,200,000 or less, the Royalty Rate shall, as of the 1st day of the

immediately succeeding fiscal year, be five percent (5%) of the weekly

Gross Sales of the Restaurant.

If the Restaurant begins operation on or after November 1 of a calendar year, its Gross

Sales shall not be considered for purposes of the foregoing adjustments until the 2nd full fiscal

year after it began operations.

C. DEFINITION OF “GROSS SALES”.

As used in this Agreement, the term “Gross Sales” means all revenue that you derive from

operating your Restaurant (whether or not in compliance with this Agreement), whether from cash,

check, credit and debit card, barter exchange, trade credit, or other credit transactions, but (1)

excluding all federal, state, or municipal sales, use, or service taxes collected from customers and

paid to the appropriate taxing authority and (2) reduced by the amount of any documented refunds,

credits and discounts your Restaurant in good faith gives to customers and your employees. We

include gift certificate, gift card or similar program payments in Gross Sales when the gift

certificate, gift card, other instrument or applicable credit is redeemed. Gross Sales also include all

insurance proceeds you receive for loss of business due to a casualty to or similar event at the

Restaurant.

D. INTEREST ON LATE PAYMENTS.

All amounts which you owe us for any reason will bear interest accruing as of their due

date at two percent (2%) per month or the highest commercial contract interest rate the law allows,

whichever is less. We will charge a service fee of One Hundred Dollars ($100) per occurrence for

checks returned to us due to insufficient funds or in the event there are insufficient funds in the

business account you designate to cover our withdrawals. We may debit your bank account

automatically for the service charge and interest. You acknowledge that this Section 3.D is not our

agreement to accept any payments after they are due or our commitment to extend credit to, or

otherwise finance your operation of, your Restaurant.

E. APPLICATION OF PAYMENTS.

Despite any designation you make, we may apply any of your payments to any of your past

due indebtedness to us. We may set off any amounts you or your owners owe us or our affiliates

against any amounts we or our affiliates owe you or your owners.


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F. METHOD OF PAYMENT.

You hereby authorize us to debit your checking, savings or other account automatically for

the Royalty, Marketing Fund (as defined in Section 9.B) contributions, and other amounts due to

us or our affiliates (the “EFT Authorization”). You agree to sign and deliver to us any documents

we require for such EFT Authorization. Such EFT Authorization shall remain in full force and

effect during the term of this Agreement. We will debit the account you designate for these

amounts on their due dates (or the subsequent business day if the due date is a national holiday or a

weekend day). You agree to ensure that funds are available in your designated account to cover

our withdrawals.

If you fail to report the Gross Sales, we may debit your account for one hundred ten percent

(110%) of the average of the last three Royalty and Marketing Fund contributions that we debited.

If the amounts that we debit from your account are less than the amounts you actually owe us (once

we have determined the true and correct Gross Sales), we will debit your account for the balance

on the day we specify. If the amounts that we debit from your account are greater than the amounts

you actually owe us, we will credit the excess against the amounts we otherwise would debit from

your account during the following week.

We may require you to pay any amounts due under this Agreement or otherwise by means

other than automatic debit (e.g., by check) whenever we deem appropriate, and you agree to

comply with our payment instructions.

G. CHANGE IN LAW.

If a law is enacted during the term of this Agreement which prohibits or restricts in any way

your ability to pay and our ability to collect Royalty or other amounts based on Gross Sales derived

from the sale of alcoholic products, then we reserve the right to modify your payment obligations

to us under this Agreement and revise the applicable provisions hereunder in order to provide the

same basic economic effect to both us and you as currently provided in this Agreement. In such

event, you agree to execute the appropriate document(s) in the form we prescribe to give effect to

or take account of such revisions. If we determine in good faith that the effect of any law enacted

hereafter will be materially detrimental to our interests, we may terminate this Agreement by

delivering written notice thereof to you.

4. TRAINING AND ASSISTANCE.

A. TRAINING.

After you sign this Agreement and no later than 60 days before you open your Restaurant,

you or your Managing Owner and Designated Manager (if other than you) must complete, to our

satisfaction, initial training conducted by us on the material aspects of operating a Smashburger

Restaurant. We will provide approximately four weeks of training at our principal offices or at a

designated training facility of our choice. You or your Managing Owner and Designated Manager

must satisfactorily complete initial training prior to operating your Restaurant. Scheduling of the

training is based on your or your Managing Owner‟s and Designated Manager‟s availability,

training restaurant availability and the projected opening date for your Restaurant which is finally


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determined by us. We reserve the right to require up to two additional managers to satisfactorily

complete initial training. If we determine that you (or your Managing Owner) or your Designated

Manager and, if required by us, the manager(s), cannot complete initial training to our satisfaction,

we may terminate this Agreement.

Although we provide initial training for no additional fee for up to three people, you agree

to pay for all travel and living expenses which you (or your Managing Owner), your Designated

Manager and your additional managers incur and for your employee's wages and workers'

compensation insurance while attending training.

You or your Managing Owner (or your Designated Manager) may request additional

training at the end of the initial training program, to be provided at our then current per diem

charges, if you (or your Managing Owner) or your Designated Manager do not feel sufficiently

trained in the operation of a Smashburger Restaurant. We and you will jointly determine the

duration of this additional training. However, if you (or your Managing Owner) and your

Designated Manager satisfactorily complete our initial training program, and have not expressly

informed us in writing at the end of that program that you (or your Designated Manager) do not

feel sufficiently trained in the operation of a Smashburger Restaurant, then you will be deemed to

have been trained sufficiently to operate a Smashburger Restaurant.

When your Restaurant is ready to open for business, we will without any additional

training fee and at our expense, send a training team (the identity and composition of which will be

in our discretion) to your Restaurant to assist with the grand opening of your Restaurant if this is

the first or second Smashburger Restaurant opened by you or your Affiliates. If this is not the first

or second Smashburger Restaurant opened by you or your Affiliates, and if we determine it to be

necessary to send our representative to the site to assist with the grand opening of the Restaurant,

we will do so, at our discretion, and you will be responsible for all travel and living expenses and

related costs incurred by us in providing such assistance, including, without limitation, salary

expenses. The representative shall determine in his or her absolute sole discretion the amount of

required time and support necessary to have your staff prepared for your grand opening.

We may require you, your Managing Owner, your Designated Manager and previously

trained and experienced employees to attend and satisfactorily complete various training courses

that we periodically choose to provide at the times and locations that we designate. We will not

require attendance at more than two such courses, or for more than a total of five business days,

during a calendar year. Besides attending these courses, your Managing Owner and Designated

Manager agree to attend an annual meeting of all Smashburger Restaurant franchise owners at a

location we designate. Attendance at the annual meeting will not be required for more than four

days during any calendar year. You agree to pay all costs to attend.

If you have a new Designated Manager during this Agreement's term, the new Designated

Manager must satisfactorily complete our then current initial training program. We may charge

reasonable fees for training new Designated Managers. You also agree to pay all travel and living

expenses which your Designated Manager incurs during all training courses and programs.


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You understand and agree that any specific ongoing training or advice we provide does not

create an obligation (whether by course of dealing or otherwise) to continue to provide such

specific training or advice, all of which we may discontinue and modify from time to time.

B. GENERAL GUIDANCE.

We will advise you from time to time regarding the operation of your Restaurant based on

your reports or our inspections and will guide you with respect to:

(1) standards, specifications, and operating procedures and methods that

Smashburger Restaurants use;

(2) purchasing required and authorized Operating Assets and other products

and services;

(3) advertising and marketing materials and programs; and

(4) employee training.

We will furnish to you the standards for the operation of your Restaurant. These standards

will be furnished in the form of our operations manual for the operation of Smashburger

Restaurants (the “Standards of Operations Manual”), which may include one or more separate

manuals as well as audiotapes, videotapes, compact discs, computer software, information

available on an Internet site, other electronic media, or written materials. We may also provide

guidance via telephonic conversations or consultation at our offices. If you request, and we agree

to provide, additional or special guidance, assistance, or training, we may charge you our then

applicable fee, including our personnel‟s per diem charges and travel and living expenses.

C. STANDARDS OF OPERATIONS MANUAL.

We will loan you during the term of this Agreement one copy of the Standards of

Operations Manual. The Standards of Operations Manual contains mandatory and suggested

specifications, standards, operating procedures, and rules that we periodically prescribe for

operating Smashburger Restaurants (“System Standards”) and information on your other

obligations under this Agreement. We may modify the Standards of Operations Manual

periodically to reflect changes in System Standards, including, without limitation, in the form of

memoranda and newsletters. You agree to keep your copy of the Standards of Operations Manual

current and in a secure location at your Restaurant. If there is a discrepancy between our copy of

the Standards of Operations Manual and yours, our copy of the Standards of Operations Manual

controls. You agree that the Standards of Operations Manual‟s contents are confidential, that you

will keep it in a secure location which will not be accessible to persons who are not authorized to

review it, and that you will not disclose the Standards of Operations Manual to any person other

than your employees who need to know its contents. You may not at any time copy, duplicate,

record, or otherwise reproduce any part of the Standards of Operations Manual. If your copy of the

Standards of Operations Manual is lost, destroyed, or significantly damaged, you agree to obtain a

replacement copy at our then applicable charge.


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At our option, we may post some or all of the Standards of Operations Manual on a

restricted Website or extranet to which you will have access. (For purposes of this Agreement,

“Website” means an interactive electronic document contained in a network of computers linked

by communications software, including, without limitation, the Internet and World Wide Web

home pages). If we do so, you agree to monitor and access the Website or extranet for any updates

to the Standards of Operations Manual or System Standards. Any passwords or other digital

identifications necessary to access the Standards of Operations Manual on a Website or extranet

will be deemed to be part of Confidential Information (as defined in Section 6).

D. DELEGATION OF PERFORMANCE.

You agree that we have the right to delegate the performance of any portion or all of our

obligations under this Agreement to third-party designees, whether these designees are our agents

or independent contractors with whom we have contracted to perform these obligations.

5. MARKS.

A. OWNERSHIP AND GOODWILL OF MARKS.

Our affiliate, Icon Burger Development Company, LLC (“Icon Burger”), is the owner of

the Marks, and we have been granted the license to use, and to sublicense, the Marks in connection

with the development and operation of Smashburger Restaurants. Your right to use the Marks is

derived only from this Agreement and limited to your operating your Restaurant according to this

Agreement and all System Standards we prescribe during its term. Your unauthorized use of the

Marks is a breach of this Agreement and infringes our, Icon Burger‟s and our other affiliates‟

rights in the Marks. You acknowledge and agree that your use of the Marks and any goodwill

established by that use are exclusively for our, our other affiliates‟ (as their interests may appear)

and Icon Burger‟s benefit and that this Agreement does not confer any goodwill or other interests

in the Marks upon you (other than the right to operate your Restaurant under this Agreement). All

provisions of this Agreement relating to the Marks apply to any additional proprietary trade and

service marks we authorize you to use. You may not at any time during or after this Agreement‟s

term contest or assist any other person in contesting the validity of, or our rights to, the Marks.

B. LIMITATIONS ON YOUR USE OF MARKS.

You agree to use the Marks as the sole identification of your Restaurant, except that you

agree to identify yourself as its independent owner in the manner we prescribe. You may not use

any Mark (1) as part of any corporate or legal business name, (2) with any prefix, suffix, or other

modifying words, terms, designs, or symbols (other than logos we have licensed to you), (3) in

selling any unauthorized services or products, (4) as part of any domain name, homepage,

electronic address, or otherwise in connection with a Website (unless in connection with our

approved Franchise System Website), (5) in any user name, screen name or profile in connection

with any social networking sites such as, but not limited to, Facebook, MySpace, YouTube and

LinkedIn, or (6) in any other manner that we have not expressly authorized in writing. You may

not use any Mark in advertising the transfer, sale, or other disposition of your Restaurant or an

ownership interest in you without our prior written consent. You agree to display the Marks

prominently as we prescribe at your Restaurant and on forms, advertising, supplies, and other


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materials we designate. You agree to give the notices of trade and service mark registrations that

we specify and to obtain any fictitious or assumed name registrations required under applicable

law.

C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.

You agree to notify us immediately of any apparent infringement or challenge to your use

of any Mark, or of any person‟s claim of any rights in any Mark, and not to communicate with any

person other than us, Icon Burger, our attorneys, and your attorneys, regarding any infringement,

challenge, or claim. We, our other affiliates and Icon Burger may take the action we deem

appropriate (including no action) and control exclusively any litigation, U.S. Patent and

Trademark Office proceeding, or other administrative proceeding arising from any infringement,

challenge, or claim or otherwise concerning any Mark. You agree to sign any documents and take

any other reasonable action that, in the opinion of our, our affiliates‟ and Icon Burger‟s attorneys,

are necessary or advisable to protect and maintain our, our affiliates‟ and Icon Burger‟s interests in

any litigation or U.S. Patent and Trademark Office or other proceeding or otherwise to protect and

maintain our, our affiliates and Icon Burger‟s interests in the Marks. We will reimburse you for

your costs of taking any action that we, our affiliates or Icon Burger has asked you to take.

D. DISCONTINUANCE OF USE OF MARKS.

If it becomes advisable, in our opinion, at any time for us to require you to modify or

discontinue using any Mark or to use one or more additional or substitute trademarks or service

marks, you agree to comply with our directions within a reasonable time after receiving notice.

We need not reimburse you for your direct expenses of changing the signs of your Restaurant, for

any loss of revenue due to any modified or discontinued Mark, or for your expenses of promoting

a modified or substitute trademark or service mark.

Our rights in this Section 5.D apply to any and all of the Marks (and any portion of any

Mark) that we authorize you to use in this Agreement. We, our other affiliates and Icon Burger

may exercise these rights at any time and for any reason, business or otherwise, that we, our other

affiliates and Icon Burger think best. You acknowledge both our right to take this action and your

obligation to comply with our directions.

E. INDEMNIFICATION FOR USE OF MARKS.

We agree to reimburse you for all damages and expenses that you incur in any trademark

infringement proceeding disputing your authorized use of any Mark under this Agreement if you

have timely notified us of, and comply with our directions in responding to, the proceeding. At our

option, we, our other affiliates and Icon Burger may defend and control the defense of any

proceeding arising from your use of any Mark under this Agreement.

6. CONFIDENTIAL INFORMATION.

We and our affiliates possess (and will continue to develop and acquire) certain

confidential information, some of which constitutes trade secrets under applicable law (the

“Confidential Information”), relating to developing and operating Smashburger Restaurants,

whether or not marked confidential, including (without limitation):


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(1) site selection criteria;

(2) training and operations materials and manuals, including, without

limitation, recipes and the Standards of Operations Manual;

(3) the System Standards and other methods, formats, specifications, standards,

systems, procedures, techniques, sales and marketing techniques, knowledge, and

experience used in developing, promoting and operating Smashburger Restaurants;

(4) market research, promotional, marketing and advertising programs for

Smashburger Restaurants;

(5) knowledge of specifications for, and suppliers of, Operating Assets and

other products and supplies;

(6) any computer software or similar technology which is proprietary to us, our

affiliates, or the Franchise System, including, without limitation, digital passwords and

identifications and any source code of, and data, reports, and other printed materials

generated by, the software or similar technology;

(7) knowledge of the operating results and financial performance of

Smashburger Restaurants, other than your Restaurant; and

(8) customer data.

All Confidential Information furnished to you by us or on our behalf, whether orally or by

means of written material (i) shall be deemed proprietary, (ii) shall be held by you in strict

confidence, (iii) shall not be copied, disclosed or revealed to or shared with any other person

except to your employees or contractors who have a need to know such Confidential Information

for purposes of this Agreement and who are under a duty of confidentiality no less restrictive than

your obligations hereunder, or to individuals or entities specifically authorized by us in advance,

and (iv) shall not be used in connection with any other business or capacity. You will not acquire

any interest in Confidential Information other than the right to use it as we specify in operating

your Restaurant during this Agreement‟s term. You agree to protect the Confidential Information

from unauthorized use, access or disclosure in the same manner as you protect your own

confidential or proprietary information of a similar nature and with no less than reasonable care.

We may require you to have your employees and contractors execute individual undertakings and

shall have the right to regulate the form of and to be a party to or third-party beneficiary under any

such agreements.

You acknowledge and agree that, as between us and you, we are the sole owner of all right,

title, and interest in and to the Franchise System and any Confidential Information. All

improvements, developments, derivative works, enhancements, or modifications to the Franchise

System and any Confidential Information (collectively, “Innovations”) made or created by you,

your employees or your contractors, whether developed separately or in conjunction with us, shall

be owned solely by us. You represent, warrant, and covenant that your employees and contractors

are bound by written agreements assigning all rights in and to any Innovations developed or


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created by them to you. To the extent that you, your employees or your contractors are deemed to

have any interest in such Innovations, you hereby agree to assign, and do assign, all right, title and

interest in and to such Innovations to us. To that end, you shall execute, verify, and deliver such

documents (including, without limitation, assignments) and perform such other acts (including

appearances as a witness) as we may reasonably request for use in applying for, obtaining,

perfecting, evidencing, sustaining, and enforcing such ownership rights in and to the Innovations,

and the assignment thereof. Your obligation to assist us with respect to such ownership rights shall

continue beyond the expiration or termination of this Agreement. In the event we are unable for

any reason, after reasonable effort, to secure your signature on any document needed in connection

with the actions specified in this Section 6, you hereby irrevocably designate and appoint us and

our duly authorized officers and agents as your agent and attorney in fact, which appointment is

coupled with an interest and is irrevocable, to act for and on your behalf to execute, verify, and file

any such documents and to do all other lawfully permitted acts to further the purposes of this

Section 6 with the same legal force and effect as if executed by you. The obligations of this

Section 6 shall survive any expiration or termination of the Agreement.

7. EXCLUSIVE RELATIONSHIP DURING TERM.

A. COVENANTS AGAINST COMPETITION: BRANDED BUSINESS.

(1) You acknowledge that we have granted you the Franchise in consideration

of and reliance upon your agreement to deal exclusively with us. You therefore agree that,

during this Agreement‟s term, neither you, any of your owners, nor any of your or your

owners‟ immediate family members will:

(i) have any direct or indirect interest as an owner – whether of record,

beneficially, or otherwise – in a Competitive Business (defined below), wherever

located or operating (except that equity ownership of less than five percent (5%) of

a Competitive Business whose stock or other forms of ownership interest are

publicly traded on a recognized United States stock exchange will not be deemed to

violate this subparagraph);

(ii) perform services as a director, officer, manager, employee,

consultant, representative, or agent for a Competitive Business, wherever located

or operating; or

(iii) divert or attempt to divert any actual or potential business or

customer of your Restaurant to a Competitive Business.

(2) The term “Competitive Business” means any restaurant, food service or

other business (other than a Smashburger Restaurant): (i) whose gross receipts from the

sale of hamburgers represent, at any time, at least 10% of the business‟ total gross receipts

(excluding receipts from the sale of alcoholic beverages), (ii) whose menu, concept,

business model or method of operation is similar to that employed by restaurant units

operated, franchised or licensed by us, (iii) that offers or sells goods or services that are

generally the same as or similar to the goods or services being offered by businesses

owned, operated, franchised or licensed by us, or (iv) that grants franchises or licenses for


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the operation of any of the foregoing or provides services to the franchisor or licensor of

any of the foregoing. You agree to obtain similar covenants from the personnel we specify,

including officers, directors, managers, and other employees attending our training

program or having access to Confidential Information. We have the right to regulate the

form of agreement that you use and to be a third party beneficiary of that agreement with

independent enforcement rights.

(3) Further, you agree that, during the term of this Agreement, you will not

operate, directly or indirectly, any other Branded Business without our written

consent. The term "Branded Business" means any business marketed by a franchisor or

chain under a locally, regionally, or nationally known or registered trademark or service

mark.

B. NON-SOLICITATION AND NON-INTERFERENCE.

(1) You further agree that, during the Term, neither you nor any of your

owners, your or your owners‟ Affiliates, or the officers, directors, managers or immediate

family members of any of the foregoing, will:

(i) recruit or hire any person who is then or was, within the

immediately preceding 24 months, employed by us, any of our affiliates, or a

franchise owner as (a) a general manager or assistant manager at any Smashburger

Restaurant, (b) a district or regional manager or any other such person having

responsibility for overseeing or supervising the operation of multiple Smashburger

Restaurants or (c) any of our or our affiliates‟ officers, in any case without our

consent or that of the relevant employer;

(ii) interfere or attempt to interfere with our or our affiliates‟

relationships with any vendors or consultants; or

(iii) engage in any other activity which might injure the goodwill of the

Marks or the Franchise System.

(2) If you fail to comply with paragraph (i) above, you agree to pay us an

amount equal to 200% of the annual salary of such person. Nothing contained herein shall

be deemed a waiver of our right to terminate pursuant to Section 14.B of this Agreement.

8. BUSINESS OPERATIONS AND SYSTEM STANDARDS.

A. CONDITION AND APPEARANCE OF YOUR RESTAURANT.

You agree that you will not use any part of the Premises for any purpose other than

operating a Smashburger Restaurant in compliance with this Agreement, and that you will place or

display at the Premises (interior and exterior) only those signs, emblems, designs, artwork,

lettering, logos and display and advertising materials that we approve from time to time. You

further agree to maintain the condition and appearance of your Restaurant, its Operating Assets

and the Premises in accordance with the System Standards and, consistent with the image of

Smashburger Restaurants, as an efficiently operated business offering high quality products and


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services and observing the highest standards of cleanliness and efficient, courteous service.

Therefore, you agree to take, without limitation, the following actions during this Agreement‟s

term at your expense: (a) thorough cleaning, repainting and redecorating of the interior and

exterior of the Premises at intervals that we may prescribe; (b) interior and exterior repair of the

Premises as needed; and (c) repair or replacement, at our direction, of damaged, worn-out or

obsolete Operating Assets at intervals that we may prescribe (or, if we do not prescribe an interval

for replacing any Operating Asset, as that Operating Asset needs to be repaired or replaced).

In addition to the foregoing, you agree to renovate, refurbish, remodel, or replace, at your

own expense, the real and personal property and equipment used in operating the Restaurant when

reasonably required by us in order to comply with the image, standards of operation, and

performance capability we establish from time to time. If we change our image or standards of

operation, we shall give you a reasonable period of time within which to comply with such

changes.

B. PRODUCTS AND SERVICES YOUR RESTAURANT OFFERS.

You agree that you (1) will offer and sell from your Restaurant all of the products and

services that we periodically specify; (2) will not offer or sell at your Restaurant, the Premises or

any other location any products or services we have not authorized; and (3) will discontinue selling

and offering for sale any products or services that we at any time disapprove.

C. MANAGEMENT OF YOUR RESTAURANT.

Your Restaurant shall be managed by the Designated Manager. Your Designated Manager

agrees to work full-time at your Restaurant, to supervise the day-to-day operations of your

Restaurant. You (or your Managing Owner) must supervise the management and operation of

your Restaurant and continuously exert best efforts to promote and enhance your Restaurant.

D. APPROVED PRODUCTS, SERVICES, AND SUPPLIERS.

If you propose to offer, conduct, or utilize any services, products, materials, forms, items,

or supplies in connection with or for sale through your Restaurant that are not approved by us, you

shall first notify us in writing requesting approval. We may withhold such approval for any reason

at our sole discretion; however, in order to make such determination, we may require submission

of specifications, information, or samples of such services, products, materials, forms, items, or

supplies. We will advise you within a reasonable time whether such products, supplies, or services

meet our specifications. A charge not to exceed the actual cost of the review may be made by us

and shall be paid by you. If, at any time (including after our initial approval), we determine that

you fail to meet our specifications and standards in connection with the provision of any products

or services, including, without limitation, delivery services, we may permanently or temporarily

terminate your right to offer such products or services; provided that nothing contained herein

shall be deemed a waiver of our right to terminate pursuant to Section 14 hereof.

We and our affiliates reserve the right to approve or designate, from time to time,

manufacturers, vendors, distributors, suppliers, and producers (collectively referred to herein as

“vendors”), terms, and distribution methods for any goods or services (which include, but are not


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limited to, services, insurance, products, equipment, supplies, and materials). You shall purchase

all goods and services required for the operation of your Restaurant from such approved or

designated vendors (which may be only one vendor for any given good or service) under terms, in

the manner, and from the source designated by us or any of our affiliates. If we or any of our

affiliates designate such goods and services are to be purchased through approved or designated

third party distributors, then you shall purchase such goods and services from such distributors

pursuant to the terms and in the manner approved by us and or our affiliates. We or any of our

affiliates may be a supplier, distributor, or otherwise party to these transactions, and may derive

revenue or profit from such transactions. We and any of our affiliates may use such revenue or

profit without restriction.

In the event you desire to purchase equipment, products, services, supplies, or materials

from vendors other than those previously approved by us and our affiliates, you shall, prior to

purchasing any such equipment, products, services, supplies, or materials, give us a written request

to change vendor. We shall notify you in writing of the approval or rejection of the proposed

vendor within a reasonable time after completion of the investigation of the proposed vendor

should we choose to conduct an investigation. We and our affiliates may from time to time inspect

any vendor‟s facilities and products to assure proper production, processing, storing, and

transportation of equipment, products, services, supplies, or materials to be purchased from the

vendor by you. Permission for such inspection shall be a condition of the continued approval of

such vendor. We and our affiliates may, for any reason whatsoever at our or their sole discretion,

elect to withhold or revoke approval of the vendor. In order to make such determination, we and

our affiliates may, at any time, require that samples from the vendor or a proposed new vendor be

delivered for testing. A charge not to exceed the actual cost of the test may be made by us and shall

be paid by you. You acknowledge that we and our affiliates are likely to reject your request for a

new vendor without conducting any investigation if we and our affiliates already have designated

an exclusive vendor for the equipment, products, services, supplies, or materials proposed to be

offered by the new vendor as permitted in this Section.

E. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.

You must secure and maintain in force throughout this Agreement‟s term all required

licenses, permits and certificates relating to the operation of your Restaurant and operate your

Restaurant in full compliance with all applicable laws, ordinances and regulations. You agree to

comply and assist us in our compliance efforts, as applicable, with any and all laws, regulations,

Executive Orders or otherwise relating to anti terrorist activities, including without limitation the

U.S. Patriot Act, Executive Order 13224, and related U.S. Treasury or other regulations. In

connection with such compliance efforts, you agree not to enter into any prohibited transactions

and to properly perform any currency reporting and other activities relating to your Restaurant as

may be required by us or by law. You confirm that you are not listed in the Annex to Executive

Order 13224 and agree not to hire any person so listed or have any dealing with a person so listed

(the Annex is currently available at http://www.treasury.gov). You are solely responsible for

ascertaining what actions must be taken by you to comply with all such laws, orders or regulations,

and specifically acknowledge and agree that your indemnification responsibilities as provided in

Section 16.D pertain to your obligations hereunder.


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Your Restaurant must in all dealings with its customers, suppliers, us and the public adhere

to the highest standards of honesty, integrity, fair dealing and ethical conduct. You agree to refrain

from any business or advertising practice which might injure our business or the goodwill

associated with the Marks or other Smashburger Restaurants. You must notify us in writing within

three business days of: (1) the commencement of any action, suit or proceeding relating to your

Restaurant; (2) the issuance of any order, writ, injunction, award or decree of any court, agency or

other governmental instrumentality relating to your Restaurant; (3) any notice of violation of any

law, ordinance or regulation relating to your Restaurant; (4) receipt of any notice of complaint

from the Better Business Bureau, any local, state or federal consumer affairs department or

division, or any other government or independent third party involving a complaint from a client or

potential client relating to your Restaurant; and (5) written complaints from any client or potential

client. You must immediately provide to us copies of any documentation you receive of events in

(1) through (5) above and resolve the matter in a prompt and reasonable manner in accordance

with good business practices.

F. INSURANCE.

During the term of this Agreement you must maintain in force at your sole expense

comprehensive business owners coverage (including contents insurance, loss of business income,

employee dishonesty, money coverage, comprehensive general liability and liquor liability)

hired/non owned auto liability, boiler and machinery coverage, umbrella coverage, building

coverage, and auto liability coverage, all containing the minimum liability coverage we prescribe

from time to time. You also must maintain workers‟ compensation insurance for your employees

in accordance with laws applicable in the state in which the Restaurant is operated. We may

periodically increase the amounts of coverage required under these insurance policies or require

different or additional insurance coverages (including reasonable excess liability insurance) at any

time to reflect inflation, identification of new risks, changes in law or standards of liability, higher

damage awards or other relevant changes in circumstances. These insurance policies must name

us and any affiliates we designate as additional named insureds and provide for 30 days‟ prior

written notice to us of a policy‟s material modification, cancellation or expiration. You routinely

must furnish us copies of your Certificate of Insurance or other evidence of your maintaining this

insurance coverage and paying premiums. If you fail or refuse to obtain and maintain the

insurance we specify, in addition to our other remedies, we may (but need not) obtain such

insurance for you and your Restaurant on your behalf, in which event you shall cooperate with us

and reimburse us for all premiums, costs and expenses we incur in obtaining and maintaining the

insurance, plus a reasonable fee for our time incurred in obtaining such insurance.

G. PRICING.

Unless prohibited by applicable law, we may periodically set a maximum or minimum

price that you may charge for products and services offered by Smashburger Restaurants. If we

impose such a maximum or minimum price for any product or service, you may charge any price

for the product or service up to and including the maximum price we impose or down to and

including the minimum price we impose, but may not charge any price in excess of the maximum

price, or below the minimum price, set by us.


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H. RESTAURANT TELEPHONE NUMBERS AND LISTINGS.

You will keep all telephone numbers for the Restaurant separate from telephone numbers

you use in any other business operations and from your personal telephone numbers. You will use

the telephone numbers for the Restaurant only for business authorized by this Agreement. Upon

the expiration or termination of this Agreement, you will (a) stop using all Restaurant telephone

numbers regardless of our intention to use them, (b) promptly inform the telephone service

provider of your discontinued use of the telephone numbers unless we request that the numbers be

transferred to us or our designee, and (c) execute all documents that we request in order to transfer

to us or our designee all Restaurant telephone numbers. You acknowledge and agree that, as

between us and you, we have the sole rights to, and interest in, all telephone numbers, facsimile

numbers, directory listings and Internet addresses which you use in the operation or promotion of

the Restaurant. You hereby irrevocably appoint us, with full power of substitution, as your true

and lawful attorney-in-fact, which appointment is coupled with an interest, to execute such

directions and authorizations as may be necessary or prudent to accomplish the foregoing. To

evidence and confirm such appointment, you must execute the form of Collateral Assignment of

Telephone Numbers, Telephone Listings and Internet Addresses which is attached hereto as

Exhibit C.

I. COMPLIANCE WITH SYSTEM STANDARDS.

You acknowledge and agree that operating and maintaining your Restaurant according to

System Standards are essential to preserve the goodwill of the Marks and the goodwill of all

Smashburger Restaurants. Therefore, you agree at all times to operate and maintain your

Restaurant according to each and every System Standard, as we periodically modify and

supplement them. Though we retain the right to establish and periodically modify System

Standards which you have agreed to maintain in the operation of your Restaurant, you retain the

right and sole responsibility for the day-to-day management and operation of your Restaurant and

the implementation and maintenance of System Standards at your Restaurant. System Standards

may regulate any aspect of the operation and maintenance of your Restaurant, including, but not

limited to, any one or more of the following:

(1) sales, marketing, advertising and promotional programs and materials and

media used in these programs;

(2) staffing levels for your Restaurant and employee qualifications, training,

dress and appearance (although you have sole responsibility and authority concerning

employee selection and promotion, hours worked, rates of pay and other benefits, work

assigned and working conditions);

(3) use and display of the Marks;

(4) days and hours of operation;

(5) methods of payment that your Restaurant may accept from customers;


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(6) participation in market research and testing and product and service

development programs;

(7) participations in gift card programs;

(8) menus;

(9) bookkeeping, accounting, data processing and record keeping systems and

forms; formats, content and frequency of reports to us of sales, revenue, and financial

performance and condition; and giving us copies of tax returns and other operating and

financial information concerning the Franchise (we will use reasonable efforts to keep such

records confidential);

(10) types, amounts, terms and conditions of insurance coverage required for

your Restaurant, including criteria for your insurance carriers; and

(11) any other aspects of operating and maintaining your Restaurant that we

determine to be useful to preserve or enhance the efficient operation, image or goodwill of

the Marks and Smashburger Restaurants.

You agree that System Standards we prescribe in the Standards of Operations Manual, or

otherwise communicate to you in writing or another form, are part of this Agreement as if fully set

forth within its text. All references to this Agreement include all System Standards as periodically

modified. You acknowledge that our periodic modification of the System Standards (including,

without limitation, changes and additions to restaurant equipment and hardware and software

required for the Computer System), which may accommodate regional or local variations, may

obligate you to invest additional capital in your Restaurant and incur higher operating costs.

9. MARKETING.

A. GRAND OPENING ADVERTISING.

You must spend at least $10,000 for a grand opening marketing program for your

Restaurant to take place on the dates we designate before and after your Restaurant opens. We

reserve the right, in our discretion, to increase the required grand opening advertising required

under this Section 9.A to $25,000 depending on factors such as whether your Restaurant is in an

urban or rural market. You agree to use the media, materials, programs and strategies we develop

or approve in connection with the grand opening advertising program.

B. MARKETING FUND.

You agree to contribute to a marketing fund for Smashburger Restaurants (the “Marketing

Fund”) an amount equal to one percent (1%) of Gross Sales, payable in the same manner as the

Royalty. However, we have the right, at any time and on notice to you, to increase the amount you

must contribute to the Marketing Fund, to up to four percent (4%) of Gross Sales, provided that in

no event will we be entitled to require that the aggregate amount of the required Marketing Fund

contribution, the local marketing requirement pursuant to Section 9.C below, and the required


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contribution to a Local Advertising Cooperative (as defined in Section 9.D below) exceed five

percent (5%) of Gross Sales.

We or our affiliates or other designees will direct all programs that the Marketing Fund

finances, with sole control over the creative concepts, materials, and endorsements used and their

geographic, market, and media placement and allocation. The Marketing Fund may pay for

preparing and producing video, audio, and written materials and electronic media; developing,

implementing, and maintaining a Franchise System Website (as defined in Section 9.D below) and

related strategies; administering regional and multi-regional marketing and advertising programs,

including, without limitation, purchasing trade journal, direct mail, and other media advertising

and using advertising, promotion, and marketing agencies and other advisors to provide

assistance; and supporting public relations, market research, and other advertising, promotion, and

marketing activities. The Marketing Fund will give you a sample of advertising, marketing, and

promotional formats and materials at no cost. We will sell you multiple copies of these materials

at our direct cost of producing them, plus any related shipping, handling, and storage charges.

We will account for the Marketing Fund separately from our other funds and not use the

Marketing Fund for any of our general operating expenses. However, we may use the Marketing

Fund to reimburse us or our affiliates or designees for the reasonable salaries and benefits of

personnel who manage and administer the Marketing Fund, the Marketing Fund‟s other

administrative costs, travel expenses of personnel while they are on Marketing Fund business,

meeting costs, overhead relating to Marketing Fund business, and other expenses that we incur in

activities reasonably related to administering or directing the Marketing Fund and its programs,

including, without limitation, conducting market research, public relations, preparing advertising,

promotion, and marketing materials, and collecting and accounting for Marketing Fund

contributions.

The Marketing Fund will not be our asset. We do not owe any fiduciary obligation to you

for administering the Marketing Fund or any other reason. We will hold all Marketing Fund

contributions for the benefit of the contributors and use contributions for the purposes described in

this Section 9.B. The Marketing Fund may spend in any fiscal year more or less than the total

Marketing Fund contributions in that year, borrow from us or others (paying reasonable interest) to

cover deficits, or invest any surplus for future use. We may use all interest earned on the

Marketing Fund contributions to pay costs before using the Marketing Fund‟s other assets. We

will prepare an annual, unaudited statement of Marketing Fund collections and expenses and give

you the statement upon written request. We may have the Marketing Fund audited annually, at the

Marketing Fund‟s expense, by an independent certified public accountant. We may incorporate

the Marketing Fund or operate it through a separate entity whenever we deem appropriate. The

successor entity will have all of the rights and duties specified in this Section 9.B.

We intend for the Marketing Fund to promote recognition of the applicable Marks and

patronage of Smashburger Restaurants generally. Although we will try to use the Marketing Fund

to develop advertising and marketing materials and programs, and to place advertising and

marketing, that will benefit all Smashburger Restaurants contributing to the Marketing Fund, we

need not ensure that Marketing Fund expenditures in or affecting any geographic area are

proportionate or equivalent to Marketing Fund contributions by Smashburger Restaurants

operating in that geographic area or that any Smashburger Restaurant benefits directly or in


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proportion to its Marketing Fund contribution from the development of advertising and marketing

materials or the placement of advertising and marketing. We have the right, but no obligation, to

use collection agents and institute legal proceedings to collect Marketing Fund contributions at the

Marketing Fund‟s expense. We also may forgive, waive, settle, and compromise all claims by or

against the Marketing Fund. Except as expressly provided in this Section 9.B, we assume no direct

or indirect liability or obligation to you for collecting amounts due to, maintaining, directing, or

administering the Marketing Fund.

We may at any time defer or reduce contributions of a Smashburger Restaurant franchise

owner and, upon 30 days‟ prior notice to you, reduce or suspend Marketing Fund contributions and

operations for one or more periods of any length and terminate (and, if terminated, reinstate) the

Marketing Fund. If we terminate the Marketing Fund, we will distribute all unspent monies to our

franchise owners who contribute to the Marketing Fund, and to us and our affiliates, in proportion

to their, and our, respective Marketing Fund contributions during the preceding 12-month period.

C. LOCAL MARKETING EXPENDITURES.

In addition to your obligations under Section 9.A and Section 9.B above, you agree to

spend money, as required in this Section 9.C, to promote your Restaurant. You agree to list and

advertise your Restaurant on all major internet search engines (for example, Google Local and

CitySearch) and all major internet consumer review websites (for example, Yelp and Urban

Spoon) set forth in the Standards of Operations Manual and in at least one recommended classified

telephone directory distributed within the market area of your Restaurant (in the business

classifications we prescribe from time to time) and to use form of classified telephone directory

advertisement approved by us. If other Smashburger Restaurants are located within the directory‟s

distribution area, we may require you to participate in a collective advertisement with those other

Smashburger Restaurants and to pay your share of that collective advertisement. You also agree to

spend, beginning after you complete your grand opening advertising obligations in Section 9.A

above, at least one percent (1%) of the Restaurant‟s Gross Sales each calendar quarter to advertise

and promote your Restaurant (this may include costs of yellow pages advertising); provided,

however, that if you or your Affiliates operate two or more Restaurants, we may require you to

spend at least three percent (3%) of your Gross Sales each calendar quarter to advertise and

promote your Restaurants. Any amount of Local Advertising Cooperative contribution you make

will be set off against amounts required to be spent by you under this Section 9.C. Within 30 days

after the end of each calendar quarter, you agree to send us, in the manner we prescribe, an

accounting of your expenditures for local advertising and promotion during the preceding calendar

quarter. Your local advertising and promotion must follow our guidelines.

You agree that your advertising, promotion, and marketing will be completely clear,

factual, and not misleading and conform to both the highest standards of ethical advertising and

marketing and the advertising and marketing policies that we prescribe from time to time. At least

20 days before you intend to use them, you agree to send us for approval samples of all advertising,

promotional, and marketing materials which we have not prepared or previously approved. If you

do not receive written disapproval within 10 days after we receive the materials, they are deemed

to be disapproved. Once we approve the materials, you are permitted to use them; provided,

however, that we may, in our discretion, withdraw our approval if a regulatory or other issue arises

that, in our opinion, makes such withdrawal in our or the System‟s best interests. You may not use


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any advertising, promotional, or marketing materials that we have not approved or have

disapproved.

We reserve the right, at any time, to issue you a notice that the amounts required to be spent

by you under this Section 9.C shall, instead, be paid to us or our designee. If we exercise this

option, we will then spend such amounts, in accordance with local Restaurant marketing

guidelines and programs that we develop from time to time, to advertise and promote the

Restaurant on your behalf. We may instead, in our discretion, contribute any such amounts to the

Marketing Fund or to a Local Advertising Cooperative in accordance with and as required under

Section 9.D below. We may also elect, on one or more occasions and without prejudice to our

rights to issue further notices, to temporarily or permanently cease conducting such marketing

activities on your behalf and, instead, to require you to conduct such marketing activities yourself

in accordance with this Section 9.C.

D. LOCAL ADVERTISING COOPERATIVE.

Subject to the terms and conditions of this Section 9.D, you agree that we or our affiliates

or designees may establish or direct the establishment of a local advertising cooperative (“Local

Advertising Cooperative”) in geographical areas (as determined by us) in which two or more

Smashburger Restaurants are operating. The Local Advertising Cooperative will be organized and

governed in a form and manner, and begin operating on a date, that we determine in advance. We

may change, dissolve and merge Local Advertising Cooperatives. Each Local Advertising

Cooperative‟s purpose is, with our approval, to administer advertising programs and develop

advertising, marketing and promotional materials for the area that the Local Advertising

Cooperative covers. If, as of the time you sign this Agreement, we have established a Local

Advertising Cooperative for the geographic area in which your Restaurant is located, or if we

establish a Local Advertising Cooperative in that area during this Agreement‟s term, you agree to

sign the documents we require to become a member of the Local Advertising Cooperative and to

participate in the Local Advertising Cooperative as those documents require.

If we establish a Local Advertising Cooperative in your geographic area pursuant to this

Section 9.D, you agree to pay us a weekly Local Advertising Cooperative contribution in the

amount we establish for the particular Local Advertising Cooperative, which amount will not

exceed three percent (3%) of the Gross Sales. Your Local Advertising Cooperative contribution is

payable in the same manner as the Royalty. These contributions may be capped based on the

provisions of the by-laws adopted by the Local Advertising Cooperative, subject to our approval.

You will pay these monies to us electronically and we will remit them periodically to the Local

Advertising Cooperative.

Each Smashburger Restaurant contributing to a Local Advertising Cooperative will have

one vote on matters involving the activities of the particular Local Advertising Cooperative. The

Local Advertising Cooperative may not use any advertising, marketing or promotional plans or

materials without our prior written consent. We agree to assist in the formulation of marketing

plans and programs, which will be implemented under the direction of the Local Advertising

Cooperative. You acknowledge and agree that, subject to our approval and subject to availability

of funds, the Local Advertising Cooperative will have sole discretion over the creative concepts,

materials and endorsements used by it. You agree that the Local Advertising Cooperative


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assessments may be used to pay the costs of preparing and producing video, audio and written

advertising and direct sales materials for Smashburger Restaurants in your geographic area;

purchasing direct mail and other media advertising for Smashburger Restaurants in that

geographic area; and implementing direct sales programs, and employing marketing, advertising

and public relations firms to assist with the development and administration of marketing

programs for Smashburger Restaurants in such area.

The monies collected by us on behalf of a Local Advertising Cooperative will be accounted

for separately by us from our other funds and will not be used to defray any of our general

operating expenses. You agree to submit to us and the Local Advertising Cooperative any reports

that we or the Local Advertising Cooperative requires.

You understand and acknowledge that your Restaurant might not benefit directly or in

proportion to its contribution to the Local Advertising Cooperative from the development and

placement of advertising and the development of marketing materials. Local Advertising

Cooperatives for Smashburger Restaurants will be developed separately and no cooperative will

be intended to benefit the others. We will have the right, but not the obligation, to use collection

agents and to institute legal proceedings to collect amounts owed to the Local Advertising

Cooperative on behalf of and at the expense of the Local Advertising Cooperative and to forgive,

waive, settle and compromise all claims by or against the Local Advertising Cooperative. Except

as expressly provided in this Section 9.D, we assume no direct or indirect liability or obligation to

you with respect to the maintenance, direction or administration of the Local Advertising

Cooperative.

E. FRANCHISE SYSTEM WEBSITE.

We have established a Website to advertise, market, and promote Smashburger

Restaurants, the products and services that they offer and sell, or the Smashburger Restaurant

franchise opportunity (a “Franchise System Website”). We may, but are not obligated to,

provide you with a webpage on the Franchise System Website that references your Restaurant. If

we provide you with a webpage on the Franchise System Website, you must: (i) provide us the

information and materials we request to develop, update, and modify your webpage; (ii) notify us

whenever any information on your webpage is not accurate; and (iii) pay our then current initial

fee and monthly maintenance fee for the webpage. We will own all intellectual property and other

rights in the Franchise System Website, including your webpage, and all information they contain

(including, without limitation, the domain name or URL for your webpage, the log of “hits” by

visitors, and any personal or business data that visitors supply).

We will maintain the Franchise System Website and may use the Marketing Fund‟s assets

to develop, maintain, and update the Franchise System Website. We periodically may update and

modify the Franchise System Website (including your webpage). You acknowledge that we have

final approval rights over all information on the Franchise System Website (including your

webpage). We may implement and periodically modify System Standards relating to the

Franchise System Website.

Even if we provide you a webpage on our Franchise System Website, we will only

maintain such webpage while you are in full compliance with this Agreement and all System


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Standards we implement (including, without limitation, those relating to the Franchise System

Website). If you are in default of any obligation under this Agreement or our System Standards,

then we may, in addition to our other remedies, temporarily remove your webpage from the

Franchise System Website until you fully cure the default. We will permanently remove your

webpage from the Franchise System Website upon this Agreement‟s expiration or termination.

All advertising, marketing, and promotional materials that you develop for your Restaurant

must contain notices of the Franchise System Website‟s domain name in the manner we designate.

You may not develop, maintain, or authorize any other Website or create or use a screen name,

user name or profile on any social networking site that mentions or describes you or your

Restaurant or displays any of the Marks.

10. RECORDS, REPORTS, AND FINANCIAL STATEMENTS.

You agree to establish and maintain at your own expense a bookkeeping, accounting, and

recordkeeping system conforming to the requirements and formats we prescribe from time to time.

We may require you to use a Computer System to maintain certain sales data and other

information. We may also require you to use a third party approved by us for accounting and

bookkeeping services. You agree to give us in the manner and format that we prescribe from time

to time:

(a) on or before the 5th

day of each accounting period specified by us from time

to time (each an “Accounting Period”), a report on the Gross Sales of your Restaurant

during the preceding Accounting Period;

(b) within 30 days after the end of each accounting quarter specified by us from

time to time (each an “Accounting Quarter”), the operating statements, financial

statements, statistical reports, purchase records, and other information we request

regarding you and your Restaurant covering the previous Accounting Quarter and the

fiscal year to date;

(c) within 90 days after the end of each fiscal year, annual profit and loss and

source and use of funds statements and a balance sheet for your Restaurant as of the end of

that calendar year, prepared in accordance with generally accepted accounting principles

or, at our option, international accounting standards and principles. We reserve the right to

require that you have these financial statements and the financial statements of any prior

fiscal years audited by an independent accounting firm designated by us in writing;

(d) within 10 days after our request, exact copies of federal and state income

tax returns, sales tax returns, and any other forms, records, books, and other information we

periodically require relating to your Restaurant and the Franchise; and

(e) by July 15 and January 15 of each calendar year, reports on the status

(including the outstanding balance, then-current payment amounts, and whether such loan

is in good standing) of any loans outstanding as of the previous June 30 and December 31,

respectively, for which the Restaurant or any of the Restaurant‟s equipment is collateral.

You must also deliver to us, within five days after your receipt, copies of any default


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notices you receive from any of such lenders. You agree that we or our affiliates may

contact your banks, other lenders, and vendors to obtain information regarding the status of

loans of the type described herein and your accounts (including payment histories and any

defaults), and you hereby authorize your bank, other lenders, and vendors to provide such

information to us and our affiliates.

You agree to verify and sign each report and financial statement in the manner we prescribe. We

may disclose data derived from these reports. Moreover, we may, as often as we deem appropriate

(including on a daily basis), access the Computer System and retrieve all information relating to

the operation of your Restaurant. You agree to preserve and maintain all records in a secure

location at your Restaurant for at least three years (including, but not limited to, sales checks,

purchase orders, invoices, payroll records, customer lists, check stubs, sales tax records and

returns, cash receipts and disbursement journals, and general ledgers).

11. INSPECTIONS AND AUDITS.

A. OUR RIGHT TO INSPECT YOUR RESTAURANT.

To determine whether you and your Restaurant are complying with this Agreement and all

System Standards, we and our designated agents or representatives, may at all times and without

prior notice to you:

(1) inspect your Restaurant;

(2) photograph your Restaurant and observe and videotape the operation of

your Restaurant for consecutive or intermittent periods we deem necessary;

(3) remove samples of any products and supplies;

(4) interview the personnel and customers of your Restaurant; and

(5) inspect and copy any books, records, and documents relating to the

operation of your Restaurant.

You agree to cooperate with us fully. If we exercise any of these rights, we will not interfere

unreasonably with the operation of your Restaurant. You agree to present to your customers the

evaluation forms that we periodically prescribe and to participate and request your customers to

participate in any surveys performed by or for us.

B. OUR RIGHT TO AUDIT.

We and our designated agents or representatives may at any time during your business

hours, and without prior notice to you, examine your Restaurant, bookkeeping, and accounting

records for your Restaurant, and sales and income tax records and returns, and other records. You

agree to cooperate fully with our representatives and independent accountants in any examination.

If any examination discloses an understatement of the Gross Sales, you agree to pay us, within 15

days after receiving the examination report, the Royalty and Marketing Fund contributions due on

the amount of the understatement, plus our service charges and interest on the understated amounts


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from the date originally due until the date of payment. Furthermore, if an examination is necessary

due to your failure to furnish reports, supporting records, or other information as required, or to

furnish these items on a timely basis, or if our examination reveals a Royalty or Marketing Fund

contribution understatement exceeding two percent (2%) of the amount that you actually reported

to us for the period examined, you agree to reimburse us for the costs of the examination,

including, without limitation, the charges of attorneys and independent accountants and the travel

expenses, room and board, and compensation of our employees. These remedies are in addition to

our other remedies and rights under this Agreement and applicable law.

12. TRANSFER.

A. BY US.

You acknowledge that we maintain a staff to manage and operate the Franchise System and

that staff members can change as employees come and go. You represent that you have not signed

this Agreement in reliance on any particular manager, owner, director, officer, or employee

remaining with us in any capacity. We may change our ownership or form or assign this

Agreement and any other agreement to a third party without restriction.

B. BY YOU.

You understand and acknowledge that the rights and duties this Agreement creates are

personal to you (or to your owners if you are an Entity) and that we have granted you the Franchise

in reliance upon our perceptions of your (or your owners‟) individual or collective character, skill,

aptitude, attitude, business ability, and financial capacity. Accordingly, neither this Agreement (or

any interest in this Agreement), your Restaurant or substantially all of its assets, any direct or

indirect ownership interest in you (regardless of its size), nor any ownership interest in any of your

owners (if such owners are legal entities) may be transferred without our prior written approval,

which consent will not be unreasonably withheld or delayed; provided, however, that transfers

among your current owners of ownership interests in you will require prior notice to us but will not

require our consent as long as the Managing Owner and Control (defined in Section 17.O below)

of you are not changed as a result of such transfer.

You further agree that you will not enter into any proposed mortgage, pledge,

hypothecation, encumbrance or giving of a security interest in or which affects the Restaurant, this

Agreement or your rights under this Agreement without our prior written consent. A transfer of

your Restaurant ownership, possession, or control, or substantially all of its assets, may be made

only with a transfer of this Agreement. Any transfer without our approval is a breach of this

Agreement and has no effect. In this Agreement, the term “transfer” includes a voluntary,

involuntary, direct, or indirect assignment, sale, gift, or other disposition of any interest in:

(1) this Agreement;

(2) you;

(3) your Restaurant or substantially all of its assets; or

(4) your owners (if such owners are legal entities).


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An assignment, sale, gift, or other disposition includes the following events:

(a) transfer of ownership of capital stock, a partnership or membership interest,

or another form of ownership interest;

(b) merger or consolidation or issuance of additional securities or other forms

of ownership interest;

(c) any sale of a security convertible to an ownership interest;

(d) transfer of an interest in you, this Agreement, your Restaurant or

substantially all of its assets, or your owners in a divorce, insolvency, or entity dissolution

proceeding or otherwise by operation of law;

(e) if you, one of your owners, or an owner of one of your owners dies, a

transfer of an interest in you, this Agreement, your Restaurant or substantially all of its

assets, or your owner by will, declaration of or transfer in trust, or under the laws of

intestate succession; and

(f) pledge of this Agreement (to someone other than us) or of an ownership

interest in you or your owners as security, foreclosure upon your Restaurant, or your

transfer, surrender, or loss of the possession, control, or management of your Restaurant.

C. CONDITIONS FOR APPROVAL OF TRANSFER.

If you (and your owners) are in full compliance with this Agreement, then, subject to the

other provisions of this Section 12, we will approve a transfer that meets all of the requirements in

this Section 12.C. A non-controlling ownership interest in you or your owners (determined as of

the date on which the proposed transfer will occur) may be transferred if the proposed transferee

and its direct and indirect owners (if the transferee is an Entity) are of good character, meet our

then applicable standards for Smashburger Restaurant franchise owners (including no ownership

interest in or performance of services for a Competitive Business and assuming the your liquor

license can be transferred), and you (and, if they are already an owner or operator of a

Smashburger Restaurant, the transferee and its owners) execute a general release as described in

paragraph (9) of this Section 12.C. If the proposed transfer is of this Agreement, of the Managing

Owner‟s ownership interest in you or a controlling ownership interest in you or one of your

owners, or is one of a series of transfers (regardless of the time period over which these transfers

take place) which in the aggregate transfer this Agreement or a controlling ownership interest in

you or one of your owners, then, in addition to the foregoing requirements, all of the following

conditions must be met before or concurrently with the effective date of the transfer:

(1) you have paid all Royalty, Marketing Fund and advertising cooperative

contributions, and other amounts owed to us, our affiliates, and third party vendors and

have submitted all required reports and statements;

(2) you have not violated any provision of this Agreement, the Lease, or any

other agreement with us during both the 60-day period before you requested our consent to

the transfer and the period between your request and the effective date of the transfer;


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(3) neither the transferee nor its owners (if the transferee is an Entity) or

affiliates have an ownership interest (direct or indirect) in or perform services for a

Competitive Business;

(4) the transferee (or its Designated Manager) satisfactorily complete our

training program;

(5) your landlord allows you to transfer the Lease or sublease the Premises to

the transferee;

(6) the transferee agrees (if the transfer is of this Agreement) to upgrade,

remodel, and refurbish your Restaurant in accordance with our current requirements and

specifications for Smashburger Restaurants within 120 days after the effective date of the

transfer (we will advise the transferee before the effective date of the transfer of the

specific actions that it must take within this time period);

(7) the transferee, at our request, signs our then current form of franchise

agreement and related documents, any and all of the provisions of which may differ

materially from any and all of those contained in this Agreement;

(8) you or the transferee pays us 50% of our then current initial franchise fee.

However, no transfer fee is due if, upon a spouse‟s death, that spouse‟s interest in this

Agreement and your Restaurant, or ownership in you, is transferred to the surviving

spouse, provided that such transfer is subject to the terms and conditions of this Section 12;

(9) you (and your transferring owners) sign a general release, in a form

satisfactory to us, of any and all claims against us and our affiliates and our and their

owners, officers, directors, employees, and agents;

(10) we have approved the purchase price, amount of debt and payment terms,

and, if you or your owners finance any part of the purchase price, you and your owners

agree that all of the transferee‟s obligations under promissory notes, agreements, or

security interests reserved in your Restaurant are subordinate to the transferee‟s obligation

to pay Royalty, Marketing Fund contributions, and other amounts due to us, our affiliates,

and third party vendors and otherwise to comply with this Agreement;

(11) you and your transferring owners (and your and their immediate family

members) will not, for two years beginning on the transfer‟s effective date, engage in any

of the activities proscribed in Section 15.D. below; and

(12) you and your transferring owners will not directly or indirectly at any time

or in any manner (except with respect to other Smashburger Restaurants you own and

operate) identify yourself or themselves or any business as a current or former

Smashburger Restaurant or as one of our franchise owners; use any Mark, any colorable

imitation of a Mark, or other indicia of a Smashburger Restaurant in any manner or for any

purpose; or utilize for any purpose any trade name, trade or service mark, or other

commercial symbol that suggests or indicates a connection or association with us.


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We may review all information regarding your Restaurant that you give the transferee, correct any

information that we believe is inaccurate, and give the transferee copies of any reports that you

have given us or we have made regarding your Restaurant.

Our approval of a transfer of ownership interests in you as a result of the death or

incapacity of the proposed transferor will not be unreasonably withheld or delayed so long as at

least one of the Managing Owners designated on Exhibit A continues to be the designated

Managing Owner. If, as a result of the death or incapacity of the transferor, a transfer is proposed

to be made to the transferor‟s spouse, and if we do not approve the transfer, the trustee or

administrator of the transferor‟s estate will have nine months after our refusal to consent to the

transfer to the transferor‟s spouse within which to transfer the transferor‟s interests to another

party whom we approve in accordance with this Section 12.C.

D. TRANSFER TO A WHOLLY-OWNED CORPORATION OR LIMITED

LIABILITY COMPANY.

Notwithstanding Section 12.C above, if you are in full compliance with this Agreement,

you may transfer this Agreement to a corporation or limited liability company which conducts no

business other than your Restaurant and, if applicable, other Smashburger Restaurants, in which

you maintain management control, and of which you own and control one hundred percent (100%)

of the economic interests, equity and voting power of all issued and outstanding ownership

interests, provided that all of the assets of your Restaurant are owned, and the business of your

Restaurant is conducted, only by that single corporation or limited liability company. The

corporation or limited liability company must expressly assume all of your obligations under this

Agreement. Transfers of ownership interests in the corporation or limited liability company are

subject to Section 12.C above. You agree to remain personally liable under this Agreement as if

the transfer to the corporation or limited liability company did not occur.

E. EFFECT OF CONSENT TO TRANSFER.

Our consent to a transfer of this Agreement and your Restaurant, or any interest in you or

your owners, is not a representation of the fairness of the terms of any contract between you and

the transferee, a guarantee of your Restaurant or transferee‟s prospects of success, or a waiver of

any claims we have against you (or your owners) or of our right to demand full compliance by you

and the transferee with this Agreement.

F. PUBLIC OR PRIVATE OFFERING.

You acknowledge that the written information used to raise or secure funds can reflect

upon us and the Franchise System. You agree to submit any written information intended to be

used for that purpose to us before inclusion in any registration statement, prospectus or similar

offering memorandum. Should we object to any reference to us or our affiliates or any of our

business in the offering literature or prospectus, the literature or prospectus shall not be used until

our objections are withdrawn. Notwithstanding the foregoing, you acknowledge and agree that

you may not engage in a public offering of securities without our prior written consent.


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G. OUR RIGHT OF FIRST REFUSAL.

If you (or any of your owners) at any time determine to sell or transfer for consideration an

interest in this Agreement and your Restaurant, or a direct or indirect ownership interest in you

(except to or among your current owners, which is not subject to this Section 12.G), in a

transaction that otherwise would be allowed under Sections 12.B and C above, you (or your

owners) agree to obtain from a responsible and fully disclosed buyer, and send us, a true and

complete copy of a bona fide, executed written offer (which may include a letter of intent) relating

exclusively to an interest in you or in this Agreement and your Restaurant. The offer must include

details of the payment terms of the proposed sale and the sources and terms of any financing for the

proposed purchase price. To be a valid, bona fide offer, the proposed purchase price must be in a

dollar amount, and the proposed buyer must submit with its offer an earnest money deposit equal

to five percent (5%) or more of the offering price. The right of first refusal process will not be

triggered by a proposed transfer that would not be allowed under Sections 12.B and C above. We

may require you (or your owners) to send us copies of any materials or information sent to the

proposed buyer or transferee regarding the possible transaction.

We may, by written notice delivered to you or your selling owner(s) within 30 days after

we receive both an exact copy of the offer and all other information we request, elect to purchase

the interest offered for the price and on the terms and conditions contained in the offer, provided

that:

(1) we may substitute cash for any form of payment proposed in the offer (such

as ownership interests in a privately-held entity);

(2) our credit will be deemed equal to the credit of any proposed buyer

(meaning that, if the proposed consideration includes promissory notes, we or our designee

may provide promissory notes with the same terms as those offered by the proposed

buyer);

(3) we will have an additional 30 days to prepare for closing after notifying you

of our election to purchase; and

(4) we must receive, and you and your owners agree to make, all customary

representations and warranties given by the seller of the assets of a business or the

ownership interests in a legal entity, as applicable, including, without limitation,

representations and warranties regarding:

(a) ownership and condition of and title to ownership interests or assets;

(b) liens and encumbrances relating to ownership interests or assets;

and

(c) validity of contracts and the liabilities, contingent or otherwise, of

the entity whose assets or ownership interests are being purchased.

If we exercise our right of first refusal, you and your selling owner(s) (and your and their

immediate family members) agree that, for two years beginning on the closing date, you and they


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will be bound by the non-competition covenant contained in Section 15.D. below. We have the

unrestricted right to assign this right of first refusal to a third party, who then will have the rights

described in this Section 12.G.

If we do not exercise our right of first refusal, you or your owners may complete the sale to

the proposed buyer on the original offer‟s terms, but only if we otherwise approve the transfer in

accordance with, and you (and your owners) and the transferee comply with the conditions in,

Sections 12.B and 12.C above. This means that, even if we do not exercise our right of first refusal

(whether or not it is properly triggered as provided above), if the proposed transfer otherwise

would not be allowed under Sections 12.B and 12.C above, you (or your owners) may not move

forward with the transfer at all.

If you do not complete the sale to the proposed buyer within 60 days after we notify you

that we do not intend to exercise our right of first refusal, or if there is a material change in the

terms of the sale (which you agree to tell us promptly), we or our designee will have an additional

right of first refusal during the 30-day period following either the expiration of the 60-day period

or our receipt of notice of the material change(s) in the sale‟s terms, either on the terms originally

offered or the modified terms, at our or our designee‟s option.

Notwithstanding the foregoing, if your Restaurant has been used as collateral for an

SBA-guaranteed loan (which is subject to our consent as described in Section 12), we will not,

while such loan remains unpaid, exercise our right of first refusal under this Section 12.G with

respect to a transfer of part of the ownership interests in you unless, in connection with our

exercise of the right of first refusal, we are paying off the SBA-guaranteed loan. However, we

retain the right to assign our right of first refusal with respect to such transfers to an unaffiliated

third-party.

13. EXPIRATION OF THIS AGREEMENT.

A. YOUR RIGHT TO ACQUIRE A SUCCESSOR FRANCHISE.

When this Agreement expires:

(1) if you (and each of your owners) have substantially complied with this

Agreement during its term; and

(2) if you (and each of your owners) are, both on the date you give us written

notice of your election to acquire a successor franchise (as provided in Section 13.B.

below) and on the date on which the term of the successor franchise would commence, in

full compliance with this Agreement and all System Standards; and

(3) provided that (a) you maintain possession of and agree (regardless of cost)

to remodel or expand your Restaurant, add or replace improvements and Operating Assets,

and otherwise modify your Restaurant as we require to comply with System Standards then

applicable for new Smashburger Restaurants, or (b) at your option, you secure a substitute

premises that we approve and you develop those premises according to System Standards

then applicable for Smashburger Restaurants,


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then you may acquire a successor franchise to operate your Restaurant as a Smashburger

Restaurant for one additional 15-year term. You agree to sign the franchise agreement we then use

to grant franchises for Smashburger Restaurants (modified as necessary to reflect the fact that it is

for a successor franchise), which may contain provisions that differ materially from any and all of

those contained in this Agreement; provided that we will waive the initial franchise fee. However,

you must pay a renewal fee in an amount equal to fifty percent (50%) of our then current initial

franchise fee. If you (and each of your owners) are not, both on the date you give us written notice

of your election to acquire a successor franchise and on the date on which the term of the successor

franchise commences, in full compliance with this Agreement and all System Standards, you

acknowledge that we need not grant you a successor franchise, whether or not we had, or chose to

exercise, the right to terminate this Agreement during its term under Section 14.B.

B. GRANT OF A SUCCESSOR FRANCHISE.

You agree to give us written notice of your election to acquire a successor franchise no

more than 270 days and no less than 180 days before this Agreement expires. We agree to give

you written notice (“Our Notice”), not more than 90 days after we receive your notice, of our

decision:

(1) to grant you a successor franchise;

(2) to grant you a successor franchise on the condition that you correct existing

deficiencies of your Restaurant or in your operation of your Restaurant;

(3) not to grant you a successor franchise based on our determination that you

and your owners have not substantially complied with this Agreement during its term or

were not in full compliance with this Agreement and all System Standards on the date you

gave us written notice of your election to acquire a successor franchise; or

(4) not to grant you a successor franchise because we are no longer granting

franchises for Smashburger Restaurants.

If applicable, Our Notice will:

(a) describe the remodeling, expansion, improvements, or modifications

required to bring your Restaurant into compliance with then applicable System Standards

for new Smashburger Restaurants; and

(b) state the actions you must take to correct operating deficiencies and the time

period in which you must correct these deficiencies.

If we elect not to grant you a successor franchise, Our Notice will describe the reasons for

our decision. If we elect to grant you a successor franchise, your right to acquire a successor

franchise is subject to your full compliance with all of the terms and conditions of this Agreement

through the date of its expiration, in addition to your compliance with the obligations described in

Our Notice.


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C. AGREEMENTS/RELEASES.

In order to acquire a successor franchise, you must satisfy all of the other conditions for a

successor franchise and you and your owners agree to execute the form of franchise agreement and

any ancillary agreements we then customarily use in granting franchises for Smashburger

Restaurants (modified as necessary to reflect the fact that it is for a successor franchise), which

may contain provisions that differ materially from any and all of those contained in this

Agreement. You and your owners further agree to sign general releases, in a form satisfactory to

us, of any and all claims against us and our affiliates and our and their owners, officers, directors,

employees, agents, successors, and assigns. We will consider your or your owners‟ failure to sign

these agreements and releases and to deliver them to us for acceptance and execution (together

with the successor franchise fee) within 30 days after their delivery to you to be an election not to

acquire a successor franchise.

14. TERMINATION OF AGREEMENT.

A. BY YOU.

If you and your owners are fully complying with this Agreement and we materially fail to

comply with this Agreement and do not correct the failure within 30 days after you deliver written

notice of the material failure to us or if we cannot correct the failure within 30 days and we fail to

give you within 30 days after your notice reasonable evidence of our effort to correct the failure

within a reasonable time, you may terminate this Agreement effective an additional 30 days after

you deliver to us written notice of termination. Your termination of this Agreement other than

according to this Section 14.A. will be deemed a termination without cause and a breach of this

Agreement.

B. BY US.

We may terminate this Agreement, effective upon delivery of written notice of termination

to you, if:

(1) you (or any of your owners) have made or make any material

misrepresentation or omission in acquiring the Franchise or operating your Restaurant;

(2) you do not locate, and sign a Lease or purchase document for, an acceptable

site for the Premises within 180 days after the Effective Date;

(3) you do not open your Restaurant for business within the deadline set forth in

Section 2.G;

(4) we determine if you (or your Designated Manager) are not capable or

qualified to satisfactorily complete initial training;

(5) you abandon or fail actively to operate your Restaurant for three or more

consecutive business days, unless you close your Restaurant for a purpose we approve;


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(6) you (or any of your owners) are or have been convicted by a trial court of, or

plead or have pleaded no contest or guilty to, a felony;

(7) you fail to maintain the insurance we require and do not correct the failure

within 10 days after we deliver written notice of that failure to you;

(8) you (or any of your owners) engage in any conduct which, in our opinion,

adversely affects the reputation of your Restaurant or the goodwill associated with the

Marks;

(9) you (or any of your owners) make or attempt to make an unauthorized

transfer (as defined in section 12.B);

(10) you lose the right to occupy the Premises;

(11) you (or any of your owners) knowingly make any unauthorized use or

disclosure of any part of the Standards of Operations Manual or any other Confidential

Information;

(12) you violate any law, ordinance, rule or regulation of a governmental agency

in connection with the operation of your Restaurant and fail to correct such violation within

72 hours after you receive notice from us or any other party;

(13) you fail to pay us or our affiliates any amounts due and do not correct the

failure within 10 days after written notice of that failure has been delivered or fail to pay

any third party obligations owed in connection with your ownership or operation of the

Restaurant and do not correct such failure within any cure periods permitted by the person

or Entity to whom such obligations are owed;

(14) you fail to pay when due any federal or state income, service, sales, use,

employment or other taxes due on or in connection with the operation of your Restaurant,

unless you are in good faith contesting your liability for these taxes;

(15) you understate the Gross Sales three times or more during this Agreement‟s

term;

(16) you (or any of your owners) (a) fail on three or more separate occasions

within any 12 consecutive month period to comply with this Agreement, whether or not we

notify you of the failures, and, if we do notify you of the failures, whether or not you

correct the failures after our delivery of notice to you; or (b) fail on two or more separate

occasions within any six consecutive month period to comply with the same obligation

under this Agreement, whether or not we notify you of the failures, and, if we do notify you

of the failures, whether or not you correct the failures after our delivery of notice to you;

(17) you make an assignment for the benefit of creditors or admit in writing your

insolvency or inability to pay your debts generally as they become due; you consent to the

appointment of a receiver, trustee, or liquidator of all or the substantial part of your

property; your Restaurant is attached, seized, subjected to a writ or distress warrant, or


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levied upon, unless the attachment, seizure, writ, warrant, or levy is vacated within 30

days; or any order appointing a receiver, trustee, or liquidator of you or your Restaurant is

not vacated within 30 days following the order‟s entry;

(18) you (or any of your owners) file a petition in bankruptcy or a petition in

bankruptcy is filed against you;

(19) you (or any of your owners) fail to comply with anti-terrorism laws,

ordinances, regulations and Executive Orders;

(20) you create or allow to exist any condition in or at the Smashburger

Restaurant‟s Premises which we reasonably determine to present a health or safety concern

for the Smashburger Restaurant‟s customers or employees;

(21) you fail to pass quality assurance audits, and do not cure such failure within

15 days after we deliver written notice of failure to you;

(22) you (or any of your owners) fail to comply with any other provision of this

Agreement or any System Standard, and do not correct the failure within 30 days after we

deliver written notice of the failure to you; or

(23) you or an Affiliate fails to comply with any other agreement with us or our

affiliate and do not correct such failure within the applicable cure period, if any.

C. ASSUMPTION OF MANAGEMENT.

We have the right (but not the obligation), under the circumstances described below, to

enter the Premises and assume the management of your Restaurant (or to appoint a third party to

assume its management) for any period of time we deem appropriate but not to exceed 90-day

increments, renewable for up to one year, in the aggregate. We will periodically discuss with you

the results of operation of the Restaurant during the time that we manage it. If we (or a third party)

assume the management of your Restaurant under subparagraphs (1) and (2) below, you agree to

pay us (in addition to the Royalty, Marketing Fund contributions, and other amounts due under this

Agreement) an amount equal to ten percent (10%) of Gross Sales, plus our (or the third party‟s)

direct out-of-pocket costs and expenses, for any period we deem appropriate. If we (or a third

party) assume the management of your Restaurant, you acknowledge that we (or the third party)

will have a duty to utilize only reasonable efforts and will not be liable to you or your owners for

any debts, losses, or obligations your Restaurant incurs, or to any of your creditors for any

supplies, products, or other assets or services your Restaurant purchases, while we (or the third

party) manage your Restaurant.

We (or a third party) may assume the management of your Restaurant under the following

circumstances:

(1) if you abandon or fail to actively operate your Restaurant;


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(2) if you fail to comply with any provision of this Agreement or any System

Standard and do not cure the failure within the time period we specify in our notice to you;

or

(3) if this Agreement expires or is terminated and we are deciding whether to

exercise our option to purchase your Restaurant under Section 15.E. below.

If we exercise our rights under subparagraphs (1) or (2) above, that will not affect our right

to terminate this Agreement under Section 14.B. above.

15. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON TERMINATION OR

EXPIRATION OF THIS AGREEMENT.

A. PAYMENT OF AMOUNTS OWED TO US.

You agree to pay us within 15 days after this Agreement expires or is terminated, or on any

later date that we determine the amounts due to us, the Royalty, Marketing Fund contributions,

interest, and all other amounts owed to us (and our affiliates) which then are unpaid.

B. DE-IDENTIFICATION.

When this Agreement expires or is terminated for any reason:

(1) you may not directly or indirectly at any time or in any manner (except with

other Smashburger Restaurants you own and operate) identify yourself or any business as a

current or former Smashburger Restaurant or as one of our current or former franchise

owners; use any Mark, any colorable imitation of a Mark, or other indicia of a Smashburger

Restaurant in any manner or for any purpose; or use for any purpose any trade name, trade

or service mark, or other commercial symbol that indicates or suggests a connection or

association with us;

(2) you agree to take the action required to cancel all fictitious or assumed

name or equivalent registrations relating to your use of any Mark;

(3) you agree to deliver to us, at your expense, within 30 days all signs,

sign-faces, sign-cabinets, marketing materials, forms, and other materials containing any

Mark or otherwise identifying or relating to a Smashburger Restaurant that we request and

allow us, without liability to you or third parties, to remove these items from your

Restaurant;

(4) if we do not have or do not exercise an option to purchase your Restaurant

under Section 15.E below, you agree promptly and at your own expense to make the

alterations we specify in the Standards of Operations Manual (or otherwise) to distinguish

your Restaurant clearly from its former appearance and from other Smashburger

Restaurants in order to prevent public confusion and in order to comply with the

non-competition provisions set forth in Section 15.D;


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41

(5) you agree to comply with your obligations with respect to the telephone

numbers, telephone listings and Internet Addresses as described in Section 8.H; and

(6) you agree to give us, within 30 days after the expiration or termination of

this Agreement, evidence satisfactory to us of your compliance with these obligations.

C. CONFIDENTIAL INFORMATION.

You agree that, when this Agreement expires or is terminated, you will immediately cease

using any of our Confidential Information (including computer software or similar technology and

digital passwords and identifications that we have licensed to you or that otherwise are proprietary

to us or the Franchise System) in any business or otherwise and return to us all copies of the

Standards of Operations Manual and any other confidential materials that we have loaned you.

D. COVENANT NOT TO COMPETE / NON-SOLICITATION.

(1) Non-Competition. Upon termination or expiration of this Agreement, you

and your owners agree that, for two years beginning on the effective date of termination or

expiration or the date on which all persons restricted by this Section 15.D begin to comply

with this Section 15.D, whichever is later, neither you nor any of your owners (or their

immediate family members) will have any direct or indirect interest as an owner (whether

of record, beneficially, or otherwise), investor, partner, director, officer, employee,

consultant, representative, or agent in any Competitive Business (as defined in Section 7

above) located or operating:

(i) within a 5-mile radius of the Premises; and

(ii) within a 5-mile radius of any other Smashburger Restaurant in

operation or under construction on the later of the effective date of the termination

or expiration of this Agreement or the date on which all persons restricted by this

Section 15.D begin to comply with this Section 15.D.

These restrictions also apply after transfers, as provided in Section 12.C(11) above.

If any person restricted by this Section 15.D refuses voluntarily to comply with these

obligations, the two year period for that person will commence with the entry of a court

order enforcing this provision. You and your owners expressly acknowledge that you

possess skills and abilities of a general nature and have other opportunities for exploiting

these skills. Consequently, our enforcing the covenants made in this Section 15.D will not

deprive you of your personal goodwill or ability to earn a living.

(2) Non-Solicitation. You further agree that, for two years beginning on the

effective date of termination or expiration, neither you nor any of your owners, your or

your owners‟ Affiliates, or the officers, directors, managers or immediate family members

of any of the foregoing, will:

(i) recruit or hire any person who is then or was, within the

immediately preceding 24 months, employed by us, any of our affiliates, or a

franchise owner as (a) a general manager or assistant manager at any Smashburger


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Restaurant, (b) a district or regional manager or any other such person having

responsibility for overseeing or supervising the operation of multiple Smashburger

Restaurants or (c) any of our or our affiliates‟ officers, in any case without our

consent or that of the relevant employer;

(ii) interfere or attempt to interfere with our or our affiliates‟

relationships with any vendors or consultants; or

(iii) engage in any other activity which might injure the goodwill of the

Marks or the Franchise System.

If you fail to comply with paragraph (i) above, you agree, in addition to all other

remedies we have as a result of your failure, to pay us an amount equal to 200% of the

annual salary of such person.

E. OUR RIGHT TO PURCHASE YOUR RESTAURANT.

(1) Purchase Option. In addition to any other rights to purchase we have

under this Agreement or under any multi-unit development agreement between us and you

or your Affiliates, we have the right to purchase your Restaurant, as described in this

Section 15.E (the “Purchase Option”), upon the occurrence of either a “Termination

Event” or a “Control Event.” We have the unrestricted right to assign the Purchase Option

in our discretion.

A “Termination Event” is either the expiration of this Agreement and any

successor franchise granted pursuant to Section 13 or the termination of this Agreement by

you without cause or by us as permitted under Section 14.B (except where the sole cause

for termination was your or your associate‟s failure to comply with the development

schedule set forth in the multi-unit development agreement pursuant to which this

Agreement was executed).

A “Control Event” is:

(a) our termination of the multi-unit development agreement between

us and you or your Affiliate pursuant to which this Agreement was executed or the

expiration of such agreement following a failure to complete an extension of the

term under the circumstances described therein;

(b) a Change of Control (as defined below); or

(c) the signing of an underwriting agreement between a managing

underwriter or underwriters and us or our affiliate, the receiving of a highly

confident or similar letter from an underwriter to us or an affiliate to sell our or a

Designated Entity‟s shares in a public offering, or the filing of a registration

statement filed under the Securities Act of 1933, as amended, in which our or our

direct or indirect parent‟s equity interests are directly or indirectly proposed to be

sold in a public offering.


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43

A “Change of Control” means any transaction or a series of related transactions

that result in (a) a merger, consolidation, recapitalization, sale of equity securities or any

similar transaction as a result of which any person other than one or more of the current

members of Icon Burger or their affiliates (“Permitted Holders”) (i) has the power, directly

or indirectly, to elect or determine the outcome of the election of our governing board or

manager or of a similar governing body of a Designated Entity; or (ii) has the right, directly

or indirectly, to receive more than twenty percent (20%) of our or a Designated Entity‟s

assets upon our or such entity‟s liquidation, or (b) a sale of all or substantially all of our or

a Designated Entity‟s assets in to any person who is not a Permitted Holder. A

“Designated Entity” is Icon Burger, Smashburger Master LLC or any direct or indirect

parent of either.

(2) Purchase Option Triggered by a Termination Event. We may exercise

the Purchase Option based on a Termination Event by giving you written notice of our

election by not later than 30 days after the occurrence of the Termination Event. The

purchase price for your Restaurant will be the net realizable value of the tangible assets in

accordance with the liquidation basis of accounting (not the value of your Restaurant as a

going concern) (“Liquidation Value”). Closing of the purchase will take place, as

described in paragraph (5) below, on a date we select which is within 90 days after the

purchase price is determined by us or, if you dispute the calculation of the purchase price,

as determined pursuant to paragraph (4) below.

(3) Purchase Option Triggered by a Control Event. We may exercise the

Purchase Option based on a Control Event by providing you with written notice (the

“Option Notice”) at any time after, but prior to the 3rd

anniversary of, the occurrence of the

Control Event (the “Option Period”); provided, however, that we have the right to rescind

our election after the purchase price is determined but prior to Closing. Closing on the

purchase (the “Closing Date”) will take place 90 days after the Option Notice (or if the 90th

day falls on a holiday or weekend, on the next business day); provided, however, that if the

purchase price cannot be calculated prior to the scheduled Closing Date because either you

have not provided the financial and other information we reasonably require in order to

make such a determination (including audited financial statements) or you dispute the

purchase price calculation, Closing shall take place not later than 45 days following the

final determination of the purchase price.

The purchase price for your Restaurant under this paragraph (3) will be determined as

follows.

a. If, when we issue the Option Notice, the Restaurant has operated for

at least a full Fiscal Year (that is, the 52 or 53 Accounting Periods that make up our

fiscal year), the purchase price will be six times the Restaurant‟s EBITDA (defined

below) for the full Fiscal Year ending on the last day of the last full Accounting

Period immediately preceding our issuing the Option Notice;

b. If, when we issue the Option Notice, the Restaurant has operated for

more than three but fewer than 12 full Accounting Periods, the purchase price will

be six times the Restaurant‟s annualized EBITDA (based on its EBITDA for the


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44

number of Accounting Periods that it operated prior to our issuing the Option

Notice); and

c. If, when we issue the Option Notice, the Restaurant has operated for

not more than three full Accounting Periods, the purchase price will be the actual

costs expended by you for development of the Restaurant plus twenty percent

(20%) of such costs.

“EBITDA” means net income, calculated using generally accepted accounting

principles (including, without limitation, all direct or indirect costs of operations including

pre-opening expenses, Royalty payments, Marketing Fund contributions and any local

marketing expenditures or Local Advertising Cooperative expenditures), before interest,

income taxes, depreciation, and amortization.

We may exclude from the assets to be purchased any operating assets or other items

that are not reasonably necessary (in function or quality) to the operation of your

Restaurant or that we have not approved as meeting System Standards for Smashburger

Restaurants, and the purchase price will reflect these exclusions. No liabilities, contingent

or otherwise, and no ownership interests will be assumed in connection with our purchase

of your Restaurant under this Section. We may set off against the purchase price, and

reduce the purchase price by, any and all amounts you or your owners owe us or our

affiliates or to any landlords, taxing authorities, vendors or other third parties who we

determine, as a result of monies owed to them, might have a claim or encumbrance against

the Restaurant or the assets we are purchasing.

If, due to a Control Event, we exercise our right under Section 10(c) to require you

to have your financial statements audited for prior fiscal years, you agree to fully cooperate

in such audit and to require your auditors to complete the audit as soon as possible after we

notify you of the required audit, but in any event not later than 6 months after such notice.

If we elect to exercise the Purchase Option under this Section 15.E(3) as a result of

a Control Event, we will do so only if we also exercise our similar options to purchase

under other franchise agreements executed by you or your Affiliates pursuant to the

Development Agreement.

(4) Disputes Regarding Purchase Price Calculation. If you dispute the

calculation of the purchase price, the purchase price will be determined by

one independent accredited appraiser designated by us who will calculate the purchase

price applying the criteria specified above. We agree to select the appraiser within 15 days

after we receive the financial and other information necessary to calculate the purchase

price (if you and we have not agreed on the purchase price before then). You and we will

share equally the appraiser‟s fees and expenses. The appraiser must complete its

calculation within 30 days after its appointment. The purchase price will be the appraiser‟s

determination of the value, applying the appropriate mechanism as described

above. Notwithstanding the foregoing, if the Restaurant is used as collateral for an

SBA-guaranteed loan (which requires our consent under Section 12.B), if, while such loan


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45

remains unpaid, we and you cannot agree on the purchase price, the purchase price will be

determined by three independent accredited appraisers, one of whom will be designated

and paid for by us, one of whom will be designated and paid for by you, and the third who

will designated by your and our appointee and paid for by you and us equally. Each

appointed appraiser will calculate the purchase price, applying the appropriate mechanism

described above, and the determination of at least two of the appraisers shall be the

purchase price. You and we will select our respective appraisers within 15 days after we

receive the financial and other information necessary to calculate the purchase price (if you

and we have not agreed on the calculation of the purchase price, as described above, before

then), and the third appraiser must be appointed within 15 days after the appointment of

your and our appraisers. The appraisers must complete their calculations within 30 days

after their appointment.

(5) Closing. You will continue to operate the Restaurant in accordance with

this Agreement through the Closing. Prior to closing, you agree to cooperate with us in

conducting due diligence, including providing us with access to your business and

financial records, relevant contracts and all other information relevant to the Restaurant.

At the closing, we (or our assignee) will pay the purchase price in cash. You agree to

execute and deliver to us (or our assignee):

(a) an Asset Purchase Agreement and all related agreements, in form

and substance acceptable to us and in which you provide all customary warranties

and representations, including, without limitation, representations and warranties

as to ownership and condition of and title to assets, liens and encumbrances on

assets, validity of contracts and agreements, and liabilities affecting the assets,

contingent or otherwise;

(b) a transfer of good and merchantable title to the assets purchased,

free and clear of all liens and encumbrances (other than liens and security interests

acceptable to us), with all sales and other transfer taxes paid by you;

(c) an assignment of all of the licenses and permits for your Restaurant

which may be assigned or transferred;

(d) an assignment of the Lease;

(e) general releases, in form and substance satisfactory to us, of any and

all claims you and your owners have against us and our shareholders, officers,

directors, employees, agents, successors, and assigns; and

(f) an agreement, in form and substance satisfactory to us, voluntarily

terminating this Agreement under which you and your owners agree to comply

with all post-term obligations set forth in Sections 15.A-15.D and with all other

obligations which, either expressly or by their nature, are intended to survive

termination or expiration of this Agreement.


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F. REMEDIES.

In the event this Agreement is terminated because of your default, you and we agree that it

would be difficult if not impossible to determine the amount of damages that we would suffer.

You and we agree that a reasonable estimate of those damages is the then net present value of the

Royalty fees, Marketing Fund contributions and Local Advertising Cooperative contributions that

would have become due from the date of termination to the scheduled expiration date of this

Agreement. For this purpose, Royalty fees, Marketing Fund contributions and Local Advertising

Cooperative contributions shall be calculated based on Gross Sales of the Restaurant for the 12

months preceding the effective date of termination. In the event the Restaurant has not been in

operation for at least 12 months preceding the termination date, Royalty fees, Marketing Fund

contributions and Local Advertising Cooperative contributions will be calculated based on the

average monthly gross sales of all Smashburger Restaurants during our fiscal year immediately

preceding the termination date.

G. CONTINUING OBLIGATIONS.

All of our and your (and your owners‟) obligations which expressly or by their nature

survive this Agreement‟s expiration or termination will continue in full force and effect

subsequent to and notwithstanding its expiration or termination and until they are satisfied in full

or by their nature expire.

16. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.

A. INDEPENDENT CONTRACTORS.

You and we understand and agree that this Agreement does not create a fiduciary

relationship between you and us, that you and we are and will be independent contractors, and that

nothing in this Agreement is intended to make either you or us a general or special agent, joint

venturer, partner, or employee of the other for any purpose. You agree to identify yourself

conspicuously in all dealings with customers, suppliers, public officials, your personnel, and

others as the owner of your Restaurant under a franchise we have granted and to place notices of

independent ownership on the forms, business cards, stationery, advertising, and other materials

we require from time to time.

You also acknowledge that you will have a contractual relationship only with us and may

look only to us to perform under this Agreement. Icon Burger is not a party to this Agreement and

has no obligations under it. You may not look to Icon Burger for performance. However, because

Icon Burger is the owner of the Marks, you and we agree that Icon Burger will be a third party

beneficiary of those provisions in this Agreement relating to usage of the Marks, with the

independent right to enforce such provisions against you and to seek damages from you for your

failure to comply with those provisions.

B. NO LIABILITY TO OR FOR ACTS OF OTHER PARTY.

We and you may not make any express or implied agreements, warranties, guarantees, or

representations, or incur any debt, in the name or on behalf of the other or represent that our

respective relationship is other than franchisor and franchise owner. We will not be obligated for


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any damages to any person or property directly or indirectly arising out of the operation of your

Restaurant or the business you conduct under this Agreement. We will have no liability for your

obligations to pay any third parties, including any product vendors.

C. TAXES.

We will have no liability for any sales, use, service, occupation, excise, gross receipts,

income, property, or other taxes, whether levied upon you or your Restaurant, due to the business

you conduct (except for our income taxes). You are responsible for paying these taxes and must

reimburse us for any such taxes that we must pay to any state taxing authority on account of your

operation or payments that you make to us.

D. INDEMNIFICATION.

You agree to indemnify, defend, and hold harmless us, our affiliates, and our and their

respective shareholders, members, directors, officers, employees, agents, successors, and

assignees (the “Indemnified Parties”) against, and to reimburse any one or more of the

Indemnified Parties for, all claims, obligations, and damages directly or indirectly arising out of

the operation of your Restaurant, the business you conduct under this Agreement, or your breach

of this Agreement, including, without limitation, those alleged to be caused by the Indemnified

Party‟s negligence, unless (and then only to the extent that) the claims, obligations, or damages are

determined to be caused solely by the Indemnified Party‟s intentional misconduct in a final,

unappealable ruling issued by a court with competent jurisdiction. For purposes of this

indemnification, “claims” include all obligations, damages (actual, consequential, or otherwise),

and costs that any Indemnified Party reasonably incurs in defending any claim against it,

including, without limitation, reasonable accountants‟, arbitrators‟, attorneys‟, and expert witness

fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other

expenses of litigation or alternative dispute resolution, regardless of whether litigation or

alternative dispute resolution is commenced. Each Indemnified Party may defend any claim

against it at your expense and agree to settlements or take any other remedial, corrective, or other

actions. This indemnity will continue in full force and effect subsequent to and notwithstanding

this Agreement‟s expiration or termination. An Indemnified Party need not seek recovery from

any insurer or other third party, or otherwise mitigate its losses and expenses, in order to maintain

and recover fully a claim against you under this subparagraph. You agree that a failure to pursue a

recovery or mitigate a loss will not reduce or alter the amounts that an Indemnified Party may

recover from you under this subparagraph.

17. ENFORCEMENT.

A. SECURITY INTEREST.

As security for the performance of your obligations under this Agreement, including

payments owed to us for purchase by you, you hereby collaterally assign to us the Lease and grant

us a security interest in all of the Operating Assets and all other assets of your Restaurant,

including but not limited to inventory, accounts, supplies, contracts, and proceeds and products of

all those assets. You agree to execute such other documents as we may reasonably request in order

to further document, perfect and record our security interest. If you default in any of your


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obligations under this Agreement, we may exercise all rights of a secured creditor granted to us by

law, in addition to our other rights under this Agreement and at law. If the Restaurant is not the 1st

or 2nd

Smashburger Restaurant developed by you or your Affiliates and if a third party lender

requires that we subordinate our security interest in the assets of your Restaurant as a condition to

lending you working capital for the construction or operation of your Restaurant, we will agree to

subordinate pursuant to terms and conditions determined by us. This Agreement shall be deemed

to be a Security Agreement and Financing Statement and may be filed for record as such in the

records of any county and state that we deem appropriate to protect our interests.

B. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.

Except as expressly provided to the contrary in this Agreement, each section, paragraph,

term, and provision of this Agreement is severable, and if, for any reason, any part is held to be

invalid or contrary to or in conflict with any applicable present or future law or regulation in a

final, unappealable ruling issued by any court, agency, or tribunal with competent jurisdiction, that

ruling will not impair the operation of, or otherwise affect, any other portions of this Agreement,

which will continue to have full force and effect and bind the parties.

If any covenant which restricts competitive activity is deemed unenforceable by virtue of

its scope in terms of area, business activity prohibited, or length of time, but would be enforceable

if modified, you and we agree that the covenant will be enforced to the fullest extent permissible

under the laws and public policies applied in the jurisdiction whose law determines the covenant‟s

validity.

If any applicable and binding law or rule of any jurisdiction requires more notice than this

Agreement requires of this Agreement‟s termination or of our refusal to enter into a successor

franchise agreement, or some other action that this Agreement does not require, or if, under any

applicable and binding law or rule of any jurisdiction, any provision of this Agreement or any

System Standard is invalid, unenforceable, or unlawful, the notice or other action required by the

law or rule will be substituted for the comparable provisions of this Agreement, and we may

modify the invalid or unenforceable provision or System Standard to the extent required to be valid

and enforceable or delete the unlawful provision in its entirety. You agree to be bound by any

promise or covenant imposing the maximum duty the law permits which is subsumed within any

provision of this Agreement, as though it were separately articulated in and made a part of this

Agreement.

C. WAIVER OF OBLIGATIONS.

We and you may by written instrument unilaterally waive or reduce any obligation of or

restriction upon the other under this Agreement, effective upon delivery of written notice to the

other or another effective date stated in the notice of waiver. Any waiver granted will be without

prejudice to any other rights we or you have, will be subject to continuing review, and may be

revoked at any time and for any reason effective upon delivery of 10 days‟ prior written notice.

We and you will not waive or impair any right, power, or option this Agreement reserves

(including, without limitation, our right to demand exact compliance with every term, condition,

and covenant or to declare any breach to be a default and to terminate this Agreement before its


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term expires) because of any custom or practice at variance with this Agreement‟s terms; our or

your failure, refusal, or neglect to exercise any right under this Agreement or to insist upon the

other‟s compliance with this Agreement, including, without limitation, any System Standard; our

waiver of or failure to exercise any right, power, or option, whether of the same, similar, or

different nature, with other Smashburger Restaurants; the existence of franchise agreements for

other Smashburger Restaurants which contain provisions different from those contained in this

Agreement; or our acceptance of any payments due from you after any breach of this Agreement.

No special or restrictive legend or endorsement on any check or similar item given to us will be a

waiver, compromise, settlement, or accord and satisfaction. We are authorized to remove any

legend or endorsement, which then will have no effect.

D. COSTS AND ATTORNEYS’ FEES.

If either party initiates an arbitration, judicial or other proceeding, the prevailing party will

be entitled to reasonable costs and expenses (including attorneys‟ fees incurred in connection with

such judicial or other proceeding).

E. YOU MAY NOT WITHHOLD PAYMENTS DUE TO US.

You agree that you will not withhold payment of any amounts owed to us on the grounds of

our alleged nonperformance of any of our obligations under this Agreement or for any other

reason, and you specifically waive any right you may have at law or in equity to offset any funds

you may owe us or to fail or refuse to perform any of your obligations under this Agreement.

F. RIGHTS OF PARTIES ARE CUMULATIVE.

Our and your rights under this Agreement are cumulative, and our or your exercise or

enforcement of any right or remedy under this Agreement will not preclude our or your exercise or

enforcement of any other right or remedy which we or you are entitled by law to enforce.

G. ARBITRATION.

We and you agree that all controversies, disputes, or claims between us and our affiliates,

and our and their respective shareholders, officers, directors, agents, and employees, and you (and

your owners, guarantors, Affiliates, and employees) arising out of or related to:

(1) this Agreement or any other agreement between you (or your owners) and

us (or our affiliates);

(2) our relationship with you;

(3) the scope or validity of this Agreement or any other agreement between you

(or your owners) and us (or our affiliates) or any provision of any of such agreements

(including the validity and scope of the arbitration obligation under this Section 17.G,

which we and you acknowledge is to be determined by an arbitrator, not a court); or

(4) any System Standard,


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must be submitted for binding arbitration, on demand of either party, to the American Arbitration

Association. The arbitration proceedings will be conducted by one arbitrator and, except as this

Section otherwise provides, according to the then-current Commercial Arbitration Rules of the

American Arbitration Association. All proceedings will be conducted at a suitable location

chosen by the arbitrator in or within 50 miles of our then-current principal place of business

(currently, Denver, Colorado). All matters relating to arbitration will be governed by the Federal

Arbitration Act (9 U.S.C. §§ 1 et seq.). Judgment upon the arbitrator‟s award may be entered in

any court of competent jurisdiction.

The arbitrator shall issue only a standard decision and not a reasoned decision. The

arbitrator has the right to award or include in his or her award any relief which he or she deems

proper, including, without limitation, money damages (with interest on unpaid amounts from the

date due), specific performance, injunctive relief, and attorneys‟ fees and costs, provided that the

arbitrator may not declare any of the trademarks owned by us or our affiliates generic or otherwise

invalid or, except as expressly provided in this Article 17, award any punitive, exemplary, or

multiple damages against either party (we and you hereby waiving to the fullest extent permitted

by law, except as expressly provided in this Article 17, any right to or claim for any punitive,

exemplary, or multiple damages against the other).

We and you agree to be bound by the provisions of any limitation on the period of time in

which claims must be brought under applicable law or under this Agreement, whichever expires

earlier. We and you further agree that, in any arbitration proceeding, each party must submit or

file any claim which would constitute a compulsory counterclaim (as defined by Rule 13 of the

Federal Rules of Civil Procedure) within the same proceeding as the claim to which it relates. Any

claim which is not submitted or filed as required is forever barred. The arbitrator may not consider

any settlement discussions or offers that might have been made by either you or us.

We reserve the right, but have no obligation, to advance your share of the costs of any

arbitration proceeding in order for such arbitration proceeding to take place and by doing so shall

not be deemed to have waived or relinquished our right to seek the recovery of those costs in

accordance with the Attorney‟s Fees and Costs provisions of this Agreement (Section 17.D

above).

We and you agree that arbitration will be conducted on an individual, not a class-wide,

basis and that an arbitration proceeding between us and our affiliates, and our and their respective

shareholders, officers, directors, agents, and employees, and you (and your owners, guarantors,

affiliates, and employees) may not be commenced, conducted or consolidated with any other

arbitration proceeding between us and any other person. Notwithstanding the foregoing or

anything to the contrary in this Section, if any court or arbitrator determines that all or any part of

the preceding sentence is unenforceable with respect to a dispute that otherwise would be subject

to arbitration under this Section, then all parties agree that this arbitration clause shall not apply to

that dispute and that such dispute shall be resolved in a judicial proceeding in accordance with the

dispute resolution provisions of the Agreements.

Despite our and your agreement to arbitrate, we and you each have the right in a proper

case to seek temporary restraining orders and temporary or preliminary injunctive relief from a


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court of competent jurisdiction; provided, however, that we and you must contemporaneously

submit our dispute for arbitration on the merits as provided in this section.

You and we agree that, in any arbitration arising as described in this Section, requests for

documents shall be limited to documents that are directly relevant to significant issues in the case

or to the case‟s outcome; shall be restricted in terms of time frame, subject matter and persons or

entities to which the requests pertain; and shall not include broad phraseology such as “all

documents directly or indirectly related to.” You and we further agree that there shall be no

interrogatories or requests to admit. With respect to any electronic discovery, you and we agree

that:

(a) production of electronic documents need only be from sources used in the ordinary

course of business. No such documents shall be required to be produced from back-up servers,

tapes or other media;

(b) the production of electronic documents shall normally be made on the basis of

generally available technology in a searchable format which is usable by the party receiving

the documents and convenient and economical for the producing party. Absent a showing of

compelling need, the parties need not produce metadata, with the exception of header fields for

email correspondence;

(c) the description of custodians from whom electronic documents may be collected

shall be narrowly tailored to include only those individuals whose electronic documents may

reasonably be expected to contain evidence that is material to the dispute; and

(d) where the costs and burdens of electronic discovery are disproportionate to the

nature of the dispute or to the amount in controversy, or to the relevance of the materials

requested, the arbitrator shall either deny such requests or order disclosure on condition that

the requesting party advance the reasonable cost of production to the other side, subject to

allocation of costs in the final award as provided herein.

In any arbitration arising out of or related to this Agreement, each side may take three

discovery depositions. Each side‟s depositions are to consume no more than a total of 15 hours.

There are to be no speaking objections at the depositions, except to preserve privilege. The total

period for the taking of depositions shall not exceed six weeks.

The provisions of this Section are intended to benefit and bind certain third party

non-signatories and will continue in full force and effect subsequent to and notwithstanding the

expiration or termination of the Agreements.

Any provisions of this Agreement below that pertain to judicial proceedings shall be

subject to the agreement to arbitrate contained in this Section.

H. GOVERNING LAW.

EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES

TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), OR


1031.002.006/46339.6

52

OTHER UNITED STATES FEDERAL LAW, THIS AGREEMENT, THE FRANCHISE,

AND ALL CLAIMS ARISING FROM THE RELATIONSHIP BETWEEN US AND YOU

WILL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO, WITHOUT

REGARD TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT (1) ANY

COLORADO LAW REGULATING THE SALE OF FRANCHISES OR GOVERNING

THE RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE WILL NOT

APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS ARE MET

INDEPENDENTLY WITHOUT REFERENCE TO THIS SECTION, AND (2) THE

ENFORCEABILITY OF THOSE PROVISIONS OF THIS AGREEMENT WHICH

RELATE TO RESTRICTIONS ON YOU AND YOUR OWNERS’ COMPETITIVE

ACTIVITIES WILL BE GOVERNED BY THE LAWS OF THE STATE IN WHICH

YOUR RESTAURANT IS LOCATED.

I. CONSENT TO JURISDICTION.

SUBJECT TO THE OBLIGATION TO ARBITRATE UNDER SECTION 17.G

ABOVE AND THE PROVISIONS BELOW, YOU AND YOUR OWNERS AGREE THAT

ALL ACTIONS ARISING UNDER THIS AGREEMENT OR OTHERWISE AS A

RESULT OF THE RELATIONSHIP BETWEEN YOU AND US MUST BE

COMMENCED IN A COURT OF GENERAL JURISDICTION NEAREST TO OUR

THEN CURRENT PRINCIPAL PLACE OF BUSINESS (CURRENTLY DENVER,

COLORADO), AND YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO THE

JURISDICTION OF THAT COURT AND WAIVE ANY OBJECTION YOU (OR THE

OWNER) MIGHT HAVE TO EITHER THE JURISDICTION OF OR VENUE IN THAT

COURT.

J. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.

EXCEPT FOR YOUR OBLIGATION TO INDEMNIFY US FOR THIRD PARTY

CLAIMS UNDER SECTION 16.D, AND EXCEPT FOR PUNITIVE, EXEMPLARY OR

MULTIPLE DAMAGES AVAILABLE TO EITHER PARTY UNDER UNITED STATES

FEDERAL LAW, WE AND YOU (AND YOUR OWNERS) WAIVE TO THE FULLEST

EXTENT PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE,

EXEMPLARY OR MULTIPLE DAMAGES AGAINST THE OTHER AND AGREE

THAT, IN THE EVENT OF A DISPUTE BETWEEN US AND YOU, THE PARTY

MAKING A CLAIM WILL BE LIMITED TO EQUITABLE RELIEF AND TO

RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.

WE AND YOU IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION,

PROCEEDING, OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY,

BROUGHT BY EITHER OF US.

K. INJUNCTIVE RELIEF.

Nothing in this Agreement bars our right to obtain specific performance of the provisions

of this Agreement and injunctive relief against conduct that threatens to injure or harm us, the

Marks or the Franchise System, under customary equity rules, including applicable rules for


1031.002.006/46339.6

53

obtaining restraining orders and preliminary injunctions. You agree that we may obtain such

injunctive relief. You agree that we will not be required to post a bond to obtain injunctive relief

and that your only remedy if an injunction is entered against you will be the dissolution of that

injunction, if warranted, upon due hearing, and you hereby expressly waive any claim for damages

caused by such injunction.

L. BINDING EFFECT.

This Agreement is binding upon us and you and our and your respective executors,

administrators, heirs, beneficiaries, permitted assigns, and successors in interest. Subject to our

right to modify the Standards of Operations Manual and System Standards, this Agreement may

not be modified except by a written agreement signed by our and your duly-authorized officers.

M. LIMITATIONS OF CLAIMS.

You and your owners agree not to bring any claim asserting that any of the Marks are

generic or otherwise invalid. Except with regard to your obligation to pay us and our affiliates

Royalty payments, the Marketing Fund contributions, Local Advertising Cooperative

contributions and other advertising fees, and other payments due from you pursuant to this

Agreement or otherwise, any claims between the parties must be commenced within one year from

the date on which the party asserting the claim knew or should have known of the facts giving rise

to the claim, or such claim shall be barred. The parties understand that such time limit might be

shorter than otherwise allowed by law. You and your owners agree that your and their sole

recourse for claims arising between the parties shall be against us or our successors and assigns.

You and your owners agree that our and our affiliates‟ members, managers, shareholders,

directors, officers, employees, and agents shall not be personally liable nor named as a party in any

action between us or our affiliates and you or your owners. The parties agree that claims of any

other party or parties shall not be joined with any claims asserted in any action or proceeding

between us and you. No previous course of dealing shall be admissible to explain, modify, or

contradict the terms of this Agreement. No implied covenant of good faith and fair dealing shall be

used to alter the express terms of this Agreement.

N. AGREEMENT EFFECTIVENESS.

This Agreement shall not be effective until accepted by us as evidenced by dating and

signing by an officer or other duly authorized representative of ours. Notwithstanding that this

Agreement shall not be effective until signed by us, we reserve the right to make the effective date

of this Agreement the date on which you signed the Agreement.

O. CONSTRUCTION.

The preambles and exhibits are a part of this Agreement which, together with the System

Standards contained in the Standards of Operations Manual (which may be periodically modified,

as provided in Sections 4.C, 8.I, and 17.L above), constitutes our and your entire agreement, and

there are no other oral or written understandings or agreements between us and you, or oral or

written representations by us, relating to the subject matter of this Agreement, the franchise

relationship, or your Restaurant (any understandings or agreements reached, or any


1031.002.006/46339.6

54

representations made, before this Agreement are superseded by this Agreement). Nothing

contained herein shall be deemed a waiver of any rights you may have to rely on the Franchise

Disclosure Document. Any policies that we adopt and implement from time to time to guide us in

our decision-making are subject to change, are not a part of this Agreement, and are not binding on

us. Except as provided in Section 16.D., nothing in this Agreement is intended or deemed to

confer any rights or remedies upon any person or legal entity not a party to this Agreement.

Except where this Agreement expressly obligates us reasonably to approve or not

unreasonably to withhold our approval of any of your actions or requests, we have the absolute

right to refuse any request you make or to withhold our approval of any of your proposed, initiated,

or completed actions that require our approval. The headings of the sections and paragraphs are

for convenience only and do not define, limit, or construe the contents of these sections or

paragraphs.

References in this Agreement to “we,” “us,” and “our,” with respect to all of our rights and

all of your obligations to us under this Agreement, include any of our affiliates with whom you

deal. The term “affiliate” means any person or entity directly or indirectly owned or controlled by,

under common control with, or owning or controlling you or us. “Control” means the power to

direct or cause the direction of management and policies.

If two or more persons are at any time the owners of the Franchise and your Restaurant,

whether as partners or joint venturers, their obligations and liabilities to us will be joint and

several. References to “owner” mean any person holding a direct or indirect ownership interest

(whether of record, beneficially, or otherwise) or voting rights in you (or a transferee of this

Agreement and your Restaurant or an ownership interest in you), including, without limitation,

any person who has a direct or indirect interest in you (or a transferee), this Agreement, the

Franchise, or your Restaurant and any person who has any other legal or equitable interest, or the

power to vest in himself or herself any legal or equitable interest, in their revenue, profits, rights, or

assets. References to a “controlling ownership interest” in you or one of your owners (if an Entity)

mean the percent of the voting shares or other voting rights that results from dividing one hundred

percent (100%) of the ownership interests by the number of owners. In the case of a proposed

transfer of an ownership interest in you or one of your owners, the determination of whether a

“controlling ownership interest” is involved must be made as of both immediately before and

immediately after the proposed transfer to see if a “controlling ownership interest” will be

transferred (because of the number of owners before the proposed transfer) or will be deemed to

have been transferred (because of the number of owners after the proposed transfer). “Person”

means any natural person, corporation, limited liability company, general or limited partnership,

unincorporated association, cooperative, or other legal or functional entity.

Unless otherwise specified, all references to a number of days shall mean calendar days

and not business days.

The term “your Restaurant” includes all of the assets of Smashburger Restaurant you

operate under this Agreement, including its revenue and the Lease.

This Agreement may be executed in multiple copies, each of which will be deemed an

original.


1031.002.006/46339.6

55

P. LAWFUL ATTORNEY.

Notwithstanding anything otherwise contained in this Agreement, if you do not execute

and deliver any documents or other assurances so required of you pursuant to this Agreement or if

we take over the management or operation of the business operated hereunder on your behalf for

any reason, you hereby irrevocably appoint us as your lawful attorney with full power and

authority, to execute and deliver in your name any such documents and assurances, and to manage

or operate the business on your behalf, and to do all other acts and things, all in such discretion as

we may desire, and you hereby agree to ratify and confirm all of our acts as your lawful attorney

and to indemnify and save us harmless from all claims, liabilities, losses, or damages suffered in so

doing. You also hereby appoint us as your attorney-in-fact to receive and inspect your confidential

sales and other tax records and hereby authorize all tax authorities to provide such information to

us for all tax periods during the term of this Agreement.

18. NOTICES AND PAYMENTS.

All written notices, reports, and payments permitted or required to be delivered by this

Agreement or the Standards of Operations Manual will be deemed to be delivered on the earlier of

the date of actual delivery or one of the following:

(a) at the time delivered via computer transmission and, in the case of the

Royalty, Marketing Fund contributions, and other amounts due, at the time we actually

receive payment;

(b) one business day after transmission by facsimile or other electronic system

if the sender has confirmation of successful transmission;

(c) one business day after being placed in the hands of a nationally recognized

commercial courier service for next business day delivery; or

(d) three business days after placement in the United States Mail by Registered

or Certified Mail, Return Receipt Requested, postage prepaid;

(e) and must be addressed to the party to be notified at its most current principal

business address of which the notifying party has notice. Any required payment or report

which we do not actually receive during regular business hours on the date due (or

postmarked by postal authorities at least two days before then) will be deemed delinquent.

19. ELECTRONIC MAIL.

You acknowledge and agree that exchanging information with us by e-mail is efficient and

desirable for day-to-day communications and that we and you may utilize e-mail for such

communications. You authorize the transmission of e-mail by us and our employees, vendors, and

affiliates (“Official Senders”) to you during the term of this Agreement.

You further agree that: (a) Official Senders are authorized to send e-mails to those of your

employees as you may occasionally authorize for the purpose of communicating with us; (b) you

will cause your officers, directors and employees to give their consent to Official Senders‟


1031.002.006/46339.6

56

transmission of e-mails to them; (c) you will require such persons not to opt out or otherwise ask to

no longer receive e-mails from Official Senders during the time that such person works for or is

affiliated with you; and (d) you will not opt out or otherwise ask to no longer receive e-mails from

Official Senders during the term of this Agreement.

This consent given in this Section 19 shall not apply to the provision of notice by either

party under this Agreement pursuant to Section 18 unless we and you otherwise agree in a written

document manually signed by both parties.

20. RELOCATION.

If, at any time during the Term of this Agreement, you determine that, despite using your

good faith efforts, it is no longer economically feasible to operate the Restaurant at the Premises,

we will consider, in good faith, your request to relocate the Restaurant to a new site within the

Development Area described in the Development Agreement. We will not be required to consider

any request to relocate the Restaurant under this Section 20 if you are not then in compliance with

this Agreement. Further, your right to relocate the Restaurant shall be subject to our approval of

the proposed new site as described in Section 2 of this Agreement, and your development of the

new Smashburger Restaurant at the new approved site in accordance with this Agreement and in

accordance with a timetable to which we agree at the time we grant our approval (including a

timetable for closing of the Restaurant at the existing Premises and re-opening the Restaurant at a

new site.) Any request for relocation and any approvals we grant in connection therewith shall be

in writing. When the Restaurant is closed at the current Premises and is re-opened at the new

approved site, this Agreement shall be deemed to reflect the new address as the Premises.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on

the dates noted below, to be effective as of the Effective Date.



By:

Name:

Title:

EFFECTIVE DATE:

FRANCHISE OWNER:

__________________________________

[Name]

By:

Name:

Title:

Date: ______________________________

A-1 Smashburger –06/2012 FDD


EXHIBIT A

TO FRANCHISE AGREEMENT

1. Form of Owner.

(a) Individual Proprietorship. Your owner(s) (is) (are) as follows:

________________________

________________________

(b) Corporation, Limited Liability Company, or Partnership. You were

incorporated or formed on , under the laws of the State of

_____________. You have not conducted business under any name other than your

corporate, limited liability company, or partnership name unless indicated in the following:

_________.

2. Owners. The following identifies the owner that you have designated as, and that we approve

to be, the Managing Owner and lists the full name of each person who is one of your owners (as

defined in the Franchise Agreement), or an owner of one of your owners, and fully describes

the nature of each owner‟s interest (attach additional pages if necessary).

Owner’s Name Type / %-age of Interest Managing Owner: %

Other Owners: %

%

%

3. Restaurant Premises:



By: _______________________________

Name: _____________________________

Title: ______________________________

Date: ______________________________

FRANCHISE OWNER:

__________________________________

[Name]

By: ________________________________

Name: ______________________________

Title: _______________________________

Date: ______________________________

B-1



EXHIBIT B

TO THE FRANCHISE AGREEMENT

SMASHBURGER FRANCHISING LLC’S

REQUIRED LEASE ADDENDUM

RIDER AND SPECIAL STIPULATIONS

TO LEASE AGREEMENT DATED ____________________

BY AND BETWEEN

______________________________________, AS "LANDLORD"

AND

_____________________________________________, AS "TENANT" FOR THE DEMISED

PREMISES ("PREMISES") DESCRIBED THEREIN

This Rider and the provisions hereof are hereby incorporated into the body of the lease to which

this Rider is attached (the "Lease"), and the provisions hereof shall be cumulative of those set forth in the

Lease, but to the extent of any conflict between any provisions of this Rider and the provisions of the Lease,

this Rider shall govern and control.

1. Consent to Collateral Assignment to Franchisor; Disclaimer. Landlord acknowledges that Tenant

intends to operate a Smashburger®

restaurant in the Premises, and that Tenant's rights to operate a Smashburger

® restaurant and to use the Smashburger

® name, trademarks and service marks are solely

pursuant to a franchise agreement ("Franchise Agreement'') between Tenant and Smashburger Franchising

LLC (“Franchisor”). Tenant's operations at the Premises are independently owned and operated. Landlord

acknowledges that Tenant alone is responsible for all obligations under the Lease unless and until

Franchisor or another franchisee expressly, and in writing, assumes such obligations and takes actual

possession of the Premises. Notwithstanding any provisions of this Lease to the contrary, Landlord hereby

consents, without payment of a fee and without the need for further Landlord consent, to (i) the collateral

assignment of Tenant's interest in this Lease to Franchisor to secure Tenant's obligations to Franchisor

under the Franchise Agreement, or (ii) Franchisor's succeeding to Tenant's interest in the Lease as a result

of Franchisor's exercise of rights remedies under such collateral assignment or as a result of Franchisor‟s

termination of, or exercise of rights or remedies granted in or under, any other agreement between

Franchisor and Tenant, or (iii) Tenant‟s, Franchisor‟s or any other franchisee of Franchisor‟s assignment of

the Lease to another franchisee of Franchisor with whom Franchisor has executed its then-standard

franchise agreement. Landlord, Tenant and Franchisor agree and acknowledge that simultaneously with

such assignment pursuant to the immediately preceding sentence, Franchisor shall be released from all

liability under the Lease or otherwise accruing after the date of such assignment (in the event Franchisor is

acting as the assignor under such assignment), but neither Tenant nor any other franchisee shall be afforded

such release in the event Tenant/such franchisee is the assignor unless otherwise agreed by Landlord.

Landlord further agrees that all unexercised renewal or extension rights shall not be terminated in the event

of any assignment referenced herein, but shall inure to the benefit of the applicable assignee.

B-2



2. Use of Premises. Without limitation of uses permitted under the Lease, but in expansion thereof,

Tenant shall have the right to use the Premises for purposes of an eat-in/take-out/delivery restaurant selling

featuring hamburgers, sandwiches, salads, other food items and beverages, and related products and

services sold in Smashburger® stores, and retail sales and other ancillary purposes associated therewith.

3. Compliance of Premises With Applicable Law; Parking. Landlord represents and warrants that as

of the date hereof the Premises are in compliance with all applicable law, including without limitation

parking sufficient to comply with the use of the Premises as provided in paragraph 2 above. Tenant shall

have the right to use parking spaces for its guests, invitees and employees in an amount at least sufficient to

comply with applicable zoning and other laws. The use of the parking spaces is provided by Landlord to

Tenant without additional charge.

4. Radius/Relocation. Any radius restrictions or relocation provisions found in the Lease are hereby

deleted and of no further force or effect.

5. Tenant‟s Signage. Notwithstanding anything in the Lease contained to the contrary or in conflict,

Landlord hereby grants and approves the following signage rights:

5.1. Landlord agrees to allow Tenant to use Franchisor‟s standard sign and awning package to

the maximum extent permitted by local governmental authorities.

5.2 Tenant shall be provided, at Tenant‟s sole cost and expense, with a panel on any

pylon/monument/directory sign for the development in which the Premises is located, and shall be

permitted to install a standard sign thereon as approved by Franchisor, including without limitation

Franchisor‟s logo.

6. Notice and Cure Rights to Franchisor. Prior to exercising any remedies hereunder (except in the

event of imminent danger to the Premises), Landlord shall give Franchisor written notice of any default by

Tenant, and commencing upon receipt thereof by Franchisor, Franchisor shall have 10 additional days to

the established cure period as is given to Tenant under the Lease for such default, provided that in no event

shall Franchisor have a cure period of less than (i) 10 days after Franchisor's receipt of such notice as to

monetary defaults or (ii) 30 days after Franchisor's receipt of such notice as to non-monetary defaults.

Landlord agrees to accept cure tendered by Franchisor as if the same was tendered by Tenant, but

Franchisor has no obligation to cure such default. The initial address for notices to Franchisor is as follows:

Smashburger Franchising LLC

Attention: Franchise Legal Department

1515 Arapahoe St.


Denver, CO 80202

7. Non-disturbance from Mortgage Lenders. Notwithstanding anything contained in the Lease to the

contrary or in conflict, it shall be a condition of the Lease being subordinated to any mortgage, deed of trust,

deed to secure debt or similar encumbrance on the Premises that the holder of such encumbrance agree not

to disturb Tenant's rights under this Lease or Tenant's possession of the Premises, so long as Tenant is not in

default of its obligations hereunder beyond an applicable grace or cure period provided herein (as may be

extended from time to time pursuant to paragraph 6 immediately above).

B-3



CHECK THE FOLLOWING PARAGRAPH THAT APPLIES. CHECK ONLY ONE. IF NONE IS

CHECKED, THEN CLAUSE a) BELOW WILL BE APPLICABLE, AND CLAUSE b) BELOW WILL

BE DEEMED DELETED

A) Landlord represents and warrants that on the date hereof no mortgage, deed of

trust, deed to secure debt or similar encumbrance encumbers the Premises.

B) A mortgage, deed of trust or deed to secure debt currently encumbers the Premises.

It is a condition precedent to Tenant's obligations under this Lease that the holder of such encumbrance

enter into a written subordination and non-disturbance agreement with Tenant, in form acceptable to

Franchisor.

8. Financing of Trade Fixtures by Franchisor and Security Interest. Any security interest or

Landlord's lien in Tenant's trade fixtures, „trade dress‟, equipment and other personal property in the

Premises is hereby subordinated to any security interest and pledge granted to Franchisor in such items.

The parties acknowledge that there may be certain personal property in the Premises which are not owned

by Tenant, which property shall not be subject to any lien of Landlord. Upon request, Landlord shall grant

the party who owns such property reasonable access to the Premises for the sole purpose of removing such

property, provided such party repairs any damage caused by such removal and otherwise complies with

Landlord‟s reasonable requirements with respect to such access.

9. Tenant Approvals. Notwithstanding anything in the Lease to the contrary, if Tenant is unable to

obtain licenses, building permits, signage permits, variances, subdivision approvals, special use permits and

other governmental approvals necessary to construct and operate a Smashburger®

restaurant (all of the

foregoing licenses, permits and approvals are hereinafter referred to as the "Tenant Approvals") within

________days after Landlord's approval of Tenant's Plans, Tenant may terminate this Lease by written

notice to Landlord, effective as of the date of delivery of written notice to Landlord thereof and any

remaining security deposit shall be returned to Tenant, and any rentals paid in advance shall be prorated

accordingly.

10. Beer, Wine and Liquor License. Notwithstanding anything in the Lease to the contrary, unless

Franchisor has waived, in writing, Tenant‟s obligation to serve alcoholic beverages in the restaurant, if a

license for beer, wine and liquor sales at the Premises has not been unconditionally issued to Tenant within

_________ days after Landlord's approval of Tenant's Plans, Tenant may terminate this Lease by written

notice to Landlord, effective as of the date of delivery of written notice to Landlord thereof and any

remaining security deposit shall be returned to Tenant, and any rentals paid in advance shall be prorated

accordingly.

11. Third Party Beneficiary. For so long as Franchisor holds a collateral assignment of the Lease,

Franchisor is a third party beneficiary of the Lease, including, without limitation, this Rider, and as a result

thereof, shall have all rights (but not the obligation) to enforce the same.

12. Franchisor Right to Enter. Landlord acknowledges that, under the Franchise Agreement,

Franchisor or its appointee has the right to assume the management and operation of the Tenant‟s business,

on Tenant‟s behalf, under certain circumstances (to-wit: Tenant‟s abandonment, Tenant‟s failure to timely

cure its default of the Franchise Agreement, and while Franchisor evaluates its right to purchase the

restaurant). Landlord agrees that Franchisor or its appointee may enter upon the Premises for purposes of

assuming the management and operation of Tenant‟s restaurant as provided in the Franchise Agreement

and, if it chooses to do so, it will do so in the name of the Tenant and without assuming any direct liability

under the Lease. Further, upon the expiration or earlier termination of this Lease or the Franchise

Agreement, Franchisor or its designee may enter upon the Premises for the purpose of removing all signs

B-4



and other material bearing the Smashburger®

name or trademarks, service marks or other commercial

symbols of Franchisor.

13. Amendments. Tenant agrees that the Lease may not be terminated, modified or amended

without Franchisor‟s prior written consent, nor shall Landlord accept surrender of the Premises

without Franchisor‟s prior written consent. Tenant agrees to promptly provide Franchisor with

copies of all proposed modifications or amendments and true and correct copies of the signed

modifications and amendments.

14. Copy of Lease. Landlord agrees to provide Franchisor with a copy of the fully-executed

Lease within 10 days of its full execution by Landlord and Tenant to the address shown in

paragraph 6 above.

15. Counterparts. This Rider may be executed in one or more counterparts, each of which shall

cumulatively constitute an original. PDF/Faxed signatures of this Rider shall constitute originals of the

same.

AGREED and executed and delivered under seal by the parties hereto as of the day and year of the

Lease.

LANDLORD: ____________________

By: Name: Title:

TENANT: ______________________

By: Name: Title:

C-1 Smashburger –06/2012 FDD


EXHIBIT C


COLLATERAL ASSIGNMENT OF TELEPHONE NUMBERS,

TELEPHONE LISTINGS AND INTERNET ADDRESSES

THIS COLLATERAL ASSIGNMENT is entered into this __ day of ,20__,

in accordance with the terms of the Smashburger Franchising LLC Franchise Agreement

("Franchise Agreement") between Smashburger Franchising LLC ("Franchisor") and

("Franchisee"), executed concurrently with this Assignment, under

which Franchisor granted Franchisee the right to own and operate a Smashburger Restaurant

("Franchise Business") located at .

FOR VALUE RECEIVED, Franchisee hereby assigns to Franchisor (1) those certain

telephone numbers and regular, classified or other telephone directory listings (collectively, the

"Telephone Numbers and Listings") and (2) those certain Internet website addresses ("URLs")

associated with Franchisor's trade and service marks and used from time to time in connection with

the operation of the Franchise Business at the address provided above. This Assignment is for

collateral purposes only and, except as specified herein, Franchisor shall have no liability or

obligation of any kind whatsoever arising from or in connection with this Assignment, unless

Franchisor shall notify the telephone company and the listing agencies with which Franchisee has

placed telephone directory listings (all such entities are collectively referred to herein as

"Telephone Company") and Franchisee's Internet service provider ("ISP") to effectuate the

assignment pursuant to the terms hereof.

Upon termination or expiration of the Franchise Agreement (without extension),

Franchisor shall have the right and is hereby empowered to effectuate the assignment of the

Telephone Numbers and Listings and the URLs, and, in such event, Franchisee shall have no

further right, title or interest in the Telephone Numbers and Listings and the URLs, and shall

remain liable to the Telephone Company and the ISP for all past due fees owing to the Telephone

Company and the ISP on or before the effective date of the assignment hereunder.

Franchisee agrees and acknowledges that as between Franchisor and Franchisee, upon

termination or expiration of the Franchise Agreement, Franchisor shall have the sole right to and

interest in the Telephone Numbers and Listings and the URLs, and Franchisee irrevocably

appoints Franchisor as Franchisee's true and lawful attorney-in-fact, which appointment is coupled

with an interest, to direct the Telephone Company and the ISP to assign same to Franchisor, and

execute such documents and take such actions as may be necessary to effectuate the assignment.

Upon such event, Franchisee shall immediately notify the Telephone Company and the ISP to

assign the Telephone Numbers and Listings and the URLs to Franchisor. If Franchisee fails to

promptly direct the Telephone Company and the ISP to assign the Telephone Numbers and

Listings and the URLs to Franchisor, Franchisor shall direct the Telephone Company and the ISP

to effectuate the assignment contemplated hereunder to Franchisor. The parties agree that the

Telephone Company and the ISP may accept Franchisor's written direction, the Franchise

Agreement or this Assignment as conclusive proof of Franchisor's exclusive rights in and to the

Telephone Numbers and Listings and the URLs upon such termination or expiration and that such

C-2 Smashburger –06/2012 FDD


assignment shall be made automatically and effective immediately upon Telephone Company's

and ISP's receipt of such notice from Franchisor or Franchisee. The parties further agree that if the

Telephone Company or the ISP requires that the parties execute the Telephone Company's or the

ISP's assignment forms or other documentation at the time of termination or expiration of the

Franchise Agreement, Franchisor's execution of such forms or documentation on behalf of

Franchisee shall effectuate Franchisee's consent and agreement to the assignment. The parties

agree that at any time after the date hereof they will perform such acts and execute and deliver such

documents as may be necessary to assist in or accomplish the assignment described herein upon

termination or expiration of the Franchise Agreement.

THUS SIGNED this as of the day and date shown on the first page hereof.



By: _______________________________

Name: _____________________________

Title: ______________________________

Date: ______________________________

FRANCHISEE:

__________________________________

[Name]

By: ________________________________

Name: ______________________________

Title: _______________________________

Date: ______________________________



EXHIBIT D


GUARANTY AND ASSUMPTION OF OBLIGATIONS

THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this _____ day

of , 20 __, by

.

In consideration of, and as an inducement to, the execution of that certain Franchise

Agreement (the “Agreement”) on this date by SMASHBURGER FRANCHISING LLC (“us,”

“we,” or “our”), each of the undersigned personally and unconditionally (a) guarantees to us and

our successors and assigns, for the term of the Agreement and afterward as provided in the

Agreement, that ________________________________________ (“Franchise Owner”) will

punctually pay and perform each and every undertaking, agreement, and covenant set forth in the

Agreement and (b) agrees to be personally bound by, and personally liable for the breach of, each

and every provision in the Agreement, both monetary obligations and obligations to take or refrain

from taking specific actions or to engage or refrain from engaging in specific activities, including

the non-competition, confidentiality, and transfer requirements.

Each of the undersigned consents and agrees that: (1) his or her direct and immediate

liability under this Guaranty will be joint and several, both with Franchise Owner and among other

guarantors; (2) he or she will render any payment or performance required under the Agreement

upon demand if Franchise Owner fails or refuses punctually to do so; (3) this liability will not be

contingent or conditioned upon our pursuit of any remedies against Franchise Owner or any other

person; and (4) this liability will not be diminished, relieved, or otherwise affected by any

extension of time, credit, or other indulgence which we may from time to time grant to Franchise

Owner or to any other person, including, without limitation, the acceptance of any partial payment

or performance or the compromise or release of any claims, none of which will in any way modify

or amend this Guaranty, which will be continuing and irrevocable during the term of the

Agreement.

Each of the undersigned waives: (i) all rights to payments and claims for reimbursement or

subrogation which any of the undersigned may have against Franchise Owner arising as a result of

the undersigned‟s execution of and performance under this Guaranty; and (ii) acceptance and

notice of acceptance by us of his or her undertakings under this Guaranty, notice of demand for

payment of any indebtedness or non-performance of any obligations hereby guaranteed, protest

and notice of default to any party with respect to the indebtedness or nonperformance of any

obligations hereby guaranteed, and any other notices to which he or she may be entitled.

Each of the undersigned represents and warrants that, if no signature appears below for

such undersigned‟s spouse, such undersigned is either not married or, if married, is a resident of a

state which does not require the consent of both spouses to encumber the assets of a marital estate.

The provisions contained in Section 17 (Enforcement) of the Agreement, including

Section 17.G (Arbitration), Section 17.I (Consent to Jurisdiction) and Section 17.D (Costs and



Attorneys‟ Fees) of the Agreement are incorporated into this Guaranty by reference and shall

govern this Guaranty and any disputes between the undersigned and us. If we are required to

engage legal counsel in connection with any failure by the undersigned to comply with this

Guaranty, the undersigned shall reimburse us for any of the above-listed costs and expenses we

incur.

By signing below, the undersigned spouse of the Guarantor indicated below, acknowledges

and consents to the guaranty given herein by his/her spouse. Such consent also serves to bind the

assets of the marital estate to Guarantor‟s performance of this Guaranty. We confirm that a spouse

who signs this Guaranty solely in his or her capacity as a spouse (and not as an owner) is signing

merely to acknowledge and consent to the execution of the Guaranty by his or her spouse and to

bind the assets of the marital estate as described therein and for no other purpose (including,

without limitation, to bind the spouse‟s own separate property).

IN WITNESS WHEREOF, each of the undersigned has affixed his or her signature on

the same day and year as the Agreement was executed.

GUARANTORS

DEVELOPER (If Different than Franchise Owner):____________________________

Sign:______________________________

Name: ____________________________

Title:______________________________

OTHER GUARANTOR(S) SPOUSE(S)

#1:

Name: ___________________________

Sign:

#1:

Name:

Sign:

#2:

Name: ___________________________

Sign:

#2:

Name:

Sign:

#3:

Name: ___________________________

Sign:

#3:

Name:

Sign:


Ex. D – List of Franchisees 1031.002.006/46341.1

EXHIBIT "D"

LIST OF FRANCHISEES



LIST OF FRANCHISEES AS OF 1/1/2012

Sunwest Burgers, LLC 9915 W. McDowell Rd. Suite 101 Avondale AZ 85392 (623) 936-3020

Sunwest Burgers, LLC 5870 W Thunderbird Rd. Glendale AZ 85306 (602) 439-4050

Sunwest Burgers, LLC 1949 E Camelback RD #164 Phoenix AZ 85016 (602) 279-0757

Sunwest Burgers, LLC 2440 W. Happy Valley Rd., F-101 Phoenix AZ 85085 (623) 780-1884

Sunwest Burgers, LLC 777 S College Ave., Ste 105 Tempe AZ 85281 (480) 829-3750

Sunwest Burgers, LLC 815 E Baseline Rd., Ste B-113 Tempe AZ 85283 (602) 838-9933

Sunwest Burgers, LLC 2000 E. Rio Salado Pkwy, Ste 1155 Tempe AZ 85281 (480) 894-3469

Smash Bros Del Mar, LLC 1555 Camino Del Mar Del Mar CA 92014 (858) 461-4105

Smash Bros, LLC 1000 Prospect St. La Jolla CA 92037 (858) 750-2531

Smash Bros Oceanside, LLC 3460 Marron Rd. Oceanside CA 92056 (760) 729-1686

Smash Bros, LLC 7610 Hazard Center, Ste 507 San Diego CA 92108 (619) 684-1550

Smash Bros Market Street, LLC 801 Market St. San Diego CA 92101 (619) 241-2207

Smash Bros Rancho P, LLC 13219 Black Mountain Rd. San Diego CA 92129 (858) 780-9300

Smash Bros Kearny Mesa, LLC 3737 Murphy Canyon Rd San Diego CA 92056 (858) 268-9301

Smash Bros Vista, LLC 1711 University Dr Vista CA 92083 (760) 630-0005

Smash Werks, LLC 1419 N Denver Ave Loveland CO 80538 (970) 461-0188

American Food Service Group LLC 630 Atlantic Blvd., Spc #B-105 Neptune Beach FL 32266 (904) 241-2666

Rising Star, Inc 5530 Windward Pkwy., Suite C310 Alpharetta GA 30004 (770) 754-0554

Rising Star, Inc 2625 Piedmont Rd., Ste 34A Atlanta GA 30324 (404) 237-2374

Rising Star, Inc 9775 Medlock Bridge Rd., Suite A Johns Creek GA 30097 (770) 497-6274

Smash Atlanta I, Inc 440 Ernest W Barrett Pkwy Kennesaw GA 30144 (770) 427-4141

Smash Atlanta I, Inc 6080 Rosewell Rd Sandy Springs GA 30328 (404) 257-1557

Smashguys, LLC 2010 SE Delaware Suites 222-224 Ankeny IA 50021 (515) 963-5100

Reload, LLC 3617 Denmark Dr., Ste 200 Council Bluffs IA 51501 (712)256-7676

Smashguys, LLC 1821 E 22nd Street Des Moines IA 50315 (515) 661-6666

Douglas G Cekander & Jayme M Cekander 2661 Chatham Rd Springfield IL 62704 (217) 787-3700

KC Smash 01, LLC 501 N 3rd Place Bld O Manhattan KS 66502 (785) 587-8485

Burgers R Us NKU, Inc 2517 Wilson Ave. Highland Heights KY 41076 (859) 441-2800

Bluegrass Burgers I, LLC 535 S Upper St Lexington KY 40508 (859) 280-2202

Bluegrass Burgers I, LLC 3695 Nicholasville Rd., Ste 120 Lexington KY 40503 (859) 271-0411

Jones Group SB, LLC 9409 Shelbyville Rd Louisville KY 40222 (502) 326-4141

Shreveport Sizzle, LLC 2300 Airline Dr., Ste 600 Bossier City LA 71111 (318) 746-7420

Shreveport Sizzle, LLC 7503 Youree Dr., Suite 500 Shreveport LA 71105 (318) 797-1988

Smash One LLC 25 Michigan St., Ste 1300 Grand Rapids MI 49503 (616) 451-9570

Smash Two LLC 2650 E. Beltline SE Grand Rapids MI 49546 (616) 575-0070

Smash Venture, LLC 4315 W Main St. Kalamazoo MI 49006 (269) 492-9400

Smashburger 06/2012 FDD Ex. D – List of Franchisees

1031.002.006/46341.1

2


MI Smash, LLC 6919 Orchard Lake Rd W. Bloomfield MI 48322 (248) 737-2960

STL Smash, LLC 1670 Clarkson Rd Chesterfield MO 63017 (636) 536-3066

STL Smash, LLC 1981 Zumbehl Rd St. Charles MO 63303 (636) 724-6777

Killybegs Management LLC 7804 Rea Rd., Ste B & C, Bldg E3 Charlotte NC 28277 (704) 544-5355

River Smash, LLC 1801 45th St SW Fargo ND 58103 (701) 478-2111

Reload, LLC 3811 Twin Creek Dr. Bellevue NE 68046 (402) 991-4800

Reload, LLC 12330 K Plaza #101 Omaha NE 68137 (402) 933-7300

Reload, LLC 7204 Jones St. Omaha NE 68144 (402) 934-4400

Smash Enterprises, LLC 700 Route 3 West Clifton NJ 07013 (973) 777-3600

Smash Enterprises, LLC 187 Columbia Turnpike Florham Park NJ 07932 (973) 520-8717

Smash Enterprises, LLC 989 Bloomfield Ave., Tenant 1c Glenridge NJ 07028 (973) 433-7343

Smash Enterprises, LLC 390 Hackensack Ave., Space 169 Hackensack NJ 07601 (201) 343-1488

Smash Enterprises, LLC 1260 Springfield Ave. New Providence NJ 07974 (908) 286-0100

Smash Enterprises, LLC Newark International Airport, Terminal C, Level 2, Gate 130 Newark NJ 07114 (973) 622-1166

Smash Enterprises, LLC 556 Rte 17 North Paramus NJ 07652 (973) 520-8717

SB Las Vegas, LLC 9101 W Sahara Ave. Las Vegas NV 89117 (702) 462-5500

SB Las Vegas, LLC 5655 Centennial Center Blvd., Suite 170 Las Vegas NV 89149 (702) 462-5503

SB Las Vegas, LLC 4725 S Maryland Pkwy. Las Vegas NV 89119 (702) 385-0043

SB Las Vegas, LLC 7541 W. Lake Mead Blvd. Suite 2 Las Vegas NV 89128 (702) 982-0009

SB Team Brooklyn LLC 74 Dekalb Ave Brooklyn NY 11201 (718) 222-1101

SBR-FOUR, LLC 4752 Cornell Rd. Blue Ash OH 45242 (513) 376-7565

Rodenkirch Management Group, LLC 2315 Miamisburg-Centerville Rd Dayton OH 45459 (937) 938-9888

SBR-TWO, LLC 1200 Brown St. Ste 190 Dayton OH 45409 (937) 985-9262

SBR-FIVE, LLC 6731 Miller Lane Dayton OH 45414 (937) 387-6564

SBR-SIX, LLC 3397 Princeton Rd., Suite 105 Fairfield OH 45011 (513) 737-1222

SBR-THREE, LLC 7598 Cox Lane West Chester OH 45069 (513) 847-4840

KCG Smash Outlet, LLC 7642 W. Reno Ave., Ste 470 Oklahoma City OK 73128 (405) 787-5700

KCG Smash Memorial Plaza, LLC 2127 W. Memorial Oklahoma City OK 73134 (405) 418-8416

Bigg Capital Holdings LLC 4980 Belt Line Road, Suite 140 Addison TX 75254 (214) 884-1124

Cowtown Sizzle, LLC 5005 S. Cooper St. Ste. 163 Arlington TX 76017 (817) 557-5554

Cowtown Sizzle, LLC 1505 Wilshire Blvd., Ste 610 Burleson TX 76028 (817) 447-4302

Bigg Capital Holdings LLC 2222 McKinney Avenue, Suite 280 Dallas TX 75201 (469) 341-3394

Bigg Capital Holdings LLC 6959 Lebanon Rd., Ste 123 Frisco TX 75034 (214) 705-0031

Phase Next Hospitality 1611 Haan Rd., Space K-123 Ft Bliss TX 79906 (915) 565-9464

Cowtown Sizzle, LLC 1605 South University Dr. Ft. Worth TX 76107 (817)810-9612

Cowtown Sizzle, LLC 6314 Camp Bowie Blvd Ft. Worth TX 76116 (817) 731-0263

Smashburger 06/2012 FDD Ex. D – List of Franchisees

1031.002.006/46341.1

3


Bigg Capital Holdings LLC 975 W John Carpenter Freeway, Ste 118 Irving TX 75039 (214) 302-2681

SB Sizzle, LLC 3080 N Eastman Rd Suite 115 Longview TX 75605 (903) 663-2319

Bigg Capital Holdings LLC 6100 W. Park Plano TX 75093 (972) 407-5800

SB Alamo Development, LLC 21025 US HWY 281 N San Antonio TX 78258 (210) 497-4479

SB Alamo Park North, LLC 842 NW Loop 410 San Antonio TX 78216 (210) 541-0836

SB Alamo Bandera, LLC 11309 Bandera Rd., #30901 SA San Antonio TX 78250 (210) 680-0987

SB Alamo Richland, LLC 8802 Potranco Rd., #101 San Antonio TX 78251 (210) 521-1750

SB Alamo McAllen I, LLC N 10th St @ Nolana Loop San Antonio TX 78504 (956) 631-5300

SB Sizzle, LLC 3314 Troup Hwy Tyler TX 75701 (903) 526-7982

SB Sizzle, LLC 7484 S Broadway Blvd Tyler TX 75703 (903) 534-3719

SB Las Vegas, LLC 158 N Red Cliff Dr., Suite A2 St George UT 84790 (435)656-9815



LIST OF FRANCHISEES WHO HAVE SIGNED BUT NOT OPENED RESTAURANTS AS OF 1/1/2012

Modern Foods Co, LTD Location to be determined

Ashish Parikh Location to be determined

NOLA Smash, Inc. Location to be determined

QSR International, L.D.C. Location to be determined

Al Taqa Al Alia Lilestithmar Company Location to be determined

Yousef Sh. Y Alessa Location to be determined Kuwait

Smash Partners 1, Inc Location to be determined NY

ISK Long Island, LLC 180 Old Country Rd Hicksville NY 11801 (516) 605-2235

Aurora Burgers, LLC Location to be determined PA

Winding River Restaurants, LLC 415 N. Thompson Ln. Murfreesboro TN 37129 (615) 809-2226

Cowtown Sizzle, LLC Location to be determined Abilene TX

Texmash 3008 S. 31st St. Temple TX 76502 (254) 742-0746

SB Sizzle, LLC 117 Richmond Road Texarkana TX

Cowtown Sizzle, LLC Location to be determined Wichita Falls TX

If you buy this franchise, your contact information may be disclosed to other buyers when you leave the franchise system.


Ex. E – EEs Who Left System 1031.002.006/46342.1

EXHIBIT "E"

LIST OF FRANCHISEES WHO HAVE

LEFT THE SYSTEM OR NOT COMMUNICATED

Smashburger 06/2012 FDD Ex. E – EEs Who Left System 1031.002.006/46342.1

E-1

FRANCHISEES WHO HAVE LEFT THE SYSTEM

AS OF 12/25/2011

Name of Franchisee City State Phone Number

Jim Cagle Grand Junction Colorado 970-261-0343

Ed Graefe & James Mitch Douglassville Pennsylvania 215-241-8888


Ex. F – Financial Statements 1031.002.006/46343.1

EXHIBIT "F"

FINANCIAL STATEMENTS

Smashburger

Franchising LLC Financial Statements as of January 1, 2012 and December 26, 2010, and for the 53 Weeks Ended January 1, 2012, 52 Weeks Ended December 26, 2010, and 52 Weeks Ended December 27, 2009, and Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

To the Managing Member of


Denver, Colorado

We have audited the accompanying balance sheets of Smashburger Franchising LLC (the “Company”) as

of January 1, 2012 and December 26, 2010, and the related statement of operations, members’ equity, and

cash flows for the 53 weeks ended January 1, 2012, the 52 weeks ended December 26, 2010, and the 52

weeks ended December 27, 2009. These financial statements are the responsibility of the Company’s

management. Our responsibility is to express an opinion on these financial statements based on our

audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of

America. Those standards require that we plan and perform the audits to obtain reasonable assurance

about whether the financial statements are free of material misstatement. An audit includes consideration

of internal control over financial reporting as a basis for designing audit procedures that are appropriate in

the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,

assessing the accounting principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation. We believe that our audits provide a reasonable

basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of

the Company as of January 1, 2012 and December 26, 2010, and the results of its operations and its cash

flows for the fiscal years ended January 1, 2012, December 26, 2010, and December 27, 2009, in

conformity with accounting principles generally accepted in the United States of America.

February 24, 2012

Deloitte & Touche LLP Suite 3600 555 Seventeenth Street Denver, CO 80202-3942 USA

Tel: 1 303 292 5400 Fax: 1 303 312 4000 www.deloitte.com

Member of Deloitte Touche Tohmatsu Limited

- 2 -


BALANCE SHEETS

AS OF JANUARY 1, 2012 AND DECEMBER 26, 2010

2011 2010ASSETS

CURRENT ASSETS: Cash and cash equivalents 530,000$ 694,000$ Accounts receivable 129,000 103,000 Accounts receivable, related party 70,000 - Prepaid expense 23,000 24,000 Restricted asset — Marketing Fund 37,000 16,000

Total current assets 789,000 837,000

NOTE RECEIVABLE, RELATED PARTY 606,000 -

DEFERRED COSTS 5,615,000 3,450,000

TOTAL 7,010,000$ 4,287,000$

LIABILITIES AND MEMBER’S EQUITY

CURRENT LIABILITIES: Accounts payable 27,000$ - $ Related party payable 809,000 301,000 Liability — Marketing Fund 37,000 16,000

Total current liabilities 873,000 317,000

DEFERRED REVENUE 5,730,000 3,670,000

Total liabilities 6,603,000 3,987,000

MEMBER’S EQUITY: Contributed capital 250,000 250,000 Retained earnings 157,000 50,000

Total member’s equity 407,000 300,000

TOTAL 7,010,000$ 4,287,000$

See notes to financial statements.

- 3 -


STATEMENTS OF OPERATIONS

FOR THE FISCAL YEARS ENDED JANUARY 1, 2012, DECEMBER 26, 2010, AND DECEMBER 27, 2009

2011 2010 2009

REVENUES: Royalty fees 4,644,000$ 2,496,000$ 518,000$ Franchise fees 2,207,000 1,425,000 625,000

Total revenue 6,851,000 3,921,000 1,143,000

COST AND EXPENSES: Servicing expense — affiliate 6,508,000 3,725,000 1,086,000 Intellectual property licensing expense — affiliate 206,000 118,000 34,000 General and administrative expense 31,000 29,000 24,000

Total costs and expenses 6,745,000 3,872,000 1,144,000

OTHER INCOME — Interest income 1,000 - 1,000

NET INCOME 107,000$ 49,000$ - $


- 4 -


STATEMENTS OF MEMBER'S EQUITY


Contributed Retained

Capital Earnings Total

BALANCE — December 28, 2008 250,000$ 1,000$ 251,000$

Net income - - -

BALANCE — December 27, 2009 250,000 1,000 251,000

Net income - 49,000 49,000

BALANCE — December 26, 2010 250,000 50,000 300,000

Net income - 107,000 107,000

BALANCE — January 1, 2012 250,000$ 157,000$ 407,000$


- 5 -


STATEMENTS OF CASH FLOWS


2011 2010 2009

CASH FLOWS FROM OPERATING ACTIVITIES: Net income 107,000$ 49,000$ - $ Changes in operating assets and liabilities: Accounts receivable (26,000) (12,000) 177,000 Accounts receivable — related party (70,000) - - Prepaid expenses 1,000 2,000 (26,000) Restricted asset — Marketing Fund (21,000) 27,000 (149,000) Deferred franchise costs (2,165,000) (1,514,000) (1,363,000) Accounts payable 27,000 - - Related party payable 508,000 292,000 (35,000) Liability — Marketing Fund 21,000 (27,000) 149,000 Deferred franchise revenue 2,060,000 1,670,000 1,175,000

Net cash (used in) provided by operating activities 442,000 487,000 (72,000)

CASH FLOWS FROM INVESTING ACTIVITIES — Issuance of notes receivable, related party (606,000) - -

Net cash used in investing activities (606,000) - -

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (164,000) 487,000 (72,000)

CASH AND CASH EQUIVALENTS: Beginning of year 694,000 207,000 279,000

- 6 -


NOTES TO FINANCIAL STATEMENTS AS OF JANUARY 1, 2012 AND DECEMBER 26, 2010, AND FOR THE YEARS ENDED JANUARY 1, 2012, DECEMBER 26, 2010, AND DECEMBER 27, 2009

1. SUMMARY OF THE ORGANIZATION

Smashburger Franchising LLC (the “Company”) was formed in the state of Delaware on March 5, 2008.

The Company is primarily engaged in franchising, fast casual “better burger” restaurants which offer

hand-crafted burgers, grilled or crispy chicken sandwiches, freshly prepared salads, handspun shakes

and an array of signature sides under the service mark Smashburger™. As of January 1, 2012, the

Company has franchised restaurants in 24 states. In addition, the Company is party to international area

development agreements and master franchise agreements under which area developers and master

franchise owners purchase the right to develop and provide operational support to Smashburger

restaurants in a specific geographic region or territory.

The Company primarily generates revenues from the sale of new Smashburger franchise agreements and

from on-going royalty fees earned under Smashburger franchise agreements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation — The accompanying financial statements have been prepared in accordance

with U.S. generally accepted accounting principles.

Fiscal Year — The Company’s fiscal year is 52 or 53 weeks ending on the Sunday closest to

December 31. Fiscal year 2011 includes 53 weeks and fiscal years 2010 and 2009 each include 52

weeks.

Use of Estimates — The preparation of financial statements in conformity with accounting principles

generally accepted in the United States of America requires management to make estimates and

assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the

disclosures of contingencies. Actual results could differ materially from these estimates.

Cash and Cash Equivalents — The Company considers all highly liquid instruments purchased with

an original maturity of three months or less to be cash equivalents.

Accounts Receivable — The Company’s accounts receivable consist primarily of franchise fees and

royalties receivable. The Company evaluates the collectability of its receivables based on a combination

of factors, including length of time the receivables are past due, historical performance and the

probability of collection. No allowance for doubtful accounts was considered necessary as of January 1,

2012 or December 26, 2010.

Deferred Franchise Costs — The Company has a franchise servicing agreement with a related party

which provides pre and post opening services required under the franchise agreement. Amounts paid to

the related party for pre opening services are deferred and expensed when all material services and

conditions have been substantially completed, generally when the franchised restaurant commences

operations. The cost associated with post opening services are expensed as incurred.

- 7 -

For the years ended January 1, 2012, December 26, 2010, and December 27, 2009, servicing fees paid

were approximately $8.3 million, $4.9 million, and $2.96 million, respectively. Additionally, the

Company expensed approximately $6.5 million, $3.7 million, and $1.1 million of servicing fees for the

years ended January 1, 2012, December 26, 2010, and December 27, 2009, respectively.

The Company licenses intellectual property from a related party. Under this agreement, the Company

pays a fee based on initial franchise fees, ongoing royalties and other fees paid to the Company by the

franchise owners. The costs paid to the related party associated with initial franchise fees are deferred

until all material services and conditions have been substantially completed, generally until the franchise

restaurant commences operations. The cost associated with royalties and other fees are expensed as

incurred.

For the years ended January 1, 2012, December 26, 2010, and December 27, 2009, $95,000, $155,000,

and $94,000, respectively, of intellectual property license fees were paid to the related party and

$206,000, $118,000, and $34,000, respectively, were expensed under the license agreement.

The total deferred costs related to payments to related parties for servicing and intellectual property

license fees as of January 1, 2012 and December 26, 2010, are approximately $5.6 million and

$3.5 million, respectively, and are included within deferred costs on the balance sheets.

Revenue Recognition — Pursuant to the various franchise agreements, franchise owners are required to

pay the Company royalty fees based on a percentage of sales ranging from 4 – 6%. Royalties are accrued

based on a percent of gross sales less discounts, as reported by the franchise owners and are included in

accounts receivable.

Initial franchise fees collected by the Company are recognized as revenue when all material services and

conditions required to be performed by the Company have been substantially completed, which is

generally when the restaurant commences operations. Initial franchise fees collected by the Company

before all material franchised services and conditions are substantially performed are recorded as

deferred revenue.

Income Taxes — The Company has elected to be treated as a partnership for income tax purposes.

Accordingly, taxable income and losses of the Company are reported on the income tax return of the

Company’s Member and no provision for income taxes has been recorded on the accompanying

financial statements.

Fair Value of Financial Instruments — The carrying amounts of cash and cash equivalents, accounts

receivable, and payables approximate fair value due to the nature of and short maturities of these

instruments.

3. RELATED PARTY TRANSACTIONS

Marketing Fund Trust — Under the franchise agreements, the Company has the right to collect a

percentage of restaurant sales from its franchise owners which is required to be utilized only for

marketing activities. The Company established the Smashburger Marketing Fund Trust (“Marketing

Fund Trust”) to collect and administer these marketing funds collected from franchise owners. The

Company has elected a related party to serve as the trustee of the Marketing Fund Trust, a variable

interest entity. Other affiliates of the Company make discretionary contributions to the Marketing Fund.

If the Company elected to not require its franchise owners to contribute any monies for marketing

activities, the Company would be required to refund any cumulative unspent monies to the franchise

owners. As of January 1, 2012, no such refund obligation exists.

- 8 -

As of January 1, 2012 and December 26, 2010, restricted assets of $37,000 and $16,000, respectively,

consisted of receivables from franchise owners designated for contributions to the Marketing Fund

Trust. Since the Company has the obligation to immediately contribute the amounts collected to the

Marketing Fund Trust, as of January 1, 2012 and December 26, 2010, corresponding restricted liabilities

were recorded.

Through December 26, 2010, the Company consolidated the accounts of the Marketing Fund Trust and

accounted for itself as an in-substance agent with regards to these funds. During 2011, the Company

reviewed the related party relationships and contractual rights surrounding the Marketing Fund Trust,

including the rights to collect marketing fees and the role of the trustee and other related parties. In

accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 810,

Consolidation, the Company performed an analysis and determined it does not have a controlling

financial interest in the Marketing Fund Trust and therefore it should not be consolidated with the

Company. As a result, the Company determined it had incorrectly accounted for the Marketing Fund

Trust in prior periods. The Marketing Fund Trust’s assets and liabilities were presented as restricted

assets and restricted liabilities. The Marketing Fund Trust’s expenses were presented net of the amounts

collected from franchise owners in the Company’s statement of operations. The effect of correcting the

balance sheet for this matter was to decrease both the restricted asset and liability by $106,000 at

December 26, 2010.

Note Receivable — During 2011, the Company issued a revolving note receivable with a related party.

The note earns interest at the greater of 1.25% or the short term Applicable Federal Rate. As of

January 1, 2012, the applicable interest rate was 1.25%. The note matures on December 31, 2015. For

the year ended January 1, 2012, interest income earned from the related party was $1,000.

4. SUBSEQUENT EVENTS

The Company has evaluated subsequent events for recognition or disclosure through February 24, 2012,

which was the date these financial statements were considered available to be issued.

* * * * * *

Smashburger 06/2012 FDD Ex. G – Manual TOC

1031.002.006/46345.1

1.

EXHIBIT "G"

TABLE OF CONTENTS TO OPERATIONS MANUAL

smashburger Operations Manual ©2009 Smashburger Franchising LLC

smashburger.com Version 1109

Table of Contents

StandardS of operationSHow To Use the Standards of Operations Manual ............................................................... StOps_3

Legal and Regulatory......................................................................................................StOps_3

Systems Compliance .......................................................................................................StOps_3

Insurance Requirements .................................................................................................StOps_4

Brand Identity Standards ...................................................................................................... StOps_5Brand Book.....................................................................................................................StOps_5

Logo Usage ....................................................................................................................StOps_5

Trademark Information ...................................................................................................StOps_5

Restaurant Design and Furnishing ..................................................................................StOps_5

Signage, Menu Boards, and Point of Purchase (POP) materials .......................................StOps_5

New Restaurant Openings ................................................................................................... StOps_6Mystery Shop Programs .................................................................................................StOps_6

Ticket Times ...................................................................................................................StOps_6

Steps to SIZZLE...............................................................................................................StOps_6

Phone Standards ............................................................................................................StOps_7

No Smoking Policy .........................................................................................................StOps_7

Music .............................................................................................................................StOps_7

Guest Complaints: LAST Strategy ...................................................................................StOps_7

Hours of Operations .......................................................................................................StOps_7

Product Standards ............................................................................................................... StOps_8Product Specification ......................................................................................................StOps_8

The Smash and Sear .......................................................................................................StOps_8

Cook Times and Temperatures ........................................................................................StOps_8

Food Safety ....................................................................................................................StOps_9

Temperature Zones .......................................................................................................StOps_10

Product Labeling ..........................................................................................................StOps_10

Sanitizer buckets...........................................................................................................StOps_10

Prep Recipes and Procedures Manual ................................................................................ StOps_11

Menu Recipes and Procedures Manual .............................................................................. StOps_11

Equipment Standards ......................................................................................................... StOps_12Approved equipment and vendors ................................................................................StOps_12

Maintenance ................................................................................................................StOps_12

Telephone Lines, Internet Access and E-mail .................................................................StOps_12

POS Systems and Back Office Systems .........................................................................StOps_12

Music Systems ..............................................................................................................StOps_12

Systems Standards ............................................................................................................. StOps_13Back Office System (MenuLink) Utilization ...................................................................StOps_13

The Red Book ...............................................................................................................StOps_13

Store level Daily and Weekly Reporting ........................................................................StOps_13

People Standards ............................................................................................................... StOps_14Manager and Assistant Manager Training .....................................................................StOps_14

Grand Opening Training .................................................................................................... StOps_14Smash Training Team ....................................................................................................StOps_14


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New Restaurant Opening Training ..................................................................................... StOps_15Schedule.......................................................................................................................StOps_15

NRO Training Materials ................................................................................................StOps_15

Certified Training Restaurant and Certified Training Manager Process...........................StOps_16

Certified Training Restaurant Criteria ............................................................................StOps_16

Certified Training Manager Process ..............................................................................StOps_16

Shift leader Training ......................................................................................................StOps_16

Team Member Training.................................................................................................StOps_16

Restaurant Safety and Security .....................................................................................StOps_17

Hiring Regulations ........................................................................................................StOps_17

Uniforms ......................................................................................................................StOps_17

Communication Standards ................................................................................................. StOps_18E-mail /Voice Mail ........................................................................................................StOps_18

Communication Board ..................................................................................................StOps_18

Manager Meetings ............................................................................................................ StOps_18

Accounting and Finance Standards .................................................................................... StOps_19Cash Handling ..............................................................................................................StOps_19

Back Office...................................................................................................................StOps_19

Cashiers........................................................................................................................StOps_20

Cash Skims ...................................................................................................................StOps_21

Cash Paper Trail ............................................................................................................StOps_21

Gift Cards .....................................................................................................................StOps_22

Paid Outs .....................................................................................................................StOps_22

Weekly Tip Pay Out .....................................................................................................StOps_22

House Accounts & Trades .............................................................................................StOps_23

Cost Controls ...............................................................................................................StOps_23

Labor Costs ..................................................................................................................StOps_23

Food and Beverage Cost...............................................................................................StOps_23

Inventory Process .........................................................................................................StOps_23

Par Levels .....................................................................................................................StOps_24

Comps and Voids .........................................................................................................StOps_24

Manager Controls ........................................................................................................StOps_24

Armored Truck Pick-Up ................................................................................................StOps_25

Invoicing ......................................................................................................................StOps_25

Chart of Accounts ........................................................................................................StOps_26

smashburger Chart of Accounts ....................................................................................StOps_26

Budgets and Forecasts ..................................................................................................StOps_29

Code and Key Policy.....................................................................................................StOps_29

Security and Control of Manager Access Cards .............................................................StOps_30

Crisis Management Standards ............................................................................................ StOps_30

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Brand BookConfidentiality Notice ...........................................................................................................brand_1

CriSiS GuideTable of Contents .................................................................................................................. crisis_2

Crisis Guide ........................................................................................................................... crisis_3

Key Corporate Crisis Team Members ..................................................................................... crisis_4

Organizing a Local Crisis Communications Team ................................................................... crisis_4

Basic Media Guidelines When the Media Calls ....................................................................... crisis_5When The Media Calls/Appears .......................................................................................crisis_5

Crime & Security .................................................................................................................... crisis_6First Steps .........................................................................................................................crisis_6

Crisis Team Responsibilities ...............................................................................................crisis_7

Demonstrations or Riots ........................................................................................................ crisis_8First Steps .........................................................................................................................crisis_8

Crisis Team Responsibilities ...............................................................................................crisis_9

Guest Illness ........................................................................................................................ crisis_10First Steps .......................................................................................................................crisis_10

Crisis Team Responsibilities .............................................................................................crisis_11

Team Member Illness ........................................................................................................... crisis_12First Steps .......................................................................................................................crisis_12


Bomb Threat ........................................................................................................................ crisis_14First Steps .......................................................................................................................crisis_14


Foreign Object Claims ......................................................................................................... crisis_16First Steps .......................................................................................................................crisis_16


Guest Claims: Non-Food Related ......................................................................................... crisis_18First Steps .......................................................................................................................crisis_18


RUMORS ............................................................................................................................ crisis_20First Steps .......................................................................................................................crisis_20


GOVERNMENT AGENCY VISITS ......................................................................................... crisis_22First Steps .......................................................................................................................crisis_22


Appendix A: Media Guidelines ............................................................................................. crisis_24When The Media Calls/Appears .....................................................................................crisis_24

If Media Comes to the Restaurant ..................................................................................crisis_25

Responses for Guests......................................................................................................crisis_25

Responses for Media ......................................................................................................crisis_25

Media tips for Multi-Unit Leaders ...................................................................................crisis_26

Top 5 Reasons we have a Media Policy ..........................................................................crisis_27

Appendix B: Demonstration Guidelines ................................................................................ crisis_28Demonstration ...............................................................................................................crisis_28

Demonstration Guidelines: Media On Site ......................................................................crisis_29

Demonstration Guidelines: Vandalism or Violence ..........................................................crisis_30

Violent Demonstrations or Acts of Violence ....................................................................crisis_30


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Appendix C: Natural Disasters ............................................................................................. crisis_31Action Plan: Hurricanes ..................................................................................................crisis_31

Action Plan: Tornados .....................................................................................................crisis_32

Action Plan: Floods .........................................................................................................crisis_33

Action Plan: Earthquakes ................................................................................................crisis_34

Power Outage Plan ........................................................................................................crisis_35

Cold Climates/Freezing Weather ....................................................................................crisis_35

APPENDIX D: Death or Serious Injury Reaction Plan ............................................................ crisis_36RESPONSIBILITIES: .........................................................................................................crisis_36

APPENDIX E: Bomb Threats — Crisis Team .......................................................................... crisis_41

BOMB THREAT CHECKLIST ................................................................................................ crisis_42Caller’s Identity ...............................................................................................................crisis_42

Pretend difficulty with hearing. Keep caller talking. If caller will answer questions, ask: ..crisis_42

Voice Characteristics .......................................................................................................crisis_42

Speech ...........................................................................................................................crisis_42

Language Skills ...............................................................................................................crisis_42

Accent ............................................................................................................................crisis_42

Manner ..........................................................................................................................crisis_42

Background Noises .........................................................................................................crisis_42

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Menu reCipeS & proCedureSTable of Contents ...............................................................................................................menuR_2

Commonly Used Steps ........................................................................................................menuR_3Station Setup ................................................................................................................menuR_3

Selling items .................................................................................................................menuR_3

Prep Procedures ..................................................................................................................menuR_4Station Setup ................................................................................................................menuR_4

Grill Drawers Setup.......................................................................................................menuR_5

smashburger & Chicken Specialties .....................................................................................menuR_7Tools Needed ...............................................................................................................menuR_7

Food Item(s) Needed ....................................................................................................menuR_7

Cheese & Toppings .............................................................................................................menuR_9Tools Needed ...............................................................................................................menuR_9

Food Item(s) Needed ....................................................................................................menuR_9

Make Table Set-Up .....................................................................................................menuR_10

Toasting Buns ...................................................................................................................menuR_13Tools Needed .............................................................................................................menuR_13

Food Item(s) Needed ..................................................................................................menuR_13

Procedures & Steps .....................................................................................................menuR_13

Dressing Buns ...................................................................................................................menuR_14Tools Needed .............................................................................................................menuR_14

Food Item(s) Needed ..................................................................................................menuR_14

Station Setup ..............................................................................................................menuR_14

smashburger and Chicken Sandwich Building Process .......................................................menuR_15

All American smashburger ................................................................................................menuR_16

Classic smashburger ..........................................................................................................menuR_17

BBQ, Bacon & Cheese ......................................................................................................menuR_18

Spicy Baja Burger / Chicken ..............................................................................................menuR_19

Mushroom Swiss ..............................................................................................................menuR_21

Classic smashchicken ........................................................................................................menuR_23

CYO smashburger or Classic smashchicken .......................................................................menuR_25

Baja Cobb Salad ................................................................................................................menuR_26

Ranch Chicken Club Salad ................................................................................................menuR_27

The smashwedge ..............................................................................................................menuR_28

Side smashwedge .............................................................................................................menuR_29

French Fries ......................................................................................................................menuR_30

smashfries .........................................................................................................................menuR_31

Haystack Onions ..............................................................................................................menuR_32

Veggie Frites .....................................................................................................................menuR_33

Beefy Chili ........................................................................................................................menuR_34

Shakes and Malts ..............................................................................................................menuR_35

Root Beer Float .................................................................................................................menuR_36

Kids smashburger .............................................................................................................menuR_38

Kids Chicken Strips ...........................................................................................................menuR_39

Kids Grilled Cheese ...........................................................................................................menuR_40

Kid’s Dog ..........................................................................................................................menuR_41

Fried Egg ..........................................................................................................................menuR_42


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Chicago Dog ....................................................................................................................menuR_43

Chili Cheese Dog ..............................................................................................................menuR_44

Classic Dog .......................................................................................................................menuR_45

To-Go Guide .....................................................................................................................menuR_46

Regional: Arizona Devil Dog .............................................................................................menuR_47

Regional: Arizona smashburger and smashchicken ............................................................menuR_48

Regional: Beehive smashburger and smashchicken ...........................................................menuR_49

Regional: Blueberry/Huckleberry Blend .............................................................................menuR_50

Regional: Buckeye smashburger/smashchicken .................................................................menuR_51

Regional: Cactus Shake .....................................................................................................menuR_52

Regional: Cheese Fries ......................................................................................................menuR_53

Regional: Chili Cheese Fries ..............................................................................................menuR_54

Regional: Chili Fries ..........................................................................................................menuR_55

Regional: Colorado smashburger and smashchicken .........................................................menuR_57

Regional: Colorado Dog ...................................................................................................menuR_58

Regional: Cornhusker smashburger/smashchicken ............................................................menuR_59

Regional: Devil Dog ..........................................................................................................menuR_60

Regional: Fried Banana Peppers ........................................................................................menuR_61

Regional: Fried Green Chiles .............................................................................................menuR_62

Regional: Fried Pickles ......................................................................................................menuR_63

Regional: Huckleberry Shake ............................................................................................menuR_64

Regional: Idaho smashburger and smashchicken ...............................................................menuR_65

Regional: Iowa smashburger and smashchicken ................................................................menuR_66

Regional: KS (Shocker) smashburger and smashchicken ....................................................menuR_67

Regional: Oklahoma smashburger and smashchicken .......................................................menuR_68

Regional: Spicy Baja ..........................................................................................................menuR_69

Regional: State Fair smashbrat ..........................................................................................menuR_70

Regional: Twin Cities Burger .............................................................................................menuR_71

Regional: Wichita Kids Meal .............................................................................................menuR_72

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prep reCipeS & proCedureSTable of Contents ................................................................................................................ prepR_2

Critical Control Points .......................................................................................................... prepR_3

Shelf Life ............................................................................................................................. prepR_3

Hand Washing ..................................................................................................................... prepR_9

Wearing Disposable Gloves................................................................................................ prepR_10

Personal Hygiene ............................................................................................................... prepR_10

Receiving Food .................................................................................................................. prepR_11

Product Storage ................................................................................................................. prepR_12

Wearing a Cutting Glove ................................................................................................... prepR_17

Commonly Used Steps ....................................................................................................... prepR_18

Meats ................................................................................................................................ prepR_19

Chicken ............................................................................................................................. prepR_21

Tomatoes — Sliced ............................................................................................................ prepR_22

Tomatoes — Diced ............................................................................................................ prepR_23

Using the Nemco Slicer ...................................................................................................... prepR_24

Red Onions — Sliced for smashburgers and smashchicken ................................................ prepR_25

Red Onions — Quarter Sliced for Salads ............................................................................ prepR_26

Yellow Onions — Sliced for Haystacks ............................................................................... prepR_27

Yellow Onions — Diced for Hot Dogs ................................................................................ prepR_28

Yellow Onions — Quarter Sliced for Grilled Onions ........................................................... prepR_29

Leaf Lettuce — smashburgers and Classic smashchicken .................................................... prepR_30

Iceberg Lettuce — Wedge ................................................................................................. prepR_31

Mushrooms — Sliced ......................................................................................................... prepR_32

Jalapeños — Sliced ............................................................................................................ prepR_33

Lemons — Wedges ........................................................................................................... prepR_34

Veggie Frites — Pre-Weighed ............................................................................................ prepR_35

Chili — Reheat Procedure .................................................................................................. prepR_36

Smash Sauce ...................................................................................................................... prepR_37

Haystack Onion Batter ....................................................................................................... prepR_38

Haystack Onion Flour ........................................................................................................ prepR_39

Handling Dressings ............................................................................................................ prepR_40

Ice Cream .......................................................................................................................... prepR_42

Butter ................................................................................................................................ prepR_43

Bacon ................................................................................................................................ prepR_44

Bacon — Diced for Salads .................................................................................................. prepR_46

smashburger Herb Oil ........................................................................................................ prepR_47


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nro GuideIntroduction .......................................................................................................................nro_1

Who Uses This Guide? .......................................................................................................nro_1

NRO Guide Overview ........................................................................................................nro_1

Opening Food Order ............................................................................................................... nro_2Opening Food Order ..........................................................................................................nro_2

NRO Pre-Opening Checklist Templates.................................................................................... nro_7Pre-Opening Checklist Template: ACCOUNTING ...............................................................nro_8

Pre-Opening Checklist Template: CONSTRUCTION ...................................................... NRO_10

Pre-Opening Checklist Template: MARKETING ............................................................. NRO_12

Pre-Opening Checklist Template: IT .................................................................................nro_12

Pre-Opening Checklist Template: HR ................................................................................nro_13

Pre-Opening Checklist Template: OPERATIONS ............................................................ NRO_14

Pre-Opening Checklist Template-Training .........................................................................nro_16

National Vendor List .........................................................................................................nro_16

Local Vendor Contact Information Template .....................................................................nro_17

Hiring Information ................................................................................................................. nro_18Management Team ..........................................................................................................nro_18

Team Members ................................................................................................................nro_18

Core Competencies ..........................................................................................................nro_19

Hiring Pars........................................................................................................................nro_19

Internet Recruiting............................................................................................................nro_19

Competitive Wage Rates ..................................................................................................nro_19

GM On-Site Agendas ............................................................................................................ nro_20Four Weeks Out ...............................................................................................................nro_20

Three Weeks Out .............................................................................................................nro_20

Two weeks Out ................................................................................................................nro_20

One Week Out Agenda ...................................................................................................nro_21

Pre-Opening Training ............................................................................................................ nro_22Training Teams .................................................................................................................nro_22

Training Schedules ............................................................................................................nro_23

Standard Training Schedule ..............................................................................................nro_23

Friends and Family and VIP events ...................................................................................nro_23

NRO Manager Tool Box ...................................................................................................nro_24

Hiring Packet ....................................................................................................................nro_24

Trainer’s Guides and Trainee Workbooks ..........................................................................nro_24

Team Member Roster and Availability ...............................................................................nro_25

Prep Sheet ........................................................................................................................nro_27

Nightly Inventory Procedures ...........................................................................................nro_28

Ticket Times .....................................................................................................................nro_34

Aloha & MenuLink Help Desks .........................................................................................nro_36

Aloha/MenuLink Frequently Asked Questions ..................................................................nro_37

Credit card EDC ................................................................................................................nro_59

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Grand openinG GuideGrand Opening Checklist ......................................................................................................grand_1

Grand Opening Details .........................................................................................................grand_2Grand Opening in a Box .................................................................................................grand_2

Public Relations ..............................................................................................................grand_3

VIP and Friends & Family Events.....................................................................................grand_3

Media Outreach Campaign ............................................................................................grand_4

What If I Have Trouble Finding A PR Firm? ...........................................................................grand_6Charity Event (for 1st store in a market) .........................................................................grand_6

Direct Mail .....................................................................................................................grand_6

Radio (for 1st store in a market) .....................................................................................grand_7

Street Teams .........................................................................................................................grand_9

The Dos & Don’ts ...............................................................................................................grand_10

Key Contacts ......................................................................................................................grand_12

appendixSample Press Releases .........................................................................................................grand_13

Example 1: ...................................................................................................................grand_13

Example 2: ...................................................................................................................grand_14

Example 3: ...................................................................................................................grand_16


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nro HirinG paCketAffirmative Action Information ................................................................................................hire_3

Confidentiality Agreement .......................................................................................................hire_5

Direct Deposit ..........................................................................................................................hire_9

Team Member New Hire Audit ..............................................................................................hire_11

New Team Member Information ............................................................................................hire_13

Team Member Internet Usage Policy .....................................................................................hire_15

Team Member Acknowledgments..........................................................................................hire_17

Reconocimientos Del Empleado .............................................................................................hire_19

smashburger Harassment Policy .............................................................................................hire_21

smashburger Política del Hostigamiento .................................................................................hire_23

Form I-9, Employment Eligiblity Verification ...........................................................................hire_25

Team Member Welcome Packet ............................................................................................hire_27

Tip Reporting and Tip Allocation ............................................................................................hire_29

Form W-4 ..............................................................................................................................hire_31

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Sizzle nro trainee WorkBookTable of Contents ........................................................................................................... NROszEE_2

Orientation ..................................................................................................................... NROszEE_3Introduce Management Team and Trainers ................................................................NROszEE_3

That’s Us… Who Are You? ........................................................................................NROszEE_3

Team Member Handbook ..........................................................................................NROszEE_3

Welcome Letter from the President ...........................................................................NROszEE_3

Why We’re Called “smashburger” ............................................................................NROszEE_3

Why “Smashing” a Burger is Better ...........................................................................NROszEE_3

smash.sizzle.savor.® ..................................................................................................NROszEE_4

Company Code of Conduct ............................................................................................ NROszEE_5TM Code of Conduct ................................................................................................NROszEE_5

Safety and Sanitation ...................................................................................................... NROszEE_6Handwashing Basics ..................................................................................................NROszEE_6

Floor..........................................................................................................................NROszEE_6

Hot Surfaces/Hot Products ........................................................................................NROszEE_6

Tools & Equipment ....................................................................................................NROszEE_7

Knives .......................................................................................................................NROszEE_7

Working with Food ...................................................................................................NROszEE_7

Store Tour .................................................................................................................NROszEE_7

Day One: Sizzle Training ................................................................................................. NROszEE_8Menu Knowledge ......................................................................................................NROszEE_8

Steps to SIZZLE.......................................................................................................NROSZEE_10

Shakes or Malts .......................................................................................................NROszEE_12

Introduction to Order Taking ...................................................................................NROszEE_12

AM Shift..................................................................................................................NROszEE_12

PM Shift ..................................................................................................................NROszEE_12

Day Two: Sizzle Training ............................................................................................... NROszEE_13Food Show ..............................................................................................................NROszEE_13

Volume Simulations/Menu Knowledge ....................................................................NROszEE_14

Guest Complaints: LAST Strategy ............................................................................NROszEE_16

Alcohol Guidelines ...................................................................................................NROszEE_17

AM Shift..................................................................................................................NROszEE_18

PM Shift ..................................................................................................................NROszEE_18

Day Three: Sizzle Training ............................................................................................. NROszEE_19Menu Knowledge ....................................................................................................NROszEE_19

Kids Meals ...............................................................................................................NROszEE_19

Salads ......................................................................................................................NROszEE_20

Assembling To-go orders .........................................................................................NROszEE_21

Debrief ....................................................................................................................NROszEE_21

AM Shift..................................................................................................................NROszEE_21

PM Shift ..................................................................................................................NROszEE_21

Day Four: Sizzle Training ............................................................................................... NROszEE_22Telephone Procedures..............................................................................................NROszEE_22

AM Shift..................................................................................................................NROszEE_22

PM Shift ..................................................................................................................NROszEE_22

smash.sizzle.savor.® Awards .....................................................................................NROszEE_23

Day One: Sizzle Quiz .................................................................................................... NROszEE_25

Day 2: Sizzle Quiz ......................................................................................................... NROszEE_26



To Go Guide ................................................................................................................. NROszEE_31


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Sizzle nro trainer’S GuideTable of Contents ...........................................................................................................NROszER_2

Orientation .....................................................................................................................NROszER_3Introduce Management Team and Trainers ............................................................... NROszER_3

That’s Us… Who Are You? ....................................................................................... NROszER_3

Team Member Handbook ......................................................................................... NROszER_3

Welcome Letter from the President .......................................................................... NROszER_3

Why We’re Called “smashburger” ........................................................................... NROszER_3

Why “Smashing” a Burger is Better .......................................................................... NROszER_3

smash.sizzle.savor.® .................................................................................................. NROszER_4

Company Code of Conduct ............................................................................................NROszER_5TM Code of Conduct ............................................................................................... NROszER_5

Safety and Sanitation ......................................................................................................NROszER_6Handwashing Basics ................................................................................................. NROszER_6

Floor......................................................................................................................... NROszER_6

Hot Surfaces/Hot Products ....................................................................................... NROszER_6

Tools & Equipment ................................................................................................... NROszER_7

Knives ...................................................................................................................... NROszER_7

Working with Food .................................................................................................. NROszER_7

Store Tour ................................................................................................................ NROszER_7

Day One: Sizzle Training .................................................................................................NROszER_8Menu Knowledge ..................................................................................................... NROszER_8

Steps to SIZZLE...................................................................................................... NROSZER_10

Shakes or Malts ...................................................................................................... NROszER_12

Introduction to Order Taking .................................................................................. NROszER_12

AM Shift................................................................................................................. NROszER_12

PM Shift ................................................................................................................. NROszER_12

Day Two: Sizzle Training ...............................................................................................NROszER_13Food Show ............................................................................................................. NROszER_13

Volume Simulations/Menu Knowledge ................................................................... NROszER_14

Guest Complaints: LAST Strategy ........................................................................... NROszER_16

Alcohol Guidelines .................................................................................................. NROszER_17

AM Shift................................................................................................................. NROszER_18

PM Shift ................................................................................................................. NROszER_18

Day Three: Sizzle Training .............................................................................................NROszER_19Menu Knowledge ................................................................................................... NROszER_19

Kids Meals .............................................................................................................. NROszER_19

Salads ..................................................................................................................... NROszER_20

Assembling To-go orders ........................................................................................ NROszER_20

Debrief ................................................................................................................... NROszER_21

AM Shift................................................................................................................. NROszER_21

PM Shift ................................................................................................................. NROszER_21

Day Four: Sizzle Training ...............................................................................................NROszER_22Telephone Procedures............................................................................................. NROszER_22

AM Shift................................................................................................................. NROszER_23

PM Shift ................................................................................................................. NROszER_23

smash.sizzle.savor.® Awards .................................................................................... NROszER_23

Day One: Sizzle Quiz ....................................................................................................NROszER_25

Day 2: Sizzle Quiz .........................................................................................................NROszER_26



To Go Guide .................................................................................................................NROszER_31

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SMaSH nro trainee WorkBookTable of Contents ..........................................................................................................NROsmEE_2

Orientation ....................................................................................................................NROsmEE_3Introduce Management Team and Trainers .............................................................. NROsmEE_3

That’s Us… Who Are You? ...................................................................................... NROsmEE_3

Team Member Handbook ........................................................................................ NROsmEE_3

Welcome Letter from the President ......................................................................... NROsmEE_3

Why We’re Called “smashburger” .......................................................................... NROsmEE_3

Why “Smashing” a Burger is Better ......................................................................... NROsmEE_3

smash.sizzle.savor.® ................................................................................................. NROsmEE_4

Company Code of Conduct ...........................................................................................NROsmEE_5TM Code of Conduct .............................................................................................. NROsmEE_5

Safety and Sanitation .....................................................................................................NROsmEE_6Handwashing Basics ................................................................................................ NROsmEE_6

Floor........................................................................................................................ NROsmEE_6

Hot Surfaces/Hot Products ...................................................................................... NROsmEE_6

Tools & Equipment .................................................................................................. NROsmEE_7

Knives ..................................................................................................................... NROsmEE_7

Working with Food ................................................................................................. NROsmEE_7

Store Tour ............................................................................................................... NROsmEE_7

Day One: Smash Training ..............................................................................................NROsmEE_8Daily Prep................................................................................................................ NROsmEE_8

Intro to Smashing .................................................................................................... NROsmEE_8

Managing the Grill .................................................................................................. NROsmEE_9

Intro to Fry Station .................................................................................................. NROsmEE_9

Intro to Dressing and Selling .................................................................................... NROsmEE_9

Intro to Burgers, Fries, smashfries .......................................................................... NROsmEE_10

AM Shift................................................................................................................ NROsmEE_11

PM Shift ................................................................................................................ NROsmEE_11

Day Two: Smash Training .............................................................................................NROsmEE_12Food Show ............................................................................................................ NROsmEE_12

Cook Haystack Onions — 4 easy steps .................................................................. NROsmEE_14

Cook Veggie Frites ................................................................................................ NROsmEE_14

AM Shift................................................................................................................ NROsmEE_14

PM Shift ................................................................................................................ NROsmEE_14

Day Three: Smash Training ..........................................................................................NROsmEE_15Prepare Kids Meals ................................................................................................ NROsmEE_15

Salads .................................................................................................................... NROsmEE_16

Assembling To-Go Orders ..................................................................................... NROsmEE_17

Debrief .................................................................................................................. NROsmEE_17

AM Shift................................................................................................................ NROsmEE_17

PM Shift ................................................................................................................ NROsmEE_17

Day Four: Smash Training ............................................................................................NROsmEE_18Debrief .................................................................................................................. NROsmEE_18

AM Shift................................................................................................................ NROsmEE_18

PM Shift ................................................................................................................ NROsmEE_18

smash.sizzle.savor.® Awards ................................................................................... NROsmEE_18

Day One: Smash Quiz .................................................................................................NROsmEE_19

Day 2: Smash Quiz ......................................................................................................NROsmEE_20



To Go Guide ................................................................................................................NROsmEE_24


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SMaSH nro trainer’S GuideTable of Contents ......................................................................................................... NROsmER_2

Orientation ................................................................................................................... NROsmER_3Introduce Management Team and Trainers ..............................................................NROsmER_3

That’s Us… Who Are You? ......................................................................................NROsmER_3

Team Member Handbook ........................................................................................NROsmER_3

Welcome Letter from the President .........................................................................NROsmER_3

Why We’re Called “smashburger” ..........................................................................NROsmER_3

Why “Smashing” a Burger is Better .........................................................................NROsmER_3

smash.sizzle.savor.® .................................................................................................NROsmER_4

Company Code of Conduct .......................................................................................... NROsmER_5TM Code of Conduct ..............................................................................................NROsmER_5

Safety and Sanitation .................................................................................................... NROsmER_6Handwashing Basics ................................................................................................NROsmER_6

Floor........................................................................................................................NROsmER_6

Hot Surfaces/Hot Products ......................................................................................NROsmER_6

Tools & Equipment ..................................................................................................NROsmER_7

Knives .....................................................................................................................NROsmER_7

Working with Food .................................................................................................NROsmER_7

Store Tour ...............................................................................................................NROsmER_7

Day One: Smash Training ............................................................................................. NROsmER_8Daily Prep................................................................................................................NROsmER_8

Intro to Smashing ....................................................................................................NROsmER_8

Managing the Grill ..................................................................................................NROsmER_9

Intro to Fry Station ..................................................................................................NROsmER_9

Intro to Dressing and Selling ....................................................................................NROsmER_9

Intro to Burgers, Fries, smashfries ..........................................................................NROsmER_10

AM Shift................................................................................................................NROsmER_11

PM Shift ................................................................................................................NROsmER_11

Day Two: Smash Training ............................................................................................ NROsmER_12Food Show ............................................................................................................NROsmER_12

Cook Haystack Onions — 4 easy steps ..................................................................NROsmER_14

Cook Veggie Frites ................................................................................................NROsmER_14

AM Shift................................................................................................................NROsmER_14

PM Shift ................................................................................................................NROsmER_14

Day Three: Smash Training ......................................................................................... NROsmER_15Prepare Kids Meals ................................................................................................NROsmER_15

Salads ....................................................................................................................NROsmER_16

Assembling To-Go Orders .....................................................................................NROsmER_17

Debrief ..................................................................................................................NROsmER_17

AM Shift................................................................................................................NROsmER_17

PM Shift ................................................................................................................NROsmER_17

Day Four: Smash Training ........................................................................................... NROsmER_18Debrief ..................................................................................................................NROsmER_18

AM Shift................................................................................................................NROsmER_18

PM Shift ................................................................................................................NROsmER_18

smash.sizzle.savor.® Awards ...................................................................................NROsmER_18

Day One: Smash Quiz ................................................................................................ NROsmER_19

Day 2: Smash Quiz ..................................................................................................... NROsmER_20



To Go Guide ............................................................................................................... NROsmER_24

smashburger.com

TOC_17

SMaSHBurGer teaM MeMBer HandBookTable of Contents ...........................................................................................................smburTM_2

Acknowledgement of Receipt .........................................................................................smburTM_3

Acknowledgement of Receipt .........................................................................................smburTM_5

Welcome ........................................................................................................................smburTM_7

Handbook Purpose .........................................................................................................smburTM_9

At-Will Employment .......................................................................................................smburTM_9

Then There’s smashburger ............................................................................................smburTM_10OK, it’s not really magic… but it is magical. ............................................................ smburTM_10

Our Reason for Being ...................................................................................................smburTM_11

Steps to Sizzle ...............................................................................................................smburTM_11

Sizzle 20 .......................................................................................................................smburTM_11

Company Code of Conduct ..........................................................................................smburTM_12Equal Opportunity Employer .................................................................................. smburTM_12

Harassment Policy ........................................................................................................smburTM_13Verbal Harassment ................................................................................................. smburTM_13

Physical Harassment ............................................................................................... smburTM_13

Visual Harassment .................................................................................................. smburTM_13

Sexual Harassment ................................................................................................. smburTM_13

Reporting ............................................................................................................... smburTM_14

Investigation........................................................................................................... smburTM_14

Retaliation .............................................................................................................. smburTM_14

Harassment & Discrimination Policy Posting ........................................................... smburTM_15

Complaint Resolution and Problem Solving ............................................................ smburTM_15

Complaint Resolution Procedure ............................................................................. smburTM_15

Confidentiality ..............................................................................................................smburTM_16

Team Member Code of Conduct ..................................................................................smburTM_17Food Safety ............................................................................................................ smburTM_17

Safety/Reporting Of Injury ...........................................................................................smburTM_18

Guest Liability Incidents ................................................................................................smburTM_18

Vendor Relationships ....................................................................................................smburTM_19

Competition .................................................................................................................smburTM_19

Drugs and Alcohol ........................................................................................................smburTM_20Drug Testing ........................................................................................................... smburTM_20

Alcoholic Beverages ................................................................................................ smburTM_21

Team Member Fraternization ........................................................................................smburTM_22

Business Ethics ..............................................................................................................smburTM_22

Violence Protection/Security .........................................................................................smburTM_23

Smoking .......................................................................................................................smburTM_23

Personal Telephone Calls ..............................................................................................smburTM_23Cell Phone Usage ................................................................................................... smburTM_23

Computers and Software ..............................................................................................smburTM_24Email Use ............................................................................................................... smburTM_24

Internet Use ........................................................................................................... smburTM_24

Team Member Conduct and Work Rules ......................................................................smburTM_25

Discipline ......................................................................................................................smburTM_25

Employment Practices ...................................................................................................smburTM_26Team Member Classifications ................................................................................. smburTM_26

Exempt/Non exempt .............................................................................................. smburTM_26


Version 1109

TOC_18

Attendance and Punctuality ..........................................................................................smburTM_26

Holidays .......................................................................................................................smburTM_26

Team Member Leave ....................................................................................................smburTM_27Family/Medical Leaves ........................................................................................... smburTM_27

Other Leaves .......................................................................................................... smburTM_27

Looking Good ...............................................................................................................smburTM_29

Pay Practices .................................................................................................................smburTM_30Work Week ............................................................................................................ smburTM_30

Timekeeping ........................................................................................................... smburTM_30

Working off the Clock ............................................................................................ smburTM_30

Breaks and Meal Periods ......................................................................................... smburTM_30

Authorization of Overtime...................................................................................... smburTM_30

Overtime ................................................................................................................ smburTM_31

Paydays .................................................................................................................. smburTM_31

Payroll Advances .................................................................................................... smburTM_31

Payroll Deductions .................................................................................................. smburTM_31

Return of Company Property ........................................................................................smburTM_31

Personnel Records and Data Changes ...........................................................................smburTM_31

Tipping .........................................................................................................................smburTM_32

Performance Evaluation and Merit Increases .................................................................smburTM_32

Inclement Weather/Restaurant Closings .......................................................................smburTM_32

Termination/Resignation ...............................................................................................smburTM_33

Re-Hire .........................................................................................................................smburTM_33

Team Member Benefits .................................................................................................smburTM_34Meal Benefits ......................................................................................................... smburTM_34

Smashcash.............................................................................................................. smburTM_34

Save ....................................................................................................................... smburTM_35

Balance Life & Work ............................................................................................... smburTM_35

Recognize............................................................................................................... smburTM_35

Benefits .................................................................................................................. smburTM_36

smashburger.com

TOC_19

SMaSH teaM MeMBer WorkBookTable of Contents ...........................................................................................................smashTM_2

Orientation .....................................................................................................................smashTM_3Team Member Handbook ......................................................................................... smashTM_3

Orientation Video ..................................................................................................... smashTM_3

Why We’re Called “smashburger” ........................................................................... smashTM_3

Why “Smashing” a Burger is Better .......................................................................... smashTM_3

Training Overview .................................................................................................... smashTM_4

Restaurant Tour ..............................................................................................................smashTM_5

Kitchen Tour ...................................................................................................................smashTM_6

Safety and Sanitation ......................................................................................................smashTM_7Handwashing Basics ................................................................................................. smashTM_7

Floor......................................................................................................................... smashTM_7

Hot Surfaces/Hot Products ....................................................................................... smashTM_7

Tools & Equipment ................................................................................................... smashTM_7

Knives ...................................................................................................................... smashTM_8

Working with Food .................................................................................................. smashTM_8

Food Show .....................................................................................................................smashTM_9

Daily Prep .....................................................................................................................smashTM_10

Intro to Smashing .........................................................................................................smashTM_11Cook times: ............................................................................................................ smashTM_11

Managing the Grill ........................................................................................................smashTM_12

Intro to Dressing and Selling .........................................................................................smashTM_13

Intro to Fry Station .......................................................................................................smashTM_18smashfries .............................................................................................................. smashTM_18

Cook Haystack Onions ........................................................................................... smashTM_18

Smash Test ...................................................................................................................smashTM_19

Sizzle Skills Proficiency Checklist ...................................................................................smashTM_25


Version 1109

TOC_20

Sizzle teaM MeMBer WorkBookTable of Contents .............................................................................................................. sizzlTM_2

Orientation ........................................................................................................................ sizzlTM_3Team Member Handbook ......................................................................................... smashTM_3

Orientation Video ..................................................................................................... smashTM_3

Why We’re Called “smashburger” .............................................................................. sizzlTM_3

Why “Smashing” a Burger is Better ............................................................................. sizzlTM_3

Training Overview ....................................................................................................... sizzlTM_4

Restaurant Tour ................................................................................................................. sizzlTM_5

Dining Room Tour ............................................................................................................. sizzlTM_6

Safety and Sanitation ......................................................................................................... sizzlTM_7Handwashing Basics .................................................................................................... sizzlTM_7

Floor............................................................................................................................ sizzlTM_7

Hot Surfaces/Hot Products .......................................................................................... sizzlTM_7

Tools & Equipment ...................................................................................................... sizzlTM_7

Knives ......................................................................................................................... sizzlTM_8

Working with Food ..................................................................................................... sizzlTM_8

Food Show ........................................................................................................................ sizzlTM_9

Day 1: All About The Guest ............................................................................................. sizzlTM_10Steps to SIZZLE........................................................................................................ SIZZLTM_10

Only YOU Can Give The Sizzle To Our Guests! ......................................................... sizzlTM_12

Menu Knowledge ...................................................................................................... sizzlTM_13

Table Touches/Running Food .................................................................................... sizzlTM_17

Day 2 .............................................................................................................................. sizzlTM_18Teachback the Food Show ......................................................................................... sizzlTM_18

Shakes and Floats ...................................................................................................... sizzlTM_18

Shadow Your Trainer On The Register ....................................................................... sizzlTM_18

Guest Complaints: LAST Strategy .............................................................................. sizzlTM_19

Alcohol Guidelines ..................................................................................................... sizzlTM_20

Register Practice During Non-Peak ............................................................................ sizzlTM_20

Day 3: Register Practice ................................................................................................... sizzlTM_21Opening or Closing Duties ........................................................................................ sizzlTM_21

Day 4: Register Practice ................................................................................................... sizzlTM_22

Sizzle Test ........................................................................................................................ sizzlTM_23

Sizzle Skills Proficiency Checklist ...................................................................................... sizzlTM_29

smashburger.com

TOC_21

SMaSHManaGMent trainee WorkBookTable of Contents .......................................................................................................... smashMG_2

smashburger Reason for Being ....................................................................................... smashMG_3

Orientation .................................................................................................................... smashMG_3Typical Schedule ...................................................................................................... smashMG_4

Why Position Training? .................................................................................................. smashMG_5As a Manager, why do you need to spend time learning each position? .................. smashMG_5

Day 1: Orientation, Inventory and Intro to BOH ............................................................ smashMG_5Smashculture ........................................................................................................... smashMG_6

Brand Promise ......................................................................................................... smashMG_8

Call Outs ................................................................................................................. smashMG_8

Consumer Brand Positioning Statement ................................................................. smashMG_10

Call Outs ............................................................................................................... smashMG_10

smashburger Key Messaging: Internal & Team Members ....................................... smashMG_10

Safety and Sanitation............................................................................................. smashMG_11

Smash Training Objectives ..................................................................................... smashMG_13

Day 1 Quiz .................................................................................................................. smashMG_14

Day 2: Prep, Grill and Cheese ...................................................................................... smashMG_15Food Show ............................................................................................................ smashMG_16

Day 2 Quiz .................................................................................................................. smashMG_17

Day 3: Prep, Grill and Cheese ...................................................................................... smashMG_18

Day 3 Quiz .................................................................................................................. smashMG_19

Day 4: Set .................................................................................................................... smashMG_20

Day 4 Quiz .................................................................................................................. smashMG_21

Day 5: Set .................................................................................................................... smashMG_23

Day 5 Quiz .................................................................................................................. smashMG_24

Day 6: Fry .................................................................................................................... smashMG_25

Day 6 Quiz .................................................................................................................. smashMG_26Prep List ................................................................................................................ smashMG_26

BOH Skills Proficiency Checklist ............................................................................. smashMG_27

Sizzle Training Objectives ...................................................................................... smashMG_27

Day 7: EOW Admin, Expo ........................................................................................... smashMG_28

Day 7 Quiz .................................................................................................................. smashMG_29

Day 8: Expo ................................................................................................................. smashMG_30

Day 8 Quiz .................................................................................................................. smashMG_31

Day 9: Cashier ............................................................................................................. smashMG_32Steps to Sizzle........................................................................................................ smashMG_32

LAST Strategy........................................................................................................ smashMG_34

Alcohol Guidelines ................................................................................................. smashMG_35

Telephone Procedures............................................................................................ smashMG_36

Day 9 Quiz .................................................................................................................. smashMG_37

Day 10: Cashier ........................................................................................................... smashMG_38

Day 10 Quiz ................................................................................................................ smashMG_39FOH Skills Proficiency Checklist ............................................................................. smashMG_40

Management and Administrative Objectives ......................................................... smashMG_40

Day 11: MOD ............................................................................................................. smashMG_41

Day 11 Quiz ................................................................................................................ smashMG_41

Day 12: MOD ............................................................................................................. smashMG_42

Day 12 Quiz ................................................................................................................ smashMG_43


Version 1109

TOC_22

Day 13: MOD ............................................................................................................. smashMG_44

Day 14: MOD ............................................................................................................. smashMG_45

Day 15: MOD ............................................................................................................. smashMG_46

Day 16: MOD ............................................................................................................. smashMG_47

Day 17: MOD ............................................................................................................. smashMG_48

Day 18: MOD ............................................................................................................. smashMG_49MOD Skills Proficiency Checklist ........................................................................... smashMG_50


Ex H – Representations and Acknowledgement 1031.002.006/46347.1

EXHIBIT "H"

REPRESENTATIONS AND ACKNOWLEDGEMENT STATEMENT


Ex H – Representations and Acknowledgement

1031.002.006/46347.1

REPRESENTATIONS AND ACKNOWLEDGMENT STATEMENT

The purpose of this Statement is to demonstrate to SMASHBURGER FRANCHISING

LLC (“Franchisor”) that the person(s) signing below (“I,” “me” or “my”), whether acting

individually or on behalf of any legal entity established to acquire the multi-unit development

and/or franchise rights (“Franchisee”), (a) fully understands that the purchase of a

SMASHBURGER Restaurant franchise is a significant long-term commitment, complete with its

associated risks, and (b) is not relying on any statements, representations, promises or assurances

that are not specifically set forth in Franchisor’s Franchise Disclosure Document and Exhibits

(collectively, the “FDD”) in deciding to purchase the franchise.

In that regard, I represent to Franchisor and acknowledge that:

I understand that buying a franchise is not a guarantee of success.

Purchasing or establishing any business is risky, and the success or failure of the

franchise is subject to many variables such as my skills and abilities (and those

of my partners, officers, employees), the time my associates and I devote to the

business, competition, interest rates, the economy, inflation, operation costs,

location, lease terms, the market place generally and other economic and

business factors. I am aware of and am willing to undertake these business

risks. I understand that the success or failure of my business will depend

primarily upon my efforts and not those of Franchisor.

INITIAL:

I received a copy of the FDD, including the Franchise Agreement and

Multi-Unit Development Agreement, at least 14 calendar days (10 business days

in Michigan, New York, and Rhode Island) before I executed the Franchise

Agreement and/or the Multi-Unit Development Agreement, as applicable. I

understand that all of my rights and responsibilities and those of Franchisor in

connection with the franchise are set forth in these documents and only in these

documents. I acknowledge that I have had the opportunity to personally and

carefully review these documents and have, in fact, done so. I have been

advised to have professionals (such as lawyers and accountants) review the

documents for me and to have them help me understand these documents. I

have also been advised to consult with other franchisees regarding the risks

associated with the purchase of the franchise.

INITIAL:

Neither the Franchisor nor any of its officers, employees or agents

(including any franchise broker) has made a statement, promise or assurance to

me concerning any matter related to the franchise (including those regarding

advertising, marketing, training, support service or assistance provided by

Franchisor) that is contrary to, or different from, the information contained in

the FDD.

INITIAL:

2 Smashburger 06/2012 FDD


1031.002.006/46347.1

My decision to purchase the franchise has not been influenced by any

oral representations, assurances, warranties, guarantees or promises whatsoever

made by the Franchisor or any of its officers, employees or agents (including

any franchise broker), including as to the likelihood of success of the franchise.

INITIAL:

I have made my own independent determination as to whether I have the

capital necessary to fund the business and my living expenses, particularly

during the start-up phase.

INITIAL:

I have not received any information from the Franchisor or any of its

officers, employees or agents (including any franchise broker) concerning

actual, average, projected or forecasted sales, revenues, income, profits or

earnings of the franchise business (including any statement, promise or

assurance concerning the likelihood of my success) except as contained in the

FDD or as indicated below (write “None” if none provided):

________________________________________________________________

________________________________________________________________.

INITIAL:

Prohibited Parties Clause. I acknowledge that Franchisor, its employees and its agents

are subject to U.S. laws that prohibit or restrict (a) transactions with certain parties, and (b) the

conduct of transactions involving certain foreign parties. These laws include, without limitation,

U.S. Executive Order 13224, the U.S. Foreign Corrupt Practices Act, the Bank Secrecy Act, the

International Money Laundering Abatement and Anti-terrorism Financing Act, the Export

Administration Act, the Arms Export Control Act, the U.S. Patriot Act, and the International

Economic Emergency Powers Act, and the regulations issued pursuant to these and other U.S.

laws. As part of the express consideration for the purchase of the franchise, I represent that

neither I nor any of my employees, agents, or representatives, nor any other person or entity

associated with me, is now, or has been listed on:

1. the U.S. Treasury Department’s List of Specially Designated Nationals;

2. the U.S. Commerce Department’s Denied Persons List, Unverified List, Entity

List, or General Orders;

3. the U.S. State Department’s Debarred List or Nonproliferation Sanctions; or

4. the Annex to U.S. Executive Order 13224.

I warrant that neither I nor any of my employees, agents, or representatives, nor any other

person or entity associated with me, is now, or has been: (i) a person or entity who assists,

sponsors, or supports terrorists or acts of terrorism; or (ii) is owned or controlled by terrorists or

sponsors of terrorism. I warrant that I am now, and have been, in compliance with U.S. anti-

money laundering and counter-terrorism financing laws and regulations, and that any funds

provided by me to Franchisor were legally obtained in compliance with these laws.

3 Smashburger 06/2012 FDD


1031.002.006/46347.1

I further covenant that neither I nor any of my employees, agents, or representatives, nor

any other person or entity associated with me, will, during the term of the Franchise Agreement,

become a person or entity described above or otherwise become a target of any anti-terrorism

law.

FRANCHISEE:

Sign here if you are taking the franchise as an

INDIVIDUAL(S)

(Note: use these blocks if you are an

individual or a partnership but the

partnership is not a separate legal entity)

___________________________________

Signature

Print Name: _________________________

Date: ______________________________

___________________________________

Signature

Print Name: _________________________

Date: ______________________________

Sign here if you are taking the franchise as a

CORPORATION, LIMITED LIABILITY

COMPANY OR PARTNERSHIP

____________________________________ Print Name of Legal Entity

By: ________________________________

Signature Print Name: __________________________

Title: _______________________________

Date: _______________________________

___________________________________

Signature

Print Name: _________________________

Date: ______________________________

___________________________________

Signature

Print Name: _________________________

Date: ______________________________


Ex. I – General Release 1031.002.006/46348.1

EXHIBIT "I"

SAMPLE GENERAL RELEASE




GRANT OF FRANCHISOR CONSENT AND [FRANCHISEE] OR [MULTI-UNIT

DEVELOPER] RELEASE

Smashburger Franchising LLC (“we,” “us,” or “our”) and the undersigned [franchisee or multi-

unit developer],

(“you” or “your”), currently are parties to a certain [franchise

agreement or multi-unit developer agreement] (the “[Franchise Agreement or Multi-Unit Developer

Agreement]”) dated , 20 . You have asked us to take the following action

or to agree to the following request: [insert as appropriate for renewal or transfer situation]

. We have the right under the [Franchise Agreement or Multi-Unit Developer

Agreement] to obtain a general release from you (and, if applicable, your owners) as a condition of taking

this action or agreeing to this request. Therefore, we are willing to take the action or agree to the request

specified above if you (and, if applicable, your owners) give us the release and covenant not to sue

provided below in this document. You (and, if applicable, your owners) are willing to give us the release

and covenant not to sue provided below as partial consideration for our willingness to take the action or

agree to the request described above.

Consistent with the previous introduction, you, on your own behalf and on behalf of your

successors, heirs, executors, administrators, personal representatives, agents, assigns, partners,

shareholders, members, directors, officers, principals, employees, and affiliated entities (collectively, the

"Releasing Parties"), hereby forever release and discharge us and our current and former officers,

directors, members, principals, employees, agents, representatives, affiliated entities, successors, and

assigns (collectively, the "Smashburger Parties") from any and all claims, damages (known and

unknown), demands, causes of action, suits, duties, liabilities, and agreements of any nature and kind

(collectively, “Claims”) that you and any of the other Releasing Parties now has, ever had, or, but for this

document, hereafter would or could have against any of the Smashburger Parties, including without

limitation, (1) arising out of or related to the Smashburger Parties' obligations under the [Franchise

Agreement or Multi-Unit Developer Agreement] or (2) otherwise arising from or related to your and the

other Releasing Parties' relationship, from the beginning of time to the date of your signature below, with

any of the Smashburger Parties. You, on your own behalf and on behalf of the other Releasing Parties,

further covenant not to sue any of the Smashburger Parties on any of the Claims released by this

paragraph and represent that you have not assigned any of the Claims released by this paragraph to any

individual or entity who is not bound by this paragraph.

We also are entitled to a release and covenant not to sue from your owners. By his, her, or their

separate signatures below, your owners likewise grant to us the release and covenant not to sue provided

above.

If the franchise is located in Maryland or if you are a resident of Maryland, the following shall apply:

Any general release provided for hereunder shall not apply to any liability under the

Maryland Franchise Registration and Disclosure Law.

[Signature Page Follows]



IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on

the date stated below.


an Delaware limited liability company

By:

Name:

Title:

Dated:

[FRANCHISEE OR MULTI-UNIT

DEVELOPER]:

(IF YOU ARE A CORPORATION,

LIMITED LIABILITY COMPANY, OR

PARTNERSHIP):

By:

Name:

Title:

(IF YOU ARE AN INDIVIDUAL AND

NOT A LEGAL ENTITY):

[Signature]

[Print Name]

[Signature]

[Print Name]


Ex. J – State Addenda/Rider 1031.002.006/46349.1

EXHIBIT "J"

STATE ADDENDA AND AGREEMENT RIDERS


Ex. J – State Addenda/Rider 1031.002.006/46349.1

ADDITIONAL DISCLOSURES FOR THE

MULTI-STATE FRANCHISE OFFERING CIRCULAR OF


The following are additional disclosures for the Franchise Disclosure Document of

Smashburger Franchising LLC required by various state franchise laws. Each provision of these

additional disclosures will only apply to you if the applicable state franchise registration and

disclosure law applies to you.

ILLINOIS

1. The "Summary" section of Item 17(v), entitled Choice of forum, is deleted.

2. The "Summary" section of Item 17(w), entitled Choice of law, is deleted and

replaced with the following:

Except to the extent the Lanham Act applies, the laws of the State of Illinois

apply.

MARYLAND

1. The following is added to the end of the "Summary" sections of Item 17(c),

entitled Requirements for franchisee to renew or extend, and Item 17(m), entitled Conditions

for franchisor approval of transfer:

However, pursuant to COMAR 02.02.08.16L, any release required as a condition

of renewal and/or assignment/transfer will not apply to claims arising under the

Maryland Franchise Registration and Disclosure Law.

2. The following is added to the end of the "Summary" section of Item 17(h),

entitled "Cause" defined - defaults which cannot be cured:

The Multi-Unit Development Agreement and Franchise Agreement provides for

termination upon bankruptcy. This provision might not be enforceable under

federal bankruptcy law (11 U.S.C. Sections 101 et seq.), but we will enforce it to

the extent enforceable.

3. The "Summary" sections for the Multi-Unit Development Agreement and

Franchise Agreement of Item 17(v), entitled Choice of forum, and 17(w), entitled Choice of

law, are amended to add the following:

, except for claims arising under the Maryland Franchise Registration and

Disclosure Law.


Ex. J – State Addenda/Rider 2 1031.002.006/46349.1

MINNESOTA

1. Renewal, Termination, Transfer and Dispute Resolution. The following is

added at the end of the chart in Item 17:

With respect to franchises governed by Minnesota law, we will comply

with Minn. Stat. Sec. 80C.14, Subds. 3, 4 and 5 which require, except in certain

specified cases, that you be given 90 days' notice of termination (with 60 days to

cure) of the Multi-Unit Development Agreement and Franchise Agreement and

180 days' notice for non-renewal of the Multi-Unit Development Agreement and


Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J might prohibit us

from requiring litigation to be conducted outside Minnesota, requiring waiver of a

jury trial or requiring the Multi-Unit Developer or Franchisee to consent to

liquidated damages, termination penalties or judgment notes. In addition, nothing

in the Disclosure Document, Multi-Unit Development Agreement or Franchise

Agreement can abrogate or reduce any of Multi-Unit Developer’s or Franchisee’s

rights as provided for in Minnesota Statutes, Chapter 80C, or Multi-Unit

Developer’s or Franchisee’s rights to any procedure, forum or remedies provided

for by the laws of the jurisdiction.

Any release required as a condition of renewal or transfer/assignment will

not apply to the extent prohibited by applicable law with respect to claims arising

under Minn. Rule 2860.4400D.

NEW YORK

1. The following information is added to the cover page of the offering circular:

INFORMATION COMPARING FRANCHISORS IS AVAILABLE. CALL

THE STATE ADMINISTRATORS LISTED IN EXHIBIT A OR YOUR

PUBLIC LIBRARY FOR SOURCES OF INFORMATION.

REGISTRATION OF THIS FRANCHISE BY NEW YORK STATE DOES

NOT MEAN THAT NEW YORK STATE RECOMMENDS IT OR HAS

VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT.

IF YOU LEARN THAT ANYTHING IN THE DISCLOSURE DOCUMENT

IS UNTRUE, CONTACT THE FEDERAL TRADE COMMISSION AND

NEW YORK STATE DEPARTMENT OF LAW, BUREAU OF INVESTOR

PROTECTION AND SECURITIES, 120 BROADWAY, 23RD FLOOR,

NEW YORK, NEW YORK 10271.



THE FRANCHISOR MAY, IF IT CHOOSES, NEGOTIATE WITH YOU

ABOUT ITEMS COVERED IN THE DISCLOSURE DOCUMENT.

HOWEVER, THE FRANCHISOR CANNOT USE THE NEGOTIATING

PROCESS TO PREVAIL UPON A PROSPECTIVE DEVELOPER OR

FRANCHISEE TO ACCEPT TERMS WHICH ARE LESS FAVORABLE

THAN THOSE SET FORTH IN THIS DISCLOSURE DOCUMENT.

2. The following is added at the end of Item 3:

With regard to us, our predecessor, the persons identified in Item 2, or an affiliate

offering franchises under our principal trademark:

A. There is no pending administrative, criminal, or civil action alleging: a

felony; violation of a franchise, antitrust, or securities law; fraud;

embezzlement; fraudulent conversion; misappropriation of property;

unfair or deceptive practices; or comparable civil or misdemeanor

allegations.

B. No such party has been convicted of a felony or pleaded nolo contendere

to a felony charge or, within the 10 year period immediately preceding the

application for registration, has been convicted of or pleaded nolo

contendere to a misdemeanor charge or been held liable in a civil action

alleging: violation of a franchise, antitrust, or securities law; fraud;

embezzlement; fraudulent conversion; misappropriation of property;

unfair or deceptive practices; or comparable allegations.

C. No such party is subject to a currently effective injunctive or restrictive

order or decree relating to the franchise, or under any federal, state, or

Canadian franchise, securities, antitrust, trade regulation, or trade practice

law, as a result of a concluded or pending action or proceeding brought by

a public agency; or is subject to any currently effective order of any

national securities association or national securities exchange, as defined

in the Securities and Exchange Act of 1934, suspending or expelling such

person from membership in such association or exchange; or is subject to

a currently effective injunctive or restrictive order relating to any other

business activity as a result of an action brought by a public agency or

department, including, without limitation, actions affecting a franchise as a

real estate broker or sales agent.

3. The following is added to the end of Item 4:

Except as disclosed above, neither we nor any of our predecessors, affiliates,

officers, or general partners have, during the 10 year period immediately

preceding the date of the offering circular: (a) filed as debtor (or had filed against

it) a petition to start an action under the U.S. Bankruptcy Code; (b) obtained a



discharge of its debts under the U.S. Bankruptcy Code; or (c) was a principal

officer of a company or a general partner in a partnership that either filed as a

debtor (or had filed against it) a petition to start an action under the U.S.

Bankruptcy Code or that obtained a discharge of its debts under the U.S.

Bankruptcy Code during or within 1 year after that officer or general partner of

ours held this position in the company or partnership.



for franchisor’s approval of transfer:

However, to the extent required by applicable law, all rights you enjoy and any

causes of action arising in your favor from the provisions of Article 33 of the

General Business Law of the State of New York and the regulations issued

thereunder shall remain in force; it being the intent of this proviso that the

non-waiver provisions of General Business Law Sections 687.4 and 687.5 be

satisfied.

5. The following is added to the end of the "Summary" section of Item 17(j), entitled

Assignment of contract by us:

However, to the extent required by applicable law, no assignment will be made

except to an assignee who, in our good faith judgment, is willing and able to

assume our obligations under the Multi-Unit Development Agreement or


6. The following is added to the end of the "Summary" sections of Item 17(v),

entitled Choice of forum, and Item 17(w), entitled Choice of law:

However, the governing choice of law and choice of forum shall not be

considered a waiver of any right conferred upon you by the provisions of Article

33 of the General Business Law of the State of New York.

NORTH DAKOTA



for franchisor’s approval of transfer:

However, any release required as a condition of renewal and/or

assignment/transfer will not apply to the extent prohibited by the North Dakota

Franchise Investment Law.



2. The following is added to the end of the "Summary" section of Item 17(r), entitled

Non-competition covenants after the franchise is terminated or expires:

Covenants not to compete such as those mentioned above are generally

considered unenforceable in the State of North Dakota; however, we and you will

enforce the covenants to the maximum extent the law allows.

2. The "Summary" section of Item 17(u), entitled Dispute resolution by arbitration or

mediation is deleted and replaced with the following:

To the extent required by the North Dakota Franchise Investment Law (unless

such requirement is preempted by the Federal Arbitration Act), arbitration will be

at a site to which we and you mutually agree.

3. The "Summary" section of Item 17(v), entitled Choice of forum, is deleted and


Litigation generally must be in the state where our then current principal place of

business is located (currently Denver, Colorado), except that, subject to your

arbitration obligation, and to the extent required by North Dakota Franchise

Investment Law you may bring an action in North Dakota.



Except as otherwise required by North Dakota law, the laws of the State of

Colorado shall apply.

RHODE ISLAND

1. The "Summary" section of Item 17(v), entitled Choice of forum, is deleted and


You must sue us in the state where our then current principal place of business is

located (currently Denver, Colorado), except to the extent otherwise required by

applicable law for claims arising under the Rhode Island Franchise Investment

Act.



The laws of the State of Colorado apply, except to the extent otherwise required

by applicable law with respect to claims arising under the Rhode Island Franchise

Investment Act.



VIRGINIA

1. The following is added as a “Risk Factor” to the State Cover Page:

We may periodically set a maximum or minimum price you may charge for products and

services.

2. The "Summary" section of Item 17(h), entitled Cause defined – non curable

defaults, is amended by adding the following:

Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful

for a franchisor to cancel a franchise without reasonable cause. If any grounds for

default or termination stated in the Franchise Agreement does not constitute

"reasonable cause," as that term may be defined in the Virginia Retail Franchising

Act or the laws of Virginia, that provision may not be enforceable.

3 The “Summary” section of Item 17(o), entitled Franchisor’s option to purchase

franchisee’s business is amended by adding the following:


for a franchisor to cancel a franchise without reasonable cause. If any grounds for

default or termination stated in the Multi-Unit Development Agreement or

Franchise Agreement does not constitute "reasonable cause," as that term may be

defined in the Virginia Retail Franchising Act or the laws of Virginia, that

provision may not be enforceable.


for a franchisor to use undue influence to induce a franchisee to surrender any

right given to him under the franchise. If any provision of the Multi-Unit

Development Agreement or Franchise Agreement involves the use of undue

influence by the franchisor to induce a franchisee to surrender any rights given to

him under the franchise, that provision may not be enforceable.

WASHINGTON

1. The following paragraph is added at the end of Item 17:

If any of the provisions in this Disclosure Document, Multi-Unit Development

Agreement or Franchise Agreement are inconsistent with the relationship

provisions of Revised Code of Washington Section 19.100.180 or any other

requirements of the Washington Franchise Investment Protection Act (the "Act"),

the provisions of the Act will prevail over the inconsistent terms of the Disclosure

Document, Multi-Unit Development Agreement or Franchise Agreement.

Smashburger 06/2012 FDD Ex. J – State Addenda/Rider

1031.002.006/46349.1

THE FOLLOWING PAGES IN THIS EXHIBIT ARE

STATE-SPECIFIC RIDERS TO THE



1031.002.006/46349.1

RIDER TO THE SMASHBURGER FRANCHISING LLC


FOR USE IN ILLINOIS

THIS RIDER is made and entered into by and between SMASHBURGER

FRANCHISING LLC, a Colorado limited liability company with its principal business address

at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or

“our”), and __________________________________________________, whose principal

business address is (“you” or “your”).

1. BACKGROUND. We and you are parties to that certain Multi-Unit

Development Agreement dated __________________________, 20___ (the " Multi-Unit

Development Agreement") that has been signed concurrently with the signing of this Rider. This

Rider is annexed to and forms part of the Multi-Unit Development Agreement. This Rider is

being signed because (a) any of the offering or sales activity relating to the Multi-Unit

Development Agreement occurred in Illinois and the SMASHBURGER RESTAURANT that

you will developed under the Multi-Unit Development Agreement will be located in Illinois,

and/or (b) you are domiciled in Illinois.

2. CONSENT TO JURISDICTION. The following is added to Section 9.B of the


Section 41 of the Illinois Franchise Disclosure Act (Act) provides that any

condition, stipulation, or provision purporting to bind any person acquiring any

franchise to waive compliance with any provision of the Act or any other law of

the State of Illinois is void.

3. APPLICABLE LAW. Section 10.F of the Multi-Unit Development Agreement

is deleted and replaced with the following:

This Agreement will be construed and interpreted under the laws of the State of

Colorado, without regard to its conflicts of laws rules, except to the extent

governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C.

Section 1051 et seq.) and all claims arising from the relationship between us and

you will be governed by the laws of the State of Illinois without regard to its

conflict of laws rules.

4. LIMITATIONS OF CLAIMS. The first paragraph of Section 9.E of the Multi-

Unit Development Agreement is deleted and replaced with the following:

EXCEPT FOR CLAIMS ARISING FROM YOUR NON-PAYMENT OR

UNDERPAYMENT OF AMOUNTS YOU OWE TO US PURSUANT TO

THIS AGREEMENT, ANY AND ALL CLAIMS ARISING OUT OF OR

RELATING TO THIS AGREEMENT OR OUR RELATIONSHIP WITH


Ex. J – State Addenda/Rider

1031.002.006/46349.1 2

YOU WILL BE BARRED UNLESS A JUDICIAL PROCEEDING IS

COMMENCED WITHIN ONE (1) YEAR FROM THE DATE ON WHICH

THE PARTY ASSERTING SUCH CLAIM KNEW OR SHOULD HAVE

KNOWN OF THE FACTS GIVING RISE TO SUCH CLAIMS.

HOWEVER, NOTHING CONTAINED IN THIS SECTION SHALL

CONSTITUTE A CONDITION, STIPULATION, OR PROVISION

PURPORTING TO BIND ANY PERSON TO WAIVE COMPLIANCE

WITH ANY PROVISION OF THE ILLINOIS FRANCHISE DISCLOSURE

ACT OR ANY OTHER LAW OF THE STATE OF ILLINOIS, TO THE

EXTENT APPLICABLE.

5. ENTIRE AGREEMENT. Section 10.L of the Multi-Unit Development

Agreement is deleted and replaced with the following:

This Agreement and all schedules attached hereto constitute the entire agreement

of the parties hereto and all prior negotiations, commitments, representations,

warranties, agreements and undertakings made prior hereto are hereby merged.

Other than the representations in the Disclosure Document you received from us,

there are no other inducements, representations, warranties, agreements,

undertakings, or promises, (oral or otherwise) among you and us relating to the

subject matter of this Agreement. No subsequent alteration, amendment, change

or addition to this agreement or any schedules will be binding upon the parties

hereto unless reduced to writing and signed by us and you or our and your

respective heirs, executors, administrators, successors or assigns. Nothing

contained herein shall be deemed a waiver of any right you may have to rely on

the franchise disclosure document.

6. ILLINOIS FRANCHISE DISCLOSURE ACT. The following language is

added as Section 10.P of the Multi-Unit Development Agreement:

P. ILLINOIS FRANCHISE DISCLOSURE ACT. Section 41 of the

Illinois Franchise Disclosure Act states that any condition, stipulation, or

provision purporting to bind any person acquiring any franchise to waive

compliance with any provision of the Act or any other law of Illinois is void.

[The remainder of this page is intentionally left blank.]



1031.002.006/46349.1 3

IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the

dates noted below, to be effective as of the effective date of the Multi-Unit Development

Agreement.

SMASHBURGER

FRANCHISING LLC, a Delaware

limited liability company

By:

Title:

Dated:____________________________


(if a corporation, limited liability or

partnership):

[Name]

By:

[Name] Title: _____________________________

Dated:

(IF INDIVIDUALS):

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1



FOR USE IN MARYLAND







Development Agreement dated __________________________, 20___ (the "Multi-Unit



being signed because (a) you are domiciled in Maryland, and/or (b) the SMASHBURGER

RESTAURANT that you will develop under the Multi-Unit Development Agreement will be

located in Maryland.

2. RELEASES. The following is added to the end of Sections 1.B(5), 6.A.(1)(f)

and 6.E of the Multi-Unit Development Agreement:

Pursuant to COMAR 02.02.08.16L, any release required as a condition of renewal

and/or assignment/transfer will not apply to claims arising under the Maryland

Franchise Registration and Disclosure Law.

3. INSOLVENCY. The following is added to the end of Section 7.A(4) of the

Multi-Unit Development Agreement:

; however, we and you acknowledge that certain aspects of this provision might

not be enforceable under federal bankruptcy law (11 U.S.C. Sections 101 et seq.).






Section 1051 et seq.), except to the extent required by applicable law, Maryland

law will apply to claims arising under the Maryland Franchise Registration and

Disclosure Law.



1031.002.006/46349.1 2

5. CONSENT TO JURISDICTION. Section 9.B of the Multi-Unit Development


SUBJECT TO THE PROVISIONS BELOW, YOU AND YOUR OWNERS

AGREE THAT ALL ACTIONS ARISING UNDER THIS AGREEMENT

OR OTHERWISE AS A RESULT OF THE RELATIONSHIP BETWEEN

YOU AND US MUST BE COMMENCED IN A COURT OF GENERAL

JURISDICTION NEAREST TO OUR THEN CURRENT PRINCIPAL

PLACE OF BUSINESS (CURRENTLY DENVER, COLORADO), AND

YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO THE

JURISDICTION OF THAT COURT AND WAIVE ANY OBJECTION

YOU (OR THE OWNER) MIGHT HAVE TO EITHER THE

JURISDICTION OF OR VENUE IN THAT COURT.

NOTWITHSTANDING THE FOREGOING, YOU MAY BRING AN

ACTION IN MARYLAND FOR CLAIMS ARISING UNDER THE

MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW.

6. LIMITATIONS OF CLAIMS. The following is added to the end of the first

paragraph of Section 9.E of the Multi-Unit Development Agreement:

; PROVIDED, HOWEVER, THAT THIS LIMITATION OF CLAIMS

SHALL NOT ACT TO REDUCE THE 3 YEAR STATUTE OF

LIMITATIONS AFFORDED YOU FOR BRINGING A CLAIM UNDER

THE MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE

LAW.




1031.002.006/46349.1 3

IN WITNESS WHEREOF, the parties have executed and delivered this Rider

on the dates noted below, to be effective as of the effective date of the Multi-Unit Development

Agreement.

SMASHBURGER



By:

Title:

Dated:____________________________



partnership):

[Name]

By:

[Name] Title: _____________________________

Dated:

(IF INDIVIDUALS):

[Signature]

[Print Name]

Dated:

Smashburger 06/2012FDD


1031.002.006/46349.1



FOR USE IN MINNESOTA










being signed because (a) the SMASHBURGER RESTAURANT that you will develop under the

Multi-Unit Development Agreement will be located in Minnesota; and/or (b) any of the offering

or sales activity relating to the Multi-Unit Development Agreement occurred in Minnesota.



Any release required as a condition of renewal and/or assignment/transfer will not

apply to the extent prohibited by the Minnesota Franchises Law.

3. INJUNCTIVE RELIEF. Section 9.D of the Multi-Unit Development


Nothing in this Agreement bars our right to obtain specific performance of the

provisions of this Agreement and injunctive relief against threatened conduct that

will cause us, the Marks, and/or the Franchise System loss or damage, under

customary equity rules, including applicable rules for obtaining restraining orders

and preliminary injunctions. You agree that we may seek such injunctive relief in

addition to such further or other relief as may be available at law or in equity.

You agree that your only remedy if an injunction is entered against you will be

the dissolution of that injunction, if warranted, upon due hearing (all claims for

damages by injunction being expressly waived hereby). Also, a court will

determine if a bond is required.


paragraph of Section 9.D of the Multi-Unit Development Agreement:

; PROVIDED, HOWEVER, THAT MINNESOTA LAW PROVIDES THAT NO

ACTION MAY BE COMMENCED UNDER MINN. STAT. SEC. 80C.17

MORE THAN 3 YEARS AFTER THE CAUSE OF ACTION ACCRUES.



1031.002.006/46349.1 2

5 MINNESOTA LAW. Notwithstanding anything to the contrary contained in the

Multi-Unit Development Agreement, Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J

prohibit us from requiring you to waive your rights to a jury trial or to waive your rights to any

procedure, forum or remedies provided for by the laws of the jurisdiction, or to consent to

liquidated damages, termination penalties or judgment notes.



Agreement.

SMASHBURGER



By:

Title:

Dated:____________________________



partnership):

[Name]

By:

[Name] Title: _____________________________

Dated:

(IF INDIVIDUALS):

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1

RIDER TO THE


MULTI-UNIT DEVELOPMENT AGREEMENT FOR USE IN THE

STATE OF NEW YORK







Development Agreement dated _______________________________, (the "Multi-Unit

Development Agreement") that has been signed concurrently with this Rider. This Rider is

being signed because (a) your are domiciled in the State of New York and the SMASHBURGER


located in New York, and/or (b) any of the offering or sales activity relating to the Multi-Unit

Development Agreement occurred in New York.

2. ASSIGNMENT BY US. The following language is added to the end of

Section 10.I of the Multi-Unit Development Agreement:

However, to the extent required by applicable law, no transfer will be made


assume our obligations under this Agreement.



Notwithstanding the foregoing all rights enjoyed by you and any causes of action

arising in your favor from the provisions of Article 33 of the General Business

Law of the State of New York and the regulations issued thereunder shall remain

in force to the extent required by the non-waiver provisions of GBL Sections

687.4 and 687.5, as amended.

4. APPLICABLE LAW. The following statement is added at the end of

Section 10.F of the Multi-Unit Development Agreement:

This Section shall not be considered a waiver of any right conferred upon you by

the provisions of Article 33 of the New York State General Business Law, as

amended, and the regulations issued thereunder.



1031.002.006/46349.1 2

5. CONSENT TO JURISDICTION. The following is added to the end of

Section 9.B of the Multi-Unit Development Agreement:






Agreement.

SMASHBURGER



By:

Title:

Dated:____________________________



partnership):

[Name]

By:

[Name] Title: _____________________________

Dated:

(IF INDIVIDUALS):

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1



FOR USE IN NORTH DAKOTA










being signed because (a) you are a resident of North Dakota and the SMASHBURGER


located or operated in North Dakota; and/or (b) any of the offering or sales activity relating to the

Multi-Unit Development Agreement occurred in North Dakota.




apply to the extent prohibited by the North Dakota Franchise Investment Law.

3. COVENANT NOT TO COMPETE/NON SOLICITATION. The following is

added to the end of Section 7.C of the Multi-Unit Development Agreement:


considered unenforceable in the State of North Dakota; however, we will enforce

the covenants to the maximum extent the law allows.

4. ARBITRATION. The first paragraph of Section 9.A of the Multi-Unit

Development Agreement is amended to read as follows:

A. ARBITRATION. We and you agree that all controversies,

disputes, or claims between us and our affiliates, and our and their respective

shareholders, officers, directors, agents, or employees, and you (or your owners,

guarantors, Affiliates, or employees) arising out of or related to:

(1) this Agreement or any other agreement between you (or your

owners) and us (or our affiliates);

(2) our relationship with you; or



1031.002.006/46349.1 2

(3) the scope or validity of this Agreement or any other agreement

between you (or your owners) and us (or our affiliates) or any

provision of any such agreements (including the validity and scope

of the arbitration obligation under this Section 9.A, which we and

you acknowledge is to be determined by an arbitrator, not a court),

must be submitted for binding arbitration, on demand of either party, to the American

Arbitration Association. The arbitration proceedings will be conducted by one arbitrator

and, except as this Section otherwise provides, according to the then current Commercial

Arbitration Rules of the American Arbitration Association. All proceedings will be

conducted at a suitable location chosen by the arbitrator in or within 50 miles of our then

current principal place of business (currently, Denver, Colorado); provided, however, that

to the extent otherwise required by the North Dakota Franchise Investment Law (unless

such a requirement is preempted by the Federal Arbitration Act), arbitration shall be held

at a site to which we and you mutually agree. All matters relating to arbitration will be

governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.).






Section 1051 et seq.) and except as otherwise required by North Dakota Law.

6. CONSENT TO JURISDICTION. The following is added to the end of Section

9.B of the Multi-Unit Development Agreement:

NOTWITHSTANDING THE FOREGOING, TO THE EXTENT

REQUIRED BY THE NORTH DAKOTA FRANCHISE INVESTMENT

LAW, YOU MAY BRING AN ACTION IN NORTH DAKOTA FOR

CLAIMS ARISING UNDER THE NORTH DAKOTA FRANCHISE

INVESTMENT LAW.

7. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL. To the extent

required by the North Dakota Franchise Investment Law, Section 9.C of the Multi-Unit

Development Agreement is deleted.


paragraph of Section 9.E of the Multi-Unit Development Agreement:

THE STATUTES OF LIMITATIONS UNDER NORTH DAKOTA LAW

APPLIES WITH RESPECT TO CLAIMS ARISING UNDER THE NORTH

DAKOTA FRANCHISE INVESTMENT LAW.



1031.002.006/46349.1 3



Agreement.

SMASHBURGER



By:

Title:

Dated:____________________________



partnership):

[Name]

By:

[Name] Title: _____________________________

Dated:

(IF INDIVIDUALS):

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1



FOR USE IN RHODE ISLAND







Development Agreement dated __________________________, 20____ (the "Multi-Unit



being signed because (a) you are domiciled in Rhode Island and the SMASHBURGER


located in Rhode Island; and/or (b) any of the offering or sales activity relating to the Multi-Unit

Development Agreement occurred in Rhode Island.






Section 1051 et seq.) and except that to the extent required by applicable law,

Rhode Island law will apply to claims arising under the Rhode Island Franchise

Investment Act.

3. CONSENT TO JURISDICTION. The following is added at the end of

Section 9.B of the Multi-Unit Development Agreement:


REQUIRED BY APPLICABLE LAW, YOU MAY BRING AN ACTION IN

RHODE ISLAND FOR CLAIMS ARISING UNDER THE RHODE ISLAND

FRANCHISE INVESTMENT ACT




1031.002.006/46349.1 2



Agreement.

SMASHBURGER



By:

Title:

Dated:____________________________



partnership):

[Name]

By:

[Name] Title: _____________________________

Dated:

(IF INDIVIDUALS):

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1



FOR USE IN WASHINGTON







Development Agreement dated __________________________, 20____ (the "Multi-Unit



being signed because (a) you are domiciled in Washington; and/or (b) the SMASHBURGER


located or operated in Washington; and/or (c) any of the offering or sales activity relating to the

Multi-Unit Development Agreement occurred in Washington.

2. WASHINGTON LAW. The following paragraphs are added to the end of the

Multi-Unit Development Agreement:

In recognition of the requirements of the Washington Franchise

Investment Protection Act (the “Act”) and the rules and regulations promulgated

thereunder, the Franchise Agreement shall be modified as follows:

The State of Washington has a statute, RCW 19.100.180, which might

supersede this Agreement in your relationship with us, including the areas of

termination and renewal of your franchise. There might also be court decisions

which supersede this Agreement in your relationship with us, including

termination and renewal of your franchise.

In the event of a conflict of laws, to the extent required by the Act, the

provisions of the Act, Chapter 19.100 RCW, shall prevail.

To the extent required by the Act, a release or waiver of rights executed by

Franchisee shall not include rights under the Act, except when executed pursuant

to a negotiated settlement after the Franchise Agreement is in effect and where the

parties are represented by independent counsel. Provisions such as those which

unreasonably restrict or limit the statute of limitations period for claims under the

Act, or rights or remedies under the Act, such as a right to a jury trial, might not

be enforceable.

To the extent required by the Act, transfer fees are collectable to the extent

that they reflect Franchisor's reasonable estimate or actual costs in effecting a

transfer.



1031.002.006/46349.1 2

IN WITNESS WHEREOF, the parties have executed and delivered this Rider

on the dates noted below, to be effective as of the effective date of the Multi-Unit Development

Agreement.

SMASHBURGER



By:

Title:

Dated:____________________________



partnership):

[Name]

By:

[Name] Title: _____________________________

Dated:

(IF INDIVIDUALS):

[Signature]

[Print Name]

Dated:


1031.002.006/46349.1

THE FOLLOWING PAGES IN THIS EXHIBIT ARE

STATE-SPECIFIC RIDERS TO THE

FRANCHISE AGREEMENT



1031.002.006/46349.1


FRANCHISE AGREEMENT

FOR USE IN ILLINOIS






1. BACKGROUND. We and you are parties to that certain Franchise Agreement

dated __________________________, 20___ (the "Franchise Agreement") that has been signed

concurrently with the signing of this Rider. This Rider is annexed to and forms part of the

Franchise Agreement. This Rider is being signed because (a) any of the offering or sales activity

relating to the Franchise Agreement occurred in Illinois and the SMASHBURGER

RESTAURANT that you will operate under the Franchise Agreement will be located in Illinois,

and/or (b) you are domiciled in Illinois.

2. GOVERNING LAW. Section 17.H of the Franchise Agreement is deleted and



TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET

SEQ.), OR OTHER UNITED STATES FEDERAL LAW, THIS AGREEMENT,

THE FRANCHISE, AND ALL CLAIMS ARISING FROM THE RELATIONSHIP

BETWEEN US AND YOU WILL BE GOVERNED BY THE LAWS OF THE

STATE OF ILLINOIS WITHOUT REGARD TO ITS CONFLICT OF LAWS

RULES, EXCEPT THAT (1) ANY LAW REGULATING THE SALE OF

FRANCHISES OR GOVERNING THE RELATIONSHIP OF A FRANCHISOR

AND ITS FRANCHISEE WILL NOT APPLY UNLESS ITS JURISDICTIONAL

REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO

THIS SECTION, AND (2) THE ENFORCEABILITY OF THOSE PROVISIONS

OF THIS AGREEMENT WHICH RELATE TO RESTRICTIONS ON YOU AND

YOUR OWNERS’ COMPETITIVE ACTIVITIES WILL BE GOVERNED BY

THE LAWS OF THE STATE IN WHICH YOUR RESTAURANT IS LOCATED.

3. CONSENT TO JURISDICTION. Section 17.I of the Franchise Agreement is

deleted in its entirety.

4. LIMITATIONS OF CLAIMS. Section 17.M of the Franchise Agreement is

amended by adding the following:

However, nothing contained in this section shall constitute a condition, stipulation, or

provision purporting to bind any person to waive compliance with any provision of the



1031.002.006/46349.1 2

Illinois Franchise Disclosure Act or any other law of the State of Illinois, to the extent

applicable.

5. CONSTRUCTION. The first paragraph of Section 17.O of the Franchise


The preambles and exhibits are a part of this Agreement which, together with the System

Standards contained in the Standards of Operations Manual (which may be periodically

modified, as provided in Sections 4.C, 8.H, and 17.K above), constitutes our and your

entire agreement. Other than the representations in the Disclosure Document you

received from us, there are no other oral or written understandings or agreements between

us and you, or oral or written representations by us, relating to the subject matter of this

Agreement, the franchise relationship, or your Restaurant (any understandings or

agreements reached, or any representations made, before this Agreement are superseded

by this Agreement). Any policies that we adopt and implement from time to time to

guide us in our decision-making are subject to change, are not a part of this Agreement,

and are not binding on us. Except as provided in Section 16.D., nothing in this

Agreement is intended or deemed to confer any rights or remedies upon any person or

legal entity not a party to this Agreement.

6. ILLINOIS FRANCHISE DISCLOSURE ACT. The following language is

added as Section 17.Q of the Franchise Agreement:

Q. ILLINOIS FRANCHISE DISCLOSURE ACT. Section 41 of the Illinois

Franchise Disclosure Act states that any condition, stipulation, or provision purporting to

bind any person acquiring any franchise to waive compliance with any provision of the

Act or any other law of Illinois is void.




1031.002.006/46349.1 3


dates noted below, to be effective as of the effective date of the Franchise Agreement.



By:

Name:

Title:

DATE:

FRANCHISE OWNER



PARTNERSHIP):

By:

Name:

Title:



[Signature]

[Print Name]

Dated:

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1


FRANCHISE AGREEMENT

FOR USE IN MARYLAND









Franchise Agreement. This Rider is being signed because (a) you are domiciled in Maryland,

and/or (b) the SMASHBURGER RESTAURANT that you will operate under the Franchise

Agreement will be located in Maryland.

2. NON-WAIVER. The following is added to the end of Section 1.B of the

Franchise Agreement:

To the extent so required by applicable law, these acknowledgments are not

intended to act, nor shall they act, as a release, estoppel or waiver of any liability

incurred under the Maryland Franchise Registration and Disclosure Law.

3. RELEASES. The following is added to the end of Sections 12.C(9) and 13.C of

the Franchise Agreement:

Pursuant to COMAR 02.02.08.16L, any release required as a condition of renewal

and/or assignment/transfer will not apply to claims arising under the Maryland


4. INSOLVENCY. The following is added to the end of Section 14.B(18) of the


; however, we and you acknowledge that certain aspects of this provision might

not be enforceable under federal bankruptcy law (11 U.S.C. Sections 101 et seq.).




TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051

ET SEQ.), OR OTHER UNITED STATES FEDERAL LAW, THIS

AGREEMENT, THE FRANCHISE, AND ALL CLAIMS ARISING FROM

THE RELATIONSHIP BETWEEN US AND YOU WILL BE GOVERNED


1031.002.006/46349.1

2

BY THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD

TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT (1) ANY

COLORADO LAW REGULATING THE SALE OF FRANCHISES OR

GOVERNING THE RELATIONSHIP OF A FRANCHISOR AND ITS

FRANCHISEE WILL NOT APPLY UNLESS ITS JURISDICTIONAL

REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT

REFERENCE TO THIS SECTION, AND (2) TO THE EXTENT

REQUIRED BY APPLICABLE LAW, MARYLAND LAW WILL APPLY

TO CLAIMS ARISING UNDER THE MARYLAND FRANCHISE

REGISTRATION AND DISCLOSURE LAW.

6. CONSENT TO JURISDICTION. Section 17.I of the Franchise Agreement is

deleted and replaced with the following:

SUBJECT TO THE PROVISIONS BELOW, YOU AND YOUR OWNERS

AGREE THAT ALL ACTIONS ARISING UNDER THIS AGREEMENT

OR OTHERWISE AS A RESULT OF THE RELATIONSHIP BETWEEN

YOU AND US MUST BE COMMENCED IN A COURT OF GENERAL

JURISDICTION NEAREST TO OUR THEN CURRENT PRINCIPAL

PLACE OF BUSINESS (CURRENTLY DENVER, COLORADO), AND

YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO THE

JURISDICTION OF THAT COURT AND WAIVE ANY OBJECTION

YOU (OR THE OWNER) MIGHT HAVE TO EITHER THE

JURISDICTION OF OR VENUE IN THAT COURT.

NOTWITHSTANDING THE FOREGOING, YOU MAY BRING AN

ACTION IN MARYLAND FOR CLAIMS ARISING UNDER THE

MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW.

7. LIMITATIONS OF CLAIMS. The following is added to the end of

Section 17.M of the Franchise Agreement:

; provided, however, that this limitation of claims shall not act to reduce the

3 year statute of limitations afforded you for bringing a claim under the Maryland




1031.002.006/46349.1

3





By:

Name:

Title:

DATE:

FRANCHISE OWNER



PARTNERSHIP):

By:

Name:

Title:



[Signature]

[Print Name]

Dated:

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1


FRANCHISE AGREEMENT

FOR USE IN MINNESOTA









Franchise Agreement. This Rider is being signed because (a) the SMASHBURGER

RESTAURANT that you will operate under the Franchise Agreement will be located in

Minnesota; and/or (b) any of the offering or sales activity relating to the Franchise Agreement

occurred in Minnesota.

2. RELEASES. The following is added to the end of Section 12.C(9) and

Section 13.C of the Franchise Agreement:


apply to the extent prohibited by the Minnesota Franchises Law.

3. RENEWAL AND TERMINATION. The following is added to the end of

Sections 13.B and 14.B of the Franchise Agreement:

However, with respect to franchises governed by Minnesota law, we will comply

with Minn. Stat. Sec. 80C.14, Subds. 3, 4 and 5 which require, except in certain

specified cases, that you be given 90 days' notice of termination (with 60 days to

cure) and 180 days' notice of non-renewal of this Agreement.

4. REMEDIES. The following language is added to the end of Section 15.F of the

Franchise Agreement

We and you acknowledge that certain parts of this provision might not be

enforceable under Minn. Rule Part 2860.4400J. However, we and you agree to

enforce the provision to the extent the law allows.

5. INJUNCTIVE RELIEF. Section 17.K of the Franchise Agreement is deleted

and replaced with the following:

Nothing in this Agreement bars our right to obtain specific performance of the

provisions of this Agreement and injunctive relief against threatened conduct that

will cause us, the Marks and/or the Franchise System loss or damage, under


1031.002.006/46349.1

2

customary equity rules, including applicable rules for obtaining restraining orders

and preliminary injunctions. You agree that we may seek such injunctive relief in

addition to such further or other relief as may be available at law or in equity.

You agree that your only remedy if an injunction is entered against you will be

the dissolution of that injunction, if warranted, upon due hearing (all claims for

damages by injunction being expressly waived hereby). Also, a court will

determine if a bond is required.



; provided, however, that Minnesota law provides that no action may be

commenced under Minn. Stat. Sec. 80C.17 more than 3 years after the cause of

action accrues.

7. MINNESOTA LAW. Notwithstanding anything to the contrary contained in the

Franchise Agreement, Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J prohibit us from

requiring you to waive your rights to a jury trial or to waive your rights to any procedure, forum

or remedies provided for by the laws of the jurisdiction, or to consent to liquidated damages,

termination penalties or judgment notes.



1031.002.006/46349.1

3





By:

Name:

Title:

DATE:

FRANCHISE OWNER



PARTNERSHIP):

By:

Name:

Title:



[Signature]

[Print Name]

Dated:

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1

RIDER TO THE


FRANCHISE AGREEMENT FOR USE IN THE

STATE OF NEW YORK







dated _______________________________, (the "Franchise Agreement") that has been signed

concurrently with this Rider. This Rider is being signed because (a) your are domiciled in the

State of New York and the SMASHBURGER RESTAURANT that you will operate under the

Franchise Agreement will be located in New York, and/or (b) any of the offering or sales activity

relating to the Franchise Agreement occurred in New York.

2. TRANSFER BY US. The following language is added to the end of

Section 12.A of the Franchise Agreement:

However, to the extent required by applicable law, no transfer will be made


assume our obligations under this Agreement.

3. RELEASES. The following language is added to the end of Sections 12.C(9)

and 13.C of the Franchise Agreement:

Notwithstanding the foregoing all rights enjoyed by you and any causes of action

arising in your favor from the provisions of Article 33 of the General Business

Law of the State of New York and the regulations issued thereunder shall remain

in force to the extent required by the non-waiver provisions of GBL Sections

687.4 and 687.5, as amended.

4. TERMINATION OF AGREEMENT - BY YOU. The following language is

added to the end of Section 14.A of the Franchise Agreement:

You also may terminate this Agreement on any grounds available by law under

the provisions of Article 33 of the General Business Law of the State of New

York.


1031.002.006/46349.1 2

5. GOVERNING LAW. The following statement is added at the end of

Section 17.H of the Franchise Agreement:




6. CONSENT TO JURISDICTION. The following is added to the end of

Section 17.I of the Franchise Agreement:






1031.002.006/46349.1 3





By:

Name:

Title:

DATE:

FRANCHISE OWNER



PARTNERSHIP):

By:

Name:

Title:



[Signature]

[Print Name]

Dated:

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1


FRANCHISE AGREEMENT

FOR USE IN NORTH DAKOTA

THIS RIDER is made and entered into as of the _____day of ________________,

20___ (the “Effective Date”) (regardless of the dates of the parties’ signatures) by and between

SMASHBURGER FRANCHISING LLC, a Colorado limited liability company with its

principal business address at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado

80202 ("we," “us,” or “our”), and _________________________________________________,

whose principal business address is (“you”

or “your”).




Franchise Agreement. This Rider is being signed because (a) you are a resident of North Dakota

and the SMASHBURGER RESTAURANT that you will operate under the Franchise Agreement

will be located or operated in North Dakota; and/or (b) any of the offering or sales activity

relating to the Franchise Agreement occurred in North Dakota.

2. RELEASES. The following is added to the end of Sections 12.C(9) and 13.C of

the Franchise Agreement:


apply to the extent prohibited by the North Dakota Franchise Investment Law.

3. COVENANT NOT TO COMPETE. The following is added to the end of

Section 15.D of the Franchise Agreement:


considered unenforceable in the State of North Dakota; however, we will enforce

the covenants to the maximum extent the law allows.

4. REMEDIES. The following language is added to the end of Section 15.F of the


We and you acknowledge that certain parts of this provision might not be

enforceable under the North Dakota Franchise Investment Law. However, we

and you agree to enforce the provision to the extent the law allows.

5. ARBITRATION. The first paragraph of Section 17.G of the Franchise

Agreement is amended to read as follows:

A. ARBITRATION. We and you agree that all controversies,

disputes, or claims between us and our affiliates, and our and their respective


1031.002.006/46349.1 2

shareholders, officers, directors, directors, agents, and employees, and you (and

your owners, guarantors, Affiliates, and employees) arising out of or related to:

(1) this Agreement or any other agreement between you (or your

owners) and us (or our affiliates);

(2) our relationship with you;

(3) the scope or validity of this Agreement or any other agreement

between you (or your owners) and us (or our affiliates) or any

provision of any such agreements (including the validity and scope

of the arbitration obligation under this Section 17.G, which we and

you acknowledge is to be determined by an arbitrator, not a court);

or

(4) any System Standard,

must be submitted for binding arbitration, on demand by either party, to the American

Arbitration Association. The arbitration proceedings will be conducted by one arbitrator

and, except as this Section otherwise provides, according to the then-current Commercial

Arbitration Rules of the American Arbitration Association. All proceedings will be

conducted at a suitable location chosen by the arbitrator in or within 50 miles of our then

current principal place of business (currently, Denver, Colorado); provided, however, that

to the extent otherwise required by the North Dakota Franchise Investment Law (unless

such a requirement is preempted by the Federal Arbitration Act), arbitration shall be held

at a site to which we and you mutually agree. All matters relating to arbitration will be

governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.).





ET SEQ.), OR OTHER UNITED STATES FEDERAL LAW, AND EXCEPT

AS OTHERWISE REQUIRED BY NORTH DAKOTA LAW, THIS




TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT ANY STATE

LAW REGULATING THE SALE OF FRANCHISES OR GOVERNING

THE RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE

WILL NOT APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS

ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS

PARAGRAPH.


1031.002.006/46349.1 3

6. CONSENT TO JURISDICTION. The following is added to the end of Section

17.I of the Franchise Agreement:


REQUIRED BY THE NORTH DAKOTA FRANCHISE INVESTMENT

LAW, AND SUBJECT TO YOUR ARBITRATION OBLIGATIONS, YOU

MAY BRING AN ACTION IN NORTH DAKOTA FOR CLAIMS ARISING

UNDER THE NORTH DAKOTA FRANCHISE INVESTMENT LAW.

7. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL. To the extent

required by the North Dakota Franchise Investment Law, Section 17.J of the Franchise

Agreement is deleted.



The statutes of limitations under North Dakota Law applies with respect to claims

arising under the North Dakota Franchise Investment Law.



1031.002.006/46349.1 4





By:

Name:

Title:

DATE:

FRANCHISE OWNER



PARTNERSHIP):

By:

Name:

Title:



[Signature]

[Print Name]

Dated:

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1


FRANCHISE AGREEMENT

FOR USE IN RHODE ISLAND




“our”), and _________________________________________________________, whose

principal business address is (“you” or

“your”).


dated __________________________, 20____ (the "Franchise Agreement") that has been

signed concurrently with the signing of this Rider. This Rider is annexed to and forms part of

the Franchise Agreement. This Rider is being signed because (a) you are domiciled in Rhode

Island and the SMASHBURGER RESTAURANT that you will operate under the Franchise

Agreement will be located in Rhode Island; and/or (b) any of the offering or sales activity

relating to the Franchise Agreement occurred in Rhode Island.





ET SEQ.), OR OTHER UNITED STATES FEDERAL LAW, THIS




TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT (1) ANY STATE

LAW REGULATING THE SALE OF FRANCHISES OR GOVERNING

THE RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE

WILL NOT APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS

ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS

SECTION, AND (2) TO THE EXTENT REQUIRED BY APPLICABLE

LAW, RHODE ISLAND LAW WILL APPLY TO CLAIMS ARISING

UNDER THE RHODE ISLAND FRANCHISE INVESTMENT ACT.

3. CONSENT TO JURISDICTION. The following is added at the end of

Section 17.I of the Franchise Agreement:


REQUIRED BY APPLICABLE LAW, YOU MAY BRING AN ACTION IN

RHODE ISLAND FOR CLAIMS ARISING UNDER THE RHODE ISLAND

FRANCHISE INVESTMENT ACT


1031.002.006/46349.1 2





By:

Name:

Title:

DATE:

FRANCHISE OWNER



PARTNERSHIP):

By:

Name:

Title:



[Signature]

[Print Name]

Dated:

[Signature]

[Print Name]

Dated:


1031.002.006/46349.1


FRANCHISE AGREEMENT

FOR USE IN WASHINGTON




“our”), and _________________________________________________________, whose

principal business address is (“you” or

“your”).


dated __________________________, 20____ (the "Franchise Agreement") that has been

signed concurrently with the signing of this Rider. This Rider is annexed to and forms part of

the Franchise Agreement. This Rider is being signed because (a) you are domiciled in

Washington; and/or (b) the SMASHBURGER RESTAURANT that you will operate under the

Franchise Agreement will be located or operated in Washington; and/or (c) any of the offering or

sales activity relating to the Franchise Agreement occurred in Washington.

2. WASHINGTON LAW. The following paragraphs are added to the end of the


In recognition of the requirements of the Washington Franchise

Investment Protection Act (the “Act”) and the rules and regulations promulgated

thereunder, the Franchise Agreement shall be modified as follows:

The State of Washington has a statute, RCW 19.100.180, which might

supersede this Agreement in your relationship with us, including the areas of

termination and renewal of your franchise. There might also be court decisions

which supersede this Agreement in your relationship with us, including

termination and renewal of your franchise.

In the event of a conflict of laws, to the extent required by the Act, the

provisions of the Act, Chapter 19.100 RCW, shall prevail.

To the extent required by the Act, a release or waiver of rights executed by

Franchisee shall not include rights under the Act, except when executed pursuant

to a negotiated settlement after the Franchise Agreement is in effect and where the

parties are represented by independent counsel. Provisions such as those which

unreasonably restrict or limit the statute of limitations period for claims under the

Act, or rights or remedies under the Act, such as a right to a jury trial, might not

be enforceable.

To the extent required by the Act, transfer fees are collectable to the extent

that they reflect Franchisor's reasonable estimate or actual costs in effecting a

transfer.



1031.002.006/46349.1 2





By:

Name:

Title:

DATE:

FRANCHISE OWNER



PARTNERSHIP):

By:

Name:

Title:



[Signature]

[Print Name]

Dated:

[Signature]

[Print Name]

Dated:



1031.002.006/46349.1

NEW YORK REPRESENTATIONS PAGE

FRANCHISOR REPRESENTS THAT THIS PROSPECTUS DOES NOT KNOWINGLY

OMIT ANY MATERIAL FACT OR CONTAIN ANY UNTRUE STATEMENT OF A

MATERIAL FACT.


Ex. K – Receipts 1031.002.006/46351.1

EXHIBIT "K"

RECEIPTS


Ex. K – Receipts 1031.002.006/46351.1

ITEM 23

RECEIPT

This Disclosure Document summarizes certain provisions of the Multi-Unit Development Agreement and Franchise

Agreement and other information in plain language. Read this Disclosure Document and all agreements carefully.

If Smashburger Franchising LLC offers you a franchise, it must provide this Disclosure Document to you 14

calendar-days before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in

connection with the proposed franchise sale. Under Iowa law, we must give you this disclosure document at the earlier

of our 1st personal meeting or 14 calendar days before you sign an agreement with, or make a payment to, us or an

affiliate in connection with the proposed franchise sale. Under New York and Rhode Island law, we must provide this

Disclosure Document at the earlier of the 1st personal meeting or 10 business days before you sign a binding

agreement with, or make a payment to, us or an affiliate in connection with the proposed franchise sale.

Michigan requires that we give you this Disclosure Document at least 10 business days before the execution of any

binding franchise, development or other agreement or the payment of any consideration, whichever occurs first.

If Smashburger Franchising LLC does not deliver this Disclosure Document on time or if it contains a false or

misleading statement, or a material omission, a violation of federal and state law may have occurred and should be

reported to the Federal Trade Commission, Washington, D.C. 20580 and the appropriate state agency identified on

Exhibit A.

The Franchisor is Smashburger Franchising LLC, located at 1515 Arapahoe Street, Tower One, 10th

Floor, Denver, Colorado

80202. Its telephone number is (303) 633-1500.

Issuance date: February 28, 2012; as amended June 14, 2012. (The effective dates in the franchise registration states are

noted on the third page of this Disclosure Document.)

Franchise sellers offering the franchise: SMASHBURGER FRANCHISING LLC, 1515 Arapahoe St., Tower One, 10th

Floor, Denver, CO 80202, (303) 633-1500. In addition, please identify the individual franchise seller who offered you a

Smashburger franchise in the space provided below:

Brett Willis


1515 Arapahoe St.


Denver, CO 80202

(303) 633-1500

Amy Weasler


1515 Arapahoe St.


Denver, CO 80202

(303) 633-1500

____________________


1515 Arapahoe St.


Denver, CO 80202

(303) 633-1500

____________________


1515 Arapahoe St.


Denver, CO 80202

(303) 633-1500

We authorize the respective parties identified on Exhibit A to receive service of process for Smashburger Franchising LLC in

the particular state.

I received a disclosure document dated February 28, 2012; as amended June 14, 2012 that included the following Exhibits:

EXHIBIT A State Administrators/Agents for Service of

Process

EXHIBIT B Multi-Unit Development Agreement

EXHIBIT C Franchise Agreement

EXHIBIT D List of Franchisees

EXHIBIT E List of Franchisees Who Have Left the

System or Not Communicated

EXHIBIT F Financial Statements

EXHIBIT G Table of Contents to Operations Manual

EXHIBIT H Representations and Acknowledgement

Statement

EXHIBIT I Sample General Release

EXHIBIT J State Addenda and Agreement Riders

EXHIBIT K Receipts

PROSPECTIVE FRANCHISEE:

If a business entity: If an individual:

Name of Business Entity (Print Name):

By:

Its: Dated:

(Print Name):

Dated: