Form G

Commonwealth of Australia

Competition andGonsumerAct20iO-subsection 93 (1)NOTIFICATION OF EXCLUSIVE DEALING

To the Australian Competition and Consumer Commission:

Notice is hereby given, in accordance with subsection 93 (1) of the Competition andConsumer Act 2070, of particulars of conduct or of proposed conduct of a kind referred tosubsections 47 (2), (3), (4), (5), (6), (7), (8) or (9) of that Act in which the person giving noticeengages or proposes to engage.

PLEASE FOLLOW DIRECTIONS ON BACK OFTHtS FORM

Applicant

(a) Name of person giving notice:(Retorto di7ection 2)

BBS Cafe System Pty Ltd ACN 114 631 106 (BCS)

(b) Short description of business carried on by that person:(Retorto di7ection 3)

BCS is the franchisor of the bb's cafe franchise system (bb's), specialis ing inthe preparation and retail sale of espresso coffee, freshly baked muffins,specially filled and gourmet breads, cakes, hot and cold beverages andassociated products. As at 12 November 2012, there are 34 bb's outlets inAustralia together with additional outlets in New Zealand.

BCS has the right or licence to operate bb's, use the "bb's Cafe"' brand, andto grant a bb's franchise to any other person or company (Franchisee). Thebb's system and bb's brand incorporates a variety of valuable intellectualproperty including trade marks, logos and business names, copyrightedmaterials, and includes a distinctive image which comprises designs andcolour schemes for bb's retail stores, store concepts and plans, signs,layouts, fixtures and fittings, uniforms and badges, certain processes,methods, systems, recipes, formulas, manuals, computer software, tradesecrets, know how and other procedures (collectively, the IntellectualProperty).

The majority of bb's retail stores are owned and operated by Franchisees(Franchised Operations) pursuant to a written franchise agreement(Franchise Agreement). bb's currently has 28 Franchised Operations. Asat 12 November 2012, 6 retail stores were operated by, or on behalf of, BCSor its associates.

bb's franchised stores sell a range of food and beverage products, includingespresso coffee, freshly baked muffins, specialty filled and gourmet breads,cakes, hot and cold beverages and associated products, predominantly toretail customers.

BOS is a related entity of Regional Franchising Systems Pty Ltd (RFS) whichowns certain trade marks and intellectual properly relevant to the bb'sfranchise system. The ownership of, and right to use, the aforesaidintellectual properly is the subject of an agreement between bb's and RFS,the terms of which are confidential.

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BCS has appointed RFGA Management Pty Ltd ACN 071 765 609, tradingas Retail Food Group (Australia)(System Manager), to manage the bb'ssystem on its behalf.

(c) Address in Australia for serviceof documents on that person:

c/- Andrew Rankin, Partner, Norton Rose Australia, Level 22, ONE ONEONE, tit Eagle Street, Brisbane, Queensland 4000.

Notified arrangement

(a) Description of the goods orservices in relation to the supply oracquisition of which this notice relates:

Approved Products and Services

This Notification relates to the acquisition by bb's Franchisees of productsand services approved or nominated, or which may be approved ornominated, by BCS, including:

(a) certain consumable and food products (eg muffins, specialty filled andgourmet breads, buns, cakes, croissants, SCOnes including pre-manufactured or pre-packaged products)(Food Products);

(b) sugar (including satchels), sauces, animal and dairy products,seasoning, muffin mix, flour, and/or other condiments, and otheringredients necessary to make the Food Products (Ingredients);

(0) beverages, such as bottled water, milk, juice and soft drinks for resaleand coffee beans, teas, drinking chocolate, Chai powder, syrups,toppings and other ingredients used in the preparation of hot and coldbeverage products (Beverage Products);

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(d) packaging, boxes, cartons, hot dog boats, paper cups and lids,napkins, plastic cutlery, utensils, merchandise and promotionalproducts and other items of packaging and cutlery used by bb's(Packaging);

(e) services for the provision of warehousing and distribution of FoodProducts, Beverage Products, Ingredients, and Packaging;

machinery, plant, equipment, fixtures, fittings and finishes (eg coffeemachine, baking equipment) used in the conduct of the FranchisedOperation, including the preparation or display for sale of the FoodProducts and or Beverage Products (Equipment);

(f)

(9) computer and point of sale systems, software, retail and businessmanagement systems, mobile or internet ordering or payment systems,loyalty or reward systems and other related information technologysystems as nominated by bb's from time to time;

training services provided by BCS or its nominated supplier;

marketing material design and ordering systems, merchandising andbranding services;

(h)

(i)

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in store design, shop-fitting and refurbishment services;

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(k) certain products and services relating to the installation, fit out,maintenance, operation, cleaning and upkeep of the FranchisedOperation and Equipment;

centralised banking facilities to facilitate customer payment processing,including EFTPOS or 'tap and go' systems;

( I)

(in)

(n) a lease, sublease or licence in respect of the occupation of premisesfrom which a Franchised Operation is, or is to be, conducted.

(collectively, the Approved Products and Services)

from specified third party suppliers.

Approved suppliers

uniforms; and

BCS has identified a number of suppliers who have been approved ornominated by BCS (Approved Suppliers) that can provide the ApprovedProducts and Services identified above to the standards required by BCS,and at a reasonable cost. The Approved Suppliers are listed at Appendix C.BCS believes that the Approved Products and Services best meet therequirements of the bb's network and that the Approved Suppliers are bestable to provide such Approved Products and Services.

Franchisees may also be required to acquire certain Approved Products andServices from BCS, or associates of BCS, or from an Approved Supplier inwhich BCS or an associate of BCS may have an ownership interest.Franchisees may also be required in the future to obtain certain ApprovedProducts and Services from a central manufacturing facility (CMF).

Franchisees may also be required to enter into a lease, sublease or licencewith BCS or an associate in relation to the occupation of premises from whicha Franchised Operation is, oris to be, conducted.

Description of the conduct or proposed conduct:(Refer to direction 4)

(b)

bb's brand and system

The specialty coffee and cafe industry is highly competitive and denselypopulated. The bb's system is designed to give Franchised Operations acompetitive advantage. This is achieved by ensuring that:

(a) all bb's outlets maintain a uniform productrange which delivers FoodProducts and Beverage Products of the highest quality;

(b) all bb's outlets are operated in such a manner as to deliver a consistentcustomer experience, including through achieving consistency in themodes and methods of operating a bb's outlet and otherwise thenature and quality of a fit out of Franchised Operations across Australiato maximise the retail experience for both Franchisees and consumersand ensure fit out and Equipment satisfies workplace requirements;and

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(c) the integrity in the marketplace of the bb's image and franchise systemis maintained and otherwise ensuring the development and continualenhancement of the Intellectual Property.

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Without ensuring that these elements are maintained and enhanced, thepotential profit for Franchisees, and benefit capable of being derived frombeing a bb's Franchisee, is eroded and the long term value of the bb's brandis diminished.

Franchisees' contractual obligations

Franchisees have obligations under their respective Franchise Agreements inrelation to the Approved Products and Services they can:

purchase, acquire or make for use in their Franchised Operation;(a)and

(b) marketorsellfromtheirFranchisedOperation.

In addition, Franchisees have obligations in relation to the Equipment theymust use in their businesses. Depending upon the concept nature of the bb'soutlet (ie full or kiosk concept outlets) operated by a Franchisee, theFranchise Agreement or the terms of a lease, sublease or licence, mayrestrictthe range of products and services that the Franchisee must acquire.

Franchisees also have obligations under their respective FranchiseAgreements in relation to the services they can utilise, including in relation tofitting out their premises (either as part of an initial fit out or as part of asubsequentfit out or refurbishment).

Under the Franchise Agreement, Franchisees are generally required to enterinto a separate licence agreement with an associated entity of BOS in respectof the occupation of premises from which the Franchised Operation is, or is tobe, conducted. In exceptional circumstances where authorised by BOS, BCSmay agree to lease, sublease or licence the premises directly with theFranchisee,

The relevant clauses of the standard Franchise Agreement that relate to thenotified conduct are set out in Annexure A (confidential),

Notified conduct

BOS proposes to require its Franchisees to acquire the Approved Productsand Services (as detailed above in section 2(a))from Approved Suppliers.

In exceptional cases, where BCS will directly grant or renew a lease,sublease or licence to a Franchisee, BCS proposes to require theFranchisees to comply with terms and conditions of the FranchiseAgreement, including as to the acquisition of the Approved Products andServices from Approved Suppliers

By appointing Approved Suppliers, BCS seeks to:

(a) leverage the bb's network forthe purposes of negotiating better thanmarket pricing for Approved Products and Services;

(b)

(0)

maintain bb's unique selling proposition (UsP) vis-a-vis marketcompetitors;

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ensure the protection of bb's Intellectual Property (includingproprietary recipes for Food Products and Beverage Products);

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(d)

(e)

ensure consistency in the product and service type offered to allFranchisees and by all Franchisees to the consumer;

ensure consistency in the high quality product offered to allFranchisees and by all Franchisees to consumers as a result of strictquality checks and quality control measures of Approved Suppliers;

ensure confidence in compliance with food safety, food handling andother food or health regulations as a result of the consistency;

ensure consistency in the delivery of Approved Products andServices and competitive pricing of Approved Products andServices;

(f)

(g)

(h) ensure consistency in the nature and quality of the fit out of theFranchised Operations across Australia to maximise the retailexperience for both Franchisees and consumers and to ensurecompliance with workplace requirements;

(1) ensure consistency in the services provided to customers ofFranchised Operations (including the provision of information inconnection with Food Products and Beverage Products, such asnutritional information); and

facilitate improved efficiencies and business efficacy at Frenchisorand Franchised Operation level.

Competition and Consumer Actimplications

The notified conduct potentially falls within the definition of exclusive dealingin sections 47(6) and (7) of the Competition and Consumer Act 2010 (Cth)(CCA), as BCS proposes try

(a) supply its services as franchisor/licensor on the condition that the

in

Franchisee acquires; and

(b) refuseto supply its services as franchisor/licensorifthe Franchiseedoes not acquire (or has not agreed to acquire);

the Approved Products and Services set out in section 2(a) above from theApproved Suppliers.

Additionally, in the limited circumstances where BCS may directly grant orrenew a lease, sublease or licence in respect of the occupation of premisesfrom which a Franchised Operation is, or is to be, conducted the notifiedconduct may fall within the definition of exclusive dealing in sections 47(8)(c)and (9)(d) of the CCA, as BCS, in conjunction with its associates, proposesto:

(a) grant or renew, or make it known that it will not exercise a power orright to terminate, a lease or licence in respect of land or a building(or a part thereof) on the condition that the Franchisee acquires theApproved Products and Services set out in 2(a) above from theApproved Supplier; and

refuse to grant or renew, or exercise a power or right to terminate, alease or licence in respect of land or a building (or a part thereof) ifthe Franchisee does not acquire (or has not agreed to acquire) theApproved Products and Services set out in 2(a) above from theApproved Supplier

(b)

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However, as outlined below, BCS maintains that the public benefits that willresultfrom the notified conduct outweigh any public detriment

Persons, or classes of persons, affected orlikely to be affected by the notifiedconduct

(a) Class or classes of persons to which the conductrelates:(Refer to direction 5)

Franchisees

Approved Suppliers

The broad wholesale/retail marketforthe sale and supply of the ApprovedProducts and Services

(b) Number of those persons:

(1) At presenttime:

Franchisees:

(11)

Approved Suppliers

Estimated within the next year:(Refer to direction 6)

Franchisees:

(c)

Approved Suppliers

Where number of persons stated in item 3 (b)(i)is less than 50, theirnames and addresses:

Franchisees

Contained at Annexure B.

28 (as at 12 November 2012)

66 (as at 12 November 2012)

Approved Suppliers

There are over 50 bb's Approved Suppliers. In any event, the details of eachApproved Supplier are contained at Annexure C (confidential), BCSanticipates that it may appointfurther Approved Suppliers in the future.

Broad wholesalerretail market

There are over 50 participants in the broad wholesalerretail market for thesale and supply of the Approved Products and Services. Accordingly, detailsof each participant have not been included.

Public benefit claims

33

4

76

(a) Arguments in support of notification:(Refer to direction 7)

The purpose of the notified arrangement is not to substantially lessencompetition. Rather, the notified arrangement will enhance the capacity ofFranchisees, as small businesses, to compete with larger businesses andother competitors. This enhanced capacity is especially important in a

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market where there is intense competition, particularly from large coffeechains and competing specialty cafe based franchise networks (such asGloria Jeans, MCCafe, The Coffee Club, Hudsons, Jamaica Blue, MuffinBreak and Starbucks).

The notified arrangement will be likely to have the following benefits forFranchisees and end consumers:

(a) Franchisees will have guaranteed access to Approved Products andServices at competitive prices due to the established supplyrelationships which allow Franchisees to offer favourable prices tothe end consumer;

(b) the notified conduct is likely to foster business efficiency asFranchisees are:

(i) assured of access to a range of Approved Products andServices of a consistent standard which gives them moretime to focus on operating their business;

(ii)

(iii)

afforded greater certainty in connection with input costswhich fosters improved business planning;

afforded access to improved point of sale equipmentincorporating increased capability/functionality whichfacilitates benchmarking and greater access to information,improved decision making processes (including in relation tostock ordering and wastage) and reduced risk of fraud;

(c) the notified conduct gives BOS more bargaining power whennegotiating prices with suppliers which will have a flow-on effect toFranchisees and the end consumer;

(d) the notified conduct allows BCS to focus on controlling quality whichensures that end consumers are provided with Food Products andBeverage Products of a consistent standard that meetthe promise ofBOS and the Franchisee as to the content and quality of the FoodProduct and or Beverage Products (as the case may be);

(e) the notified conduct ensures that Franchisees and ultimatelyconsumers are able to purchase genuine licensed products in thecase when they are pre-packaged products (eg bottled beveragesfor resale, etc);

(f) the notified conduct ensures that Franchisees purchase theApproved Products and Services which are licensed, includingApproved Products and Services which are manufactured orsupplied under licence from BOS or an associated entity, from theappropriate Iy licensed Approved Suppliers and not from unlicensedmanufacturers or suppliers;

the notified conduct ensures that Franchisees purchase and or utiliseequipment and other business requisites, and store fit out services,from appropriate Iy qualified and accredited Approved Suppliers andnot from unapproved manufacturers, suppliers or service providers;and

(9)

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(h) improved efficiencies for the Franchisor allowing it to apply greaterresources towards improving franchise system servicing and productinnovation.

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(b) Facts and evidence relied upon in support of these claims:

Franchisees and consumers

The notified conduct is likely to have the benefits listed below for Franchiseesand end consumers,

(a) The notified conduct will ensure consistency, uniformity and end-to-endquality control, which is paremount to the integrity of the bb's brandand image, so that the Approved Products and Services:

co meetbb's standardsfordesign, function, performance, quality,taste, serviceability and warranty (as the case may be); and

(ii) are manufactured, produced and or supplied by thosemanufacturers, producers and or suppliers specified orapproved by BOS as meeting its standards for technicalsupport, training, reporting, reputation, equipment provision,production and delivery methods, scale, labelling and orinformation disclosure (necessary to satisfy obligations arisingunder the Food Standards Code or other legislation), servicecapacity and back up support (as the case may be).

Franchisees will have guaranteed access to the Approved Productsand Services sold or provided by Approved Suppliers at a competitiveprice due to the increased purchasing power of the network. This willafford certainty which fosters improved business planning and allowFranchisees to offer favourable prices to the consumer.

Where incumbent Approved Suppliers have the opportunity to requote,bb's will review the current market, including alternate suppliers of likeproducts and services, with the purpose of ensuring that the prices thatare quoted by an incumbent Approved Supplier are relevantto currentmarket conditions and trends. BCS at alltimes negotiates pricing withthe aim of ensuring that the bb's system receives better than marketpricing to ensure brand profitability whilst maintaining product qualityand consistency. BCS regularly monitors volume demands to ensurepricing levels are relevant and meet market pricing.

In the general retailfood and coffee market, interbrand competition isparamount. By requiring Franchisees to acquire Approved Productsand Services from Approved Suppliers, BOS is able to ensure that allFranchisees maintain high standards so that the brand can competemore effective Iy in the retailfood and coffee market.

The notified conduct is likely to foster business efficiency asFranchisees are assured of access to Approved Products and Servicesfrom Approved Suppliers that are of a consistent standard and price,which gives them more time to focus on operating their business.

Business efficiency is further enhanced as it would be extremelyinefficient if each Franchisee had to assess the ability of each of itssuppliers to meet BCS's specifications. BOS draws on its knowledgeand experience in the food and coffee industry to identify thosesuppliers that can and will supply goods and services of a particularstandard as required, removing this burden from the Franchisees.

The bb's cafe network operates in Queensland, New South Wales,Victoria and South Australia and BCS, and its associated entities,conduct tender processes where significant business opportunities

(b)

(c)

(d)

(e)

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warrant a full review of the current market for particular ApprovedProducts and Services.

(f) The notified conduct provides for increased quality of the FoodProducts and Beverage Products being offered under the bb's brandname and other Approved Products and Services as the ApprovedSuppliers undergo quality checks, health inspections, stock and supplycontrol standards and continuous quality control measures.

The notified conduct not only seeks to ensure the quality of the finalproduct produced by a Franchised Operation but also seeks to ensurethe quality of the Franchised Operation itself, by ensuring thatFranchisees are provided with reputable providers for services.

It is of the up most importance to BCS that all Franchisees comply withallfood, health and safety regulations when preparing items for sale inthe Franchised Operation and or offering items for sale to consumers,By requiring that Franchisees use certain Approved Products andServices, BCS can better manage Franchisees compliance with itsstandards.

(g)

(h)

( i) By requiring that Franchisees purchase certain products and servicesfrom Approved Suppliers, BOS is helping to ensure that the value ofFranchisees' and Franchised Operations is maintained by ensuringthat the bb's network as a whole provides a consistent and high qualityFood Product and Beverage Product, meaning that customers willassociate the bb's brand with high quality Food Products and BeverageProducts and purchase these Food Products and Beverage Productsfrom multiple Franchised Operations.

in The notified conduct will also assist BCS, bb's and Franchisees tomaximise the benefits derived, or to be derived, from marketing and toavoid any adverse publicity, action by third parties or relevantgovernmental authorities or other adverse ramifications whereFranchisees do not comply with BOS's requirements for high qualityand consistency oilmage.

Fees and benefits

BCS negotiates and receives fees and benefits (including the benefit ofwholesale supply prices, volume incentives, financial benefits,reimbursements of costs, licence fees and rebates) from the ApprovedSuppliers in relation to Approved Products and Services supplied toFranchisees. The nature and amount of the fees and benefits vary dependingon the commercial arrangements between BCS and the Approved Suppliers.The fees and benefits are an important source off unding forthe bb's network.Although not directly shared with Franchisees, the benefits are used by BCSto cover a range of costs, which ultimately benefit bb's and Franchisees. Thebenefits can be used:

(k) to fund infrastructure growth and to cover operational costs associatedwith bb's which benefitthe bb's network as a whole;

(1) to offset the financial liability incurred by Franchisees in relation to thehire of equipment, purchase of products or receipt of services;

by BOS forthe benefit, promotion or service of bb's generally (includingthrough deposit into the marketing fund);

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(in)

Page 9 of 17

(n) forthe purpose of sponsoring bb's events, promotions or rewardingFranchisees (such as conferences, special promotions and prizes);

(0) for research and development purposes, including to pay fortestingand product development; and

(p) forthe purposes of training Franchisees in the modes and methods ofoperating a bb's Franchised Operation.

BCS discloses to its Franchisees in its Disclosure Document that BCS mayfrom time to time receive fees or benefits in connection with the supply ofproducts by Approved Suppliers to Franchisees. Franchisees are notspecifically informed of the level of fees and benefits received by BOS inrelation to the Approved Products and Services that Franchisees are requiredto purchase from Approved Suppliers. This is common in franchise networksand disclosure of the amount of the financial benefit or rebate is not requiredunder the Franchising Code of Conduct. The additional information disclosedto Franchisees by BCS in relation to rebates and financial benefits is theinformation required to be disclosed in its Disclosure Document pursuant toclause 9.1(j) of Annexure I of the Franchising Code of Conduct,

BCS also indirectly receives benefits that are provided directly to Franchisees(including free and discounted Approved Products and Services, sampleproducts, promotional products, training supplies, Equipment servicing orsupport, etc).

Under the Franchise Agreement, Franchisees agree that BOS shall beentitled to negotiate and receive a fee or other benefits from ApprovedSuppliers.

Suppliers

The notified conduct provides the Approved Suppliers with certainty of supplyand quantities of supply to Franchisees which may result in:

(a) cost savings in the management of the Approved Supplier's business;and

(b)

5

increased business efficiency which gives them more time to focus onrunning their businesses, planning future production and innovativestrategies; and

Market definition

(c)

(a)

promoting competition among Approved Suppliers.

Provide a description of the market(s) in which the goods or servicesdescribed at 2 (a) are supplied or acquired and other affected marketsincluding: significant suppliers and acquirers; substitutes available forthe relevant goods or services; any restriction on the supply oracquisition of the relevant goods or services (for example geographicor legal restrictions):

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(Refer to direction 8)

BCS submits that the relevant markets are characterised by a high degree ofcompetition and by a large number of active and meaningful participants.

The markets can reasonably be identified as:

(a) the broad retail and wholesale markets forthe sale of the ApprovedProducts and Services in Australia; and

(b)

Each of the above markets is characterised by a relatively large number ofparticipants at the relevant wholesale and retailleve!s. In some cases, thecompetitors in the market may often be large corporations or large franchisechains, such as Gloria Jeans, MCCafe, The Coffee Club, Hudsons, JamaicaBlue, Muffin Break and Starbucks.

the retail and wholesale markets forthe sale of each of the aboveApproved Products and Services in isolation in Australia.

6

Franchisees may apply for consent to acquire products or services fromsuppliers other than the Approved Suppliers, provided they meet BCS'sspecifications.

Public derriments

(a) Derriments to the public resulting or likely to result from thenotification, in particular the likely effect of the notified conduct on theprices of the goods or services described at 2 (a) above and the pricesof goods or services in other affected markets:(Refer to direction 9)

The notified conduct may have the following derrimental effect:

(a) the notified conduct prevents Franchisees from selecting betweensuppliers on the normal commercial basis of product or service priceand quality; and

(b) suppliersthat are riot nominated, approved or licensed will not haveaccess to bb's Franchisees.

However, the notified conduct is unlikely to have any derrimental effect onend consumers as they will not be restricted in the products they canpurchase from bb's Franchisees.

BOS does not believe that there are any substantial public detriments of thenotified arrangement. Any anti-competitive effects on suppliers of theApproved Products and Services will be minimal due to the number ofpotential purchasers of their products and services. Further, the FranchiseAgreement provides scope for a Franchisee to request that products orsuppliers that are not part of the Approved Products and Services orApproved Suppliers be approved by BOS for use in the Franchisee'sbusiness.

The anti-competitive effect of this arrangement on the end consumer isnegiigible, as it will have little to no impact on the consumer.

BOS contends that the notified arrangements will have a negligible effect oncompetition within the relevant markets and that the public benefits resultingfrom the notified conduct outweigh any public detriments caused by theconduct.

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Facts and evidence relevant to these detriments:

The public detriments that may flow from the notified conduct are discussedbelow. However, BOS contends that any detriment is negligible, and is faroutweighed by the public benefits outlined above.

Franchisees

The notified conduct may prevent Franchisees from selecting betweensuppliers on the normal commercial basis of product quality and price.Franchisees may also be required to acquire Approved Products andServices from BCS, its associates or from a supplier in which BCS or anassociate of BCS may have an ownership interest.

However, as specified in Annexure A (confidential), the Franchise Agreementprovides a mechanism for Franchisees to seek approval of products(including the Approved Products and Services), ingredients, businessrequisites or supplies, plant, equipment, fixtures and fittings which theypropose to acquire from sources which are not nominated or approved byBCS. BOS may consent to a Franchisee's request to use a product fromanother supplier if the product conforms to certain standards and theFranchisee satisfies certain conditions. BCS may consider samples,submitted by the Franchisee, and determine if the sample meets BCS'srequirements for design, function, performance, warranty, quality, reliability,serviceability and product control (as the case may be). BCS will alsoconsider whether the proposed supplier is financially sound and able toreliably meet its commitments with respect of supply and is capable of fulfillingBOS's requirements in relation to technical support, training, reporting,reputation, equipment provision, production and delivery methods, scale,labelling and or information disclosure and back up assistance (as the casemay be).

BCS may also allow individual Franchisees to stock product lines which arenot ordinarily permitted or sold within the Franchised Operation or otherFranchised Operations. BCS may allow this where it is in the bestinterests ofbb's or a particular Franchisee to do so.

Franchisees are also entitled to source their own quotes for shop-fitting andrefurbishment services, subject to BCS approval and the application of theFranchise Agreement.

In addition, BCS, and its associated entities, undertake regular monitoring andbenchmarking of prices to ensure that the prices offered by ApprovedSuppliers are consistent with current market conditions and trends.

On this basis, the derrimentto Franchisees will be minimal.

Consumers

The anti-competitive effect on the end consumer is negligible, as it will notultimately prohibit consumers from comparing prices and products for thefollowing reasons:

(a) retailers which offer or provide the Food Products and BeverageProducts in the relevant retail markets are numerous in Australiawhich allows consumers to "shop around" easily; and

(b) there is arguably no barrier to entry at retaillevel because of thevolume of retailers in Australia, which offer a range of similar FoodProducts and Beverage Products in the relevant retail markets (eg

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cafes, coffee shops and other hot and cold food or beverage outletsetc).

Suppliers

The wholesale suppliers that are not Approved Suppliers will not have accessto Franchisees, unless they are nominated by a particular Franchisee toprovide nori"approved products and meetthe specification outlined by BOS.

However, the anti-competitive effect on suppliers who do not have access toFranchisees will be insignificant given the number of retailers in Australia towhich suppliers may selltheir products. In any event, bb's regularly monitorsand benchmarks Approved Supplier pricing and undertakes tender processeswhere significant business opportunities are available.

7

The notified conduct should only further promote competition betweensuppliers as they compete for approved supplier status.

Further information

(a) Name, postal address and contact telephone details of the personauthorised to provide additional information in relation to thisnotification:

Andrew RankinPartnerNorton Rose Australia

Level22, ONE ONE ONE111 Eagle StreetBrisbane, Queensland 4000Telephone:(07) 3414 2850Email: andrew. rankin@norionrose. coin

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DIRECTIONS

I. In lodging this form, applicants must include allinformation, including supportingevidence that they wish the Commission to take into account in assessing theirnotification.

Where there is insufficient space on this form to furnish the required information, theinformation is to be shown on separate sheets, numbered consecutiveIy and signedby or on behalf of the applicant.

2. Ifthe notice is given by or on behalf of a corporation, the name of the corporation is tobe inserted in item I (a), notthe name of the person signing the notice, and the noticeis to be signed by a person authorised by the corporation to do so.

3. Describe that part of the business of the person giving the notice in the course of thewhich the conduct is engaged in.

4. If particulars of a condition or of a reason of the type referred to in section 47 of theCompetition and Consumer Act20iO have been reduced in whole or in part towriting, a copy of the writing is to be provided with the notice.

5. Describethe businessor consumers likely to be affected by the conduct.

6. State an estimate of the highest number of persons with whom the entity giving thenotice is likely to dealin the course of engaging in the conduct at any time during thenext year.

7. Provide details of those public benefits claimed to result orto be likely to resultfromthe notified conductincluding quantification of those benefits where possible.

8. Provide details of the market(s)likely to be affected by the notified conduct, inparticular having regard to goods or services that may be substitutes forthe good orservice that is the subject matter of the notification.

9. Provide details of the derrimentstothepublic which may resultfrom the notifiedconduct including quantification of those derriments where possible.

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Annexure A

SUBMISSION BY BBSCAFE SYSTEM PTY LTD IN SUPPORT OF NOTIFICATION UNDERSETION 93(,) OFTHE COMPETITIONAND CONSUMERACT2070(CTH)

Introduction

The purpose of this submission is to assist the AGCC in its consideration of the facts set outin the Notification of Exclusive Dealing (Notification) given by BCS in relation to the bb'sfranchise system.

Franchise Agreement

The arrangement described in this Notification is given effectthrough the terms of theFranchise Agreement between BCS and bb's Franchisees. The relevant clauses of the bb'sFranchise Agreement have been extracted below.

IExcludedfrom the publicregister. I

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Annexure B - Franchisees

At presentthere are 28 bb's Franchisees. The details of each of these Franchisees are listedin the following table.

IExcludedfrom the pub"c registerJ

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Annexure C - Approved Suppliers

At presentthere are 66 Approved Suppliers of products and services for bb's. The details ofeach of these Approved Suppliers are listed in the following table.

It is anticipated that other suppliers will be added as "Approved Suppliers"in the future.

IExcluded from the public register. I

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