Key Items to Watch out for in the FUJISAN FRANCHISING CORP., 2019 FDD

Please consider the following RISK FACTORS before you buy this franchise: 1. THE FRANCHISE AGREEMENT REQUIRES YOU TO RESOLVE ALMOST ALL DISPUTES WITH US BY ARBITRATION/LITIGATION ONLY AT A NEUTRAL LOCATION IN LOS ANGELES COUNTY, CALIFORNIA. OUT-OF-STATE ARBITRATION/LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO ARBITRATE/LITIGATE WITH US IN CALIFORNIA THAN IN YOUR OWN STATE. 2. THE FRANCHISE AGREEMENT STATES THAT, WITH SPECIFIC EXCEPTIONS, CALIFORNIA LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. 3. YOU MUST PURCHASE ALL OR NEARLY ALL OF THE INVENTORY OR SUPPLIES THAT ARE NECESSARY TO OPERATE YOUR BUSINESS FROM US, FROM OUR AFFILIATES, OR FROM SUPPLIERS WE DESIGNATE AT PRICES WE OR THEY SET. THESE PRICES MAY BE HIGHER THAN PRICES YOU COULD OBTAIN ELSEWHERE FOR THE SAME OR SIMILAR GOODS. THIS MAY REDUCE THE ANTICIPATED PROFIT OF YOUR FRANCHISE BUSINESS. 4. YOUR SPOUSE MUST SIGN A DOCUMENT THAT MAKES YOUR SPOUSE LIABLE FOR YOUR FINANCIAL OBLIGATIONS UNDER THE FRANCHISE AGREEMENT, EVEN THOUGH YOUR SPOUSE HAS NO OWNERSHIP INTEREST IN THE BUSINESS. THIS GUARANTEE WILL PLACE BOTH YOUR AND YOUR SPOUSE’S MARITAL AND PERSONAL ASSETS, PERHAPS INCLUDING YOUR HOUSE, AT RISK IF YOUR FRANCHISE FAILS. 5. THE FRANCHISOR’S FINANCIAL CONDITION, AS REFLECTED IN ITS FINANCIAL STATEMENTS (SEE ITEM 21), CALLS INTO QUESTION THE FRANCHISOR’S FINANCIAL ABILITY TO PROVIDE SERVICES AND SUPPORT TO YOU. 6. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Item 5: Initial Fees

You pay us a franchise fee to operate a Kiosk at an initial location identified in an addendum to your Franchise Agreement. The franchise fee is paid in a lump sum when you sign your franchise agreement. The franchise fee is $3,750 for a Traditional Kiosk, except as noted below. The franchise fee for a Satellite Kiosk is $500. A Satellite Kiosk may only be operated in companionship with a Traditional Kiosk.

The initial franchise fee is partially refundable in limited circumstances. If you are operating a single Kiosk location, are in good standing under your Franchise Agreement, and lose the right to operate it in the first 12 months of your Franchise Agreement through no fault of yours, you may be entitled to a refund. Any refund is a pro-rated portion of your initial franchise fee based on the number of months remaining before the first anniversary of the effective date (e.g., if you paid a $3,750 initial franchise fee, and the franchise agreement was effective January 1, 2016 and it was mutually terminated in this way on June 1, 2016, then you would receive 1/2 of your initial franchise fee as a refund). We require you to sign a general release as a condition to the refund.

We can require you to pay us a non-refundable candidate evaluation fee of up to $300 to offset credit check costs and similar expenses before you can be offered a franchise. The fee may vary depending on the location of your Kiosk and the information you provide to us. The fee payment does not obligate you or us to offer/accept a franchise or enter into a franchise relationship. We have not previously charged this fee, but may choose to do so in the future. We can adjust the amount of the candidate evaluation fee in the future, as well.

You also can be required where it is lawful to undergo drug testing, other physical testing and/or a background investigation. Currently, we may require you to pay us $200 for any background investigation requested by us or the Premises Host after the Franchise Agreement is signed. The fee is nonrefundable. As of the date of this Disclosure Document, we have begun development of a new facility at our current headquarters in Santa Fe Springs, California that we plan to utilize for some or all of the instructional courses associated with your FujiSan Kiosk. We anticipate completion of this new facility in or about August of 2019, but since construction timelines depend on many factors, this date could be later than August of 2019.

Franchisees who begin our certification program prior to completion of our new facility, will attend and complete our CURRENT Certification Program. Under our CURRENT Certification Program, you pay us a non-refundable Initial Certification Fee of $6,000 when you sign the Franchise Agreement for 1 to 4 participants to attend our certification program, which involves approximately 8 days of instruction at your Kiosk or at another location we designate. If more than 4 attendees participate, one or more additional instructors will be required and you will pay an additional fee of $6,000 per additional instructor.

Once our new facility is completed, franchisees must attend and complete our NEW Certification Program requirements. Under our NEW Certification Program, you pay us a non-refundable Certification Fee of $6,000 when you sign the Franchise Agreement which covers both our 5-Day Initial Certification Program for up to 2 of your Designated Owners at our new facility in Santa Fe Springs, California and our 3-Day Kiosk Certification Program for up to 4 participants onsite at your Kiosk location. If more than the maximum attendees allowed for each program attend, you must pay an additional fee of $6,000 per additional instructor needed. You must pay us a Manual Loan Deposit of $300 per Traditional Kiosk. The deposit is refundable on return of the loaned Manual to us, and/or if your electronic access to the Manual is discontinued.

You will be required to purchase from us an initial inventory of food and equipment, including signage and grand opening and initial marketing materials, products, uniforms and supplies that we consider necessary for you to begin operations. We estimate that it will be in the range of $14,068 to $23,130 for a Traditional Kiosk and $750 to $6,350 for a Satellite Kiosk, but cannot assure you that you will not spend more. We will invoice you for the dollar amount of the initial inventory, which is non-refundable and due to us on demand and according to the invoice. We are not required to offer you more than one FujiSan Kiosk location addendum. But if we choose to offer you more than one, all “Initial Fees” and “Other Fees” and required purchases will apply.

Item 8: Restrictions on Sources of Products and Services

You must offer only Products and Services at your Kiosk that we and the Premises Host authorize. We can require you to buy these and other goods and services that we designate only from us, our affiliates or from suppliers we choose. If we set standards and any specifications or requirements for any Products and Services or suppliers then you can only use/offer suppliers, Products and/or Services that meet those requirements. We may reconsider our approval of any goods, services or suppliers. We will notify you if we revoke an approval, and you must stop purchasing disapproved goods or services and must not make purchases from a disapproved supplier. Any negotiated volume discount may not be available to franchisees located in markets that a particular supplier does not serve or does not serve in sufficient volume. Presently, there are no purchasing or distribution cooperatives that you must join.

We, our licensor and our franchisees have a substantial interest in having consistent quality Products and Services associated with the FujiSan Kiosk Marks and System. Additionally, the ingredient statements and nutritional facts with which our approved products are labeled are based upon the food products, sauces, and spices used and/or produced by us according to proprietary recipes. These are some of the reasons that we currently are the only approved supplier for core products you are required to purchase for your Franchised Business, currently including rice, vinegar, pre-packaged food products and condiments, seafood products, branded items, labels, sauces and sushi trays. You can request our approval of another supplier that you source locally, but the products you want to purchase from them must meet our standards and specifications, as noted above.

You will have an opportunity to review our current product/service price list before you sign the Franchise Agreement, but prices and products/services are subject to change. We can require that you sign our then current form non-disclosure agreement. We purchase almost all of the products we sell to you from our affiliate, Fuji Food Products (FFP). FFP will make a profit on items we purchase from them for resale to you. We anticipate their mark up on sales to us will be approximately 33% – 45%. We, our associates and approved suppliers may use discretion in allocating Products or Services, especially if there are shortages, interruptions or delays. No other affiliate of ours supplies Products and Services that are purchased by our franchisees.

We are a supplier of Products and Services we can require you to buy before you begin service at your Kiosk, including a credit and background check, our certification program, initial inventory of food and equipment, and signs and other point of sale materials. You pay us a fee for all of these Products and Services. A Manuals deposit also is required, but is refundable if you return the Manuals when the Franchise Agreement is over. You also can be required where it is lawful to undergo drug testing, other physical testing and/or a background investigation. Currently, you pay us $200 for any background investigation required after the Franchise Agreement is signed. (Refer to Items 5 and 6 for additional information on these costs.)

You are required to purchase tablet technology support services from a designated vendor that is unaffiliated with us. We may change vendors or discontinue this requirement, and the fees may change. We collect these fees on behalf of the vendor without marking up the price, but we reserve the right to do so in the future. Typically, you will have to locate your Kiosk in a grocery store or other Premises Host’s facility according to agreements that we or our affiliate make with the Premises Host. We and/or our affiliate and the Premises Host keep a portion of the revenues you generate with your Kiosk. (Refer to Item 6 for additional information on revenue sharing).

Occasionally, we may provide you a list of approved or designated suppliers and distributors for certain products and/or services for use or sale at your Kiosk. Currently, we have a list of approved suppliers for some equipment. If you would like us to consider an alternative or additional supplier, product or service, you pay us a $500 internal processing fee and also pay any costs we incur in the evaluation. We can approve or disapprove as we see fit and are not required to make available to prospective suppliers, standards and specifications that are confidential and/or proprietary to us or our licensor or any other affiliate of ours. In evaluating suppliers, we will consider a variety of factors, which can include whether the supplier is able to supply the products or services according to our standards, is able to produce and deliver products timely and with good quality service, is financially stable, offers appropriate sales terms and meets other applicable criteria. We will tell you our decision within about 60 days of your written request.

You must obtain and maintain insurance coverage meeting our specifications and through carriers satisfactory to us. Current requirements include commercial general liability ($2,000,000 per occurrence and $4,000,000 aggregate), worker’s compensation (as required by state law), employer’s liability($1,000,000 per occurrence), unemployment insurance, property insurance, business income insurance, state disability insurance (as required by state law), automobile insurance($1,000,000 per occurrence for owned, leased, hired or borrowed automobiles), and Employment Practices Liability Insurance (for franchisees with multiple kiosks).

We and our affiliates can receive discounts, volume rebates, administration fees, commissions, advertising allowances or other advantages that we can obtain from suppliers. We do not currently have arrangements to earn money from your purchases or leases from unrelated suppliers, but we could make these arrangements in the future. Additionally, we and/or our affiliates have the right to be an approved supplier, exclusive or otherwise, and to earn a profit on any Products or Services sold to you. We do not currently markup items/services we sell you, but reserve the right to do so. Any affiliate will make a profit on items we purchase from them for resale to you, as noted above. For the fiscal year ended December 31, 2018, our revenues from franchisees’ purchases or leases of products/services from us were $13,915,322, or 26% of our total revenues of $53,997,210.

Our Directors, Mr. Meruelo and Mr. Armona, and our Secretary, Mr. Tapanes, have an ownership interest in us and our affiliate, FFP. Unless you receive a specific written warranty for a particular item or service, all items we or an affiliate sell are provided “as is” and without any warranties, express or implied. You have to follow our policies and procedures about our or our affiliate’s product shipments. We do not provide you with any material benefit, such as the grant of an additional franchise or a renewal franchise, based on your use of or purchases from approved suppliers.

Assuming that the estimated minimum initial costs to begin operations and other financial obligations are within the ranges described in Item 7, we estimate that your required purchases and leases will represent approximately 95% of all purchases and leases you make in the establishment and opening of your Kiosk. We also estimate that the required purchases and leases you make on an ongoing basis will represent approximately 95% of all purchases and leases you make in operating the business on an ongoing basis.

Item 10: Financing

We expect that we sometimes will sell Products and Services on an open account basis to certain franchisees and payment generally will be due within 30 days of purchase, although we can vary terms. We can deduct these purchases from your share of Gross Revenues. We also may extend financing to franchisees to which our accounting department decides to extend credit for certain expenses involved in starting a Kiosk business, like opening inventory, small wares/equipment and costs of licenses and permits, and various other costs (refer to the chart below). We also might finance some of your opening expenses, like certification program fees. You cannot rely on our financing and will need to discuss it with us on a case by case basis. We deduct your monthly payment(s) to us from your share of Gross Revenues. If your share of Gross Revenues is less than the amount you owe us for a particular month, we may finance the shortfall. We will make deductions from your share of Gross Revenues in the following months according to the credit terms and until the balance is paid. The chart below represents terms that we expect will apply, but the amounts financed and the time period for repayment may vary. We and our affiliates do not offer other direct or indirect financing or sell any debt to a third party. We and our affiliates do not guarantee any of your obligations.

You are not required to sign any promissory notes or security agreements. Under the Franchise Agreement, if you do not pay us any money you owe us, we can charge an interest rate of 1.5%per month (or the highest rate allowed by the state where you are located, whichever is higher) on overdue amounts and can terminate the Franchise Agreement for an uncured failure to pay.

*Interest rates shown in the above chart do not include the 1.5% per month interest we can charge you if the money you owe us is past-due. If your loan payment program extends beyond an 8 month payment schedule you may be charged an additional interest fee of 1.5% on the remaining balance. Past due is 30 calendar days. This document was downloaded from franchimp.com. All the information on this website is published in good faith and for general information purpose only. FranChimp.com does not make any warranties about the complete

Item 12: Territory

We grant you a franchise to operate a FujiSan Kiosk at a location identified on a Location Addendum to your Franchise Agreement. If we choose to offer you the opportunity to operate more than one Kiosk, you will sign the then current form of the applicable Location Addendum for each Kiosk and the Franchise Agreement will apply to each one that you sign. You have no right to acquire another Kiosk location. You are not granted any minimum territory. You can operate only your FujiSan Franchised Business at a Kiosk identified on a location addendum and can only sell products that we approve and which are acceptable to the Premises Host.

We will not franchise or operate a FujiSan Sushi Kiosk at your specific Premises Host address. You will not receive an exclusive territory. You may face competition from other franchises, from outlets that we own, or from other channels of distribution or competitive brands that we control. Our affiliate, FFP, manufactures, distributes and sells sushi and various related products under Marks other than FujiSan, which are like the products that you will sell. It also sells to grocery retailers and others prepared Asian style food products under the “Okami” brand, which may be stocked in any of their locations, including possibly by your Premises Host. Additionally, we or FFP may ourselves or through a designee/licensee choose to establish Kiosks or to sell competitive products through a variety of other venues, such as universities, airports, shopping centers and others, any of which could compete with your Kiosk. Neither we nor our affiliates must pay you for soliciting or accepting orders within your territory.

We and our affiliates have all rights involving your Kiosk location not expressly granted to you in your Franchise Agreement. You have no marketing or customer exclusivity or other area rights under the Franchise Agreement and no right to object to or make any claims about any FujiSan Kiosk or any other operations or activities outside of your Kiosk location, no matter how close they may be to your Kiosk location, the customers serviced, the products/services sold or the trademarks used. Except for another Kiosk physically located in your Premises Host’s store, we can locate and operate anywhere, and authorize others to locate and operate anywhere, a FujiSan Kiosk and/or any other kind of business, using any channel of distribution, including the Internet, catalogues, mobile services and temporary facilities, and offering any type of product or service to customers located anywhere under any brand or trademark, including the Marks. We and FFP (and the applicable Premises Host) may offer and sell “Fuji” and “FujiSan” brand sushi and other food products in any facility so long as a franchised Kiosk is not operated on the facility premises. FFP currently operates a company-owned Kiosk in Illinois, and we have a contractual arrangement with Amazon Go under which FujiSan products are prepared in a kitchen that is shared with producers of other food products, picked up, and delivered together with the other producers’ products by a shared contracted vendor.

We also can acquire, be acquired by, merge, affiliate or co-brand with, or engage in any transaction with other businesses with outlets located anywhere, whether or not competitive or franchised. Any of these business activities can result in changes to the Marks and System, including possibly the need to convert to another brand. You can solicit customers who are located anywhere, but you can only offer product to them and sell to them from the physical location of your Traditional Kiosk or Satellite Kiosk location at a Premises Host store. You cannot use any other channels of distribution, including without limitation the Internet, direct marketing, catalogues or any channel other than your Kiosk operation. You cannot establish any website, Internet directory listing or any other presence on the Internet relating to the Kiosk or your franchised business or publish any information using the Marks, including on social networks and other media, without our written permission. You have to follow any policies we have for using the Marks in any media, including the Internet. (Franchise Agreement, Section 6.H).

There is no minimum sales quota or other sales minimum that we set, but a Premises Host may do so and the amount of sales you make can always influence whether or not the Premises Host will allow you and/or the Kiosk to keep operating. Your operation requires the ongoing consent of the Premises Host and you can be required to stop operating a Kiosk at their facility at any time. You cannot continue to operate a Kiosk if the Premises Host decides you have to stop operating the Kiosk or closes the retail facility in which your Kiosk is located. We and our affiliates are not required to maintain any agreement that we/they have with the Premises Host and are not responsible for any costs or damages you have because you have to close and possibly relocate a Kiosk business.

If you have to stop operating a Kiosk, the Location Addendum is automatically cancelled and considered to be a mutual termination of the Addendum. If you are not at fault for the cancellation and are complying with the Franchise Agreement, we will use commercially reasonable efforts to find an alternative Kiosk location to which you can relocate. We do not promise that an alternative site will be found or that it will be as successful as the Kiosk you had to vacate, and we and our affiliates are not responsible when you have to close a Kiosk location. If you are not operating another Kiosk under a Location Addendum within 60 days of the day you had to vacate your Kiosk, the Franchise Agreement is mutually terminated unless you and we agree to extend it in writing. You will not receive any refunds from us unless the mutual termination happens in the first 12 months after the date of the Franchise Agreement. In any case, you may not relocate any Kiosk without having a signed Location Addendum with us for that Kiosk.

Neither we nor any affiliate of ours has established, or presently intends to establish, other franchised or company-owned Kiosks which sell our Products or Services under a different trade name or trademark in the United States (but we reserve the right to do so in the future, without first obtaining your consent).

Item 15: Obligation to Participate in the Actual Operation of the Franchise Business

You are responsible for managing your Traditional or Satellite Kiosk and must maintain competent and conscientious personnel to staff your Traditional or Satellite Kiosk and maintain its condition and appearance, while following our mandatory standards and specifications and required procedures and meeting your Premises Host’s rules. These are all established to protect the value of the brand, the quality of the products/services offered under the brand and the good will the brand has earned. We can require that you or your staff undergo background checks or specific physical tests (like drug testing) and as requested by the Premises Host, all at your expense. This information can be shared with the Premises Host. You must use your best efforts to maximize and promote sales of your Kiosk’s Products and Services. You must operate your Kiosks each day that the Premises Host is open and according to the business hours requirements set by the Premises Host and as outlined by the Manuals and the Location Addendum for the applicable Kiosk. We can require that you meet certain eligibility requirements to participate in a particular program or product offering, like meeting any necessary professional or certification requirements or conditions on the ability to offer a certain menu item. You must conduct the Franchised Business in compliance with Premises Host requirements in order to preserve the good will associated with the FujiSan brand.

You are responsible for having a minimum of 1 employee and for maintaining sufficient personnel to staff your Kiosk business, for the terms of their employment and compensation, and for providing ongoing staff development to meet mandatory FujiSan System standards. You are exclusively in charge of scheduling, staffing and management of your Franchised Business employees and contractors, the terms of their employment and their compliance with the System standards. System standards do not include any employment policies or requirements. The people you select to work in your Franchised Business are exclusively your agents and employees. They are not our or FFP’s agents or employees and neither we nor FFP nor any of our other affiliates are joint employers of theirs. You also are solely responsible for state, federal and/or local taxes, fees and withholdings of every kind, including business and/or personal selfemployment taxes and income taxes; payroll and payroll taxes for Franchised Business employees; and social security and other amounts required to be paid or withheld, as well as for worker’s compensation insurance as required by law. Neither we nor FFP nor any of our other affiliates are responsible for any item or expense associated with your Franchised Business payroll or for any other compensation or benefits related to your Franchised Business employees or independent contractors.

Occasionally, we permit individuals to sign the Franchise Agreement as individuals on the understanding that they will assign the franchise to a wholly owned business entity as soon as it is formed and cannot participate in the certification program until they do so. In these cases, a sample of the assignment and consent agreement used for this purpose is attached to this Disclosure Document as Exhibit F and is subject to change by us in the future. A Designated Owner is the person named in Schedule A of the Franchise Agreement and we deal with this individual on all matters about the Franchise Agreement. A Designated Owner has to have at least a 51% interest in the franchisee, unless we permit otherwise with a written exception. If no single individual has a 51% or better ownership interest, then we can require that 1 of every 2 owners meet certification requirements. Any proposed change in the Designated Owner requires our prior written consent and the proposed individual’s compliance with applicable certifications and other owner requirements. In the absence of the Designated Owner, we may communicate with the manager of any Kiosk about routine operations and reporting requirements. You must keep us informed at all times of the identities of each Designated Owner and each Kiosk Manager. Changes are to be reported to us within 24 hours.

We recommend on-premises supervision by your Designated Owner. Your Designated Owner must successfully complete our initial certification program. If the Designated Owner is not the chef, your selected chef also must complete the program. If you have additional Kiosk locations, you may choose to hire a Kiosk Manager for on-premises supervision, but the Designated Owner must still supervise the operations of the Kiosk and is responsible for training the Kiosk Manager about the FujiSan System and mandatory standards for quality purposes. We can require that your Designated Owner and/or your Kiosk Manager participate in additional/remedial informational programs if we decide it is necessary to correct, improve, update and/or enhance the products and service at your Kiosk(s) to preserve quality/consistency standards and the positive FujiSan image.

We can require all Owners of a Business Entity franchisee, and their respective spouses or domestic partners, to sign a personal guarantee of the franchisee’s performance. Our current form of personal guarantee is attached to the Franchise Agreement as Schedule B, but the form can change. The Franchisee and all Owners commit to personal covenants to protect our Trade Secrets, Copyrighted Works and confidential information which restrict their ability to own or provide services to a competitive business both during and after the Franchise Agreement term (Section 17 of the Franchise Agreement). Our current form is attached as Schedule F-1 (Non-CA franchises) and F-2 (CA franchises only) to the Franchise Agreement. We can require that you have similar agreements made with your Kiosk Manager and other personnel with access to our intellectual property.

Item 16: RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL

You must offer and sell only goods and services we and the Premises Host approve (the “Products and Services”) for sale at your Kiosk, subject to any applicable Premises Host rules and/or requirements. A Premises Host may require that specific grocery items be obtained from them so they can trace the product source for quality and liability reasons. In that case, we will notify of you these requirements before you sign the applicable Kiosk location Addendum. All food menu items must be prepared and made according to the FujiSan Kiosk System recipes, techniques and processes. If you want to offer other items, you must first get our written consent, which we may withhold.

We can require that you offer the full range of Products and Services. Additionally, a Premises Host occasionally may require a Kiosk to offer and sell a product outside of our standard menu items. In that case, we will sell you the product and equipment you need to produce the item and give you the recipe for its preparation. You can ask us for approval to carry a smaller line of approved Product menu items with input from your Premises Host for that Location. You must not offer for sale or sell any unapproved Products or Services or use the Kiosk for any purpose other than the operation of the FujiSan Kiosk unless you have our written permission. If you want to stop offering any Product or Service, you must first get our approval in writing. As it is important for the System to be flexible, we can add, delete or modify approved suppliers, as well as the Services and Products you must offer from your Kiosk, and the Manuals and all other components of the FujiSan System to respond to commercial opportunities and challenges. However, you cannot make changes without our written consent. When you sign a Franchise Agreement you commit to the mandatory elements of the System and all related requirements and changes to the System and understand that changes can require additional investment from you. There are no restrictions on our rights to change the System, Products, Services, Manuals or approved suppliers.

You must follow any sampling policies we establish and your Kiosk staff must wear branded uniforms from approved suppliers. All Products you prepare at the Kiosk must be sold only from the Kiosk and through the Premises Host, except for Products you make for sale at a Satellite Kiosk under a specific location Addendum. If we introduce new Products you must meet any related inventory requirements for testing/launching the Products. You will not conduct any business or engage in any activity at the Kiosk or offer or sell any goods or services other than the Products and Services according to requirements of the System and the Manuals. You may not make material alterations to or replacements of equipment, fixtures, signs, layout or d?cor of any Kiosk, or any material change in the facility or its operations without our prior written consent.

To view the full Franchise Disclosure Document, please click here