EL POLLO LOCO FRANCHISE AGREEMENT

Dated: _____________________

Location:

Franchisee:

Effective March 2, 2004

EL POLLO LOCO FRANCHISE AGREEMENT

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EL POLLO LOCO

FRANCHISE AGREEMENT

This Franchise Agreement (“Agreement”), dated for identification purposes only as of                         , 200    , is made and entered into by and between EL POLLO LOCO, INC., a Delaware corporation (the “Company”), and                                  (“Franchisee”).

A.     The Company operates and franchises others to operate a number of retail outlets for the sale of flame-broiled food items and related products, in connection with the “El Pollo Loco” name and the Company’s distinctive plan of food service operation.

B.     Franchisee desires to operate a restaurant under the Company’s name and to utilize the Company’s plan of food service operation, all in accordance with the terms, covenants and conditions of this Agreement.

C.     Franchisee understands that the success of the business contemplated by this Agreement is subject to substantial risks and depends in large part on the business ability of Franchisee and its active participation in the development and management of the franchise business.

1.1     Franchisee desires to operate and manage an “El Pollo Loco” restaurant to be located at                  City of , County of             , State of (the “Location”). The Company owns certain proprietary and other property rights and interests in and to the “El Pollo Loco” trademark and service mark, and such other trademarks, service marks, logo types, insignias, trade dress designs and commercial symbols as Company may from time to time authorize or direct Franchisee to use in connection with the operation of a “El Pollo Loco” Restaurant (the “El Pollo Loco Marks”). The Company has a distinctive plan for the operation of retail outlets for the sale of flame-broiled food items and related products, which plan includes but is not limited to the El Pollo Loco Marks and the Operations Manual (the “Manual”), policies, standards, procedures, employee uniforms, signs, menu boards and related items, and the reputation and goodwill of the Company’s chain of restaurants (collectively, the “El Pollo Loco System”). Therefore, in entering into this Agreement, Franchisee fully understands and agrees that this Agreement is conditioned upon the continued strict adherence by Franchisee to all standards, policies, procedures and requirements published or which may from time to time be published or otherwise brought to Franchisee’s attention by the Company for the operation, maintenance or improvement of “El Pollo Loco” restaurants under the El Pollo Loco System and the El Pollo Loco Marks. Franchisee understands and agrees that strict adherence to these standards, policies, procedures and requirements is essential to the value of the El Pollo Loco System and the El Pollo Loco Marks.

1.2     Franchisee represents that it is experienced in and has independent knowledge of the nature and specifics of the restaurant business. Franchisee understands that there is not, nor can there be, any assurance or guaranty of success in the franchise business and that Franchisee’s business ability and attitude are primary in determining Franchisee’s success. Franchisee represents that, in entering into this Agreement, it has relied solely on its personal knowledge and understanding and has not relied on any representation of the Company or any of its officers, directors, employees or

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agents, except those representations contained in any legally required disclosure document delivered to Franchisee.

1.3    In consideration of the foregoing representations and agreements of Franchisee and other consideration as set forth herein, and subject to all of the terms, covenants and conditions of this Agreement, the Company hereby grants to Franchisee, and Franchisee hereby accepts from the Company, the right and license to operate the one “El Pollo Loco” restaurant under the El Pollo Loco Marks and in accordance with the El Pollo Loco System (the “Restaurant”) at the Location. Franchisee acknowledges that the franchise granted hereunder is only for the Location, and, as more fully provided for at Section 24.13, Franchisee is not granted any area, market or protected territorial rights. Franchisee expressly acknowledges and agrees that the Company and its affiliates have and expressly reserve the right to (a) operate and license others to operate El Pollo Loco restaurants at any location; and (b) merchandise and distribute goods and services identified by the El Pollo Loco Marks at any location through any method or channel of distribution, including, without limitation, grocery or convenience stores and via the Internet.

1.4    It is expressly understood and agreed by the parties that Franchisee is and shall be an independent contractor, that Franchisee is not for any purpose an employee or agent of the Company, and that all of the personnel employed by Franchisee at the Restaurant will be employees or agents of Franchisee as an independent contractor and will not be employees or agents of the Company. Franchisee understands and agrees that, as an independent contractor, it does not have the authority to do anything for or on behalf of the Company including, but not limited to, holding itself out as the Company; signing contracts, notes or other instruments; purchasing, acquiring or disposing of any property; or incurring any other obligation or liability.

2.1    Upon the terms, covenants and conditions contained herein and during the term hereof, Franchisee shall have the right to display and use the El Pollo Loco Marks, but only for use in connection with retail sales and service of certain food products which Franchisee is required to prepare and sell to the general public in and at the Restaurant.

2.2    Nothing contained herein shall be construed as authorizing or permitting Franchisee to use the El Pollo Loco Marks or the El Pollo Loco System at any location other than the Location or for any purpose or in any manner other than that authorized herein; or in connection with the sale of any products for resale, or any products not required or approved by the Company, or any products prepared at any place other than at the Location; provided, however, that catering and special event sales may be undertaken by Franchisee in strict adherence with the limitations and procedures set forth in the Manual. Notwithstanding anything to the contrary contained herein, the Company may require Franchisee to discontinue the preparation, offer or sale of any product or item which, in the opinion of the Company or any of its representatives, does not conform to the quality standards or image of the Company and its products.

2.3    Nothing contained herein shall give Franchisee any right, title or interest in or to any of the El Pollo Loco Marks excepting only the privilege and license, during the term hereof, to display and use the same according to the foregoing limitations. Any and all goodwill arising in connection with Franchisee’s use of the El Pollo Loco Marks and the El Pollo Loco System of restaurant operation shall belong to the Company.

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2.4    Franchisee agrees that the business franchised hereunder shall be named “El Pollo Loco” without any suffix or prefix attached thereto. Franchisee shall use signs and other advertising which denote that the Restaurant is named “El Pollo Loco” and which are approved by the Company in advance. If Franchisee is an Entity (as defined below), the name of such corporation shall not contain any of the El Pollo Loco Marks.

2.5    Except as the Company may otherwise permit in writing, Franchisee shall not display or use the trademark, trade name, service mark, logo types, label, design or other identifying symbol or name of any other person, or Entity in, on or at the Restaurant or the Location.

2.6    Franchisee agrees that in all public records, in its relationship with other persons or companies, and in any offering circular, prospectus or similar document, Franchisee shall indicate clearly that Franchisee’s business is independently owned and that the operations of said business are separate and distinct from the operation of the Company’s business. Franchisee shall display at the Restaurant, in such locations as may be specified by the Company and in all correspondence and forms, a notification that the Restaurant is operated by an independent operator and not by the Company.

2.7    Franchisee shall not develop, create, generate, own, license, lease or use in any manner any computer medium or electronic medium (including, without limitation, any Internet home page, e-mail address, website, domain name, bulletin board, newsgroup or other Internet-related medium) which in any way uses or displays, in whole or in part, the El Pollo Loco Marks, or any of them, or any words, symbols or terms confusingly similar thereto without Franchisor’s express written consent, and then only in such manner and in accordance with such procedures, policies, standards and specifications as Franchisor may establish from time to time.

2.8    Franchisor is the owner of, and will retain all right, title and interest in and to the domain names “elpolloloco” and “crazychicken;” the URLs: www.elpolloloco.com, www.elpolloloco.net, www.elpolloloco.org, www.elpollolocofranchising.com and www.crazychicken.com; all existing and future domain names, URLs, future addresses and subaddresses using the El Pollo Loco Marks in any manner; all software; all content prepared for, or used on, the Website; and all intellectual property rights in and to any of them.

3.1    The term of this Agreement shall commence on the date Company executes this Agreement and shall end on the date which is the 20^th anniversary of the date Franchisee first opens the Restaurant to the public (the “Opening Date”), unless sooner terminated as provided herein. Promptly following the Opening Date, the parties shall execute an opening date memorandum in the form of Exhibit B which shall confirm the Opening Date; provided, however, if the parties fail to execute such memorandum, the Opening Date shall be as determined in good faith by Company. Upon the expiration or earlier termination of this Agreement, Franchisee shall have no right or option to extend the term of this Agreement. The sole conditions under which Franchisee will have the opportunity to obtain a successor franchise agreement upon the expiration of the term of this Agreement are set forth at Section 20.

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4.1    Franchisee shall submit a proposed site for the Restaurant for acceptance by Franchisor’s Real Estate Site Approval Committee (“RESAC”), together with such site information as may be reasonably required by Franchisor to evaluate the proposed site. Franchisor shall, provided there exists no default by Franchisee under this Agreement or any other development, franchise or other agreement between Franchisor and Franchisee, evaluate the site proposed for which Franchisee has provided all necessary evaluation information, and shall promptly, but not more than sixty (60) days after receipt of Franchisee’s proposal, send to Franchisee written notice of acceptance or non-acceptance of the site. Site approval does not assure that a Franchise Agreement will be executed. Execution of the Franchise Agreement is contingent upon Developer purchasing or leasing the proposed site.

Within ninety (90) days after Franchisor’s site acceptance, Franchisee shall:

4.2    After execution of this Agreement, Franchisee will be required to achieve certain milestones to assure the timely development of the Restaurant:

a.    Franchisee shall complete the acquisition of the Location, resulting in a fully executed lease or recorded grant deed (for real property which includes the Location) in the name of Franchisee within ninety (90) days following the date of Company’s execution of this Agreement; and

b.    Within six (6) months following the date of Company’s execution of this Agreement, Franchisee must have completed all of the site development work (including, but not limited to, engineering, architectural/design, entitlements, and permitting) and commence construction of the Restaurant.

c.    Within twelve (12) months following the date of Company’s execution of this Agreement, Franchisee must have completed construction of the Restaurant at the Location and the Restaurant shall be open to the public.

The Company shall have no liability under any lease or purchase agreement for the Location and shall not guaranty Franchisee’s obligations under the same. In the event that Franchisee executes a lease for the Location site, Franchisee shall furnish to the Company a copy of the executed lease within fifteen (15) days of the date of execution

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of such lease. Company shall have no obligation to assist Franchisee to negotiate such lease.

The lease may not contain a non-competition covenant which restricts the Company, or any franchisee of the Company, from operating an El Pollo Loco Restaurant or any other retail restaurant, unless such covenant is approved by the Company in writing prior to the execution of the lease.

Any lease entered into by Franchisee shall include the following terms and conditions:

i.    The landlord consents to Franchisee’s use of the premises as an El Pollo Loco restaurant and such restaurant may be open for business during the required days and hours set forth in the Manual from time to time;

ii.    The landlord agrees to furnish the Company with copies of any and all notices of default, if any, pertaining to the lease and the premises, at the same time that such notices are sent to Franchisee; and

iii.    The landlord agrees that, subject to any other applicable provisions in this Agreement, the Company shall have the right, at its sole option and without any obligation whatsoever to do so, to assume Franchisee’s occupancy rights under the lease for the remainder of its term upon Franchisee’s default or termination under such lease, the termination of this Agreement, or the exercise by the Company of its right of first refusal or right to purchase as set forth at Sections 17 and 19 of this Agreement.

iv.    That upon expiration or termination of the lease for any reason, Franchisee shall, upon Company’s demand, remove all of the El Pollo Loco Marks from the Restaurant and the Location and modify the decor of the Restaurant and Location so that it no longer resembles, in whole or in part, a “El Pollo Loco” restaurant and that if Franchisee shall fail do so, Company will be given written notice and the right to enter the Location to make such alterations, in which event Franchisee shall reimburse Company for all direct and indirect costs and expense it may incur in connection therewith, including attorney’s fees.

4.3    Franchisee shall complete and open the Restaurant for business, in accordance with the provisions of this Agreement, no later than twelve (12) months from the date of Company’s execution hereof; provided, however, if Franchisee purchases a currently operating and Company-owned Restaurant from the Company (a “Turnkey Restaurant”), then Franchisee shall begin operation of the Restaurant on the date possession of the Restaurant is transferred to Franchisee pursuant to the agreement entered into between Franchisee and the Company for the purchase of such restaurant facility. Failure to reach each milestone described in Section 4.1 a.-c. above within the specified time frames shall constitute a material default hereunder. Prior to opening the Restaurant, Franchisee shall obtain and thereafter maintain throughout the term of this Agreement all necessary business licenses, permits and other documentation necessary for the operation of an El Pollo Loco restaurant.

4.4    Franchisee understands and acknowledges that in accepting Franchisee’s Location, or by granting a franchise for a Location (whether or not formerly operated as a Company-owned Restaurant), the Company does not in any way endorse, warrant or guarantee either directly or indirectly the suitability of such Location or the success of

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the franchise business to be operated by Franchisee at such Location. The suitability of the Location and the success of the franchise business depends upon a number of factors outside of the Company’s control including, but not limited to, the Franchisee’s operational abilities, site location, consumer trends and such other factors that are within the direct control of the Franchisee. Franchisor may require, as a condition to its approval of a site, a site description and analysis, traffic and other demographic information, all in such format as the Company may require, which information shall include, without limitation, a study prepared by a third party reasonably acceptable to the Company analyzing the impact of the proposed site on other franchised restaurants surrounding or within the vicinity of such proposed site. All such analyses, information and studies shall be prepared at the sole cost and expense of Franchisee.

5.1    If the Location is other than a Turnkey Restaurant, then this Section 5 will apply to the building, reconstruction, remodeling, or other changes necessary to conform the Location to the requirements set forth in this Section or as provided and updated by the Company from time to time in accordance with this Section.

5.2    Franchisee, at its sole expense, shall construct or, in the case of an existing building, remodel the Location and install such signs, fixtures, furniture and equipment at the Location as are required in accordance with the Company’s current requirements and specifications for same. Franchisee shall be responsible for obtaining all zoning classifications and clearances which may be required by state or local laws, ordinances or regulations. Franchisee shall obtain from applicable governmental authorities all permits, licenses and certifications required for lawful construction or remodeling work and for the operation of the Restaurant. If requested by the Company, Franchisee shall submit to the Company a copy of all such required permits, licenses and certifications for the construction or remodeling work prior to commencing the construction or remodeling of the Location.

5.3    The Company shall provide Franchisee with standard plans and a sample layout for a typical El Pollo Loco restaurant and a set of typical construction, equipment and decor specifications (the “Plans”). At all times, Franchisee shall use its best efforts to treat and keep the Plans and the information contained therein as confidential as possible and limit access to the Plans to employees and independent contractors of Franchisee on a need to know basis only. Franchisee acknowledges that the unauthorized use or disclosure of the Company’s Plans and the confidential information contained therein will cause irreparable injury to the Company and that damages are not an adequate remedy. Franchisee accordingly covenants that without the Company’s prior written consent, Franchisee shall not disclose (except to such employees, agents, contractors or subcontractors as must have access to such Plans in order to construct the Restaurant at the Location) or use or permit the use of such Plans (except as may be required by applicable law or authorized by this Agreement), or copy, duplicate, record or otherwise reproduce such Plans, in whole or in part, or otherwise make the same available to any person or source not authorized in writing by the Company to receive such Plans or the information contained therein at any time during the term of this Agreement or thereafter.

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5.4    Franchisee, at its sole expense, shall employ architects, designers, engineers or others as may be necessary to complete, substitute, adapt or modify the Plans for the Restaurant so as to create a set of final plans and specifications. FRANCHISEE SHALL SUBMIT TO THE COMPANY A COMPLETE SET OF FINAL PLANS AND SPECIFICATIONS, INCLUDING A SITE PLAN, AND OBTAIN THE COMPANY’S WRITTEN APPROVAL OF SUCH PLANS AND SPECIFICATIONS PRIOR TO COMMENCING THE CONSTRUCTION OF THE RESTAURANT OR, IN THE CASE OF AN EXISTING BUILDING, THE REMODELING WORK FOR THE RESTAURANT. The Company shall review such final plans and specifications promptly and approve or disapprove the same, and the Company may provide comments on the plans and specifications to Franchisee. Such review and approval by the Company will be limited to items and issues relating to the El Pollo Loco System only and is not intended to be a verification or approval of the structure of the building, mechanical systems or document accuracy. Examples of conceptual areas related to the El Pollo Loco System include signs, logos, finishes, decor and aesthetics, guest comfort, and ability to serve food within the Company’s standards for quality, timeliness and cleanliness.

5.5    Franchisee shall use a qualified licensed general contractor to perform the construction or remodeling work at the Restaurant. The Company shall not be responsible for delays in the construction, equipping or decoration of the Restaurant or for any loss resulting from the Restaurant design or construction. The Company must approve in writing any and all changes in the Restaurant plans relating to the El Pollo Loco System, as described in Section 5.4 above, prior to the construction or remodeling of the Restaurant or the implementation of such changes. FRANCHISEE SHALL PROVIDE WRITTEN NOTICE TO THE COMPANY OF THE DATE UPON WHICH CONSTRUCTION OF THE RESTAURANT COMMENCED WITHIN SEVEN (7) DAYS AFTER COMMENCEMENT AND THEREAFTER SHALL PROVIDE TO THE COMPANY MONTHLY PROGRESS REPORTS OF THE STATUS OF THE CONSTRUCTION WORK SIGNED BY FRANCHISEE’S ARCHITECT OR GENERAL CONTRACTOR. Franchisee’s failure to commence the design, construction or remodeling, equipping and opening of the Restaurant promptly and with due diligence shall be grounds for the termination of this Agreement. The Company shall make a final inspection of the completed Restaurant and Location and may require such corrections and modifications as it deems necessary to bring the Restaurant and the Location into compliance with approved final plans and specifications. FRANCHISEE SHALL NOTIFY THE COMPANY OF THE DATE OF COMPLETION OF CONSTRUCTION AND, WITHIN A REASONABLE TIME THEREAFTER, THE COMPANY SHALL CONDUCT THE FINAL INSPECTION OF THE RESTAURANT AND ITS PREMISES. Franchisee acknowledges and agrees that Franchisee shall not open the Restaurant for business without the express written authorization of the Company and that the Company’s authorization to open shall be conditioned upon Franchisee’s furnishing to the Company:

a.     A letter from the general contractor responsible for the construction or remodeling of the Restaurant indicating that the Restaurant has been constructed or remodeled in substantial conformance with the approved final plans and specifications, including any changes thereto approved by the Company, and in accordance with all applicable state and local governmental laws, statutes and ordinances regulating such construction including, without limitation, building, fire, health and safety codes; and

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b.    A temporary or final Certificate of Occupancy issued by the applicable local governmental entity.

5.6    Franchisee shall, at its sole expense, purchase all required signs, fixtures, furniture and equipment for the Restaurant and Location from a distributor listed on the Approved Brands and Distributors List (as defined below) or another distributor approved pursuant to Section 11.4. The items purchased shall be installed in strict accordance with the specifications of the Company and erected and displayed in the manner and at such locations as are approved and authorized by the Company in writing. Franchisee shall maintain and display signs which reflect the current image of El Pollo Loco restaurants and shall not place additional signs at the Restaurant without the prior written consent of the Company. Franchisee shall discontinue the use of and remove, or modify, as applicable, such signs that are declared obsolete by the Company within thirty (30) days after Franchisee’s receipt of the Company’s written request, subject to reasonable extension if Franchisee is unable after using reasonable diligence to obtain required governmental approvals for modification of such signs. Proper signage is fundamental to the El Pollo Loco System and Franchisee hereby grants to the Company the right to enter the Restaurant in order to remove and de-identify any unapproved or obsolete signs in the event Franchisee has failed to do so within the above-specified time frame.

5.7    Franchisee is solely responsible for the acts or omissions of its contractors regarding compliance with all of the provisions of this Section 5, and the Company shall have no responsibility for such acts or omissions. The Company shall not be liable for any loss or damage arising from the design or plan of the Restaurant by reason of its approval of plans and specifications, or otherwise. Franchisee shall indemnify the Company for any loss, cost or expense, including attorneys’ fees, that may be sustained by the Company because of the acts or omissions of Franchisee’s contractors or arising out of the design, construction or remodeling of the Restaurant, except to the extent that any such loss, cost or expense arises as a result of the negligent acts or omissions of the Company, its employees and/or agents.

5.8    Franchisee shall give to the Company at least thirty (30) days prior written notice of the anticipated Opening Date. If Franchisee did not deliver to the Company a final Certificate of Occupancy prior to the Opening Date, Franchisee shall deliver to the Company a copy of an unconditional final Certificate of Occupancy issued by the applicable local governmental entity no later than ninety (90) days following the Opening Date.

6.1    Franchisee agrees to pay to the Company during the term of this Agreement the following:

a.    An initial franchise fee of Forty Thousand Dollars ($40,000.00), payable as follows: (i) Fifteen Thousand Dollars ($15,000.00) upon execution of this Agreement (and within 30 days of delivery of execution copies of this Agreement to Franchisee); and (ii) Twenty-five Thousand Dollars ($25,000.00) on the earlier of (x) forty-eight hours following the commencement of physical construction or remodeling of the Restaurant; or (y) 12 months following Company’s execution of this Agreement; provided, however, if the Restaurant is a Turnkey Restaurant the

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initial franchise fee shall be payable upon execution of this Agreement. All such payments shall be made by cashier’s check or other form of payment acceptable to the Company. Franchisee hereby acknowledges and agrees that the grant of this franchise and the agreements of the Company contained in this Agreement constitute the sole and only consideration for the payment of the initial franchise fee and the initial franchise fee shall be fully earned by the Company upon execution of this Agreement. In that regard, upon the payment of any portion of the initial franchise fee, the entire initial franchise fee shall be deemed fully earned and non-refundable in consideration of the administrative and other expenses incurred by the Company in granting this franchise and for the Company’s lost or deferred opportunity to franchise to others.

b.    A Grand Opening Fee in an amount of no less than Five and nor more than Ten Thousand Dollars ($5,000.00—$10,000.00), payable upon payment in full of the Initial Fee. The Company will use those funds exclusively for marketing and advertising for the Restaurant’s Grand Opening.

c.    A weekly royalty fee in the sum of four percent (4%) of Franchisee’s weekly Gross Sales (as defined below).

d.    A fee, which shall be used in accordance with Section 8.1, for advertising, public relations and promotion and for the creation and development of advertising, public relations and promotional campaigns in the amount of five percent (5%) of Franchisee’s weekly Gross Sales, if the Restaurant is located outside of the Los Angeles designated market area (“DMA”), or four percent (4%) of Franchisee’s weekly Gross Sales, as defined in Section 7.1., if the Restaurant is located within the Los Angeles DMA.

e.    The amount of all sales taxes, use taxes and similar taxes imposed upon or required to be collected or paid by the Company on account of goods or services furnished to Franchisee by the Company, whether such goods or services are furnished by sale, lease or otherwise. Franchisee shall reimburse the Company for the invoice amount within seven (7) days after the invoice has been delivered to Franchisee pursuant to Section 24.3 of this Agreement.

6.2    For any calendar year in which the Company has received the approval of the Qualified Franchisees (as that term is hereinafter defined) which own sixty percent (60%) of the El Pollo Loco restaurants owned by all of the Qualified Franchisees located in Franchisee’s DMA (as that term is hereinafter defined), Franchisee shall pay an advertising fee (the “DMA Advertising Fee”) based upon a percentage of Franchisee’s monthly Gross Sales generated during such calendar year, which fee shall be paid monthly along with and in addition to the advertising fee required to be paid pursuant to Section 6.1(c). The DMA Advertising Fee shall be used in accordance with Section 8.1. Such DMA Advertising Fee percentage will be determined, and is subject to the approval, by the Qualified Franchisees in Franchisee’s DMA.

A “Qualified Franchisee” is any franchisee who has entered into a Franchise Agreement with the Company containing terms and conditions substantially the same as this Section 6.2. DMA means the demographic market area in which the Restaurant is located as established periodically by Nielson Media Research, a Dunn & Bradstreet company, or any other similar type of designation used by the Company from time to time to identify advertising market areas.

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If the Company desires to impose the DMA Advertising Fee upon Franchisee during any calendar year (hereinafter the “Applicable Calendar Year”), it shall give notice of its desire to impose such fee and the proposed use of the funds to each of the Qualified Franchisees in Franchisee’s DMA not later than sixty (60) days prior to the beginning of the Applicable Calendar Year. If the Company obtains the sixty percent (60%) approval required in the first paragraph of this Section 6.2, it shall notify Franchisee of such approval and Franchisee shall begin paying the DMA Advertising Fee described in such paragraph beginning with the first month of the Applicable Calendar Year. Franchisee acknowledges that it is required to make such payment, whether or not it voted to approve the imposition of such DMA Advertising Fee. Franchisee’s obligation to pay such DMA Advertising Fee will expire upon the expiration of the Applicable Calendar Year unless the Company receives the required approval of the Qualified Franchisees to continue or reimpose such fee for the subsequent calendar year pursuant to the foregoing requirements.

6.3    Franchisee agrees to pay interest to the Company on any amounts which may become due to the Company from Franchisee, if such are not paid when due, at the rate of fifteen percent (15%) per annum or the maximum interest rate permitted by law, whichever is less.

7.1    The term “Gross Sales” as used in this Agreement shall mean the total revenues derived by Franchisee in and from the Restaurant from all sales of food, goods, wares, merchandise and all services made in, upon, or from the Restaurant, whether for cash, check, credit or otherwise, without reserve or deduction for inability or failure to collect the same, including, without limitation, all revenues derived from delivery, catering, and special event sales, such sales and services where the orders therefore originate at and are accepted by Franchisee into the Restaurant but delivery or performance thereof is made from or at any other place, or other similar orders are received or billed at or from the Restaurant, and any sums or receipts derived from the sale of meals to employees of the Restaurant. Gross Sales shall not include rebates or refunds to customers; or the amount of any sales taxes or other similar taxes that Franchisee may be required to and does collect from customers to be paid to any federal, state or local taxing authority.

7.2    Franchisee shall deliver to the Company on or before the sixth (6th) calendar day after each week a weekly Gross Sales statement (“Weekly T-Sheet”), in the form specified by the Company, setting forth the amount of Gross Sales for the preceding week and a calculation of the weekly fees payable on such sales. Weekly fees, including royalty and advertising fees, shall be due and payable on the sixth(6th ) day after the close of the sales week, which closing shall be designated by El Pollo Loco in its sole discretion upon ten (10) days advance written notice to Franchisee. Franchisee shall make all payments due hereunder by one of the following forms of payment (the “Forms of Payment”): check, electronic funds transfer, pre-arranged draft or sweep of Franchisee’s bank account. Franchisee will give the Company authorization (in the form attached as Exhibit “D” ) for direct debits from Franchisee’s business bank operating account. The Company shall choose the Form of Payment in its sole discretion from time to time and shall provide written notice of any changes to Franchisee at least ten (10) business days prior to the effective date of the change.

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If Franchisee is delinquent in any payment of such fees, or if Franchisee has not submitted the Weekly T-Sheet for more than a two-week period, the Company may, in its sole discretion initiate an EFT transfer from Franchisee’s business bank account an estimated amount of fees due the Company for such period which shall be based on the average of the immediately preceding three (3) months Gross Sales. If, at any time, the Company determines that Franchisee has under-reported the weekly Gross Sales of the Restaurant, or underpaid the weekly royalty, advertising fees, DMA Advertising Fee, or other amounts due to the Company under this Agreement, or any other agreement, the Company may, in addition to exercising all other rights and remedies available to it under this Agreement, initiate an immediate transfer from the Account in the amount equal to the unpaid fees in accordance with the foregoing procedure, including interest as provided in Section 6.3 above. Any overpayment of fees will be credited to the Account effective as of the first Due Date after the Company and Franchisee determine that such credit is due.

In connection with payment of the weekly royalty fee and advertising fee by EFT, Franchisee shall: (1) comply with procedures specified by the Company relating to EFT transfers; (2) perform those acts and sign and deliver those documents as may be necessary to accomplish payment by EFT as described in this Section 7.2; (3) give the Company an authorization in the form designated by the Company to initiate debit entries and/or credit correction entries to the Account for payments of the weekly royalty and advertising fees, or other amounts due to the Company under this Agreement, or any other agreement, including any interest charges; and (4) make sufficient funds available in the Account for withdrawal by EFT of fees due no later than each Due Date.

7.3    In addition to the sales data required to be provided in the Weekly T-Sheet to be delivered pursuant to Section 7.2, Franchisee shall deliver (in the manner prescribed by Company) to the Company on or before the sixth (6th) day after the end of each sales week during the term of this Agreement any other sales and menu mix data reasonably requested by the Company with respect to the preceding sales week, whether specified in the Manual or otherwise.

7.4    One hundred twenty (120) days after the end of each fiscal year of the franchise business during the term of this Agreement, Franchisee shall provide to the Company an unaudited profit and loss statement and a balance sheet of the franchise business which shall include such information and data as specified by the Company. Such fiscal year-end financial statements must be signed by Franchisee, Franchisee’s treasurer or Franchisee’s chief financial officer and contain a representation that the financial statements present fairly the financial position of Franchisee and the results of operations of the franchise business during the period covered.

7.5    Franchisee agrees to make all payments when due to third parties for obligations arising out of or in any way connected with the existence, operation or maintenance of the Restaurant, including, but not limited to, rental and mortgage payments and payments for utilities, services, products, equipment, supplies, goods, inventory, materials, taxes, labor and other matters. In the event that Franchisee fails to make any such payment in accordance with the foregoing and the nonpayment results or may reasonably result in a condition or event which threatens public safety or health or which may materially and adversely affect the ownership, condition or operation of the Restaurant, in either case in the reasonable judgment of the Company, the Company shall have the right, after five (5) days written notice to Franchisee, but not the obligation, to make such payment on behalf of Franchisee. Such payment shall be

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without prejudice and in addition to all other available rights and remedies. Any payment made by the Company pursuant to this Section 7.5 shall be paid by Franchisee to the Company as an additional amount for the monthly billing period in which such payment is made by the Company.

7.6    Franchisee shall maintain accurate and complete books and records pertaining to the operation and maintenance of the Restaurant as required by the standards, policies and procedures established by the Company in accordance with the Manual. Franchisee shall be solely responsible for performing all record keeping duties, and the cost for all such services shall be borne solely by Franchisee.

7.7    Franchisee shall record all sales and all receipts of revenue on individual machine serial numbered guest checks. Cash registers must validate a receipt which will be presented at the time of sale to each customer. Franchisee shall only use cash registers of a cumulative non-resettable type as designated and approved in writing by the Company and shall provide the Company or its employees with a key to permit readings of the running of such cash registers at any time, at the Company’s discretion. If, for any reason, the Restaurant’s cash registers must be repaired, replacement cash registers must be used in their absence, with a beginning non-resettable total recorded. The presence of any more than the original non-resettable cash registers must have the Company’s prior written approval. During any period of repair of the authorized cash registers in the Restaurant, all business records of Franchisee shall be kept on forms and in accordance with the procedures as prescribed by the Company from time to time in its sole discretion. Notification of the replacement of any cash registers must be in accordance with Section 24.3, and notice must be given not more than twenty-four (24) hours from the time a cash register is determined to be inoperative. The Company may require Franchisee, at Franchisee’s expense, to convert to, install and use in the Restaurant a computer-based cash control and restaurant management, or “point of sale,” system. The Company must approve the criteria on which Franchisee’s system will run and communicate with the Company’s system. Franchisee also agrees to procure and install such data processing equipment computer hardware, software, required dedicated telephone, communication and power lines, modems, printers, and other computer-related accessory or peripheral equipment as the Company may require. Franchisee agrees that the Company shall have the free and unfettered right to retrieve any data and information from Franchisee’s computers as the Company, in its sole discretion, may deem appropriate, with the telephonic (or similar means of communication) cost of the retrieval to be borne by the Company, including electronically polling the daily sales, menu mix and other data of the Restaurant. Company may require Franchisee to maintain an e-mail account and connect the Franchisee’s computer system to a telephone line (or other communications medium specified by the Company) at all times and be capable of accessing the internet via a designated third party network (such as MSN, Worldnet, Earthlink, AOL, etc.). Upon request, Franchisee shall permit the Company to access its computer system in the Restaurant and the files stored therein, with or without prior notice via any means specified by the Company, including electronic polling communications. All of the hardware and software specified to be installed or purchased, shall be at Franchisee’s expense. Franchisee must utilize any proprietary software program that the Company may develop in addition to system documentation manuals and other proprietary materials developed by the Company (or for the Company) in connection to the operation of the Restaurant. If and when the Company develops proprietary software, the Company may require that Franchisee execute a standard form software license agreement and input and maintain in the Franchisee’s computer the software programs,

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data and information as the Company prescribes. Franchisee must purchase the proprietary software programs, manuals and/or materials whenever the Company decides to use new or upgraded programs, manuals and/or materials from Company or an approved distributor, if any, and if from an approved distributor, upon terms determined by such distributor; provided, however, that Franchisee shall not be required to replace such system more frequently than once every seven (7) years during the term of this Agreement. In such event, Franchisee shall adopt such related procedures as the Company may require to obtain the efficient use of such system.

7.8    All of the accounts, books, records and federal, state and local tax returns and reports of Franchisee, so far as they pertain to the business transacted under this Agreement, shall be open to inspection, examination and audit by the Company and its authorized representatives at any and all times, and copies thereof may be made by the Company and retained for its own use. All of such records shall be maintained and retained by Franchisee for seven (7) years, and following the termination or expiration of this Agreement, the books and records for the preceding seven (7) years shall be maintained and retained by Franchisee for five (5) years. The Company may perform such auditing for the purpose of verifying the operating and financial data upon which the rents, fees and other charges payable to the Company hereunder are based. Any such inspection, examination and audit shall be at the Company’s cost and expense unless the same is necessitated by Franchisee’s failure to prepare and deliver its transmittal reports to the Company as required herein, or to maintain books and records as hereinabove provided, or unless any such transmittal report is determined to be in error to an extent of two percent (2%) or more. In any such event, the cost and expense for such inspection, examination and audit shall be borne and paid by Franchisee. Any such cost and expense shall be set forth in a written invoice delivered to Franchisee by the Company. Franchisee shall reimburse the Company for the invoice amount within seven (7) days after the invoice has been delivered to Franchisee pursuant to Section 24.3 of this Agreement.

8.1    The Company shall use the advertising fees payable pursuant to Sections 6.1(c) and 6.2 to purchase, develop and engage in advertising, public relations and promotional campaigns (which may include internet web sites and internet advertising) designed to promote and enhance the value of El Pollo Loco restaurants, including, but not limited to, market research, the development of logotypes and slogans, direct media advertising and point of sale promotional materials. The Company shall be under no obligation to advertise equally for all markets or franchise areas; provided, however, that the DMA Advertising Fees payable by Franchisee pursuant to Section 6.2 shall be used by the Company solely for the purchase of media advertising and the research, development and production of advertising, public relations and promotional campaigns to be conducted in the DMA in which Franchisee’s Restaurant is located. All aspects of such media purchases and advertising activities and promotional campaigns, including, without limitation, the type, quantity, timing and choice of media or agency, shall be determined and conducted by the Company in its sole discretion. In this regard, the Company shall not be required to expend any particular amounts or conduct any particular method of advertising in any given period. The Company shall be under no obligation to determine the incremental cost of franchise sales advertising and investor

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relations sections of any internet web sites established by the Company and funded in whole or in part by advertising fees. The Company may from time to time develop brochures, posters and other advertising materials as it, in its sole discretion, deems beneficial to the marketing of the El Pollo Loco products and services. The Company shall make available to Franchisee reasonable quantities of such materials that are designed for use chain-wide and/or in the regional market in which the Restaurant is located, provided that Company reserves the right to impose a reasonable charge for such materials. Upon request by the Franchisee Association (as defined below), but not more frequently than annually, the Company shall provide to the Franchisee Association a written description of the expenditures made by the Company during the Company’s fiscal year immediately preceding such request of the advertising fees of the type described in Section 6.1(c) received by the Company from its franchisees. In addition, not later than one hundred twenty (120) days following the end of the Company’s fiscal year, the Company shall provide to the Franchisee Association an accounting describing any DMA Advertising Fees received pursuant to Section 6.2 and the expenditures made by the Company with respect to such fees for the purchase of media advertising and the research, development and production of advertising, promotional materials and promotional campaigns during such previous fiscal year.

8.2    Franchisee shall not engage in any advertising activities (including any electronic or internet advertising) directly nor shall it erect, hand out or display any sign, poster, coupon, advertising or promotional material of any type without the prior written consent of the Company or its authorized marketing agent. All of Franchisee’s local advertising will be subject to Company’s approval. Company will not derive income from Franchisee’s purchase of local advertising. Ten (10) business days are required for review and approval of any materials submitted for Company’s prior approval. In the event of a breach of this Section, the Company shall have the right to remove any unauthorized material at the expense of Franchisee.

8.3    In addition to advertising fees payable pursuant to Section 6.1 and 6.2 of this Agreement, Franchisee shall expend an amount determined by Company, of not less than $5,000 or and not more than $10,000, to conduct a grand opening advertising and promotion program for Franchisee’s Restaurant, utilizing advertising and promotional materials approved by Company, in the manner specified in Section 8.2. Such grand opening advertising shall be conducted in accordance with Company’s specifications and standards and in accordance with a grand opening plan (which will cover advertising and promotion for the 15 days prior to the Opening Date and 45 days following the Opening Date) which Franchisee prepares and submits to Company for approval at least 30 days prior to the anticipated Opening Date. Franchisee shall submit to Company not later than 15 days following the conclusion of such grand opening promotion, written receipts and other evidence reasonably satisfactory to Company evidencing all amounts spent by Franchisee to conduct said grand opening promotion.

9.1    During the term hereof, Franchisee shall obtain and maintain insurance coverage with insurance carriers acceptable to the Company in accordance with the Company’s current insurance requirements. The coverage shall commence when the Location is secured by Franchisee by executed deed or lease and shall comply with the requirements of Franchisee’s lease, if any, for products liability and broad form contractual liability coverage in the amount of at least two million dollars

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($2,000,000.00) combined single limit. Franchisee shall also carry fire and extended coverage insurance with a maximum deductible of $10,000 and with endorsements for vandalism and malicious mischief, covering the building, structures, equipment, improvements and the contents thereof in and at the Restaurant, on a full replacement cost basis, insuring against all risks of direct physical loss except for unusual perils such as nuclear attack, earth movement and war, and business interruption insurance in actual loss sustained form covering the rental of the Location, previous profit margins, maintenance of competent personnel and other fixed expenses. Franchisee shall also carry such worker’s compensation insurance as may be required by applicable law. In connection with and prior to commencing any construction, reimage or remodeling of the Restaurant, Franchisee shall maintain Builder’s All Risks Insurance and performance and completion bonds in forms and amounts, and written by a carrier or carriers, acceptable to the Company. As proof of such insurance, a certificate of insurance shall be submitted by Franchisee for the Company’s approval prior to Franchisee’s commencement of any activities or services to be performed under this Agreement. Franchisee shall deliver a complete copy of Franchisee’s then-prevailing policies of insurance to the Company within thirty (30) days following the delivery of the certificate of insurance.

9.2    The Company shall be named as an additional insured on all of such policies referenced in Section 9.1 above to the extent of its interests and shall be provided with certificates of insurance evidencing such coverage prior to the Opening Date and promptly following the date any policy of insurance is renewed, modified or replaced during the term of this Agreement. All coverages shall be placed with an insurer with a rating of A or better from Moody’s or S&P or a rating of A-VIII or better from Best’s. All public liability and property damage policies shall contain a provision that the Company, although named as an additional insured, shall nevertheless be entitled to recover under such policies on any loss occasioned to it, its affiliates, officers, agents and employees by reason of the negligence of the Company, the Franchisee, or their respective principals, contractors, agents or employees. All policies shall extend to and provide indemnity for all obligations assumed by Franchisee hereunder and all other items for which Franchisee is required to indemnify the Company under the provisions of this Agreement, whether or not the liability arose from the negligence of the Company, its principals, contractors, agents or employees, and shall provide the Company with at least thirty (30) days prior written notice of cancellation, termination or material reduction of coverage. The Company reserves the right to specify reasonable changes (which may include increases) in the types and amounts of insurance coverage required by this Section 9. Should Franchisee fail or refuse to procure the required insurance coverage from an insurance carrier acceptable to the Company or to maintain it throughout the term of this franchise, the Company may in its discretion, but without any obligation to do so, obtain such coverage for Franchisee, in which event Franchisee agrees to pay the required premiums or to reimburse the Company therefore. The amount of such premiums shall be set forth in a written invoice delivered to Franchisee by the Company. Franchisee shall reimburse the Company for the invoice amount within seven (7) days after the invoice has been delivered to Franchisee pursuant to Section 24.3 of this Agreement. Failure to maintain the required insurance or to promptly reimburse the Company for any premiums paid on behalf of the Franchisee by the Company shall constitute a default hereunder.

9.3    Franchisee agrees to defend at its own cost and to indemnify and hold harmless the Company, its subsidiaries, parent and affiliates, shareholders, directors, officers, employees and agents (each an “Indemnity”) from and against any and all loss, costs,

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expenses (including attorneys’ fees), damages and liabilities, however caused, resulting directly or indirectly from or pertaining to the use, condition, construction, equipment, decorating, maintenance or operation of the Restaurant, and including the preparation and sale of any product made in or sold from the Restaurant, and including any labor or other employee related claims of any kind including, without limitation, any claims made by an employee of Franchisee resulting from the employee’s training in a Company operated facility or restaurant, and including Franchisee’s failure for any reason to fully inform any third party of Franchisee’s lack of authority to bind the Company for any purpose. Such loss, claims, costs, expenses, damages and liabilities shall include, without limitation, those arising from latent or other defects in the Restaurant, whether or not discoverable by the Company, and those arising from the death of or injury to any person or arising from damage to the property of Franchisee or the Company, their agents or employees, or any third person or Entity, whether or not such losses, claims, costs, expenses, damages or liabilities resulted from any strict liability imposed on the Company or any of its officers, agents or employees. Notwithstanding the foregoing, Franchisee shall not be responsible to an Indemnity for any loss, claim, cost, expense, damage or liability which arises as a result of the negligence of such Indemnity.

Franchisee agrees that no cigarette machine, video game machine, juke box, public telephone or other type of vending machine or device, whether or not coin operated, shall be installed in the Restaurant, or on its premises, without the written approval of the Company. The revenues received by Franchisee from any approved machines shall be included in Franchisee’s Gross Sales.

11.1    Franchisee acknowledges and agrees that strict and continued adherence by Franchisee to the Company’s standards, policies, procedures and requirements, as set forth in this Section 11, is expressly made a condition of this Agreement, so that failure on the part of Franchisee to so perform will be grounds for termination of this Agreement as provided in Section 18 hereof. Franchisee acknowledges that changes, modifications, deletions and additions to the standards, specifications, procedures and menu items comprising the El Pollo Loco System may be necessary and desirable from time to time. The Company may make such modifications, revisions, deletions and additions, including without limitation modifications, revisions, deletions and additions to the Manual and to the menu items required to be offered by Franchisee, which the Company, in good faith and exercising its judgment, believes to be desirable and reasonably necessary. Franchisee agrees to comply with any such modification, revision, deletion or addition as of the date that such modification, revision, deletion or addition becomes effective. Franchisee acknowledges that it shall receive the Manual on loan from the Company and that the Manual shall at all times remain the sole property of the Company. Franchisee understands that the Company has entered into this Agreement in reliance upon Franchisee’s representation that it will strictly comply with all the provisions of the Manual. For purposes of this Agreement, the Manual shall be deemed to include all written directions delivered to Franchisee by Company from time to time setting forth standards, specifications and procedures for the operation of Franchisee’s El Pollo Loco restaurant.

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11.2    Franchisee agrees that it is in the best interest of the business conducted at the Restaurant to prepare and serve food in the Restaurant only from ingredients which meet the product specifications as communicated by Company to Franchisee from time to time (the “Specifications”), and Franchisee further agrees that all products, equipment, goods, inventory and supplies used in connection with the Restaurant will comply with the Specifications. Furthermore, Franchisee shall not offer or sell any product, service or other item at the Restaurant except those approved in writing by the Company.

a.    All menu items shall be made in strict compliance with the Company’s written recipes and requirements, which the Company may change from time to time by amendments to the Manual.

b.    All proprietary El Pollo Loco marinades, marinade mixes and marinated ingredients used in the preparation of the required and approved El Pollo Loco food products are unique. Their formulae and the process of their manufacture constitute trade secrets. Franchisee agrees to purchase such marinades, marinade mixes and marinated ingredients exclusively from the Company or, in the Company’s sole discretion, from the Company’s designated distributor. The right to purchase and use such marinades, marinade mixes and marinated ingredients is licensed to Franchisee pursuant to this Agreement, and such right is restricted to use in the franchise business at the Restaurant and solely for the term of this Agreement.

11.3    Throughout the term of this Agreement, Franchisee shall have successfully completed Company’s initial training program and be actively engaged in the management and day-to-day operation of the Restaurant. The Restaurant shall be managed by not less than four (4) managers (which need not be Franchisee) who have successfully completed the Company’s initial training program and have received the ServSafe certification and who will assume responsibility for the day-to-day management of the operations of the Restaurant, including the preparation of food products, accounting and the supervision and training of personnel. Each of these trained managers of the Restaurant shall devote at least forty (40) hours per week to management responsibilities and shall be at the Restaurant during open and operating hours for that amount of time. If Franchisee is a corporation, partnership, limited liability company or other legal entity which is not an individual (“Entity”), Franchisee must also appoint a general operations manager, who shall be acceptable to Company, shall own at least a ten percent (10%) equity in the Entity, and shall have successfully completed Company’s initial training program, to supervise all franchise operations.

11.4    Franchisee acknowledges that it has received a copy of the Company’s list of approved brands and distributors (the “Approved Brands and Distributors List”). The Company has consulted with the distributors set forth on such list and each distributor has agreed to offer products, equipment, goods, inventory, supplies or paper products which will comply with the Specifications. Such Approved Brands and Distributors List is furnished to Franchisee for Franchisee’s convenience only, and, except for the Company’s proprietary products which must be purchased from the Company or its designated distributors pursuant to Section 11.2(b), Franchisee shall be entitled to purchase products, equipment, goods, inventory, supplies and paper products which comply with the Specifications from any other distributor offering such items; provided, however, that if Franchisee desires to purchase any products from any distributor not

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named on the Approved Brands and Distributors List, Franchisee shall first submit to the Company a written request for approval of any such distributor prior to Franchisee’s use of any such distributor. The Company shall have the right to require that its representatives be permitted to inspect the distributor’s facilities and that samples from the distributor be delivered either to the Company or to an independent laboratory designated by the Company for testing. Upon completion of Company’s inspection and/or evaluation of the proposed distributor (or samples provided by such distributor), and upon submission of any additional information or data required by Company, Company shall promptly approve or reject such proposed distributor. The Company reserves the right, at its option, to reinspect the facilities and products of any such approved distributor or of any distributor on the Company’s Approved Brands and Distributors List and to revoke its approval upon the distributor’s failure to continue to meet any of the Company’s then-current Specifications and criteria. Nothing in the foregoing shall require the Company to approve any distributor. The Company agrees to evaluate any item which Franchisee is considering procuring to determine whether such item complies with the Specifications. No charge shall be made by the Company for the services of the Company’s employees in connection with such evaluation; however, Franchisee shall reimburse the Company for amounts paid to independent laboratories or consultants chosen by the Company in its sole discretion to assist in such evaluation. All such amounts shall be set forth in a written invoice delivered to Franchisee by the Company. Franchisee shall reimburse the Company for the invoice amount within seven (7) days after the invoice has been delivered to Franchisee pursuant to Section 24.3 of this Agreement. The Approved Brands and Distributors List and any guide containing such list is proprietary information of El Pollo Loco and must be kept strictly confidential by Franchisee. Franchisee shall not copy, distribute, release or otherwise provide any third party with all or any part of the information contained in the Approved Brands and Distributors List or guide without first obtaining the prior written approval of the Company, which approval may be withheld in the Company’s sole discretion.

11.5    As uniformity of appearance and public recognition are important to the financial success of Franchisee and the Company hereunder, Franchisee agrees that in connection with the operation of the Restaurant, Franchisee shall:

a.    Use only uniforms, menu boards, signs, cards, posters, notices, displays, decorations, table tents and other such advertising materials which are identical in appearance and quality to those furnished or approved by the Company. The Company may make available its menu-stock (pre-printed as to all matters other than menu prices), including specials and featured items, to Franchisee for printing in the event that Franchisee elects to charge prices not provided for in the Company’s menu codes. Franchisee agrees that all specials or featured items designated by the Company shall be included as part of the menu and shall be made available on the days and times designated by the Company; and

b.    Not authorize or permit in the Restaurant, or on behalf of the Restaurant, any advertising, signs, cards, posters, notices, displays, decorations or table tents other than those described in Subparagraph 11.5.a, nor authorize or permit

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in or around the Restaurant any products or services which are not authorized by Company, without the prior written consent of the Company.

The Company shall have the right to remove any unauthorized material at Franchisee’s expense.

12.1    Maintenance and repair of the Restaurant are the sole responsibility and shall be done at the expense of Franchisee. For the term of this Agreement, Franchisee, at its sole cost and expense, shall maintain the Restaurant and the Location, including, but not limited to, the Restaurant building, the Location and parking lot, equipment, decor, furnishings, fixtures, wares, utensils, supplies, and inventory, in good working order and condition and in compliance with all laws. Franchisee shall replace any of the Restaurant’s equipment, furnishings and fixtures and repaint the Restaurant as necessary to satisfy this Section 12. Without limiting the generality of the foregoing, upon notice from Company of any change required or recommended by applicable law, rule or regulation, or if Company discovers any circumstance which is or may result in a danger to public health, Franchisee shall promptly, remove, repair, replace or modify any equipment or fixtures used in the Restaurant necessary to satisfy or rectify the same. All replacement equipment, furnishings and fixtures shall comply with the Company’s then-current requirements and specifications.

12.2    Franchisee agrees that it shall not make any addition to or change in the physical appearance, decor, characteristics or style of the Restaurant without the prior written consent of the Company.

12.3    During the term of this Agreement, the Company may require Franchisee, at Franchisee’s expense, to remodel the Restaurant, as the condition of the building may require, to then current El Pollo Loco standards, format, design and image, as designated pursuant to plans and specifications provided by the Company; provided, however, Franchisee shall not be required to undertake such remodeling more than once every seven (7) years during the term of this Agreement, except if such remodeling is required in connection with a transfer of the Restaurant under Section 17.4c of this Agreement.

12.4    All signs to be used in connection with the Restaurant, both exterior and interior, must conform to the Company’s sign criteria as to type, color, design and location and be approved in writing by the Company prior to installation or display. Franchisee shall change its signs to conform with updated or revised requirements of the Company when such revisions have been implemented at seventy percent (70%) of the Company’s then-operated El Pollo Loco restaurants and at such times as Franchisee is required to perform remodeling work pursuant to Section 12.3.

12.5    Franchisee shall at all times operate its Restaurant as a clean, safe, sanitary, orderly, legal and respectable place of business in accordance with the Manual, the lease or sublease, if any, for the Location and all applicable federal, state or local laws, rules, or regulations. Franchisee shall not cause or allow any part of its Location to be used for any immoral or illegal purpose.

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13.1    Franchisee agrees to keep the Restaurant fully operational and open to the public upon such days and during such minimum number of hours as the Company shall prescribe from time to time throughout the term of this Agreement in accordance with the Manual. In the event that the Restaurant is closed for reasons beyond Franchisee’s control, Franchisee will immediately notify the Company by the fastest means available. Franchisee shall supply to the Company prior to the commencement of the construction or remodeling work of the Restaurant proof that the Restaurant is allowed to be open to the public during such required hours and days by the applicable local governmental authorities and the landlord under the lease for the Location, if any.

14.1    Franchisee agrees to hire, train and supervise Restaurant employees in accordance with the applicable provisions of the Manual. Franchisee shall do everything necessary to ensure that all employees are, at all times during employment in the Restaurant, neat, clean and adequately trained and supervised in connection with the performance of their duties. Franchisee shall also ensure that employees, in the performance of their duties, wear neat, clean and uniform attire as required by the Company in accordance with the Manual.

14.2    Franchisee acknowledges that adequate training and supervision are necessary in order to ensure that the Restaurant personnel provide service to the public in a courteous, efficient and skilled manner and in accordance with the standards set forth in the Manual. Franchisee understands and agrees that Franchisee is solely responsible for the performance of its employees and that the acts and omissions of such employees which are inconsistent with the provisions of this Agreement shall be considered grounds for termination of this Agreement as provided in Section 18 hereof.

14.3    Franchisee agrees to maintain wages, hours, working conditions and other benefits for all of its employees in accordance with all federal, state and local laws and regulations.

14.4    Franchisee agrees to maintain all employee time, payroll and tax records and to file required reports thereon in accordance with all federal, state and local laws and regulations.

14.5    It is mutually understood and agreed by the parties that Franchisee retains the responsibility and independent authority, notwithstanding any provision of this Agreement, to maintain and enforce personnel policies and procedures, including, but not limited to, hiring, firing and disciplining its employees. Nothing contained in this Agreement shall be construed or interpreted so that any employee of Franchisee becomes or is deemed to be an employee or agent of the Company. Franchisee shall be solely responsible for the maintenance and handling of all employee matters in the manner required by this Section 14, and Franchisee agrees to indemnify and hold the Company and its affiliates and subsidiaries harmless from any claims, losses, or liabilities resulting from any failure by Franchisee to act in such a manner.

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15.1    In order to maintain the high standards of quality necessary for the mutual success of the Company and Franchisee hereunder, the Company and its authorized representatives shall have the right to inspect the Restaurant and the supplies and inventory of Franchisee. The Company’s personnel and representatives shall have the right to enter the Restaurant at any reasonable time, and from time to time, with or without notice, for the purposes of examination, conferences with Franchisee and personnel of Franchisee, observation and evaluation of the operations being conducted at the Restaurant, and for all other purposes in connection with a determination that the Restaurant is being operated in accordance with the terms of this Agreement, the Specifications and Manual and other applicable laws and regulations.

15.2    In connection with such inspections, the Company and its authorized representatives may deliver to Franchisee an inspection report in such form(s) as may be adopted by the Company from time to time (the “Inspection Report(s)”). The Inspection Report(s) shall indicate the principal items inspected, observed and evaluated.

15.3    In the event that any such Inspection Report indicates a deficiency or unsatisfactory condition with respect to any item listed thereon, Franchisee shall promptly commence to correct or repair such deficiency or unsatisfactory condition and thereafter diligently pursue the same to completion. In the event of a failure by Franchisee to comply with the foregoing obligation to correct or repair, the Company, in addition to all other available rights and remedies, including the right to terminate this Agreement pursuant to Section 18 below, shall have the right, but not the obligation, to forthwith make or cause to be made such correction or repair, and the expenses thereof, including, without limitation, meals, lodging, wages and transportation for the Company’s personnel, if so utilized in the Company’s sole discretion, shall be reimbursed by Franchisee. Should any deficiency or unsatisfactory condition be reported more than once within any thirty (30) day period, the Company shall have the right, in addition to all other available rights and remedies, to place a Company representative in charge of the Restaurant for a period of up to thirty (30) days in each such instance, and the wages and expenses of meals, lodging and transportation of said representative, which shall be commensurate with that provided for managers of other Company-owned El Pollo Loco restaurants, shall promptly be reimbursed by Franchisee. All such expenses incurred by the Company pursuant to this Section shall be set forth in a written invoice delivered to Franchisee by the Company. Franchisee shall reimburse the Company for the invoice amount within seven (7) days after the invoice has been delivered to Franchisee pursuant to Section 24.3 of this Agreement.

16.1    The Company and Franchisee agree that it is important to the operation of the Restaurant that Franchisee and its employees receive such training as the Company may require from time to time. In that regard, Franchisee agrees as follows:

a.    Unless Franchisee (if Franchisee is an individual), a minimum of three (3) of Franchisee’s managers for the Restaurant, and, Franchisee’s general operations manager (if Franchisee is an Entity), have each attended and successfully completed Company’s initial training, a minimum of three (3) of

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Franchisee’s managers for the Restaurant, together with Franchisee (if Franchisee is an individual) or Franchisee’s general operations manager (if Franchisee is an Entity), shall attend and satisfactorily complete an initial training session provided by the Company. Such training shall be completed prior to the opening of the Restaurant.

b.    Franchisee shall implement a training program for Franchisee’s employees in accordance with training standards and procedures prescribed by the Company and shall staff the Restaurant at all times during the term of this Agreement with a sufficient number of trained employees.

c.    The Company may provide continuing operations training from time to time to reinforce operational standards, and new product roll-outs. The required frequency, duration, subject matter and required attendees shall be as determined by the Company from time to time.

d.    In addition to the initial management training session described above, the Company may, at the Company’s sole option, (and if the Restaurant is Franchisee’s or its affiliate’s first El Pollo Loco restaurant, the Company shall) assist Franchisee in the initial opening of the Restaurant by sending to the Restaurant a member of the Company’s personnel who shall assist in the scheduled opening of the Restaurant.

e.    The Restaurant shall not be opened until the Company is satisfied that Franchisee and Franchisee’s managers and other restaurant personnel have been adequately trained in the El Pollo Loco System.

16.2    Company shall provide the training specified in Section 16.2 and initial training to Franchisee’s new managers without additional charge to Franchisee, provided that if Franchisee shall request Company to provide initial training to more than 3 managers in any 12 month period, Company may charge Franchisee a training fee for each manager so trained. Franchisee understands and agrees that Franchisee and any trainee shall be solely responsible for any and all costs incurred by them with respect to such training, including the costs for any compensation, wages (including compensation of and worker’s compensation insurance), lodging, travel expenses or any other expenses incurred in connection with any initial training sessions, refresher courses or optional training programs, and any such trainee shall not be considered an employee or agent of the Company.

17.1    Assignment by the Company. The Company shall have the right to assign or transfer any of its rights or delegate any of its obligations under this Agreement in whole or in part to any person, firm or corporation; provided, however, that with respect to any assignment resulting in the subsequent performance by the assignee of the obligations of the Company hereunder:

a.    The assignee shall expressly assume and agree to perform such obligations of the Company in writing; and

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b.    From and after the date of any such assignment, the Company shall have no further obligation or liability under this Agreement.

17.2    Assignment by Franchisee. The rights and duties created by this Agreement are personal to Franchisee. Franchisee acknowledges that the Company has entered into this Agreement in reliance on the individual or collective character, skill, aptitude, business ability, and financial capacity of Franchisee and its owners. Franchisee and each owner of an interest in this Agreement represent, warrant, and agree that all “Interests” in the Franchisee are owned in the amount and manner in which Franchisee has disclosed them to the Company, as more particularly set forth in Schedule 1 to this Agreement. (An “Interest” means any shares or partnership interests in the Franchisee and any other legal or equitable right in any of Franchisee’s stock, revenues, profits, rights or assets. When referring to the Franchisee’s rights or assets, an “Interest” also includes this Agreement and the Franchisee’s rights under and interest in this Agreement, the Restaurant and the revenues, profits or assets of the Restaurant.) Franchisee and each owner also represent, warrant and agree and no change will be made in the ownership of an Interest other than as permitted by this Agreement or as we may otherwise approve in writing. Franchisee and each owner agree to furnish the Company with evidence as the Company may request from time to time to assure that the Interests of the Franchisee and each owner remain as permitted by this Agreement, including a list of all persons or entities owning any Interest.

Neither this Agreement nor any Interest herein nor any Interest of the Franchisee or any owner may be directly or directly, sold, transferred, assigned, conveyed, gifted, pledged, mortgaged, or otherwise encumbered without the Company’s prior written approval (“Assignment”). Any such purported Assignment occurring by operation of law or otherwise without the Company’s prior written consent shall constitute a default of this Agreement by Franchisee, and shall be null and void. Except in the instance of Franchisee advertising to sell its Restaurant and assign this Agreement in accordance with the terms thereof, Franchisee shall not, without the Company’s prior written consent, offer for sale or transfer at public or private auction or advertise publicly for sale or transfer, the furnishings, interior and exterior décor, items, supplies, fixtures, equipment, Franchisee’s lease or the real or personal property used in connection with the Restaurant. This Agreement may not be transferred by Franchisee to a publicly-held entity, or to any entity whose direct or indirect parent’s securities are publicly traded and no shares of Franchisee or any direct or indirect owner of Franchisee may be offered for sale through the public offering of securities.

17.3    In the event that Franchisee desires to assign all or any part of its rights, privileges and interests under this Agreement, Franchisee shall first offer such Assignment to the Company by notifying the Company in writing of the material terms and conditions, including price and identity of transferee) upon which Franchisee would be willing to make such an Assignment. Franchisee shall also concurrently provide the Company with the estoppel certificate identified in Section 17.5 below and such other information as needed by the Company to enable the Company to evaluate the offer. The Company shall have the first right to acquire said rights, privileges and interests of Franchisee by accepting the offer in accordance with said terms and conditions or equivalent cash, as determined by Company in its reasonable business judgment. If,

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within thirty (30) days after receipt of Franchisee’s notice, the Company advises Franchisee of its acceptance of the offer as stated in the notice, Franchisee agrees to promptly make the Assignment to the Company on the stated terms and conditions. Should the Company elect to exercise its right of first refusal, Franchisee shall, if requested by the Company, cause Franchisee’s lease or sublease, if any, with the lessor for the Location to be assigned to the Company. Notwithstanding the foregoing, the Company shall have at least sixty (60) days from the date of its notice of exercise to Franchisee to close the transaction and the Company shall also be entitled to all customary and reasonable representations and warranties from Franchisee regarding the Restaurant.

17.4    If, within thirty (30) days after receipt of Franchisee’s notice, the Company does not indicate its acceptance of the offer as stated in the notice, Franchisee shall thereafter have the right, subject to the prior written consent of the Company, to make the Assignment to the proposed transferee on the same terms and conditions as stated in the notice. Should the Company not exercise its right of first refusal and should the contemplated Assignment not be completed within one hundred (120) days from the date of Franchisee’s notice, or should the terms and conditions thereof (including the proposed transferee or the ownership therein) be altered in any material way, this right of first refusal shall be reinstated and any such subsequent proposed Assignment or altered terms and conditions of the current transaction must again be offered to the Company in accordance with the terms of these Sections 17.3 and 17.4. Franchisee shall notify the Company in writing of any proposed assignee and shall promptly furnish the Company with such other information and documentation as the Company may request for the purpose of considering whether to grant its written consent. Franchisee acknowledges and agrees that the Company shall be entitled, at its election and without liability to Franchisee, to provide assignee with information relating to the Restaurant, including information in the Company’s possession relating to operations and sales. The Company shall not unreasonably withhold its consent to an Assignment provided that the Franchisee and the assignee satisfy such reasonable terms and conditions which may be imposed by the Company as a condition to obtaining the Company’s consent, which may include, without limitation, the following:

a.    The assignee (and its partners or the officers, directors, principal shareholders, or members of the assignee, as the case may be) shall be determined by the Company:

i.    To have the appropriate business qualifications, restaurant operations experience, reputation, character, and aptitude necessary to operate and maintain the Restaurant;

ii.    To have the ability to devote full time and best efforts to operating and maintaining the Restaurant;

iii.    To be financially responsible, possess a favorable credit rating, be economically capable of carrying on the Restaurant business and have sufficient net worth as required by the Company for new franchisees;

iv.    To not have been convicted of a felony or other criminal misconduct that is relevant to the operation of the Restaurant;

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v.    Shall neither directly nor indirectly own, operate, control or have any financial interest in any other business which would constitute a “Competitive Business” (as such term is defined in Section 21.5 of this agreement); and

vi.    Shall have demonstrated to the Company’s satisfaction that assignee meets all of the Company’s then-current requirements for new El Pollo Loco franchisees, which requirements are subject to change by the Company from time to time in its sole discretion.

b.    At the election of the Company, the assignee shall either expressly assume in writing, for the benefit of and in form and substance satisfactory to the Company, all of the obligations and liabilities of Franchisee under this Agreement or enter into the Company’s then-current form of franchise agreement; provided, however, that the term of such new agreement shall be equal to the remaining term of this Agreement and assignee shall not be required to pay a new initial franchise fee. In addition, if assignee is an Entity, Company may require that one or more of the partners, shareholders or members of assignee, as applicable, and Franchisee in the case of a transfer by Franchisee to an Entity to be owned in whole or in part by Franchisee, execute a personal guaranty, in form and substance satisfactory to the Company, guaranteeing each of assignee’s obligations and liabilities. The number and identity of those partners, shareholders and members of assignee which will be required to execute guarantees shall be those persons and entities which, in the reasonable judgment of the Company, have a sufficient net worth to ensure assignee’s performance under this Agreement. If the assignee is a corporation, partnership or limited liability company, it also shall demonstrate to the reasonable satisfaction of the Company that it has established transfer instructions prohibiting the transfer on its records of any equity securities, partnership interests or ownership interests in violation of the requirements set forth in this Section 17 and that each stock, partnership or ownership certificate of Franchisee shall have conspicuously endorsed upon its face a statement in form satisfactory to the Company that the assignment or transfer is subject to all of the restrictions imposed upon assignments by this Agreement;

c.    The assignee or the assignor agrees to the reimage and/or remodel of the Restaurant to the Company’s then-current standards, format, design and image, as designated pursuant to plans and specifications provided by the Company. The assignee must deposit into an escrow account the sums the Company deems necessary to complete the required reimage and/or remodel of the Restaurant. Franchisee will have a specified period of time to complete required reimage and/or remodel of the Restaurant, and the sum deposited into escrow will not be released to Franchisee until the Company determines that the required reimage and/or remodel of the Restaurant has been completed to its satisfaction;

d.    The assignee, or if assignee is an Entity, its designated general operations manager (who has at least a ten percent (10%) equity interest in assignee), and two persons designated as managers, have successfully completed the Company’s management training program;

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e.    The assignee shall represent and warrant to the Company in writing that the assignee:

i.    Has conducted an independent study of the Restaurant and the business therein;

ii.    Has not in any way relied upon statements or representations of the Company or its employees or agents except as may be contained in an Offering Circular or other comparable disclosure document which may be required to be delivered to such assignee in accordance with applicable law; and

iii.    Acknowledges and understands that the assignee’s rights upon assignment are conditioned on full performance of Franchisee’s obligations hereunder and are limited to those expressly provided for in this Agreement.

f.    As of the date of such assignment, Franchisee shall have fully performed and complied with all of its obligations to the Company, whether under this Agreement or any other agr