Detailed Information on Pancheros Mexican Grill’s Initial Franchise Fee, Royalty Fee + 28 Other Fees (Items 5 and 6, 2021 FDD)

1.  Initial Franchise Fee:  $25,000 to $30,000

• When you sign the Franchise Agreement, you must pay Pancheros Mexican Grill an initial franchise fee. Pancheros Mexican Grill’s standard initial franchise fee is $30,000.

• If you are developing Franchised Restaurants under an Area Development Agreement (see below), the initial franchise fee is $25,000 for each Franchised Restaurant developed under the Area Development Agreement.

• If you are an existing franchisee in good standing who purchases a second or additional franchise, Pancheros Mexican Grill’s current policy is to offer a discount so that the initial franchise fee is $25,000 for each additional Franchised Restaurant.

• The initial franchise fee is nonrefundable and, except for the discounted fees described above, is uniform for all franchisees.

2.  Area Development Fee:  $10,000 for the second, the third, and, if applicable, each additional Franchised Restaurant to be developed under the Area Development Agreement

• If you enter into a multi-unit development agreement (“Area Development Agreement”), you must develop at least three Franchised Restaurants. When you sign the Area Development Agreement, you also will sign a Franchise Agreement for the first Franchised Restaurant to be developed under the Area Development Agreement and you will pay the $25,000 reduced initial franchise fee for the first Franchised Restaurant, and an area development fee equal to $10,000 for the second, the third, and, if applicable, each additional Franchised Restaurant to be developed under the Area Development Agreement.

• The area development fee is nonrefundable.

• When you sign the second and each subsequent Franchise Agreement under the Area Development Agreement, Pancheros Mexican Grill will credit $10,000 of your area development fee payment toward payment of the $25,000 initial franchise fee due under the Franchise Agreement, and you will pay it the $15,000 balance at that time.

3.  Initial Merchandise Purchases:  $1,800 to $2,500 (estimated)

• You may elect to purchase certain items from Pancheros Mexican Grill before your Franchised Restaurant opens, including: menus, business cards, temporary signage, and gift cards.

• You are not required to purchase these items from Pancheros Mexican Grill, and the timing and amount of these purchases is in your discretion. The payments are not refundable once made.

• Pancheros Mexican Grill estimates that the cost of these initial purchases will range from $1,800 to $2,500.

4.  Royalty Fee:  5% of Gross Revenues

• Due Date:  Weekly.

5.  Advertising Fund Contribution:  up to 3% of Gross Revenues, currently 2%

• Due Date:  Weekly.

6.  Local Advertising Requirement:  at least 3% of Gross Revenues

• Due Date:  Monthly.

7.  Advertising Cooperative:  your proportionate share will be determined by participating locations in the advertising cooperative

• Due Date:  Monthly.

• If you are required to participate in an Advertising Cooperative, the amount of your contribution to cooperative advertising and promotional programs in the Advertising Coverage Area will be credited toward your Local Advertising Requirement.

• Currently, there are no advertising cooperatives.

8.  Operational Expenditures, Upgrades, and Modifications:  a reasonable per diem for Pancheros’ services

• Due Date:  At time of upgrade or modification.

• You must update your Franchised Restaurant within the reasonable time period Pancheros Mexican Grill requests to meet its updated standards, specifications, and operating procedures.

• There are no required capital expenditures during the first two years of operations.

9.  Management Fee:  a reasonable daily management fee; currently, $500 per day for up to 60 days, plus expenses

• Due Date:  Weekly after time of service and at the same time as the Royalty Fees.

• Pancheros Mexican Grill may assume management of your Franchised Restaurant if you abandon or fail to actively operate the Franchised Restaurant, fail to comply with any provision of the Franchise Agreement and do not timely cure, or if the Franchise Agreement expires or terminates and Pancheros Mexican Grill is deciding whether to exercise its purchase option for the Franchised Restaurant.

10.  Late Fees:  $100 for past due payments and payments not honored by your financial institution (plus related bank charges), plus interest at the lower of 1.5% per month or the highest commercial contract interest rate under applicable law

• Due Date:  As incurred.

• Applies to all amounts due to Pancheros Mexican Grill, including Royalty Fees, Advertising Fund Contributions, and amounts due for purchases from Pancheros Mexican Grill or its affiliates.

11.  Supplier/Supplies Approval:  reasonable cost of inspection and actual cost of test

• Due Date:  Time of inspection.

• Applies to new suppliers or supplies you wish to purchase that Pancheros Mexican Grill has not approved.

12.  Advisory Council:  council assessments

• Due Date:  When levied.

• Pancheros Mexican Grill has the right to enforce payments, and amounts may vary.

• Currently, there is no Advisory Council.

13.  Operation of the Franchised Restaurant in Case of Your Absence, Incapacity, or Death:  $400 per day, plus expenses

• Due Date:  Weekly after time of service and at the same time as the Royalty Fees.

• Prevents harmful interruption or depreciation of Franchised Restaurant in case of your absence, incapacitation, or death.

14.  Insurance:  you must reimburse Pancheros Mexican Grill’s costs

• Due Date:  30 days after billing.

• If you fail to maintain required insurance, Pancheros Mexican Grill may obtain insurance for you.

15.  Transfer Fee – for Convenience:  Pancheros’ actual expenses

• Due Date:  Reimbursement of Pancheros’ expenses is due upon demand.

• You must reimburse Pancheros for its actual expenses for a transfer of convenience.

16.  Transfer Fee – of Minority Interest:  $2,500, plus reimbursement of Pancheros’ actual expenses

• Due Date:  1/2 of fee is due upon your request of Pancheros’ approval; remainder due at time of transfer.

17.  Transfer Fee – Assignment of Interest:  $10,000

• Due Date:  1/2 of fee is due upon your request of Pancheros Mexican Grill’s approval; remainder due at time of transfer.

• You must pay Pancheros Mexican Grill a $10,000 transfer fee if you are assigning your interest in the Franchise Agreement, transferring all or substantially all of the assets of the Franchised Restaurant, or your owners are transferring a controlling interest in the franchisee entity.

18.  Audit:  cost of audit, plus interest on underpayment

• Due Date:  30 days after billing.

• Payable only if audit shows that you understated Gross Revenues by at least 2%.

19.  Additional Manager Training:  $300 per day, plus expenses

• Due Date:  Time of service.

• You pay for training if you request it or if you hire a new designated manager.

20.  Additional Assistance:  $300 per day, plus expenses

• Due Date:  Time of assistance.

• If this is your first Franchised Restaurant, Pancheros Mexican Grill provides 10 days of assistance at the beginning of operations at its cost. Additional training is at your cost.

21.  Continuing Education:  you must pay your and your employees’ expenses in attending these programs

• Due Date:  Time of program.

• Attendance will not be required more than once a year and will not last more than 4 business days.

22.  Special Meetings:  you must pay your and your employees’ expenses in attending these programs

• Due Date:  Time of program.

• Attendance will not be required more than once a year and will not last more than 4 business days.

23.  Re-Inspection Fee:  Pancheros Mexican Grill’s then-current Re-Inspection Fee; currently, $2,000

• Due Date:  As incurred.

• Due if Pancheros Mexican Grill must re-inspect Franchised Restaurant to make sure you cured operating or other deficiency.

24.  Administrative Fee:  currently, $25 per occurrence

• Due Date:  On demand.

• Due if you are required but fail to submit any report, information, certificate, document, or any other type of submission required by the due date.

• Pancheros Mexican Grill may increase this fee on notice to you to reflect an amount it reasonably believes estimates its administrative costs to pursue any required submission.

25.  Cost of Enforcement or Defense:  all costs, including attorneys’ fees

• Due Date:  As incurred.

• You will reimburse Pancheros Mexican Grill for all costs it incurs to enforce your obligations under the Franchise Agreement if it prevails.

26.  Indemnification:  all costs, including attorneys’ fees

• Due Date:  Upon settlement or conclusion of claim or action.

• You must defend suits at your own cost and hold Pancheros Mexican Grill harmless against suits involving damages resulting from your operation of Franchised Restaurant.

27.  Enforcement Administrative Fee:  $250 per enforcement effort (i.e., written or verbal notification and follow up), and $250 per week for each week that the issue remains unresolved

• Due Date:  Upon demand.

• Pancheros may assess an administrative fee to compensate it for its time.

28.  Holdover Period:  150% of the Royalty Fee and Advertising Fund contributions due in the Franchise Agreement

• Due Date:  Weekly.

29.  Liquidated Damages:  average Royalty Fees calculated through the end of the term

• Due Date:  On demand.

• Payable only if you prematurely close the Franchised Restaurant or if Pancheros Mexican Grill terminates the Franchise Agreement on account of your material breach.

30.  Third-Party Delivery Service Fees:  all costs and fees

• Due Date:  Upon invoice.

• Payable only if Pancheros Mexican Grill requires your Franchised Restaurant to utilize the services of one or more of its third-party food ordering/delivery services and it pays the third-party fees for you.