Joining the Burger King System

You may enter the Burger King System by developing a new BURGER KING® Restaurant or by purchasing a franchisee-operated Restaurant. It is also possible that on occasions the business may decide to sell a Company-owned Restaurant. The Company has the right in its absolute discretion to approve or disapprove your application of the contemplated transaction. Your approval as a prospective franchisee is based upon several factors, including experience, qualifications, financial status and net worth. If an approval is granted, Burger King Corporation does not guarantee the success of the franchised Restaurant, the level of sales or operating margins. Your success depends upon many factors including your ability as an independent business person or organisation. Therefore, neither Burger King Corporation nor the Service Companies ("the Company", "We" or "Us") make any representation or warranty as to potential success. Further, no employee or representative of the Company is authorised to make any such representation or warranty. You are encouraged to make an independent investigation regarding the purchase or development of a BURGER KING® restaurant and regarding the Burger King System itself. It is recommended that you visit and speak to existing franchise owners and obtain the advice of a lawyer and accountant with experience and knowledge of franchise relations and restaurant ownership prior to signing any agreement.

The market in which franchised BURGER KING® restaurants compete is characterised by intense competition. The franchisee will compete with other international fast food chains, regional chains, local independent restaurants, convenience stores, grocery store delicatessens and food counters, cafeterias and any number of other purveyors of quickly available, moderately-priced foods. Although you may receive an exclusive target read to search for a site (under a 'Target Reservation Agreement' or 'TRA', that exclusivity is solely for the purpose of locating potential sites prior to development of your Restaurant, and after the opening of your Restaurant (unless you have a Development Agreement which provides otherwise) (a) all exclusivity and all territorial rights terminate and (b) the Company is free to locate additional Restaurants anywhere near your Restaurant. Accordingly, you may also compete with other existing and subsequently established Restaurants both franchised and Company-owned. Burger King Corporation and Service Companies are also free to establish and operate or franchise similar or different businesses under any name at any location, and to use their trademarks and service marks in connection with the sale of products and services through other distribution channels. The quick service restaurant business has become highly competitive and, while the business continually strives to improve its products and operation so as to minimise business risks to franchisees, you must realise that Burger King Corporation and the Service Companies cannot and do not guarantee the success of any Restaurant or the security of any franchisee's investment. You should be aware that franchise failures can and do occur.

Legal and Ownership Requirements

1. Legal and Ownership Structures of Franchisees

   Each franchised BURGER KING® Restaurant is operated pursuant to a written franchise agreement between Burger King Corporation and the franchisee.

   Franchisees organise their operating entities in a number of ways. The most common structure is for the applicant to own an interest in an operating company that executes the franchise agreement as franchisee.

2. General Principles

   In reviewing the proposals of potential franchisees regarding the legal and ownership structures of their operating entities (the 'Operating Entity'), the Company is guided by the following general principles:

   1. The Operating Entity may be an individual, or a group of individuals, all of whom will be liable for compliance with the franchise agreement.
   2. The Operating Entity may be a company or other entity acceptable to Burger King Corporation but in such a case We will carefully consider whether the structure of the Operating Entity results in a clear allocation of control to a specific person acceptable to Burger King Corporation. For example, We are unlikely to approve a structure that may result in a voting deadlock. The company must be incorporated in a place or jurisdiction acceptable to Us and We usually require that the only business of the Operating Entity is the operation of BURGER KING® Restaurants.
   3. If the Operating Entity is a company each of the shareholders, or (if the Company considers appropriate) one or more of the main shareholders, will be required to execute the franchise agreement in order to guarantee this performance of the Operating Entity's obligations. These people are referred to as 'Principals'.
   4. Restricted Transfer: Neither equity interests of partners nor the shareholdings of the shareholders may be transferred or otherwise disposed of, and there may be no issue of new equity or shares, without the prior written consent of Burger King Corporation. The foregoing applies to the transfer and disposal of the beneficial interest in any shares or equity. This is the Company's means of ensuring that control of the Operating Entity is transferred only to individuals who are properly trained, properly financed and otherwise acceptable to it. The Company will not unreasonably withhold its consent to a transfer which otherwise meets its requirements.
      NOTE: This restriction does not allow a financing institution to take a security interest or charge against the business at the Restaurant or the premises where the Restaurant is located. Additionally, the franchise agreement prohibits the grant by the Operating Entity of a security interest or charge against the Operating Entity's rights under the franchise agreement. This possibility may be considered in exceptional cases, on terms acceptable to the Company.
   5. Listed Companies: in the case of publicly listed companies, We will assess the suitability of its management structures to determine whether or not it can be acceptable as a franchisee. If the vehicle chosen for the franchisee is the subsidiary of such a company, the public listed company will be required to guarantee its obligations and not to dispose of its shareholding without our consent.
   6. No Conflict of Interest: Neither the franchisee nor any of the Principals may, during the term of the franchise agreement or for one year thereafter, hold a direct or indirect interest in any counter-service hamburger restaurant business that competes with the franchised Restaurant. Neither the franchisee nor any of the Principals may be involved in any counter-service hamburger restaurant business that competes with any BURGER KING® Restaurant. An exception may be made in relation to small shareholdings in competing counter-service hamburger businesses, such as those listed on a recognised stock exchange, provided the stake is not sufficiently large to enable the holder to influence that company's affairs.
   7. Approved Manager: The franchisee must appoint an individual Approved Manager who must be approved by Us and trained in the Burger King System. The Approved Manager will direct the day-to-day operation of the franchised Restaurant, will devote his/her fulltime and best efforts to the operation of the franchisee's BURGER KING® Restaurants and must live in the vicinity of such Restaurant/s. In the case of an individual franchisee this position will normally be held by the franchisee him/herself. We prefer that the Approved Manager holds a controlling equity stake in the franchisee but may waive this requirement (e.g. if the franchisee is a publicly listed company)

3. Choice of Structure

   Applicants are advised to discuss with the relevant Service Company at the earliest possible date what entity structures and guarantees will be required by Us.

4. Disposals - Right of Pre-emption

   The Company enjoys certain right of pre-emption where shares or equity in the Operating Entity, or the Restaurant, are subject to an offer of purchase. Broadly, the Company must match the offer if it wishes to buy the shares, equity or Restaurant. Any third party purchaser must be approved in writing by Us prior to the sale.

Financial Requirements

We review each franchise application with reference to certain financial ratios and other criteria for all proposed and existing restaurants, as estimated by the applicant. This is done for the Company's internal purposes and is not a guarantee or assurance of adequacy for success at your particular site.

Training and Operational Assistance

The Approved Manager will be required to undertake and satisfactorily complete a Company-conducted training program. It is a structured program, approximately 595 hours in duration, and normally conducted at both a designated Company-owned Restaurant and in classrooms. We do not give any representation or warranty as to any trainee's ability to satisfactorily complete any training programme.

Prior to commencing training, each trainee must sign the Trainee's Acknowledgement and Agreement Form. All travel, accommodation and personal expenses to attend training and meeting are the responsibility of each franchisee, as are certain training texts and other materials. We will, on occasions, also charge a tuition fee for certain training courses.

Approvals

The intending franchisee should apply for and obtain 'Franchise Approval' which is granted by the Company.

This comprises three parts:

Operational Approval, Financial Approval and Legal Approval. The applicant franchisee must not be in breach of any legal obligation to, or be involved in a claim against, Burger King Corporation or its affiliates.

The above is not an exhaustive list of these matters that the Company may take into account in determining whether to grant or maintain Franchise Approval. Franchise Approval may be withdrawn if the franchisee fails to continue to meet the relevant requirements and the Company will not grant a franchise if Franchise Approval is not in place when the restaurant is due to open. Once Franchise Approval is provided the Franchise will be expected to follow the remainder of the 9 step approval process for each and every proposed development.

Summary of Franchise Agreement

As explained above, each licensed BURGER KING® Restaurant is operated pursuant to a written franchise agreement ('the Franchise Agreement'). The form of agreement is subject to change by the Company in its sole discretion at any time prior to execution. If you are interested in a mobile Restaurant, you will need to ask for a copy of the special Mobile Restaurant Franchise Agreement. If you wish to operate the franchise as an individual or through a partnership, please ask for the appropriate 'individual' Franchise Agreement. Each Franchise Agreement obligates the franchisee to operate the BURGER KING® Restaurant at a specific site (the 'Site') for an agreed period of years (the 'Term'). You need to ensure that you have control of the Restaurant site for the full Term, as loss of control of the Site or early closing for any other reason does not excuse you from your obligations to operate for the full Term.

The Term is usually twenty (20) years. The Company makes exceptions to these guidelines in its sole discretion based only on exceptional circumstances. Burger King Corporation has the right to terminate the Franchise Agreement sooner in specified circumstances, for example if the franchisee breaches any term of the Franchise Agreement or abandons the franchised Restaurant or the franchise relationship. The Franchise Agreement entitles the franchisee to use the trade marks applied for or registered in the relevant jurisdiction as listed in the Franchise Agreement in the operation of the Restaurant, but the Company does not warrant that these will be free from intellectual property claims by third parties. The Franchisee may be expected to use marks that have not been registered. The Franchise Agreement also obliges the franchisee to operate the BURGER KING® Restaurant pursuant to rigorous standards. The franchisee must comply with all specifications as to uniformity and quality of product preparation, service formats and standards of cleanliness. Only Company approved menu items presented and served and packaged in an approved way may be sold. The franchisee is required to purchase all equipment, fixtures, food and supplies from suppliers and distributors designated by the Company, subject to a few very limited exceptions. The maximum prices that suppliers or distributors can charge franchisees may be established by negotiation between the approved suppliers and distributors and Us (although in some countries the obligation to negotiate prices rests solely with the franchisee). Franchisees may propose alternative sources of supply that will be evaluated by the Company against its standard. Inn the European Union franchisees are permitted to purchase from each other goods which originate from approved suppliers, provided quality and hygiene standards are observed. Franchisees cannot sell BURGER KING® products directly to the consumer except from the franchised Restaurant. The Company reserves the right to enter and inspect a franchisee's restaurant for the purpose of evaluating compliance with approved operating standards. Intending franchisees should note that We do not undertake to have one or more suppliers of any particular item located within any particular geographical area. Subject to applicable laws and regulations, franchisees are generally free to purchase from any Company approved source. No particular level of sale margin can be predicted as this depends on many factors such as import duties and restrictions, harvests, consumer wealth and competitor activity.

The Franchise Agreement may not be directly or indirectly assigned without the prior written consent of the Company and, as detailed above, stock/equity transfers are also restricted. Particular attention should be paid to the provisions applying in the event of the death of a contracting party, if an individual or partnership franchise is contemplated.

The Company requires certain minimum levels of insurance cover to be maintained by its franchisees and franchisees are required to indemnify the Company for all claims, expenses and other costs made against the Company arising out of the franchised Restaurant. This indemnity is not reciprocal. There is no commitment made by Burger King Corporation for any extension or renewal of the Franchise Agreement. Any such extension or renewal will be at the sole discretion of the Company.

The Service Companies may from time to time lease certain properties to franchisees of Burger King Corporation any and may acquire leases with a view to transferring or subletting the same to franchisees. Applicant franchisees should, however, be aware that each such decision is arrived at on a case-by-case basis. If a franchisee takes a lease or assignment of an existing lease from a Service Company, that Service Company owes no duty to safesguard the interests of the franchisee and, except as may be expressly stated in formal written agreement, no warranty or other commitment is given. The intending franchisee must take independent professional advice before committing to any such matter. The Service Companies are not, and do not provide the services of, architects, surveyors, engineers, real estate agents, project managers or quantity surveyors. Unless expressly stated in a formal contract, the Franchisee must engage such professional advice and services as it deems appropriate.

In making any recommendation or giving any approval to the franchisee the Service Company acts in its own interests and those of Burger King Corporation, and its background and skill-base are only those of a service company providing services to a franchisor (Burger King Corporation).

In order to meet competitive or other pressure, the Burger King System undergoes more or less continual change - sometimes radical. Burger King Corporation has the right under the Franchise Agreement to require the franchisee to accept changes to many things including (without limitation) menu items, product names, cooking methods, handling procedures, restaurant image (which may include repairs and alterations), sources of supply and distribution, equipment and types of packaging. The Company's own marketing strategies will change from time to time. Franchisees are strongly encouraged to subscribe to these marketing strategies and to carry out their own 'Local Store Marketing', which is at the franchisee's cost. Any marketing carried out by the franchisee must be approved in advance by Us.

Fees payable to Burger King Corporation

1. Target Reservation Deposit

   Upon execution of a Target Reservation Agreement ("TRA"), representing exclusivity over a particular site you must pay a US$5,000 target reservation deposit to Burger King Corporation. The target reservation deposit is non-refundable, but will be credited against the initial franchise fee described below for a Restaurant opened within the area specified in the TRA. All target reservation deposits are stated net of applicable VAT (if any), which is the sole responsibility of the franchisee.

2. Franchise Fee

   You will be required to pay an initial 'franchise fee' of US$40,000 (net of any target reservation deposit) to Burger King Corporation prior to the execution of the Franchise Agreement and opening of the Restaurant. In those cases where Burger King Corporation agrees a franchise term of less than 20 years the fee may be reduced pro-rata. The fee may, from time to time, be reduced by Burger King Corporation so as to incentivise development by franchisees. Your Development Manager will be able to provide details on request. All franchise fees are net of applicable VAT (if any) which is the sole responsibility of the franchisee. The franchise fee is fully earned by Burger King Corporation on payment.

3. Royalty and AdFund Contribution

   You must pay to Burger King Corporation a monthly royalty of 5% of gross sales of the Restaurant (excluding VAT), and an additional monthly payment of 5% of gross sales at the Restaurant which is earmarked for advertising and promotions (the 'AdFund Contribution'). All royalties and AdFund Contributions are net of any applicable VAT, which is the sole responsibility of the franchisee.

4. Transfer Fees

   If you contract to sell your Restaurant or shares or equity in the Operating Entity the Company will have a right of first refusal to purchase the Restaurant or the shares or equity on the terms set out in the Franchise Agreement - which broadly involves matching the price offered to you by another proposed purchaser. If the Company does not exercise its right of first refusal and approves the sale pursuant to the terms of the Franchise Agreement, you must pay a transfer fee of US$10,000. All transfer fees are net of any applicable VAT which is the sole responsibility of the franchisee.

5. Successor Fees

   If Burger King Corporation agrees in its sole discretion to grant you a new Franchise Agreement after expiration of the Term of your original Franchise Agreement, Burger King Corporation will charge you its then current 'successor' franchise fee. At this time the successor fee is US$40,000 for a 20 year agreement.

Forecasting Sales and Operating Expenses

Neither Burger King Corporation nor any of its affiliates makes any representation, warranty or assurance regarding projected sales at any existing Restaurant or at any proposed or approved Site. You must conduct your own due diligence and make an independent business judgement. No representative or employee or Burger King of the Company is authorised to make written or verbal representations, warranties or assurances regarding projected sales and you should not rely on any such unauthorised representation, warranty or assurance. The above applies equally to operating margins and all costs associated with operating a Restaurant.

For information purposes only, and without any representation, warranty or assurance whatsoever, We may, if considered appropriate, provide you with the historical sales information and/or information regarding the levels of cost experienced by Company-owned restaurants (if applicable).

Overview

The above is inevitably not a complete statement of all matters relating to the general relationship between Burger King Corporation and its franchisees.

The Company's legal relationship with its franchisees and intending franchisees is governed solely by such contractual documents as may have been executed. Neither Burger King Corporation nor any of the Service Companies has any other duty or obligation to any franchise or intending franchisee, unless such duty or obligation is created by the mandatory provisions of an applicable law.

Subject to the terms of any contract to which it may be a party, Burger King Corporation may change or vary any of the above matters or fees for a particular territory, for a particular case, or generally for its whole business. If you have any questions regarding the level of authority of any employee or representative of the Company you may seek clarification in writing.

Should you wish to receive further details of the some of the basic facts fundamental to a BURGER KING® franchise then please request a copy of our Pre Contract Disclosure Document to be sent to you. N.B. The Pre Contract Disclosure Document is not a substitute for a careful review of the relevant contracts and the exercise of appropriate due diligence. We would advise you to consult an independent lawyer and an accounting professional before investing.