FRANCHISE DISCLOSURE DOCUMENT · franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has

FRANCHISE DISCLOSURE DOCUMENT

Issuance Date: March 30, 2007 As Amended February 1, 2008

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FRANCHISE DISCLOSURE DOCUMENT

QUIZNO’S FRANCHISING II LLC (a Delaware limited liability company) 1475 Lawrence Street Suite 400 Denver, Colorado 80202 Telephone: (720) 359-3300 www.quiznos.com quiznosfranchises.com

Quizno’s Franchising II LLC (“we” or “us”) is offering franchises to operate a restaurant offering submarine and other sandwiches, salads, soups, soft drinks and related other products under the service mark “QUIZNOS” and “QUIZNOS SUB.” The total investment necessary to begin operation of a traditional QUIZNOS Restaurant ranges from $215,000 to $283,160. This includes $127,150 to $141,110 that must be paid to the franchisor or its affiliate, but does not include rent for the Franchised Location. (See Footnote 10, Item 7)

The total investment necessary to begin operation of a non-traditional QUIZNOS Restaurant ranges from $88,200 to $323,860. This includes $69,200 to $114,560 that must be paid to the franchisor or its affiliate, but does not include rent for the Franchised Location.

The total investment necessary to begin operation of a non-traditional QUIZNOS Kiosk ranges from $77,500 to $199,500. This includes $61,000 to $115,500 that must be paid to the franchisor or its affiliate. The total investment necessary to begin operation of a non-traditional QUIZNOS Cooler ranges from $26,800 to $28,800. This includes $21,800 to $28,800 that must be paid to the franchisor or its affiliate. This Franchise Disclosure Document summarizes certain provisions of your franchise agreement and other information in plain English. Read this Franchise Disclosure Document and all accompanying agreements carefully. You must receive this Franchise Disclosure Document at least 14 calendar days before you sign a binding agreement with, or make any payment to, the franchisor or an affiliate in connection with the proposed franchise sale. Note, however, that no government agency has verified the information contained in this document. You may wish to receive your Franchise Disclosure Document in another format that is more convenient for you. To discuss the availability of disclosures in different formats, contact Laura Sporrer, 1475 Lawrence Street, Suite 400, Denver, Colorado 80202, (720) 359-3300, [email protected]. The terms of your contract will govern your franchise relationship. Don’t rely on the Franchise Disclosure Document alone to understand your contract. Read all of your contract carefully. Show your contract and this Franchise Disclosure Document to an advisor, like a lawyer or an accountant. Buying a franchise is a complex investment. The information in this Franchise Disclosure Document can help you make up your mind. More information on franchising, such as “A Consumer’s Guide to Buying a Franchise,” which can help you understand how to use this Franchise Disclosure Document, is available from the Federal Trade Commission. You can contact the FTC at 1-877-FTC-HELP or by writing to the FTC at 600 Pennsylvania Avenue, NW, Washington, D.C. 20580. You can also visit the FTC’s home page at www.ftc.gov for additional information. Call your state agency or visit your public library for other sources of information on franchising. There may also be laws on franchising in your state. Ask your state agencies about them.

ISSUANCE DATE: MARCH 30, 2007, AS AMENDED FEBRUARY 1, 2008


STATE COVER PAGE Your state may have a franchise law that requires a franchisor to register or file with a state franchise administrator before offering or selling in your state. REGISTRATION OF A FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS THE FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS FRANCHISE DISCLOSURE DOCUMENT. Call the state franchise administrators listed in Exhibit A for information about the franchisor, or about franchising in your state. MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW UNCONDITIONALLY AFTER THE INITIAL TERM EXPIRES. YOU MAY HAVE TO SIGN A NEW AGREEMENT WITH DIFFERENT TERMS AND CONDITIONS IN ORDER TO CONTINUE TO OPERATE YOUR BUSINESS. BEFORE YOU BUY, CONSIDER WHAT RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF ANY, AND WHAT TERMS YOU MIGHT HAVE TO ACCEPT IN ORDER TO RENEW. Please consider the following RISK FACTORS before you buy this franchise: 1. THE FRANCHISE AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH

US BY LITIGATION ONLY IN COLORADO. ALSO, ANY LEGAL ACTION THAT WE BRING AGAINST YOU WILL BE FILED ONLY IN COLORADO. OUT OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT ALSO MAY COST YOU MORE TO LITIGATE WITH US IN COLORADO THAN IN YOUR HOME STATE.

2. THE FRANCHISE AGREEMENT STATES THAT COLORADO LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTION AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.

3. SOME STATE FRANCHISE LAWS PROVIDE THAT CONSENT TO JURISDICTION AND CHOICE OF LAW PROVISIONS ARE VOID OR SUPERSEDED. YOU MIGHT WANT TO INVESTIGATE WHETHER YOU ARE PROTECTED BY A STATE FRANCHISE LAW. YOU SHOULD REVIEW ANY ADDENDA OR RIDERS ATTACHED TO THIS FRANCHISE DISCLOSURE DOCUMENT FOR DISCLOSURES REGARDING STATE FRANCHISE LAWS.

4. AS OF DECEMBER 31, 2007, 1146 QUIZNOS FRANCHISEES HAD NOT OPENED THEIR RESTAURANTS WITHIN 12 MONTHS OF SIGNING THE FRANCHISE AGREEMENT. THIS NUMBER REPRESENTS APPROXIMATELY 83.28% OF ALL FRANCHISEES WHO HAD NOT OPENED A RESTAURANT AS OF THAT DATE.

5. WE MAY TERMINATE YOUR FRANCHISE AGREEMENT IF YOU DO NOT OPEN YOUR RESTAURANT WITHIN 12 MONTHS AFTER YOU SIGN THE FRANCHISE AGREEMENT. THE FRANCHISE FEE IS NONREFUNDABLE.

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6. THE FRANCHISE AGREEMENT PERMITS US AND OUR AFFILIATES TO ESTABLISH OTHER FRANCHISED OR COMPANY-OWNED LOCATIONS AT ANY LOCATION OTHER THAN YOUR FRANCHISED LOCATION, TO SELL OR DISTRIBUTE ANY PRODUCT OR SERVICE TO THE GENERAL PUBLIC, OR TO ESTABLISH OTHER CHANNELS OF DISTRIBUTION WHICH MAY COMPETE WITH YOUR FRANCHISE.

7. WE WILL REQUIRE YOUR SPOUSE (OR, IF YOU ARE AN ENTITY, THE SPOUSE OF ANY OWNER WITH A 25% OR MORE INTEREST IN THE ENTITY) TO SIGN A GUARANTY AND ASSUMPTION OF FRANCHISEE’S OBLIGATIONS CAUSING YOUR SPOUSE (OR THE OWNERS’ SPOUSE) TO BECOME INDIVIDUALLY LIABLE FOR ALL OBLIGATIONS OF THE FRANCHISE AND BOUND BY THE RESTRICTIVE COVENANTS, CONFIDENTIALITY PROVISIONS, AND INDEMNIFICATION PROVISIONS OF THE FRANCHISE AGREEMENT, EVEN IF YOUR SPOUSE IS NOT INVOLVED IN THE OPERATION OF THE FRANCHISE BUSINESS. THIS REQUIREMENT PLACES THE PERSONAL ASSETS OF OWNERS AND SPOUSES AT RISK.

8. IF THE FRANCHISE AGREEMENT IS TERMINATED BECAUSE OF YOUR DEFAULT, YOU WILL BE LIABLE TO US FOR A LUMP SUM AMOUNT EQUAL TO THE NET PRESENT VALUE OF THE ROYALTIES, MARKETING AND PROMOTION FEES, LOCAL ADVERTISING FEES, AND REGIONAL ADVERTISING FEES THAT WOULD HAVE BECOME DUE FOLLOWING TERMINATION OF THE FRANCHISE AGREEMENT FOR THE PERIOD THE FRANCHISE AGREEMENT WOULD HAVE REMAINED IN EFFECT BUT FOR YOUR DEFAULT. ROYALTIES AND MARKETING AND PROMOTION FEES WILL BE CALCULATED BASED ON YOUR RESTAURANT’S AVERAGE MONTHLY GROSS SALES FOR THE 12 MONTHS PRECEDING THE TERMINATION DATE.

9. IT MAY TAKE 8 TO 18 MONTHS TO FIND AN ACCEPTABLE SITE AND/OR OBTAIN AN ACCEPTABLE LEASE.

10. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

We use the services of one or more franchise brokers or referral sources to assist us in selling our franchise. A franchise broker or referral source represents us, not you. We pay this person a fee for selling our franchise or referring you to us. You should be sure to do your own investigation of the franchise.

The effective dates of this Franchise Disclosure Document in the states with franchise registration laws are in Exhibit A.

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THE FOLLOWING APPLIES ONLY TO TRANSACTIONS GOVERNED BY THE MICHIGAN FRANCHISE INVESTMENT LAW

THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU:

(a) A prohibition on the right of a franchisee to join an association of franchisees.

(b) A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protections provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.

(c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.

(d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee’s inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of franchisor’s intent not to renew the franchise.

(e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.

(f) A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.

(g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:

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(i) The failure of the proposed franchisee to meet the franchisor’s then current reasonable qualifications or standards.

(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.

(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.

(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.

(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).

(i) A provision which permits the franchisor to directly or indirectly convey, assign, or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.

If the franchisor’s most recent financial statements are unaudited and show a net worth of less than $100,000, the franchisor shall, at the request of a franchisee, arrange for the escrow of initial investment and other funds paid by the franchisee or subfranchisor until the obligations to provide real estate, improvements, equipment, inventory, training, or other items included in the franchise offering are fulfilled. At the option of the franchisor, a surety bond may be provided in place of escrow.

THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE ATTORNEY GENERAL.

Any questions regarding the notice should be directed to:

State of Michigan Consumer Protection Division

Attention: Franchise 670 G. Mennen Williams Building

525 West Ottawa Lansing, Michigan 48933 Telephone: 517-373-7117

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TABLE OF CONTENTS ITEM PAGE

1 THE FRANCHISOR, AND ANY PARENTS, PREDECESSORS, AND AFFILIATES .......................................................................................................................1

2 BUSINESS EXPERIENCE .................................................................................................5

3 LITIGATION.....................................................................................................................10

4 BANKRUPTCY ................................................................................................................10

5 INITIAL FEES...................................................................................................................10

6 OTHER FEES....................................................................................................................14

7 ESTIMATED INITIAL INVESTMENT...........................................................................20

8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES............................23

9 FRANCHISEE’S OBLIGATIONS ...................................................................................29

10 FINANCING......................................................................................................................30

11 FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING...............................................................................................................31

12 TERRITORY .....................................................................................................................41

13 TRADEMARKS................................................................................................................43

14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION............................45

15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS .................................................................................................46

16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL ....................................47

17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP...............................................................................47

18 PUBLIC FIGURES............................................................................................................52

19 FINANCIAL PERFORMANCE REPRESENTATIONS .................................................52

20 OUTLETS AND FRANCHISEE INFORMATION .........................................................54

21 FINANCIAL STATEMENTS...........................................................................................68

22 CONTRACTS....................................................................................................................68

23 RECEIPT ...........................................................................................................................69

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Exhibits A List of State Agencies/Agents for Service of Process/Effective Dates B Franchise Agreement with Guaranty and Assumption of Franchisee’s Obligations C List of Franchisees D List of Area Directors/Small Market Area Directors E Franchisees and Area Directors Who Have Left the System or Not Communicated F Financial Statements G Table of Contents of Operations Manual H Representations and Acknowledgment Statement I State Addenda and Agreement Riders J Addendum to Franchise Agreement Non-Traditional Restaurant K Consent to Transfer L Renewal Addendum M Equipment Lease Agreement N Addendum to Franchise Agreement Non-Traditional Kiosk O Addendum to Franchise Agreement Non-Traditional Cooler P Site Specific Addendum Q Addendum to Franchise Agreement Small Market Development R Litigation S Receipts APPLICABLE STATE LAW MIGHT REQUIRE ADDITIONAL DISCLOSURES RELATED TO THE INFORMATION CONTAINED IN THIS FRANCHISE DISCLOSURE DOCUMENT, AND MIGHT REQUIRE A RIDER TO THE FRANCHISE AGREEMENT. THESE ADDITIONAL DISCLOSURES AND RIDERS, IF ANY, APPEAR IN EXHIBIT I.


ITEM 1

THE FRANCHISOR, AND ANY PARENTS, PREDECESSORS, AND AFFILIATES

The Franchisor and its Parent. The franchisor is Quizno’s Franchising II LLC (referred to as “we,” “us” or “QFII” in this Franchise Disclosure Document). We refer to the person or entity who buys the franchise as “you” throughout this Franchise Disclosure Document. If you are a corporation, partnership, limited liability company, or other entity, certain terms of the Franchise Agreement also apply to your owners (noted where applicable).

We were formed as a limited purpose Delaware limited liability company on October 28, 2004 (although we did not commence operations until early February 2005). Our principal business address is 1475 Lawrence Street, Suite 400, Denver, Colorado 80202. All of our predecessors, parents and affiliates share our principal business address, except for SOD (defined below) and 123 Fit Franchising, LLC. The principal business address for our affiliate, SOD, is 540 Gallatin Place N.W., Albuquerque, New Mexico 87121. The principal business address for our affiliate, 123 Fit Franchising, LLC, is 1415 Larimer Street, Suite 500, Denver, Colorado 80202. We were formed to be the franchisor of all new QUIZNOS franchises offered and granted beginning February 5, 2005. We do business under our limited liability company name and the “QUIZNOS” and “QUIZNOS SUB” trademarks (together “QUIZNOS”). We disclose our agents for service of process in Exhibit A.

Our Parent, Predecessors and Affiliates. The Quizno’s Corporation (“TQC”), a Colorado corporation, was the franchisor of the QUIZNOS franchise system from 1991 until October 2000. TQC was a publicly-traded company from February 1994 until December 2001, trading on the Nasdaq SmallCap Market. In October 2000, The Quizno’s Franchise Company (“TQFC”), a Colorado corporation, was formed as TQC’s wholly-owned subsidiary to be the franchisor of the QUIZNOS franchise system on a going-forward basis. TQC assigned all of its existing Franchise Agreements to TQFC in 2001. (TQFC changed from a corporation to a limited liability company in May 2002 and converted to a Delaware limited liability company in December 2005. TQFC was dissolved in December 2006.)

As a result of an internal corporate restructuring process completed in July 2002, Quizno’s Franchising LLC (“QF”) an affiliate of both TQC and TQFC, was formed to be the franchisor of all QUIZNOS franchises granted beginning in July 2002. TQFC remained the franchisor of all QUIZNOS franchises granted before July 2002. As part of this restructuring process, TQC assigned all of its remaining assets and liabilities to The Quizno’s Master LLC (“TQM”), formed in May 2002 and currently a Delaware limited liability company. TQM licensed the “QUIZNOS” trademarks, copyrights, confidential information, and other intellectual property (“QUIZNOS IP”) to QF and TQFC for use in the QUIZNOS franchise program. TQFC and QF therefore collectively were the franchisors of the QUIZNOS franchise system from December 2000 until early February 2005.

In early February 2005, as part of a securitization financing transaction involving the QUIZNOS system, numerous steps occurred simultaneously that resulted in another corporate restructuring among affiliated companies in the QUIZNOS organization. As a result of that transaction, the QUIZNOS IP was transferred (in November 2004) to a newly formed limited


purpose Delaware limited liability company called QIP Holder LLC (“QIP”), and the then-existing United States and Puerto Rico Franchise Agreements and Area Director Marketing Agreements were transferred (in November 2004) to a newly formed limited purpose Delaware limited liability company called QFA Royalties LLC (“QFA”) which is a wholly owned subsidiary of QIP. We were formed as the new wholly-owned subsidiary of QFA to grant new QUIZNOS franchises and area director rights beginning in February 2005. QCE Holding LLC, a Delaware limited liability company, is the ultimate parent to us and to our affiliates.

QIP has licensed the QUIZNOS IP to QFA for a 99-year term to use in, among other things, exercising its rights as the franchisor under all existing QUIZNOS Franchise Agreements and all Area Director Marketing Agreements in the United States and Puerto Rico granted before we started offering franchises. In turn, QFA has sublicensed the QUIZNOS IP to us for a 99-year term to use in, among other things, exercising our rights as the franchisor of all QUIZNOS Franchise Agreements in the United States and Puerto Rico granted beginning in February 2005. (See Items 13 and 14 for more details)

Under certain Servicing Agreements between us and TQSC II LLC, an affiliated Delaware limited liability company (“TQSC II”), on our behalf and at our direction, TQSC II performs our obligations under the QUIZNOS Franchise Agreements we issue for QUIZNOS Restaurants located in the United States and Puerto Rico, including managing the QUIZNOS system operating under our authority; marketing and offering new and successor Franchise Agreements; assisting our QUIZNOS franchisees operating in the United States and Puerto Rico; implementing our quality assurance programs; and otherwise fulfilling our duties under QUIZNOS Franchise Agreements. TQSC II performs similar functions for QFA and its franchisees. TQSC II also acts as our franchise sales agent. (In that capacity, TQSC II’s agents for service of process are the same as ours disclosed in Exhibit A.) We pay weekly franchise servicing fees for these services. If TQSC II fails to perform its obligations under its Servicing Agreement, then TQSC II may be replaced as the franchise servicer. However, as the franchisor, we always are responsible and accountable to you to make sure that all services we promise to perform under our Franchise Agreement with you are performed in compliance with the Franchise Agreement, regardless of who performs those services on our behalf.

Besides our parent companies and affiliated predecessors described above, other affiliates (all of which are currently Delaware limited liability companies unless otherwise noted) include The Quizno’s Operating Company LLC (“TQOC”), formed in 1994, to own and operate company-owned Restaurants; The Quizno’s Realty Company LLC (“TQRC”), formed in 1995, is a party to a limited number of leases for QUIZNOS Restaurants; American Food Distributors LLC (“AFD”), formed in 2000, wholesales “QUIZNOS” branded and non-branded products to unaffiliated distributors who then sell these products to Franchisees, and leases fountain and bubble equipment for carbonated beverages to Franchisees; Continental Lending Group LLC (“CLG”), formed in March 2002, has entered into a contract with Muzak® LLC for provision of music to Franchisees which was subsequently assigned to TQSC II in August 2007; Source One Distribution LLC (formerly known as National Restaurant Supply Distribution LLC) (“SOD”), formed in July 2002, sells restaurant equipment and building materials, architectural services, third party point-of-sale and credit card processing systems, uniforms, supplies, printing and other services to Franchisees; QCE Gift Card LLC, formed in Arizona in August 2006, provides stored value card services to Franchisees; 123 Fit Franchising, LLC, formed in Colorado in


February 2005, offers and sells franchises for fitness clubs under the name “123 Fit”; Quiz-Can LLC (formerly known as Quiz-Can Ltd.) (“Quiz-Can”), an affiliate formed in May 2002, owns 100% of Quizno’s Canada Restaurant Corporation (formerly known as Quizno’s Canada Corporation), the master franchisee in Canada. Quiz-Can operates the master franchise through a management agreement with Quizno’s Canada Restaurant Corporation. Quiz-DIA LLC, an affiliate, formed in 1999, operates Restaurants at the Denver International Airport. QAFT, Inc. (“QAFT”), formed in June 2005, serves as the Trustee of our national and regional advertising funds. TQM also grants master franchises outside the United States, including in Canada. Except as provided above, we have no predecessors or affiliates required to be disclosed in this Item 1.

The Franchises. We offer franchises to individuals or entities for restaurants with carry-out and delivery facilities that sell submarine and other sandwiches, salads, other food products and beverages, and related services (“QUIZNOS Restaurants” or “Restaurants”) under the form of Franchise Agreement attached as Exhibit B (the “Franchise Agreement”). We refer to each QUIZNOS Restaurant as a “traditional” QUIZNOS Restaurant unless it is located in a non-traditional facility (see next paragraph).

If your QUIZNOS Restaurant is located in a non-traditional facility (like a hotel, airport, university, stadium, gas station, or convenience store), it will be referred to as a “Non-Traditional Restaurant.” If you sign a Franchise Agreement for a Non-Traditional Restaurant, you will sign (in addition to our standard Franchise Agreement) the Addendum in Exhibit J. Non-Traditional Restaurants have no protected area (just like any “traditional” QUIZNOS Restaurant) (see Item 12). We may also offer you the option of operating a QUIZNOS kiosk (“QUIZNOS Kiosk”) or a QUIZNOS cooler (“QUIZNOS Cooler”) in non-traditional facilities. If we grant you the right to operate a QUIZNOS Kiosk, you will sign the Addendum attached as Exhibit N (in addition to the Franchise Agreement). If we grant you the right to operate a QUIZNOS Cooler, you will sign the Addendum attached as Exhibit O (in addition to the Franchise Agreement). In this Franchise Disclosure Document, we refer to a QUIZNOS Kiosk and QUIZNOS Cooler as a Non-Traditional Restaurant unless otherwise specified.

If you have identified and we have preliminarily approved a site for the QUIZNOS Restaurant that you desire operate under the Franchise Agreement, we will sign a site specific addendum attached as Exhibit P (the “Site Specific Addendum”) concurrently with the Franchise Agreement.

We may (but currently do not) offer certain supplemental programs (“Special Products”). Special Products are “co-branded” products like frozen yogurt or donuts sold through or from the Restaurants. Special Products might be sold under trademarks that QIP owns or trademarks licensed to us by third parties. In deciding whether to offer a Special Product, we review factors like demographics for each market, Restaurant location, and competitors within the market. If we offer you any Special Product, we also might give you a separate Franchise Disclosure Document from the third-party licensor.

You are not required to participate in the Special Product Program, and we do not guarantee that we will offer it to you or that you will qualify for it even if you buy a franchise and wish to participate in it. If we offer you the Special Product Program and you wish to


participate in it, you must sign an addendum to the Franchise Agreement for any Special Product. Although we do not currently charge any additional franchise fee for any Special Product, we may charge a training fee for each Special Products Program in which you participate. (There currently are no Special Product Programs or addenda.)

We may offer certain qualified Franchisees who already operate “traditional” QUIZNOS Restaurants the right to operate a QUIZNOS Cooler in connection with their operation of the QUIZNOS Restaurant. If we offer you the opportunity to operate a QUIZNOS Cooler in the future, and you wish to accept such offer, you will sign an addendum to the Franchise Agreement.

Also offered as franchises are area director marketing businesses (“Area Director Businesses”), in which the area director (“Area Director”) acts as a sales representative within a defined geographic area (“Territory”) to solicit and identify prospective Franchisees, to assist in locating and securing sites for QUIZNOS Restaurants within that Territory, and to provide additional support before, during, and after the Restaurant opens. The Area Director Business is offered in a separate Franchise Disclosure Document. (See Exhibit D for information on Area Directors operating in your state.) Area Directors operating under existing agreements with our affiliates also will assist us on the same terms. (See Item 5) Upon completion of the securitization financing transaction, we became the Area Director in several market areas in the United States.

Restaurants and Area Director Businesses are licensed to use the service mark “QUIZNOS” and related trademarks (“Marks”) and other QUIZNOS IP owned by QIP that make up the QUIZNOS marketing plan and proprietary business methods (collectively, “System”), all of which have been sublicensed to us for our franchise program. As noted above, the support made available to you under a Franchise Agreement will be provided directly by an Area Director or TQSC II. When a franchise is sold, the Franchise Agreement is signed by the Franchisee and us. The Area Director and TQSC II are obligated to perform services as we promise you in the Franchise Agreement those services will be performed. As the franchisor, we are contractually responsible to you if the services are not properly performed.

At times, we engage third parties like mall consultants to locate sites for Restaurants in non-traditional venues, such as airports and regional malls. These third parties are “Segment Specialists.” They carry on local, regional, or national segment development activities at non-traditional locations, including locations within Area Director territories.

Under a separate Franchise Disclosure Document, we offer franchises for area director marketing businesses for geographic areas consisting of small markets and middle markets which have more limited development opportunities than standard area director markets. These small market area directors (“Small Market Area Directors”) and middle market area directors (“Middle Market Area Directors”) also act as our sales representative and provide certain pre-opening support services to Franchisees, but do not provide ongoing services to Franchisees. If you sign a Franchise Agreement for a QUIZNOS Restaurant to be developed in a Small Market Area Director’s geographic area, you must also sign the Addendum to Franchise Agreement for Small Market Development attached as Exhibit Q.


Market Competition. In your market, you might compete with submarine and other sandwich restaurants and fast food restaurants (including other QUIZNOS Restaurants) that offer similar items. Our Restaurants appeal to a broad range of customers because of the perceived variety and quality of our products.

Regulations. There are no regulations specific to the operation of a QUIZNOS Restaurant, although you must comply with all local, state, and federal health and sanitation laws. Franchisees also must comply with all local, state, and federal laws of a more general nature that affect the Restaurant, including employment, workers’ compensation, insurance, corporate, tax, licensing, the Americans with Disabilities Act, and similar laws and regulations. You should familiarize yourself with these laws.

Business Experience. Our current and former affiliates and predecessors operated this franchising business beginning in 1991. We began offering QUIZNOS franchises in early February 2005. QF offered QUIZNOS franchises from July 2002 until January 2005. TQFC offered QUIZNOS franchises from December 2000 until July 2002, when it ceased offering franchises in all states other than California and Washington. It ceased offering franchises in these states as well in November and September 2002, respectively. TQC began offering individual franchises in 1991 and area director franchises in March 1993 (and stopped offering both in December 2000). QF and/or TQM have offered international master franchises since 1999. In February 2005, QFA became the franchisor (through assignment) under all QUIZNOS Restaurant Franchise Agreements and Area Director Marketing Agreements in the United States and Puerto Rico that became effective before February 2005. Except as described above, neither we nor any of our affiliates has offered franchises in any other line of business. We have never operated any QUIZNOS Restaurants. However, certain of our, QF’s and TQM’s affiliates have operated QUIZNOS Restaurants on and off since 1991. (See Item 20) Where appropriate, this Franchise Disclosure Document refers to all QUIZNOS Restaurants, including those for which we, QFA, and any other affiliate are (or have been) the franchisor.

ITEM 2

BUSINESS EXPERIENCE

Chief Executive Officer: Greg B. Brenneman

Greg. B. Brenneman has been QFII’s Chief Executive Officer since January 8, 2007. Since November 1994, Mr. Brenneman has been the Chairman and Chief Executive Officer of TurnWorks, Inc., located in The Woodlands, Texas. He was Chief Executive Officer and a director of Burger King Corporation, located in Miami, Florida, from August 2004 to April 2006. He was also Chairman of Burger King Corporation from February 2005 to April 2006. From June 2002 to October 2002, Mr. Brenneman was President and Chief Executive Officer of PricewaterhouseCoopers Consulting located in New York, New York. Mr. Brenneman has also served for over five years on the board of directors of The Home Depot, Inc., located in Atlanta, Georgia, and ADP, located in Roseland, New Jersey.


President: David Deno

David Deno began serving as President of QFII and QCE Holding LLC in January 2008. Mr. Deno previously served as Managing Director of CCMP Capital, located in New York, New York, from August 2006 to December 2007. From October 2004 to January 2006, he served as Chief Operating Officer of YUM! Brands in Louisville, Kentucky. From November 1999 to April 2006, he also served as Chief Financial Officer of YUM! Brands.

Executive Vice President and Chief Legal Officer: Richard J. Emmett

Richard J. Emmett began serving as Executive Vice President and Chief Legal Officer of QFII and QCE Holding LLC in May 2007. He also began serving as Secretary of QCE Holding LLC in May 2007. Mr. Emmett previously served as Senior Vice President and General Counsel of Papa John’s International, Inc., located in Louisville, Kentucky, from March 2002 to May 2007. Mr. Emmett joined Papa John’s International, Inc. in December 1992. He also served as Papa John’s Secretary from March 2005 to May 2006.

Chief Financial Officer and Executive Vice President: J. Brandon Turner

J. Brandon Turner has been QFII’s and Quizno’s Canada Restaurant Corporation’s Chief Financial Officer and Executive Vice President since January 2007. From May 2006 to January 2007, he served as Senior Vice President for Cervantes Capital LLC in Denver, Colorado. From April 2004 to April 2006, he served as Senior Vice President of TQM. From August 2003 to March 2004, he served as Senior Vice President of Signature Capital in Portland, Maine. From July 2000 to July 2003, he held the position of Vice President for Milestone Merchant Partners located in Washington, D.C.

Manager: Richard E. Schaden

Richard E. Schaden has been a member of QFII’s Board of Managers since February 2005. He was also the Chief Executive Officer of QFII, QFA and TQSC II from February 2005 to January 2007. He was Chief Executive Director of QF from July 2002 to January 2007 and TQFC from October 2000 to January 2007. He also held these positions with TQC from its inception in 1991 until June 2002. He was QF’s President from June 2002 to February 2004, TQFC’s President from October 2000 to February 2004, and TQC’s President from January 1991 until June 2002.

Manager: Patrick E. Meyers

Patrick E. Meyers has been a member of QFII’s Board of Managers since February 2005. He also served as our, QFA’s and TQFC’s Chief Legal Officer from October 2006 to May 2007 and our, QFA’s and TQFC’s Executive Vice President of Finance, Planning and Support from February 2005 to October 2006. He has held the same positions with QF and TQFC since July 2002. He was also Secretary of QFII, QF and TQFC until October 2006. He was TQFC’s Vice President until July 2002, when he became Executive Vice President. He has held these positions with us since February 2005, QF since QF’s organization in June 2002, and TQFC since October 2000.


Independent Manager: Philip Martone

Philip A. Martone has been QFII’s independent manager since May 2006. He has served as Vice President of Lord Securities Corporation in New York, New York since February 2006. From April 2004 through February 2006, he was self-employed as an Attorney in Sea Cliff, New York. From February 1981 to March 2004, he served as Vice President of The Bank of New York in New York, New York.

Secretary, Senior Vice President and Assistant General Counsel: Amy Powers

Amy Powers has been QFII’s Secretary, Senior Vice President and Assistant General Counsel since October 2006. Ms. Powers also has been TQSC II’s Senior Vice President and Assistant General Counsel since October 2006 after having served as Senior Vice President and Senior Counsel from February 2005 to October 2006. She was QF’s Senior Vice President and Senior Counsel from September 2004 to February 2005. From September 2003 to September 2004, she served as Vice President and Senior Counsel-Franchising and was Deputy Chief General Counsel of QF from June 2002 through September 2003.

FRANCHISE SALES AGENT: TQSC II LLC

As discussed in Item 1 above, TQSC II acts as our Franchise Sales Agent and also on our behalf, performs our duties and obligations under QUIZNOS Franchise Agreements. In addition to the principals of TQSC II listed below, all of the principals of QFII also hold the same positions with TQSC II.

Executive Vice President of Development – William P. Flaherty

William P. Flaherty has been TQSC II’s Executive Vice President of Development since May 2007. From November 2006 to May 2007, he was President of AFD. Mr. Flaherty was Executive Vice President of Finance and Planning from August 2003 through November 2006. He was also our Senior Vice President of Non-Traditional Development and Transfers from August 2002 to August 2003.

Executive Vice President and Chief Marketing Officer: Steven D. Provost

Steven D. Provost was appointed TQSC II’s Executive Vice President and Chief Marketing Officer in March 2007. He had been with Yum! Brands, Inc.’s A&W Restaurants (“A&W”), Kentucky Fried Chicken (“KFC”) and Long John Silver’s for the last 18 years. He was Chief Marketing Officer and Food Innovation Officer for Long John Silver’s and A&W in Louisville, Kentucky from March 2005 to March 2007. He was the Head Coach for the Southeast Region for KFC in Louisville, Kentucky from September 2003 to March 2005. Mr. Provost was also the Senior Vice President – Franchising for KFC from January 2000 to September 2003.

Executive Vice President - Third Party Development: Michael M. Elliott

Michael M. Elliott has been TQSC II’s Executive Vice President - Third Party Development since November 2007 after having served as Executive Vice President – Franchise


Assistance Program from February 2007 to November 2007. He also serves as President and Chief Executive Officer for Peak Franchise Capital LLC, located in Dallas, Texas, since February 2007 and will continue to serve in those positions. From March 2003 to January 2006, he was the Managing Director for Burger King Corporation, located in Miami, Florida, leading their franchise restructuring program and business development teams. From January 1997 to February 2003, he served as Senior Director of Finance for YUM! Brands, Inc. and Pizza Hut, Inc., both located in Dallas, Texas, where he was responsible for domestic merger and acquisition activities and managed the Pizza Hut franchise finance functions.

Executive Vice President – SNO Management and International Development: Michael R. Daigle

Michael R. Daigle began serving as TQSC II’s Executive Vice President – SNO Management and International Development in May 2007 after having served as TQSC II’s Executive Vice President-Development from October 2006 to May 2007. He also served as TQSC II’s General Counsel and Assistant Secretary from July 2005 to October 2006. He was TQFC II’s, as Deputy Chief General Counsel from August 2001 through July 2002. From July 2002 through July 2005, he served as Executive Vice President – Development / Chief Counsel of Barnie’s Coffee & Tea Company, Inc., in Orlando, Florida.

Chief Information Officer: Frank A. Hood

Frank A. Hood has been the Chief Information Officer for TQSC II since May 2005. He was previously Senior Vice President and Chief Information Officer for Krispy Kreme Doughnut Corporation in Winston-Salem, North Carolina from June 1997 through May 2005.

Senior Vice President – Non-Traditional Development: John C. Teza

John C. Teza has been TQSC II’s Senior Vice President – Non-Traditional Development since January 2008 after having served as Senior Vice President – Sales from June 2007 to January 2008. He was our Senior Vice President - Coolers from February 2007 to June 2007. He also served as Senior Vice President - Sales and Transfers from October 2006 to January 2007. He served as TQSC II’s Senior Vice President of Construction from October 2005 to October 2006. He was Senior Vice President of Development and Operations from February 2005 to October 2005. He was QF’s and TQFC’s Vice President of Development (Northeast) from July 2002 to January 2005.

Senior Vice President – Operations Services: Brian K. Farris

Brian K. Farris began serving as TQSC II’s Senior Vice President of Operations Services in December 2007. From October 2006 to December 2007, he was TQSC II’s Vice President of Assessment. From July 2006 to October 2006, he served as TQSC II’s Vice President of Special Projects. From November 1995 to February 2006, he was employed by Boston Market Corporation, located in Golden, Colorado, in various positions. Most recently, he served as Vice President of Catering from January 2004 to February 2006 and Vice President of Operations from January 2002 to December 2003.


Senior Vice President – Field Operations: Kevin Dearth

Kevin Dearth began serving as TQSC II’s Senior Vice President – Field Operations in December 2007. From November 2006 to November 2007, he served as Vice President of Operations for Arby’s Restaurant Group located in Atlanta, Georgia. From August 1994 to November 2006, he was employed by YUM! Brands, located in Louisville, Kentucky, in various positions. Most recently, he served as Region Coach for KFC in Atlanta, Georgia from December 2004 to November 2006 and Director for Multi Brand Development in Louisville, Kentucky from May 2002 to December 2004.

Senior Vice President – Non-Traditional Concepts: Hannibal D. Myers, III

Hannibal D. Myers, III has been TQSC II’s Senior Vice President – Non-Traditional Concepts since January 2008 after having served as Senior Vice President – Non-Traditional Development from July 2007 to January 2008. He has also served as President and owner of H3 Consulting, LLC in Atlanta, Georgia since April 2005. He also co-founded Providence Realty Group, LLC in Atlanta, Georgia in April 2005. From November 1997 to December 2004, he served as the Chief Development Officer for Church’s Chicken located in Atlanta, Georgia.

Senior Vice President of Development and Real Estate: Brian Belmont

Brian Belmont has been TQSC II’s Senior Vice President of Development and Real Estate since November 2007 after having served as Senior Vice President of Real Estate from May 2007 to November 2007. He was also Senior Vice President of Real Estate and Openings from October 2006 to May 2007 and Senior Vice President of Real Estate from March 2006 to October 2006. He also served as the Senior Vice President of Development and Operations from February 2005 to March 2006. He was QF’s Senior Vice President of Support Services from July 2002 to February 2005.

Senior Vice President of Training: Janice L. Branam

Janice Branam was appointed TQSC II’s Senior Vice President of Training in October 2006 after serving as TQSC II’s Vice President of Small Market Development from October 2005 to October 2006. She previously served as Vice President of Development and Operations from February 2005 to October 2005. She held the same position with QF in January 2005. She was QF’s and TQFC’s Senior Vice President of Area Director Development from March 2003 to December 2004. She was QF’s Senior Vice President of Curriculum Development from June 2002 to March 2003 and held the same position with TQFC from April 2002 until March 2003.

Senior Vice President – Delivery: Rebecca Steinfort

Rebecca Steinfort has been TQSC II’s Senior Vice President – Delivery since January 2008 after having served as TQSC II’s Senior Vice President – Corporate Strategy from April 2007 to January 2008. Ms. Steinfort was Vice President-Corporate Strategy for Service Magic located in Golden, Colorado from January 2007 to March 2007. From November 2005 to November 2006, she served as Senior Vice President – Integration for Level 3 Communication located in Broomfield, Colorado and before that, served as their Senior Vice President – Corporate Strategy from July 2001 to November 2005.

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Senior Vice President and Principle Accounting Officer: Rusty Spinney

Rusty Spinney has been TQSC II’s Senior Vice President and Principle Accounting Officer since May 2007. From January 2006 to May 2007, he served as Director of Technical Accounting for Molson Coors located in Denver, Colorado and from January 2003 to December 2005, served as European Controller of Molson-Coors.

ITEM 3

LITIGATION

Other than the actions disclosed in Exhibit R, no litigation is required to be disclosed in this Franchise Disclosure Document.

ITEM 4

BANKRUPTCY

No person identified in Item 1, and no officer of franchisor, or any other individual who will have management responsibility relating to the sale or operation of franchises offered by this Franchise Disclosure Document, has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item.

ITEM 5

INITIAL FEES

Initial Franchise Fee. You currently must pay an initial franchise fee of $25,000 for the first Franchise Agreement that you sign for a traditional location (“Initial Franchise Fee”). We currently charge $20,000 for the second and each subsequent effective Franchise Agreement that you sign for a traditional location, although we may at any time change this practice and charge you our standard initial franchise fee for all effective Franchise Agreements signed after the first one. You must sign a separate Franchise Agreement for each Restaurant you operate and pay the Initial Franchise Fee in a lump sum when you sign each Franchise Agreement. If a Franchisee refers a prospective Franchisee to us who ultimately purchases a franchise for a QUIZNOS Restaurant, we currently pay the referring Franchisee $500, although we may stop this practice or change the amount at any time.

We fully earn the Initial Franchise Fee when paid. If you sign a Site Specific Addendum and, after making best faith efforts, you are not able to secure the site identified in the addendum due solely to landlord’s action or inaction or zoning or other governmental restrictions, we will refund the Initial Franchise Fee in accordance with the terms of the Site Specific Addendum upon your execution of a general release in the form we provide. We will also refund the Initial Franchise Fee if you sign a Site Specific Addendum and you do not receive final approval from us for the site, subject to your execution of a general release in the form we provide. It is not refundable under any other circumstance.

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We reserve the right to waive or reduce the Initial Franchise Fee under other circumstances we deem appropriate. The Initial Franchise Fee during the last fiscal year for a QUIZNOS Restaurant and a Non-Traditional Restaurant franchise ranged from $0 to $25,000.

When a franchise is sold through an Area Director, the Area Director will receive a commission equal to 25% of the total Initial Franchise Fee paid by a Franchisee who purchases a QUIZNOS Restaurant franchise within that Area Director’s territory, subject to the following conditions: (i) the Franchisee executed a Franchise Agreement with us, and we have received the Initial Franchise Fee, (ii) the sale for which the Initial Franchise Fee was paid is not a resale of any existing QUIZNOS Restaurant, and (iii) the Area Director has complied with all of its other obligations. This commission will be paid to the Area Director within 20 days after the sales conditions have been fulfilled. When an Area Director has performed all of its site services for a Franchisee, the Area Director will be paid a Site Services Commission equal to 25% of the total Initial Franchise Fee paid to us, payable within 20 days after the Franchisee’s QUIZNOS Restaurant opens. Within 20 days after completion of a transfer, Area Directors are paid a commission of 50% of any transfer fee we actually receive from the transfer of a franchise within the Area Director’s territory. An Area Director also is paid, within 20 days after the end of each 4 or 5-week period, 40% of the royalty fees (excluding certain fees) received from each Franchisee (with some exceptions) located in its territory.

When a franchise is sold through a Small Market Area Director, the Small Market Area Director will be paid a commission equal to 12.5% of the total initial franchise fee paid by the Franchisee who purchases a QUIZNOS Restaurant franchise within that Small Market Area Director’s territory, subject to fulfillment of certain conditions by the Small Market Area Director. This commission will be paid to the Small Market Area Director within 20 days after the franchise sales conditions have been fulfilled. When a Small Market Area Director has performed all of its site services for a Franchisee, the Small Market Area Director will be paid a Site Services Commission, equal to 12.5% of the total initial franchise fee paid, within 20 days after the Franchisee of a QUIZNOS Restaurant delivers to us a fully executed lease for the Restaurant location, subject to the Small Market Area Director’s fulfillment of certain conditions. When the Small Market Area Director has performed all of its pre-opening support services for a Franchisee, the Small Market Area Director will be paid a commission equal to 25% of the total initial franchise fee paid by the Franchisee within 20 days after the Franchisee’s Restaurant opens. If the Small Market Area Director is complying with the Small/Middle Market Area Director Agreement, the Small Market Area Director also will receive, within 20 days after the end of each 4 or 5 week period, 20% of the royalty fees (excluding certain fees) actually received by us from each Franchisee located in its territory during the first 3 years of operations of the Franchisee’s QUIZNOS Restaurant, subject to certain exceptions for a Restaurant territory that ceases to operate or the Franchise Agreement is terminated during the term of the Small/Middle Market Area Director Agreement. Each Franchisee who purchases a QUIZNOS Restaurant franchise from the Small Market Area Director shall sign the Addendum attached as Exhibit Q (in addition to the Franchise Agreement).

When a franchise is sold through a Middle Market Area Director, the Middle Market Area Director will be paid a commission equal to 12.5% of the total initial franchise fee paid by the Franchisee who purchases a QUIZNOS Restaurant franchise within that Middle Market Area Director’s territory, subject to fulfillment of certain conditions by the Middle Market Area

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Director. This commission will be paid to the Middle Market Area Director within 20 days after the franchise sales conditions have been fulfilled. When a Middle Market Area Director has performed all of its site services for a Franchisee, the Middle Market Area Director will be paid a Site Services Commission, equal to 12.5% of the total initial franchise fee paid, within 20 days after the Franchisee of a QUIZNOS Restaurant delivers to us a fully executed lease for the Restaurant location, subject to the Middle Market Area Director’s fulfillment of certain conditions. When the Middle Market Area Director has performed all of its pre-opening support services for a Franchisee, the Middle Market Area Director will be paid a commission equal to 25% of the total initial franchise fee paid by the Franchisee within 20 days after the Franchisee’s Restaurant opens. If the Middle Market Area Director is complying with the Small/Middle Market Area Director Agreement, the Middle Market Area Director also will receive, within 20 days after the end of each 4 or 5 week period, 20% of the royalty fees (excluding certain fees) actually received by us from each Franchisee located in its territory during the first 5 years of operations of the Franchisee’s QUIZNOS Restaurant, subject to certain exceptions for a Restaurant territory that ceases to operate or the Franchise Agreement is terminated during the term of the Small/Middle Market Area Director Agreement.

Except for the portion of the Initial Franchise Fee paid to an Area Director, a Small Market Area Director or a Middle Market Area Director, we will pay a significant portion of the Initial Franchise Fee to TQSC II, which will perform various franchise sales, site selection, and Restaurant pre-opening services for us. However, as your franchisor, we are contractually responsible for making sure that these services are performed for you as required under the Franchise Agreement and are accountable to you if they are not properly performed.

Non-Traditional Restaurant. If you desire to operate a Non-Traditional Restaurant, you must sign our Franchise Agreement (and, if applicable, the Addendum for a Non-Traditional facility, the Kiosk Addendum or the Cooler Addendum). (See Item 1). You must pay an Initial Franchise Fee of $10,000 for each Non-Traditional Restaurant (or $5,000 if you sign the Cooler Addendum) (“Non-Traditional Restaurant Fee”). You must sign a separate Franchise Agreement for each Non-Traditional Restaurant that you operate. Non-Traditional Restaurant Fees are not refundable under any circumstances. We fully earn Non-Traditional Restaurant Fees once paid. You must pay the fee in a lump sum when you sign the Franchise Agreement.

Lease Review. After you select a location for your Restaurant, we must approve that location. If approved, our authorized representative (which likely will be TQSC II or another affiliate) will review and likely will negotiate certain lease provisions. We do not act as your legal counsel or representative in conducting those negotiations, although our interests, as Franchisor, are usually aligned with yours as the Franchisee and tenant. We encourage you to consult your own attorney if you need legal assistance in negotiating a lease with which you are satisfied. You must pay us or our authorized representative a “Lease Review Fee” of $1,000. The Lease Review Fee covers the costs of reviewing and (if applicable) negotiating the first lease we review. You must pay only one Lease Review Fee unless you refuse to sign a lease that we have approved for your Restaurant and we or our authorized representative then must conduct one or more additional lease reviews for the Restaurant. In that case, you must pay a Lease Review Fee for the first lease review and another Lease Review Fee for each additional lease review conducted. You do not have to pay the Lease Review Fee if you operate a Non-

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Traditional Restaurant and are providing the premises for the Restaurant, although we still have the right to approve the location.

Restaurant Equipment and Certain Construction Materials; Architectural Services. You must buy from us or an affiliate we designate virtually all of your Restaurant’s equipment (including the point-of-sale and credit card processing systems) and certain construction materials necessary for the Restaurant’s build-out. The total payment to us (or our affiliate) for these items will range from $83,700 to $91,160 for a traditional Restaurant, $48,000 to $86,860 for a Non-Traditional Restaurant, $50,500 to $95,500 for a QUIZNOS Kiosk and $16,800 to $23,800 for a QUIZNOS Cooler. (Also see Item 8) At our discretion, you may be required to pay a deposit for these items and services in 1 or more installments. For a Traditional Restaurant, the deposit amount is subject to change but is currently $40,000 (see Item 7). The deposit ranges from $0 to $40,000 for a Non-Traditional Restaurant. The balance is due before your equipment is shipped. We (or our affiliate) will credit your account for $50 for each full 30-day period after your deposit check has cleared, with a maximum $400 credit. We (or our affiliate) will deduct the credit from the total amount due for the equipment when it sends the final invoice. If the site or the lease you submitted is not approved, we (or our affiliate) will refund your deposit including any credit made to your account.

Unless you purchase a franchise for a non-traditional QUIZNOS Cooler, you also must use architectural services from a firm we designate, which could be one of our affiliates. You must reimburse us for architectural fees, which will range from $6,500 to $13,000 and do not include permitting fees. (Architectural fee will range from $500 to $10,000 for QUIZNOS Kiosks.) The architectural fee is payable together with the final payment for the equipment (prior to shipment of the equipment).

You must buy from us or our affiliate certain uniforms and related accessories (“Teamwear in a Box”) prior to opening your Restaurant. Teamwear in a Box currently costs $650 (Teamwear in a Box is included in Restaurant equipment package for Kiosks and Coolers). If you purchase a franchise for a traditional QUIZNOS Restaurant, you must also purchase from us or our affiliate a grand opening marketing kit (“Grand Opening in a Box”) prior to opening your Restaurant. Grand Opening in a Box currently costs $4,050.

If you purchase a franchise for a traditional QUIZNOS Restaurant, you must buy from us or our affiliate a delivery kit (“Delivery in a Box”). Delivery in a Box currently costs $6,250 and includes opening advertising campaign, small wares, equipment, training, in-store point of purchase, local store marketing materials and packaging.

Site Specific Addendum. If you sign a Site Specific Addendum, you must pay a nonrefundable amount equal to $5,000 in a lump sum when you sign the Franchise Agreement. This amount covers the Lease Review Fee ($1,000) and part of the deposit for architectural service at the time you sign the Franchise Agreement. The $4,000 will be applied to your final payment for architectural services. The $5,000 payment is not refundable under any circumstances.

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ITEM 6

OTHER FEES

Type of Fee1 Amount Due Date Remarks

Royalty 7% of Gross Sales2 Payable on the day of the week periodically designated (based on the prior week’s Gross Sales)

Your bank account will be debited for Royalties due3

Non-Compliance Charge

Up to $250 per default (at our discretion)

On demand, but only if you are delinquent in your payments to us or otherwise violate an obligation under the Franchise Agreement

Payable the day after payment or other event (such as required report) is due

Interest on Late Payments

2% interest per month on any late payment to us, including Royalty and Marketing and Promotion Fee payments

As incurred Due on late payments

Bookkeeping Services4

$65-$75 per week per Traditional Restaurant

Payable on the day of the week periodically designated

Mandatory for first 12 months your first Restaurant is operating or your first 12 months as a Franchisee if purchasing an existing Restaurant from another Franchisee; optional after that time if you meet certain requirements. Your bank account will be debited for the amount due. We may increase the fee after the first 12 months based on market rates for similar services. This may not be required for all Non-Traditional Restaurants5

Marketing and Promotion Fee

1% of Gross Sales Payable on the day of the week periodically designated (based on the prior week’s Gross Sales)

Your bank account will be debited for amount due

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Regional Advertising Fee

Currently 3% or 4% of Gross Sales, depending on the market area in which your Restaurant is located. If currently 3%, may be subject to increase to 4%

Weekly As of the date of this Franchise Disclosure Document, there are 4 regional advertising programs; you must contribute to the program operating in your region (see Item 11). This Regional Advertising Fee replaces the Local Advertising Fee as long as (and to the extent) the regional advertising program operates

Local Advertising Fee

Currently, 1% of Gross Sales unless the “regional advertising” program ceases to operate in your region, in which case you will have to pay 3% of Gross Sales for local advertising (see Regional Advertising Fee discussion immediately above)

As incurred Must be expended during each calendar quarter and receipts submitted upon request. All or a portion of the Local Advertising Fee may be collected and designated for either a regional advertising program or for the Marketing and Promotion Fund for the benefit of either the Restaurants within your particular region or all of the Restaurants operating under the QUIZNOS Marks

Local Advertising Cooperative

Percentage of Gross Sales determined by franchisees contributing to the Local Advertising Cooperative

Weekly If we implement a program to permit QUIZNOS Restaurants to form Local Advertising Cooperatives, franchisees in your geographic area may form such a Local Advertising Cooperative. If a Local Advertising Cooperative is formed, you must contribute the amount determined according to the bylaws which must be approved by us (see Item 11)

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Transfer 50% of then-current Initial Franchise Fee (or, if applicable, 50% of the then-current Non-Traditional Restaurant Fee)

Before the transfer Payable when your interest in the Franchise Agreement, a material portion of the Restaurant’s assets, or an interest in you is transferred

Renewal Fee $1,000 When you renew your franchise and sign the then-current Franchise Agreement

Inspection and Audit Fee

(1) Interest on past due amount at lesser of 2% per month or maximum commercial contract interest rate allowed by law and (2) costs of audit

On demand Costs of audit payable only if you understate your Gross Sales by 2% or more; interest payable if you understate your Gross Sales by any amount

Training Program Expenses6

Costs associated with attending mandatory training session

As incurred We may require additional training occasionally. We may charge a training fee for each Special Product in which you participate

Management Fee 3% of Gross Sales plus direct out-of-pocket costs and expenses

As incurred Due when we (or a third party) manage your Restaurant after your default or abandonment

Costs and Attorneys’ Fees

Will vary under circumstances

As incurred Payable only if you do not comply with the Franchise Agreement

Indemnification Will vary under circumstances

As incurred You must reimburse us and our affiliates if any of us are held liable for claims related to your Restaurant’s operations

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Insurance Premiums/Rent

Varies under circumstances

As incurred If you do not pay your rent or insurance premiums, we or our affiliates can pay them for you and you must reimburse the payor. Rent includes any payments required under your lease

Music Fee Currently ranges from $27 to $38 per month

Monthly You must pay this fee for music we designate for your Restaurant

Product and Service Purchases

See Item 8 See Item 8 You must buy products and services that meet QUIZNOS standards and specifications, and in many cases, from approved or designated vendors, manufacturers, suppliers and distributors (which may be us or one or more of our affiliates)

Testing Cost of Testing (We currently do not charge a fee.)

As incurred This covers the costs of testing new products or inspecting new suppliers you propose

Noncompetition Violation7

A fee equal to our then-current Initial Franchise Fee for each competitive business and 8% of its Gross Sales

Upon a violation of the noncompetition covenants

Operations Manual Replacement Fee

Cost of printing and shipping (currently, not to exceed $50)

Upon receipt of replacement copy of Operations Manual

If you lose, destroy, or damage your copy of the Operations Manual, you must pay for the replacement copy

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Estimated Royalty, Marketing and Promotion Fee, Regional Advertising fee, and other payments

Royalties, Marketing and Promotion Fee, Regional Advertising fee and all other payments due under the Franchise Agreement will be calculated based on assumed Gross Sales of $10,000 per week, to be increased by 10% for each week you fail to comply with reporting requirements

As incurred Payable only if you fail to submit timely reports of Gross Sales and your Gross Sales must be estimated in order to debit your account for required payments; these amounts will be reconciled with the actual amounts owed after you submit reports

1/ Except as otherwise noted, fees are imposed by us under the Franchise Agreement and

collected by and payable to us or our designated affiliates. No fees are refundable. We will pay TQSC II most of the ongoing amounts that we receive from Franchisees under their Franchise Agreements (not including Initial Franchise Fees) as an intellectual property sublicense fee or a servicing fee.

2/ “Gross Sales” are defined as sales of any kind for all services or products from or through your Restaurant, including any sales made for cash or upon credit, or partly for cash and partly for credit, regardless of collection of charges for which credit is given, regardless of whether sales are conducted in compliance with or in violation of the terms of the Franchise Agreement, and regardless of whether sales occur at the site of your Restaurant or off-site, but excluding discounts, sales taxes, or other similar taxes and credits. “Gross Sales” also include the fair market value of any services or products you receive in barter or exchange for your services and products and all insurance proceeds that you receive for loss of business due to a casualty to or similar event at the Restaurant. We do not currently offer any Special Products, but we reserve the right to change the Royalty rate for certain Special Products depending on the arrangement with the particular third-party licensor.

3/ Before opening, you must sign and deliver all documents needed to permit our designated representative to debit your bank account for each week’s Royalty and Marketing and Promotion Fee payments and other payments due under the Franchise Agreement or otherwise, including interest due on late payments. However, you must pay all amounts due by means other than automatic debit whenever we deem appropriate.

4/ You must use a designated vendor (which may be one of our affiliates) to provide bookkeeping services for you for the first 12 months your first Restaurant is operating or for your first 12 months as a Franchisee if you purchase a Restaurant from an existing Franchisee, regardless of the age of the Restaurant. After that, you may discontinue the

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service provided that you retain a full-time professional accountant (approved by us in writing) to provide bookkeeping services and that accountant agrees in writing (on a form acceptable to us) to provide required financial statements when required and in the forms and formats we require. If you fail to provide those financial statements more than 2 times in any 12-month period, we may require you to use our designated bookkeeping services at the then-current fee. We can terminate the services upon 90 days’ notice. Your right to discontinue bookkeeping services after the first 12 months your first Restaurant is operating does not include discontinuing payroll services. If you purchase a franchise for a Traditional Restaurant, you must continue to use our designated vendor for payroll services unless we approve another vendor. You may only propose a new vendor after the first 12 months of operations. You do not pay us or an affiliate for payroll services.

5/ We reserve the right to elect to have you enter into a direct contractual or other arrangement with the service provider, in which case you will be responsible for directly compensating the service provider for services and pay the amounts charged by the service provider for such services.

6/ Expenses associated with travel, meals, and lodging while you attend initial training sessions, as well as any fees charged by test facilities. All of these expenses are paid to third parties. Although we currently do not do so, we may in the future charge a tuition fee for training additional managers. (See Item 11)

7/ You agree not to engage in certain businesses defined as “Competitive Businesses” during the franchise term; not to engage in a “Branded Business” within ¼ mile of your Restaurant without our consent during the franchise term; and not to engage in any Competitive Business located or operating within a 5-mile radius of your former Restaurant (including at the former Franchised Location) or any other QUIZNOS franchised or company-owned Restaurant for 2 years following the termination or expiration of the Franchise Agreement. These restrictions may be modified if you sign an agreement to operate a Non-Traditional Restaurant.

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ITEM 7

ESTIMATED INITIAL INVESTMENT

YOUR ESTIMATED INITIAL INVESTMENT

Type of Fee1

Low/High Range Traditional Unit2

Low/High RangeNon-Traditional

Unit3

Low/High Range

Kiosk

Low/High Range

Cooler

Method of Payment

When Due

To Whom Payment

is to be Made

Initial Franchise Fee $25,000 $10,000 $10,000 $5,000 At signing of Franchise Agreement

Us

Leasehold Improvements4 $60,000 - $105,000 $15,000 - $200,000 $10,000 - $60,000 $1,000 - $2,500 Before opening Landlord; one of our Affiliates; and Contractors

Equipment, Construction Materials and Signs4, 5

$83,000 - $89,000 $48,000 - $80,000 $48,000 - $85,000 $16,000 - $23,000 Before opening One of our Affiliates or Suppliers

Cash Register, Credit Card, Music and Computer Systems

$5,400 - $6,860 $0 - $6,860 $2,500 - $10,500 $800 Before opening One of our Affiliates or Suppliers

Phones, Other Miscellaneous Items

$1,000 $1,000 $500 - $10,000 $0 Before opening One of our Affiliates or Suppliers

Security Deposits, Utility Deposits, and Business Licenses

$3,600 - $8,000 $500 - $1,000 $0 $0 Before opening Us, one of our Affiliates, or Landlord; Suppliers; or Government Agencies

Professional and Architect Fees6

$6,500 - $13,000 $6,500 - $13,000 $500 - $10,000 $0 Before opening Suppliers such as lawyers and our Affiliates (for architect fees)

Training Expenses7 $1,200 - $2,000 $1,200 - $2,000 $0 $0 Before opening Us and outside vendors

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Type of Fee1

Low/High Range Traditional Unit2

Low/High RangeNon-Traditional

Unit3

Low/High Range

Kiosk

Low/High Range

Cooler

Method of Payment

When Due

To Whom Payment

is to be Made

Opening Advertising Campaign 8

$10,300 $3,000 $3,000 $0 Before opening Advertising media we approve

Real Estate Note9 Note9 $0 $0

Opening Inventory $8,000 - $12,000 $2,000 $2,000 - $6,000 $300 - $1,500 Before opening Suppliers and Affiliates

Lease Review Fee $1,000 $0 $0 $0 Upon submission of request for site approval

Us or our affiliate

Additional Funds — 3 months10

$10,000 $1,000 - $5,000 $1,000 - $5,000 $1,000 - $5,000 As incurred Suppliers and your Employees

TOTAL ESTIMATED INITIAL INVEST-MENT11 (excluding real estate costs)

$215,000 - $283,160 $88,200 - $323,860 $77,500 - $199,500 $24,100 - $42,800

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1/ The initial franchise fee is not refundable unless you sign a Site Specific Addendum and

are unable to secure the site identified in the addendum due solely to landlord’s action or inaction, zoning or other governmental restrictions (see Item 5). Security deposits may also be refundable. Otherwise, none of the fees described above are refundable under any circumstances.

2/ Investment figures represent approximate costs based on the size of your traditional QUIZNOS Restaurant, location, and the extent of renovations required. A lower cost Restaurant is one that would require fewer leasehold improvements, less seating, and fewer equipment expenditures. A higher cost Restaurant might require extensive interior renovations, extensive seating, and additional equipment. It might not be possible to build a Restaurant for the lower total investment cost listed.

3/ These figures represent approximate costs for purchasing, installing, and equipping a Non-Traditional Restaurant. Because they are located in a host facility, these Non-Traditional Restaurants require fewer leasehold improvements and equipment expenditures than traditional QUIZNOS Restaurants. Opening inventory expenditures usually are lower as well, but the initial investment in a Non-Traditional Restaurant depends on the type, location, and configuration of the host facility and the type of Non-Traditional Restaurant established.

4/ These amounts might be reduced if the landlord contributes any tenant finish allowance. The amounts do not include any applicable sales taxes (which are your responsibility). In addition, actual costs may exceed these ranges in certain metropolitan markets.

5/ Included in the equipment and construction materials are HVAC, electrical panel, and one sign.

6/ These amounts do not include plan review fees assessed by the municipality in which the Restaurant will be located.

7/ You are responsible for arranging transportation and paying the expenses for meals and lodging for any persons attending the training program. The amount expended will depend on the distance you travel and the type of accommodations you choose. The estimate contemplates attendance by one person. Your expenses will be higher if more than one individual attends the training program.

8/ This amount covers the costs of Grand Opening in a Box and Delivery in a Box.

9/ Real estate costs depend on whether you owned the Franchised Location before signing the Franchise Agreement or instead purchase or lease your Franchised Location. A traditional Restaurant typically is located in an outdoor or enclosed mall or a strip shopping center and generally is from 1,200 to 1,600 square feet. Leasehold improvement costs, including floor covering, wall treatment, counters, ceilings, painting, window coverings, electrical, carpentry and similar work, and contractor’s fees, depend on the site’s condition, location, and size; the demand for the site among prospective lessees; the site’s previous use; the build-out required to conform the site for your

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Restaurant; and any construction or other allowances the landlord grants. If you lease your Franchised Location, the amount of rent depends on the market, Restaurant size, and common area expenses passed through to tenants. Rent for enclosed mall locations generally will be higher.

10/ This estimates the funds needed to cover your initial expenses for the first 3 months of operation. It includes payroll costs (but not any draw or salary for you), utilities, and miscellaneous supplies. However, this is only an estimate, and it is possible that you will need additional working capital during the first 3 months you operate your Non-Traditional Restaurant or Restaurant and for a longer time period after that. This 3-month period is not intended, and should not be interpreted, to identify a point at which your Non-Traditional Restaurant or Restaurant will break even. We cannot guarantee when or if your Non-Traditional Restaurant or Restaurant will break even. Your costs will depend on your management skill, experience, and business acumen; local economic conditions; the prevailing wage rate; competition; and your Restaurant’s sales during the initial period. This also includes expenses associated with travel, meals, and lodging while you attend initial training sessions. All of these expenses are paid to third parties.

11/ This amount does not include real estate costs. We have relied on our affiliates’ (including QF, QFA and TQM) and our principals’ many collective years of experience in this business to compile these estimates. Because these figures are only estimates, it is possible both to reduce and to exceed costs in any of the areas listed above. Actual costs will vary depending on physical size and current condition of the premises. In addition, actual costs may substantially exceed these estimates in a major metropolitan market. To avoid excessive construction costs, we require that you pick contractors carefully by obtaining several competitive bids beforehand. These estimates do not include extensive exterior renovations. You should review all figures in this Item 7 carefully with a business advisor before you decide to purchase the franchise. Except as noted in Item 10, neither we nor our affiliates offer financing directly or indirectly for any part of the initial investment. The availability and terms of financing depend on the availability of financing generally, your creditworthiness and collateral, and lending policies of financial institutions. The estimate does not include any finance charge, interest, or debt service obligation.

ITEM 8

RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

Franchisees are required to use only approved and/or designated manufacturers, vendors, distributors, suppliers, and producers (collectively defined as "vendors") (which may be us or our affiliates) and are required to enroll in certain mandatory service programs, as set forth below. You must purchase all goods and services required for the operation of the Restaurant from such approved and/or designated vendors (which may be only one vendor for any given good or service) under terms, in the manner, and from the source designated by Franchisor or any of its affiliates. If Franchisor or any of its affiliates designates such goods and services are to be purchased through approved and/or designated third party distributors, then Franchisee shall purchase such goods and services from such distributors pursuant to the terms and in the manner

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approved by Franchisor and or its affiliates. Except as noted in this Item, we and our affiliates currently are not approved vendors of any item, although our affiliates may become approved vendors at any time in the future and may even be the designated or sole vendor of one or more items, in which case you would have to buy the items from our affiliates at their then current prices.

If you desire to purchase equipment, products, services, supplies, or materials from vendors other than those previously approved, you first must submit a written request to change the supplier. Presently, AFD and SOD review these requests on our behalf (depending on the type of supplier), and either AFD or SOD will notify you in writing of its approval or rejection of the proposed vendor within a reasonable time after completing its investigation. AFD or SOD may withhold approval of the vendor for any reason. In order to make its decision, AFD may require that samples of a proposed new product first be delivered for testing. Permission for inspection will be a condition of the continued approval of any vendor. You will pay a charge not to exceed the actual cost of the test. We and our affiliates reserve the right periodically to inspect the facilities and products of any approved vendor and to revoke approval upon the supplier’s failure to continue to meet any of the then current QUIZNOS criteria. If an exclusive vendor already has been designated for the equipment, products, services, supplies, or materials proposed to be offered by a new supplier, your request for a new vendor likely will be rejected without further review or investigation.

Lease Review. TQSC II or another designated supplier reviews (and typically negotiates for our benefit) your lease. The Lease Review Fee (see Item 5) pays the cost for the lease review and (if applicable) negotiations we conduct for our purposes. This lease review and certification are solely for our benefit and designed to satisfy us that the proposed lease complies with minimum QUIZNOS requirements, based on the assumption that the lease has not previously been reviewed by counsel. It is important that you review the lease closely and understand all of the terms and conditions before signing it. We may provide you with a list of attorneys who understand our lease requirements. You should have your own attorney review the lease on your behalf before signing it. These fees are paid to either us or QFA, depending on which entity is the franchisor with respect to the particular site. During fiscal year ended December 31, 2006, we received $377,125 from Franchisees in Lease Review Fees which represents 0.9% of our total revenue of $41,881,946. During fiscal year ended December 31, 2006, QFA received $91,100 from Franchisees in Lease Review Fees.

Architectural and Construction Services. As described in Item 5, you must use architectural services from a firm we designate, which could be one of our affiliates. You must reimburse us for fees charged us by the architectural firms. Our affiliates received revenue from franchisees for these architectural fees. You must also use contractors who are approved by us. To avoid excessive construction costs, we require that you pick contractors carefully by obtaining several competitive bids beforehand. Neither we nor our affiliates receive any compensation from approved contractors. Our internal construction department may provide assistance and guidance to you during the construction process, but we do not retain your contractor and do not act as your general contractor. Neither we nor our affiliates will provide construction services directly to you or eliminate your need to employ construction contractors. However, the construction department might provide an indirect benefit to you in the form of shorter construction times.

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Equipment and Fixtures. You must follow all QUIZNOS standards and specifications for construction, design, and remodeling of your Restaurant premises, food products, packaging, advertising materials, supplies, ingredients, equipment, computerized cash register, fixtures, furnishings, computer, and other items used in operating your Restaurant. You must purchase or lease (as designated) these items only from suppliers or other sources approved and/or designated for the QUIZNOS System. We and our affiliates may designate a single approved supplier for certain items, and our affiliates may be an approved or the designated supplier for certain items. If there is no approved or designated supplier for a particular item, you must obtain all products and services from suppliers who meet QUIZNOS specifications and standards as to quality, composition, appearance, and service and adequately demonstrate their capacity to supply your needs in the quantities, at the times, and with the reliability required for an efficient operation. AFD, one of our affiliates, is the sole wholesale supplier of virtually all proprietary and branded items manufactured specially for the QUIZNOS System. AFD sells these items to unaffiliated distributors, who then resell the items to QUIZNOS Franchisees. AFD also has the right (delegated from QFA and us) to choose the suppliers to the QUIZNOS System. AFD will pay license fees directly to QFA and indirectly to us for those product designation rights and for the right to use the QUIZNOS IP.

SOD is the sole supplier of certain restaurant equipment and building materials for your Restaurant and the point-of-sale system, credit card processing te

Documents

FRANCHISE DISCLOSURE DOCUMENT · franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has