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Business Description

Compass Group USA, Inc. (“Compass”) is a Delaware corporation with its principal business address at 2400 Yorkmont Road, Charlotte, North Carolina 28217. Compass does business under its corporate name and operates various related lines of business through separately identified corporate divisions, such as “Canteen,” “Chartwells,” “Eurest Dining Services,” “Eurest Support Services,” and “ESS Support Services,” and its affiliated companies operate under other corporate names such as “Flik”, “Unidine Corporation”, “Bon Appetit,” “Restaurant Associates,” “Morrison,” “Touchpoint Support Services,” “Best Vendors,” “Statewide Services,” “Crothall,” “Kimco,” “E15, LLC,” “Gourmet Dining,” “Lackmann Culinary Services,” “SSC Service Solutions,” “Culinart Group,” the “RAC Holdings” group of companies, and the “Levy Restaurant” group of companies. Our agents for service of process and their addresses are disclosed in Exhibit G. Compass Group USA, Inc. is wholly-owned by Compass Group USA Investments, Inc. Compass Group USA Investments, Inc. is a Delaware corporation with its principal business address at 103 Foulk Road, Suite 202, Wilmington, Delaware 19803. Compass Group PLC is our ultimate corporate parent with a principal business address at Compass House, Guildford, Chertsey, Surrey, KT16 9BQ. Canteen does not have any predecessors that are required to be disclosed in this Disclosure Document.

Prior Experience

Canteen has entered into arrangements with Blimpie Subs and Salads and Au Bon Pain to sell certain products (“Trademarked Products”) through Canteen vending machines. Under these arrangements, Canteen will sell certain Trademarked Products through Canteen vending machines bearing the mark for the Trademarked Product developed for the program. Canteen may enter into similar agreements with other companies which produce nationally recognized products in order to sell these Trademarked Products through the Canteen vending machines under the nationally recognized mark of the companies, and this program may be made available to you, at our option. We have operated businesses of the type you will operate since June of 1994. We began offering franchises in April 1996. Before we offer a Canteen franchise, we ask that a prospective franchisee first sign our standard form 2019 CANTEEN FDD 2 Confidentiality Agreement, a copy of which is attached as Exhibit F to this Disclosure Document. We grant franchises under a Franchise Agreement substantially in the form attached as Exhibit A to this Disclosure Document (the “Canteen Franchise Agreement”). However, we have in the past and may in the future, depending upon the nature of the transaction, amount of business involved, the type and amount of assets and/or accounts you purchase from one or more of our branch operations, as discussed below, negotiate the material terms of our form of Franchise Agreement, including the royalty rate and term. Generally, prospective franchisees will have existing vending or food service operations that will be converted to operate under the Canteen System. In connection with the sale of a franchise, on an occasional and infrequent basis we also may offer you the right to purchase the assets of one or more of our branch operations which do not meet our strategic needs. Prospective franchisees who purchase one of our branch operations also must execute an Asset Purchase Agreement substantially in the form attached as Exhibit B to this Disclosure Document. In certain circumstances, we may lease or assign an existing lease to you in which case you must execute a Lease or Assignment of Lease substantially in the form attached as Exhibits D and E, respectively. In addition to the franchises we offer under the Canteen Franchise Agreement, we may enter into a vending franchise relationship whereby you will be granted rights to service vending accounts having annual gross revenues of $25,000 or less on a limited exclusive basis, and the right to service vending accounts having annual gross revenues of greater than $25,000 on a non-exclusive basis. Any such change to our standard Canteen Franchise Agreement to account for the vending threshold franchise relationship will be in the Vending Threshold Franchise Agreement, which is attached to this Disclosure Document as Exhibit C (“Threshold Franchise Agreement”). Under the Threshold Franchise Agreement, you will not have the right to use our name and mark CANTEEN. Unless otherwise specifically provided for in this Disclosure Document, the terms of the Canteen Franchise Agreement and the Threshold Franchise Agreement are identical, and will be collectively referred to in this Disclosure Document as “Franchise Agreement”. We will license you to sell food, beverage and other consumer products (which may include janitorial and paper goods) through the channel(s) of distribution that we specify in the Franchise Agreement. Under the Canteen Franchise Agreement, these channels of distribution generally include vending only (including automated or unattended environments using a self-checkout method) and food only (i.e., contract food, executive dining and/or catering) accounts of a certain revenue threshold, combined vending and food accounts, and office coffee services accounts. Under the Threshold Franchise Agreement, the channel of distribution will be vending accounts (including automated or unattended environments using a self-checkout method). However, we recognize that some vending operators also offer office coffee services, food services, and commissary services, and we may offer you, in our sole discretion, the right to provide food services to accounts under a certain revenue threshold, office coffee services, and commissary services, depending on the territory granted, whether we, an affiliate or one of our licensees is already providing such service, your experience, the size of your franchise and other factors. We or one of our affiliates may provide you with sandwiches and other food products and supplies produced or distributed from one or more of our production facilities. We also may allow you to sell certain products we develop which bear trademarks owned by or licensed to us (“branded products”). Our branded programs currently include a coffee branded program, fresh food branded programs, and a convenience store branded program. We are not required to offer you the opportunity to participate in any branded product programs, and you do not have to participate in any programs that we may offer to you. Under the Canteen Franchise Agreement, we will grant you a protected territory within which you may operate through the channels we license to you, although your right to offer office coffee services or food services may be non-exclusive depending on the territory granted, whether we or an affiliate are already providing such service, and the amount of office coffee or food services business you conduct. Under the Threshold Franchise Agreement, you will receive an assigned territory where the level of exclusivity is limited to vending accounts having annual gross revenues of $25,000 or less. If you decide to become a franchisee, we will ask you to sign a letter acknowledging your receipt of Compass' Code of Business Conduct and agreement to conduct Compass-related business activities consistent with the principles and standards detailed in the Code of Business Conduct. A copy of the form letter is attached as Exhibit P to this Disclosure Document.

Business Offered

We are in the vending services business, namely installing and servicing vending machines offering food, beverages and other consumer items principally at business and industry, institutional and recreational locations. We engage in this line of business directly through our own branch operations. We also grant franchises for vending services and certain contract food, catering, executive dining, office coffee services and/or secured delivery services. Other divisions of Compass provide contract food, catering, executive dining, concessions and other food services using names other than “Canteen,” as described above. In some markets, Compass also has entered into franchise arrangements where it serves as franchisee or licensee for a number of quick-casual and fast food or coffee chains, including national brands such as Pizza Hut, Quizno's, Subway, Papa John's Pizza, Starbucks, Einstein's Bagels, Dunkin Donuts, Panda Express and Peet's Coffee, among many others.

Initial Fees

Under the Canteen Franchise Agreement, the initial franchise fee ranges from $3,250 to $25,000, depending upon the territory granted, size of your franchise, term of the franchise and other factors. Generally, the initial fee will be $3,250 for small vending operators having annual gross revenues of $2,000,000 or less and receiving a Protected Territory of only a few counties (10 or less) in a particular State and having a franchise term of 5 – 8 years. For franchise prospects having annual gross revenues of more than $2,000,000, receiving a Protected Territory of more than that stated above and having a franchise term of greater than 8 years, the initial fee will be $25,000. The initial franchise fee is payable in a lump sum on signing the franchise agreement, or may be deducted from your quarterly rebate payment until paid in full, or if earlier, upon expiration or termination of your Franchise Agreement. Under the Threshold Franchise Agreement, the initial franchise fee is $3,000, and will be deducted from your quarterly rebate payment until paid in full, or if earlier, upon expiration or termination of your Franchise Agreement. The initial franchise fee is non-refundable. Purchase of Branch Operation Assets In connection with the purchase of a franchise, we infrequently and on an occasional basis will offer you the right to purchase the assets of one or more of our branch operations which do not meet our strategic needs and is located in your territory. If you purchase assets of a branch operation from us, you must pay us the purchase price for the assets under the Purchase Agreement and, if applicable, for the real estate under the Real Estate Purchase Agreement. The purchase price for the assets and, if applicable, the real estate are separate from the initial franchise fee. The purchase price will be determined by mutual agreement and will vary depending upon the location, sales volume and profitability of the 2019 CANTEEN FDD 9 operation and condition of the assets purchased. The assets you will acquire generally include vending machines and coin changers, vehicles, office furniture, inventory and transferable rights to location contracts and potentially an existing building and improvements, although the assets sold may vary depending upon the branch you acquire. You are encouraged to independently evaluate the purchase price for the assets of such branch operation and, if applicable, the real estate before you sign the Franchise Agreement. You must pay the purchase price in lump sum, except as otherwise agreed to by the parties. If you sign the Purchase Agreement before closing, you may have to make an advance payment which will vary depending upon the purchase price. The advance payment will be credited toward the purchase price and will only be refundable if we do not fulfill our obligations under the Purchase Agreement. The purchase price is not refundable under any other circumstances. During the last fiscal year, we did not sell a branch operation as part of a sale of a franchise. Except as expressly disclosed above, you are not obligated to pay to us or any affiliate of ours before operating as a Canteen franchisee any other fees or other payments for services or goods received from us or our affiliates.

Financing

Except as explained below, we generally do not offer direct or indirect financing for your purchase of a Canteen franchise. Advances and Initial Franchise Fee When you enter into a Threshold Franchise Agreement, we will advance you a certain amount (the “Advance”), the exact amount to be negotiated between you and us, but approximately ½% of your anticipated quarterly revenue, which will be repaid by offset against rebates that will become payable to you as described in Item 8 above. Your Initial Franchise Fee will also be repaid by offset against these rebates. When you enter into a Canteen Franchise Agreement, we may offer that you pay your initial Franchise Fee by offset against your rebates. The amount of the offset will equal the rebates we receive from suppliers and the offsets will continue until the rebate amounts equal the Advance and the Initial Franchise Fee. No interest will accrue on the outstanding amount of the Advance or the Initial Franchise Fee during the Term of your franchise. To the extent the Advance and the Initial Franchise Fee have not been repaid as of the date your Franchise Agreement terminates or expires, the remaining outstanding balance of the Advance and the unpaid portion of the Initial Franchise Fee will be due and payable at that time, and, if not then repaid, will bear interest at the greater of the rate of 13% simple interest or the prime rate published periodically by The Wall Street Journal beginning on the first day following the effective date of the termination or expiration of your Franchise Agreement. Purchase of Branch Assets In circumstances where you purchase one of our branch operations under the Asset Purchase Agreement 2019 CANTEEN FDD 25 (Exhibit B), we may allow you to defer payment of a portion of the purchase price on terms and conditions negotiated by the parties or we may offer a conditional letter of credit to help the franchisee secure a loan from a third party to pay a portion of the purchase price. If we allow you to defer a portion of the purchase price or offer a letter of credit, you may be required to execute a Promissory Note in our favor and a Security Agreement whereby you grant to us a security interest in the assets and inventory we sell to you along with your personal guaranty of the amounts deferred. A form Promissory Note is attached to this Disclosure Document as Exhibit Q, and a form Security Agreement is attached to this Disclosure Document as Exhibit R. The Promissory Note contains waivers of the borrower's right of issuance, notice of dishonor or changes, notice of acceleration of maturity and you agree to continue to remain bound for the payment of principal, interest and all other sums due under the Promissory Note despite any change or changes by way of release, surrender, exchange, modification or substitution of any security. (Promissory Note, Paragraph 5). The Promissory Note and Security Agreement provide for consent to jurisdiction in North Carolina and waive the borrower's right to object to venue and claims of inconvenient forum. (Promissory Note, Paragraph 5; Security Agreement, Section 25). Other Direct and Indirect Financing In limited circumstances, we may offer financial assistance in unique instances to existing franchisees, depending on the financial and operational status of the franchisee, the size and location of the franchise involved, and market conditions. The financial assistance would be in the form of a loan or guaranty of a note, and would help the franchisee secure a loan from a third party of franchisee's choice to cover ongoing franchise obligations, or to assist in the buyout of ownership interests, or in connection with the franchisee's acquisition of new business. The amount of the assistance offered is subject to negotiation, including an extension to the term of the franchise agreement and a prohibition on transferring the business or ownership of the franchisee, and depends upon the loan amount and the costs and fees that the lender requires in order to grant the loan. Any assistance we provide will be secured by satisfactory collateral, including the assets of the franchisee's business and other unencumbered assets, including the franchisee owner's personal assets. (Promissory Note, Paragraph 4). The franchisee must sign a Promissory Note and other applicable documents. During fiscal year 2018, Canteen provided a variety of repayment terms from 0 to 18 months, depending on the amount financed, the type of collateral provided, and other factors. The interest rate charged will vary depending on when financing is obtained as well as other factors, however, the annual interest rate charged by us during 2018 did not exceed 5%. The highest interest rate that we may charge is 10% annually. Any interest rate is not an annual percentage rate calculated in accordance with the Consumer Credit Protection Act (“Truth in Lending”) and Regulation Z. You may prepay the financed amount, and we will not apply prepayment penalties. Upon default by franchisee, we may accelerate the balance of the note and assess attorney's fees and other costs incurred by us and associated with the collection of the debt (Promissory Note, Paragraph 4 and 6). In addition, the financing documentation contains crossdefaults to the Franchise Agreement (Promissory note, Paragraph 3) and other documentation signed by the franchisee. The borrower waives its right of issuance, notice of dishonor or changes, notice of acceleration of maturity and you agree to continue to remain bound for the payment of principal, interest and all other sums due under the Promissory Note despite any change or changes by way of release, surrender, exchange, modification or substitution of any security. (Promissory Note, Paragraph 5). The Promissory Note and Security Agreement provide for consent to jurisdiction in North Carolina and waive the borrower's right to object to venue and claims of inconvenient forum. (Promissory Note, Paragraph 5; Security Agreement, Section 25). In fiscal year 2018, we have provided approximately $755,000 in financial assistance described in this paragraph. The financial assistance described in this paragraph is under evaluation by our management and may not be available in the future. We have not in the past sold, assigned or discounted to a third party, in whole or in part, any note, contract or other instrument executed by a franchisee, nor do we intend to do so in the future. We do not receive payments from any person for the placement of financing for any franchisee. Except as noted above, we do not guaranty your note, lease or other obligation. We do not require a guaranty from any other entity other than the franchisee and its owners.

Franchisee Revenue and Profit

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the Disclosure Document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances. The following information is provided for the purpose of helping you evaluate the potential rebate returns you may achieve by being a Canteen franchisee. The rebate returns are a historic Financial Performance Representation about existing Canteen franchisees, and are calculated by reviewing the rebates passed back to the franchisee from Canteen after Canteen deducts its administrative fee described in Item 6, based on the purchases the franchisee makes using Canteen's purchasing programs, and comparing the rebates passed back against the revenue reported by the franchisees. The information below is based on supplier pricing and prices paid by participants in the Canteen purchasing program for the period commencing September 16, 2017 and ending September 15, 2018 (the “Financial Performance Period”). The information is compiled from the performance of 124 Canteen franchises, which represents all Canteen franchises that have been a franchisee of the Canteen system during the entire Financial Performance Period. We have excluded information for the 1 Canteen franchise that became a franchisee during the Financial Performance Period, and the 10 Canteen franchisees that left the system during the Financial Performance Period, and were therefore not Canteen franchisees during this entire Financial Performance Period. Canteen franchises recognized average rebate returns of approximately 8.87% and a median rebate return of 8.7%. Of the 124 Canteen franchisees included as the basis for this financial performance representation, 50%, or 61 franchisees, recognized rebate returns less than 8.7% (25% of which recognized rebate returns equal to or less than 7.0%), and 50%, or 63 franchisees, recognized rebate returns equal to or greater than 8.7% (25% of which recognized rebate returns equal to or greater than 9.7%) during the Financial Performance Period by being Canteen franchisees. In connection with your review and analysis of the above financial performance representation, you should consider the following: 1. No Certified Public Accountant has audited the figures or data presented here or expressed any opinion as to the contents or form, and the information is not presented in accordance with the statement on standards for accountants' services on prospective financial information (or its successor) issued by the American Institute of Certified Public Accountants, Inc. 2. The financial performance representation is based upon information furnished by Canteen suppliers and Canteen franchisees. Canteen has not independently verified the accuracy of this information. Items used in Canteen's analysis include rebates received on purchases for all cold beverages, candy, salty snacks, pastry, gum, mints, fresh food, frozen food, coffee products, paper goods used in vending, condiments, vending equipment and parts (including snack vending machines, coffee vending machines, fresh food machines, bill changers, frozen food machines, office coffee machines, cold beverages machines), and services. 3. The financial performance representation is based upon data for the Financial Performance Period, and there can be no assurance that the pricing policies of suppliers, including base pricing, discounts and rebates will be the same for any succeeding period, or that the volume of products you purchase in the future will be identical to the volume of products that were included in the Financial Performance Representation analysis. In addition, there can be no advance assurance that a supplier or distributor that is participating in Canteen's purchasing system will agree to supply you with its products or will continue to participate in the Canteen 2019 CANTEEN FDD 47 purchasing program. Factors which a supplier or distributor may consider in determining whether to supply you with products include availability of distribution at your outlet locations and your credit-worthiness, and any other factors that suppliers or distributors may consider when making these decisions. 4. The level of savings you will achieve will depend in large measure upon the product mix and volume you purchase. In calculating the savings, we have assumed that you will purchase the same quantity of products through the Canteen purchasing system as you actually purchased during the Financial Performance Period. Savings resulting from base pricing differentials, discounts and rebates will vary based upon the suppliers from whom you make purchases, the volume of each product you purchase, the quantities of goods purchased in the specific orders you place, and the payment terms you select, if multiple payment alternatives are made available to purchasers. There may be variations in pricing for certain products based on the different specifications and volumes per package of products you use, versus the specifications and volumes per package of products offered by Canteen suppliers. 5. In determining cost savings, you must also consider the amount you will be required to pay to Canteen as royalties, administrative fees and other required payments. In addition, you must also consider the amount of rebates you received before becoming a Canteen franchisee. Except as stated in this Item 19, the financial performance representation above does not take these reductions into account. Some outlets have earned this amount. Your individual results may differ. There is no assurance that you'll earn as much. Other than the preceding financial performance representation, Canteen does not make any financial performance representations. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor's management by contacting the President of the Franchise Division, currently Dale Whetstone, 2400 Yorkmont Road, Charlotte, NC 28217, 704-328-4000, the Federal Trade Commission, and the appropriate state regulatory agencies.