Highlights of The Egg & I’s Item 19 Financial Performance Representations (2013 FDD) – Part 2

Explanatory Notes for Chart 3:  Operating Performance of Certain Restaurants Open At Least One Year

• This chart shows the historical operating performance of 37 of the 51 franchised Restaurants and the 7 company-owned Restaurants that were all in operation for at least one year before the reporting period of July 1, 2012 through June 30, 2013. All amounts listed in the chart are averages.

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  Restaurants Owned by Parent Average – This category in Chart 3 is made up of 7 of the company-owned Restaurants that are operated by subsidiaries of the franchisor’s parent, E & I Restaurants, Inc., and located in Colorado. 4 of the 7 company-owned Restaurants (57% of the company-owned Restaurants) exceeded the average gross sales.

• Affiliated Franchised Restaurants Average – This category in Chart 3 is made up of the 17 franchised Restaurants that are owned by the franchisor’s affiliates. Subsidiaries of the franchisor’s parent, E & I Restaurants, Inc., manage the operations of 12 of the 17 affiliated franchised Restaurants. 8 of the 17 affiliated franchised Restaurants (47% of the affiliated franchised Restaurants) exceeded the average gross sales.

• Non-affiliated Franchised Restaurants Average – This category in Chart 3 is made up of 20 of the 34 non-affiliated franchised Restaurants. The franchisor is not able to provide similar information relating to the other 14 non-affiliated franchised Restaurants because it does not have reliable information relating to costs incurred by these franchise operators. 9 of the 20 non-affiliated franchised Restaurants (45% of the non-affiliated franchised Restaurants) exceeded the average gross sales.

• Direct Expenses – Includes certain discounts, repairs and maintenance, marketing, utilities, uniforms, supplies, credit card fees, janitorial, and other expenses incurred at the Restaurant.

• EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, and Amortization without considering major capital expenditures.

• Other Costs may include but not necessarily be limited to the following:

• Management fees
• Interest or other finance charges
• Income taxes
• Depreciation
• Pre-opening expenses
• Accounting, legal fees, and general administrative expenses
• Occupancy costs
• Royalty fees

• These costs and other expenses may be significant and will vary widely from Restaurant to Restaurant. For example Chart 3 does not reflect debt service costs. You will incur debt service costs to the extent you finance the initial franchise fee and the development and construction of the Restaurant and the furniture, fixtures, and equipment, or to the extent you borrow funds to acquire the property and build the Restaurant.

• You must factor in the length of time these Restaurants have been operating, the market recognition of The Egg & I brand in its existing markets, and the experience of the operators of these Restaurants, when reviewing these results.

• There are no material differences between the operations of the Restaurants franchised by the company and the Restaurants operated by subsidiaries of the franchisor’s parent, E & I Restaurants, Inc.. Additionally, there are no material differences between the operations of the Restaurants franchised by the company and the affiliate franchised Restaurants.

Chart 3:  Operating Performance of Certain Restaurants Open At Least One Year (July 1, 2012 through June 30, 2013)

7 Restaurants Owned by Parent (Average)

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