The Role of the Franchisee

and the Franchise Agreement

As a Franchisee you will be our direct To succeed as a Yum! Franchisee, you

link to customers. You will turn our must at a minimum:
message of quality, value and fun into
■ Design, build and equip your restaurant to Yum!
customer experiences. Specifications

That’s why we select people who have a passion for the Franchisees work closely with Yum! Consultants
business and share our vision. to select and develop sites

We choose Franchisees who enjoy working with people ■ Train key operators using Yum’s training courses
in a collaborative environment, yet who understand the
necessity of complying with our brand standards. We Our training programme is a unique approach to
seek people who understand the integrity and trust that developing customer-focused teams
is necessary to any successful business relationship.
■ Operate the Franchise according to Yum!
Standards
When our customers walk through the
It takes discipline and adherence to established
door of a KFC restaurant, they expect the
processes to turn raw ingredients into food that
food they crave, friendlyservice, and a people crave and a brand that people trust
fun, casual atmosphere.
■ Share your knowledge and expertise
And they expect it every time at every We value your input and ideas, and we expect you
restaurant! to contribute ideas to improve our businesses

To make these expectations a reality, we

look for the following in our Franchisees:
The Franchise agreement
■ A working knowledge of the food service,
hospitality, or retail industry This gives you the rights to use the Trademarks, the
Operational system and manuals.
■ An understanding of the local marketplace,
culture and community ■ Term: 10 years plus franchise option for a further
10 years
■ A long-term interest to own and operate the
■ Marketing: Contribution to the Marketing Fund
franchise
■ Conditions: No operating of competing brands or
■ The financial and human resources to support an sub franchising
aggressive growth agenda
Full details are outlined in the International Franchise
■ People who care about people and who can share Agreement
our cultural values

By passionately adhering to Yum!

Methods for operations and training, you
will strengthen your own business, build
equity in the brand, and help build the
profitability of your expertise.
History of KFC

THE KFC HERITAGE

In the beginning… As it grew…

Colonel Harland Sanders, born in 1890,
Harland Sanders fame
began at age 40, cooking for hungry
grew and in 1935 he
travellers at his service station in
was made a Kentucky
Corbin Kentucky. He later moved
Colonel for his
across the street to a motel and
contributions to the
restaurant that seated 142 people, and
state’s cuisine.
over the next 9 years perfected his secret blend of eleven
herbs and spices and the basic cooking technique that is Confident of the quality of his fried chicken he then,
still used today. aged 62 devoted himself to his chicken franchising
business and travelled across the country by car cooking
batches of chicken and making ‘handshake’ deals.

The Franchise: a miracle solution! Explosive international growth

By 1964, Colonel Sanders had more than 600 franchised By the time KFC was acquired by PepsiCo in 1986, it had grown
outlets in the United States and Canada and that year he to approximately 6,600 outlets in 55 countries and territories.
sold his interest in the company but remained a public KFC is now the largest chicken restaurant brand with over
spokesman for the company until his death in 1980. 13,000 outlets worldwide.
Getting started as a Franchisee

The Process of becoming a KFC franchisee

1. Initial
contact/Franchise
Application form
Submission

2. Verification

3. Business Plan
presentation

Next Steps
4. Franchise
Approval Start by completing the attached Franchise
franchisee Application form and send it to the Business
Development Manager at Yum.

Further information can be found on our

5. Letter Of
Intent websites at the following Addresses.

■ www.kfcfranchisee.in

■ www.kfc.com

6. Documentations
Process

7. Restaurant
Opening!

8. Training (3 - 6
months)
Yum! Brands
The World’s largest restaurant group

International Stores in India

YUM! Brands operates in over a 100 countries with At present, Yum Brands! operates 811 stores -- (426
yearly system sales exceeding 24 billion US$. Its stores Pizza Hut outlets, 378 KFC and 7 Taco Bell) in India.
are 80% franchised and there are over 1000 new builds
worldwide each year.
UK 597
YUM Restaurants International has become the world’s 426
largest restaurant chain in terms of units. 45
Germany
78

France 19
Store Count 129
14
Netherlands
8 KFC
PH
30
Spain
115

Poland 61
45

Russia 8
4

Greece 37
12

Portugal 72
13

Czech 1
19

The brands India

Key Market store numbers as at 2004

Four of the brands – KFC, Pizza Hut, Taco bell and LJS
are global leaders in their cataegory.
Best Pizzas under one roof
Pizza

Real Food Fast

Chicken

Think outside the bun

Mexican

5 leading restaurant brands

America’s largest
Quick Serve Seafood
Seafood
All American Food
Hamburgers, Hot
Dogs and more
 Terms and Requirements

Applicant requirements
 "User" includes any Individual/ Firm/ Proprietorship/ Company or other legal entity and shall be competent
to enter into a contract under the Indian Contract Act, 1872.
 In case of Individual, user must be resident of India and aged 18 years or more.
 Educational qualification (10th Pass only) and nationality needed to be fulfilled before

Against him in any police station

 The character of the applicant should be good. He should not have any criminal record

CIBIL Requirement
 Applicant's bank CIBIL score should be (700 to 900).

Franchise Area Requirement

 Restaurants Area: - (1,000 to 1,500 sq. ft.) in a commercial area that matches its guiding principles.
 You need to have a floor space of:- (1000 sq. ft.) in a highly lucrative commercial area to confirm the list
for the goods.

Related to land Company Rule

 There should not be any Government Objections above the land.
 The land should be on the road.
 The company does not offer KFC Franchise inside the village

Franchise Services and Training

 The company helps with all the Drawings, Layout and Interior Design for the Restaurants as everything
should be as per the KFC LLC Corporate norms.
 All Crew Members will be well trained.
 The sales team will be given training so that they get to know about the product features, customer
 Handling and sales process everything.
 It provides assistance in Business Development.
 Provides Necessary Operational Support required for Franchise.
 It provides marketing support for regional advertising.
 KFC Development
Total Profit and Royalty

Lower Cost Moderate Cost Higher Cost Remarks

4% 5% 6% Royalty of sales

20/25% 25/30% 30/40% Profit Margin

Item 5
Initial Fees

All franchisees pay a (Lower Cost Rs.10,70,000 Moderate Cost Rs.13,80,000 Higher Cost
Rs.17,15,000) lump sum initial franchise fee on the opening of the restaurant, except for:
(a) the KFC companies, which do not pay any initial franchise fee; (b) Franchisees of locations
having 10 years or less of real estate tenure will pay a prorated initial franchise fee based on
the term of the franchise; (c)Franchisees who rebuild or relocate their restaurants will pay
the initial franchise fee less a credit for a portion of the previously paid initial franchise fee,
on the earlier of the first of the month after the seventh year after the Opening of the rebuilt
or relocated restaurant or the end of the previous franchise term (see Item 7, note 1);
 Item 6
Other Fees

Base Rent:
Payable on the 1st day of
the month.
Pass Thru Rent, if Where we lease the land and/or
applicable: building, we will pass thru any rent
Rent Varies (3)(4)
Payable on the 1st day of escalations which occur throughout
the month. the lease term as pass thru rent.
Percentage Rent:
Payable monthly on the
10th day of the next month.
Payable only if audit/inspection fee
Audit/Inspection Fee (1) Cost of audit Immediately upon billing shows an understatement of at least
2% of Gross Sales.
On each anniversary of
Satellite Annual Fee (1) opening or on a fixed date
annually
Payable monthly on the
Satellite Rent (1) Varies (6) 10th day of the next
month
Same as Base and
STO and STR Rent (1) Varies (3)(7) Percentage
Rent above.

BFL Rent (1) Varies (3)(8) Same as Rent above.

Relocation Contribution On opening of the

1 Lakh
(1)(9) relocated restaurant.

INR 12,000 Payable annually by check

You pay the annual fee to us for the
(one-time fee)(10) (August) or drafted
POS Releases Fee (1) integration of your store system
INR 5,000 semiannually
platform.
annual integration fee (August/November).
Payable annually by check
Restaurant File Maintenance (August) or drafted You pay this fee to us for the
INR 10,000
(RFM) Fee (1) semiannually annual maintenance of RFM.
(August/November).
Payable annually by check
You pay this fee to us for the use of
R2D2 Software Maintenance (August) or drafted
INR 5,000 our restaurant data diagnostic
Fee (1) semiannually
system.
(August/November).
You pay the annual software
INR 1,00,000 license
Payable annually by check maintenance fee to us and we remit
fee (one-time fee)(10)
(August) or drafted payment to RDI, our affiliate, which
NewPOS Software Fee (1) INR INR 30,000 annual
semiannually owns the portion of the VSI
software maintenance
(August/November). business that serves the KFC’s
fee
System. See Item 1.
1. All fees are imposed and collected by and payable to KFC’s. All fees are non-refundable and uniform.
We will automatically draft rent and service fees from your bank account according to the terms of
the Franchise Agreement. We also may draft miscellaneous receivables that you owe us, provided
you confirm the amount of each draft.
2. The following is the rent structure for new restaurants:
Fixed Percentage Rent with Monthly Base Rent and Pass Thru Rent, if applicable
Monthly Base Rent
All restaurants will have a Monthly Base Rent. For a site where both the land and the building are
owned by KFC’s or its affiliates, Monthly Base Rent is based upon the total amount invested by KFC’s
in the acquisition and development of the land and the building. A finance factor is applied to this
amount to produce an appropriate return for KFC’s. For a site where the land and/or building is
leased by KFC’s from a third party, Monthly Base Rent is based upon the total amount invested by
KFC’s in the acquisition and development of the land and the building as well as monthly rent paid in
the first year to a third party landlord. A finance factor is applied to each of these amounts to
produce an appropriate return for KFC’s. You must pay this amount every month of the franchise
term.
3. Pass Thru Rent
For a site where the land and/or building is leased by KFC’s, there may be rent escalations for which
KFC’s is responsible under the lease which are above and beyond the original monthly rent we paid
to the landlord. For these rent escalations, KFC’s will charge you pass thru rent which must be paid
every month the escalations are in effect. We do not apply a finance factor to the pass thru rent.
4. Fixed Percentage Rent
The Fixed Percentage Rent for new restaurants that opened on or after 2021, is generally computed
as follows:

KFC’s Total Acquisition and Development Costs Franchisee’s

More Than Up To Fixed Percentage Rent Rate

INR 0.00 INR 60, 00,000 5%

INR 80,00,000 INR 1,00,00,000 8,75%

The Fixed Percentage Rent is payable only if the monthly Gross Sales exceed the monthly base sales
figure which is computed by dividing the Rupees amount of the Monthly Base Rent by the Fixed
Percentage Rent rate. If you are purchasing an existing restaurant from a franchisee, the chart will not
apply as you will be assuming the Monthly Base Rent and Fixed Percentage Rent paid by the selling
franchisee (except for any rent relief which is personal to the selling franchisee).

The Fixed Percentage Rent for new term franchises will not be lower than the Fixed Percentage Rent in
the previous franchise term. For sites owned by KFC’s, the percentage rent will remain the same unless
KFC’s has made additional investments outside of our standard contributions to institutional programs
such as rebuilds, relocations and major remodels. For sites leased by KFC’s, the percentage rent will
remain the same as the previous term unless KFC’s has made additional
 Investments outside of our standard contributions to institutional programs as described above, and
will also include any additional lease costs above the average lease cost generally over the previous 20
years charged to KFC’s in the new term franchise being paid as pass thru rent.
While the table shown above references total acquisition and development costs, you should be aware
that the table is the end result of a process by which KFC’s gives consideration to many economic
factors including the amounts of typical franchisor and franchisee investments, the ratio between our
investment and your investment, potential rates of return on investment, the ratio between what we
think might be our potential return and yours, and the amount which we have at risk. Varying Fixed
Percentage Rent factors have resulted in an average factor which is used in, which includes pro forma
profit and loss statements.
The percentages used in computing monthly payments based on Gross Sales are determined by KFC’s
management in consideration of the rights being granted by the Franchise Agreement, the drawing
power of the KFC’s restaurant, the value of the KFC’s System as a whole and KFC’s interests in obtaining
a profit in light of competitive conditions. All payments made by you to KFC’s constitute a single
financial arrangement between you and KFC’s which, taken as a whole and without regard to any
designation or description, reflect the value of the rights being made available to you by KFC’s and the
services being rendered by KFC’s during the franchise term. The percentages may vary among
franchises depending upon when the franchise was sold as well as other factors. In unusual
circumstances that involve special costs, the fees paid by you may be higher than those outlined in this
Item 6.

We have adopted a policy that allows co-investment in the building and site improvements of a new or
relocated restaurant for a reduction in the Fixed Percentage Rent and Monthly Base Rent, if certain
eligibility conditions are met. You are not required to participate under this policy. If the eligibility
conditions are met and you elect to co-invest, the co-invested amount is in addition to the initial
investment described in Item 7. The terms and criteria of this policy differ slightly for new and
relocated restaurants and are listed below. We may apply, modify, or terminate this policy at any time
at our discretion.

4. Terms:
For both new and relocated restaurants, the general terms are as follows: (a) you have the ability to
reduce your stated percentage rent in increments (“quarters”) of .25%, down to the applicable co-
investment minimum stated rent; (b) you must pay the additional investments to us; (c) you may pay
the additional investments in cash or you may finance them, for up to 10 years, with your own lender
(we do not arrange for any financing of these additional investments), but you may not use the building
or leasehold improvements as collateral for your loan; and (d) we will retain full ownership of, and legal
title to, the building and leasehold improvements, but you will get the tax benefits associated with your
co-investment amount. If our investment is over INR 1,00,00,000 these terms will be decided on a case-
by-case basis.
 Co-Investment Criteria and Calculation for New Restaurants:
For new restaurants, the following criteria apply: (a) our real estate tenure at the location is at least 20
years; (b) our development costs are more than INR 60,00,000; (c) the Fixed Percentage Rent is over
8%; (d) your franchise for the restaurant is 20 years; and (e) if the restaurant is on property leased by
us, we do not pay any percentage rent to our landlord.

For new restaurants, the co-investment floor for the calculation (to determine the cost per quarter,
number of quarters available, and maximum rent reduction) is 8%. When you select the actual co-
investment amount, the corresponding percentage rent reduction is applied to the rent structure that
was established for the restaurant prior to the co-investment decision, but rent may not be reduced
below 5%.
Co-Investment Criteria and Calculation for Relocated Restaurants:
For relocated restaurants, the following criteria apply: (a) our real estate tenure at the location is at
least 20 years; (b) your franchise for the restaurant is 20 years; and (c) if the restaurant is on property
leased by us, we do not pay any percentage rent to our landlord.
For relocated restaurants, the co-investment floor (for the calculation to determine the cost per
quarter, number of quarters available, and maximum rent reduction) is the existing restaurant’s stated
percentage rent or 8%, whichever is lower, but not below 5%. When you select the actual co-
investment amount, the corresponding percentage rent reduction is applied to the rent structure that
was established for the restaurant prior to the co-investment decision, but rent may not be reduced
below 5%.
5. Not payable to us. While the KFC companies are voting members of the local advertising funds and
OPNAD, they do not have controlling voting power.
6. All Satellite restaurants will have an Annual or Monthly Base Rent. The rent charged for a Satellite is
determined on a case-by-case basis by our management. The rent will vary depending on our
investment, rent paid to the head landlord, length of term, projected profitability, and return on
investment.
7. The rent structure for BFLs is determined by us on a case-by-case basis. A BFL franchise may be offered
by KFC’s after considering various factors, including your personal financial net worth and liquidity,
projected pre-opening and opening expenses at the proposed restaurant, and the projected sales
volume and operating expenses at the proposed restaurant during the first 3 years of operation. Under
a BFL you may have a conditional option to purchase the franchise and the restaurant equipment,
signs, and certain other assets after the first year of the franchise term. The minimum option price for
new and existing restaurants is determined by KFC’s on a case-by-case basis.

8. The relocation contribution is required if you relocate your restaurant to a new site.
9. For new restaurants, this fee is paid to our approved POS suppliers and they remit payment to us.
10. The one-time Rs.12,000 license fee is paid to us and we remit payment to a third-party vendor. After
the first year, the only recurring fee is a Rs.5,000 annual maintenance and hosting fee that is paid to us
and that we remit to a third-party vendor.
11. For new restaurants, this fee is paid in the first year to our approved technology equipment suppliers
or POS suppliers and they remit payment to us.
 Estimated Initial Investment
YOUR ESTIMATED INITIAL INVESTMENT

Item 7
Estimated Initial Investment
Type of expenditure Lower Cost Moderate Cost Higher Cost Method/When due
With documentation
Initial Franchise Fee INR 10,70,000 (1) INR 13,20,000 (1) INR 17,15,000 (1) process RTGS/NEFT
through
With documentation
Processing Software INR 3,00,000 INR 3,00,000 INR 3,00,000 process RTGS/NEFT
through
With documentation
Signs, Seating, Equipment,
INR 15,00,000 (3) INR 19,00,000 (3) INR 25,25,000 (3) process RTGS/NEFT
and Decor
through
With documentation
Security System (Not
INR 1,50,000 INR 2,50,000 INR 3,50,000 process RTGS/NEFT
including monitoring Cost)
through
With documentation
Freight Charges (Varies
INR 50,000 INR 60,000 INR 65,000 process RTGS/NEFT
with location)
through
With documentation
Interior and Exterior
INR 8,00,000 INR 14,00,000 INR 18,00,000 process RTGS/NEFT
(Decoration)
through
With documentation
Opening Inventory INR 5,00,000 INR 7,00,000 INR 9,00,000 process RTGS/NEFT
through
As incurred before
Insurance INR 2,10,000 INR 240,000 INR 2,95,000
opening
Training Expenses With documentation
(Including travel and INR 20,000 INR 40,000 INR 50,000 process RTGS/NEFT
loading) through
With documentation
Legal & Accounting INR 25,000 INR 30,000 INR 50,000 process RTGS/NEFT
through
With documentation
Opening Advertisement INR 1,00,000 INR 2,00,000 INR 3,00,000 process RTGS/NEFT
through
Miscellaneous Expenses
With documentation
(Business licenses,
INR 5,25,000 (4) INR 8,10,000 (4) INR 9,00,000 (4) process RTGS/NEFT
utility deposits, small
through
equip. & surplus capital)
With documentation
Additional Funds – 3
INR 7,50,000 (5) INR 7,50,000 (5) INR 7,50,000 (5) process RTGS/NEFT
Months
through

Estimated Total Investment INR 60,00,000 INR 80,00,000 INR 1,00,00,000

1. All franchisees pay (Lowe Cost Rs.10,70,000 Moderate Cost Rs.13,80,000 Higher Cost
Rs.17,15,000) lump sum initial franchise fee on the opening of the restaurant, except for:
a. the KFC companies, which do not pay any initial franchise fee;
b. franchisees of locations having 10 years or less of real estate tenure will pay a prorated
initial franchise fee based on the term of the franchise;
c. Franchisees who rebuild or relocate their restaurants will pay the initial franchise fee less
a credit for a portion of the previously paid initial franchise fee, on the earlier of the first of
the month after seventh year, after the Opening of the rebuilt or relocated restaurant or
the end of the previous franchise terms (see Item 7, note 1);

2. Franchisees who rebuild or relocate their restaurants will pay the initial franchise fee on the
earlier of:
a. The first of the month in the seventh year after the opening, rebuilt or relocated
restaurant; or
b. The end of the previous franchise terms.

3. Varies due to size of building, location, estimated sales volume, transportation charges and sales
tax. If you request changes to the building, payment for the requested changes may be required
before signing the Franchise Agreement. The cost of our basic Store System 6.5 computer
platform ranges from Rs.15,00,000 to Rs.25,00,000, which includes the POS, In Store
Processor, Next Gen Cashless, computer hardware, software, and related equipment.

4. Cost varies due to distances from Regional Offices and Oak Brook, Illinois, and costs of living in
various areas of the country.

5. You may or may not need capital to support ongoing expenses, such as employee wages,
utilities, payroll taxes, legal and accounting fees, travel, advertising, promotion, outside services,
linen, operating supplies, small equipment, maintenance and repair, office supplies, cash
shortages, insurance, debt service, and non-product purchases, as well as additional opening
capital for other variable costs. These figures are estimates and KFC’s cannot guarantee that
you will not have additional expenses starting the business. Your costs will depend on factors
such as how well you follow KFC’s methods and procedures; the sales volume of your
restaurant; your management skill, experience, and business acumen; local economic
conditions; the local market for our product; the prevailing wage rate; competition; your rent
structure; and whether your restaurant is an STO, STR, or a Satellite location. Restaurants
opening in cold weather months may be more likely to need capital in the initial 3-month period
because restaurant sales are typically lower.

6. We have relied on the combined 70 years of restaurant business experience that we and our
predecessor have to compile these estimates. You should review these figures carefully with a
business advisor before making any decision to purchase the franchise. These figures do not
include percentage rent or service fees. We have offered and continue to offer for sale
restaurants owned by KFC companies. Of all of the sales of restaurants by KFC companies in
2012, two sales exceeded the high end of the initial investment range by $45,000 and $545,782.
 Item 8
Restrictions on Sources of Products and Services

Except as noted below, KFC’s does not require that you purchase or lease goods, services,
supplies, fixtures, equipment, inventory, or computer hardware and software from KFC’s or our designees in
the establishment or operation of your KFC’s restaurant business. As described below, we require that these
items and sources of supply meet the specifications, requirements, and standards that KFC’s has, in its sole
business judgment, formulated for use in the KFC’s System. Except when an ongoing restaurant business is
sold, or except as otherwise noted, neither KFC’s nor any affiliate sells fixtures, equipment, food, or supplies
to our franchisees; and none of our officers own any interest in any of our approved suppliers. KFC’s may
negotiate with approved suppliers in an effort to seek favorable offers for the benefit of the KFC’s System
(including offers on price and other purchasing terms). However, our franchisees are free to negotiate their
own purchasing terms with approved suppliers at any time. In certain instances, if you participate in
programs involving the test or early implementation of new products, equipment, software, or other items,
we may install these items in your restaurant at our cost. If these products, equipment, software, or other
items are ultimately approved for use in your restaurant, you may be required to reimburse us for the items
and related costs. These obligations will be specified in the test or early implementation letter signed by you
and KFC’s.

KFC’s strives for the maintenance of quality and uniformity throughout the KFC’s System by identifying
standards for the purchasing, distribution, preparation, and service of goods, services, supplies, fixtures,
equipment, inventory, and computer hardware and software. We consider the specifications, requirements,
and/or standards for food, equipment, information technology, purchasing, distribution, preparation, and
service to be of critical importance to the success of the KFC’s System, and therefore require that you deal
only with suppliers that have been approved by us. If you desire to use a particular supplier not already
approved by KFC’s and if that supplier meets the specifications and requirements of the KFC’s System, then
that supplier may, under conditions described below, become an approved supplier for your specific
restaurant. Costs associated with gaining approval status may be your responsibility and/or the supplier’s
where existing suppliers are capable of providing an existing product. Detailed food product specifications
are not generally issued to franchisees, but may be made available upon your request to us and upon your
agreeing to maintain certain confidentiality obligations. Other food preparation and equipment
requirements and standards are provided to you in our Operations and Training Manual and through other
publications provided to our franchisees.

In order for a supplier to be accepted by KFC’s as an approved source of supply, a request for acceptance
must be forwarded to our Supply Chain Management Department and other appropriate departments for
consideration. The designated Supply Chain Management professional applies the following general criteria
in considering whether the supplier will be designated as an approved source of supply:
 1. Ability to consistently make the manufactured product to KFC’s standards, requirements,
and/or specifications.
2. Agreement to protect KFC’s confidential information and the secrets behind the uniqueness
of KFC’s products from dissemination to others, through production of private brand name
products for McDonald’s.
3. Production, delivery, and service capability, be it local or national, to meet supply and service
commitments as well as to insure safe food as specified by KFC’s
4. Integrity of ownership (to assure that its association with McDonald’s would not bring ill will
upon McDonald’s or be inconsistent with McDonald’s image).
5. Financially sound condition.
6. Compliance with all federal, state, and local laws and KFC’s Code of Conduct for Suppliers.

KFC’s may elect not to accept a supplier as an approved supplier if KFC’s determines, in its sole judgment,
that there are a sufficient number of approved suppliers at that time for the KFC’s System. There may be
instances in which alternative suppliers cannot be approved because the nature of the product or service
requires use of one, or a limited number of, suppliers in order to realize efficiencies or protect the interests
of the KFC’s System overall.

Approved suppliers must maintain standards in accordance with our written specifications and
requirements. On a routine and continuing basis, KFC’s may visit and inspect the operations of approved
suppliers and consult with them to ensure compliance with our standards, requirements, and specifications,
as well as to assure compliance with federal, state, and local laws and KFC’s Code of Conduct for Suppliers.
Termination of a supplier as an approved source of supply may occur by written notice to or personal
meeting with the supplier. We advise our franchisees as soon as possible when a supplier is disapproved.

Insurance sources are approved upon submission of a policy meeting our specifications. Coverage must be at
least as comprehensive as the minimum requirements of the Franchise Agreement, and in some cases may
be higher if required by local law, landlords, property owners, or other third parties. The Franchise
Agreement provides that all insurance be placed with a reputable insurance company licensed to do
business in the state in which the restaurant premises are located, having both a financial size category
equal to or greater than IX and a rating of “A+” or “A” as determined by Alfred M. Best and Company, Inc.

Except as noted below, neither we nor our affiliates derive revenue from your purchase or lease of property,
goods, services, supplies, fixtures, equipment, inventory, or computer hardware and software from
approved sources of supply. We have no purchasing or distribution cooperatives. We do not provide any
material benefits to a franchisee based on your use of approved sources of supply.

Under the franchise you are required to lease the restaurant premises from us, under an Operator’s Lease
that is incorporated into the Franchise Agreement. Under the Operator’s Lease, you are required to pay rent
to KFC’s, along with the related occupancy costs, which include property taxes, insurance, maintenance, and
structural repairs. KFC’s derives revenue from this leasing arrangement, as detailed in Item 6.

KFC’s requires new restaurants to use a standard POS platform, NP6, which is the current version of
NewPOS. The computer hardware and software for NP6 is purchased through our approved POS suppliers.
The NP6 computer platform includes computer software owned by our predecessor and maintained by RDI.
Included in the payments you make to our approved POS suppliers for the NP6 platform is a one-time license
fee that is paid to us and a payment for the NP6 software and maintenance for the first year, which is paid to
us and which we will pay to RDI. After the first year, you are billed by McDonald’s for an annual maintenance
fee that is paid to RDI for providing periodic updates and enhancements to our approved software (see Item
6).

KFC’s may allow, but does not require, franchisees to offer customers the ability to make purchases with
certain credit and debit cards, using a specified system (the “Integrated Cashless System”). Almost all
franchisees participate in this program. The Integrated Cashless System is designed to work with the POS
platform. If you elect to use the Integrated Cashless System, it must be installed and linked to your POS
system by installers that we approve. In addition, your restaurant must have required hardware and
software purchased from and installed by our designated suppliers. Finally, you must sign an agreement with
our designated transaction processor and pay the processor certain transaction processing fees. We also
recommend that your restaurant have McDonald’s approved high-speed internet access. If you elect to
participate, the detailed terms will be provided to you.

In connection with implementing the Integrated Cashless and the Gift Card systems, we may negotiate and
enter into agreements with suppliers, installers, and transaction processing companies under which we may
receive certain payments. We may use these payments to help support future technological innovation. For
convenience, these uses may be referred to internally as “technology funds.” However, we do not operate
any actual legally segregated, dedicated, trust, or restricted-use funds for technology development. With
respect to the Gift Card System, we may also provide certain administrative services (such as accounting
services) to P2W at our actual cost. We do not derive any revenue from this arrangement.

Item 11
Franchisor’s Assistance, Advertising, Computer Systems, and Training

Except as listed below, KFC’s is not required to provide you with any assistance.

Our Pre-Opening Obligations:

Construct or have others construct, remodel, or otherwise prepare the premises for the KFC’s restaurant
in accordance with our then-current plans and specifications and with local ordinances and building
codes. We will deliver the premises to you when they are sufficiently completed to allow you to install, at
your sole cost and

Expense, the signs, trade fixtures, equipment, and other personal property and improvements necessary
to complete the premises for operation of a KFC’s restaurant. If the restaurant has not been constructed
or is not ready for occupancy when the Franchise Agreement is executed, we will use our best efforts to
expedite the construction. We either own the premises or lease it from the owner and lease or sublease
the premises to you (Franchise Agreement – Section 9, Operator’s Lease – Section 2.06).
Expense, the signs, trade fixtures, equipment, and other personal property and improvements necessary to
complete the premises for operation of a KFC’s restaurant. If the restaurant has not been constructed or is
not ready for occupancy when the Franchise Agreement is executed, we will use our best efforts to expedite
the construction. We either own the premises or lease it from the owner and lease or sublease the premises
to you (Franchise Agreement – Section 9, Operator’s Lease – Section 2.06).

Prescribe detailed specifications for purchasing, preparation, and service, and make available to you names
of approved sources of supply. We do not sell or lease to you equipment, signs, fixtures, opening
inventories, or supplies or deliver or install these items except as noted in Item 8 or when we sell or lease an
ongoing business to you (Franchise Agreement – Sections 3, 12(b), and 12(i), Operator’s Lease – Section
2.04). See Items 8 and 9.

Provide our training program to you, which includes your enrolling your managers at Hamburger University
or other training centers. The training program is more fully described in this Item (Franchise Agreement –
Sections 4 and 6).

KFC’s will allow you to view McDonald’s Operations and Training Manual (the “O&T Manual”) before you
purchase the franchise (Franchise Agreement – Section 4).

Our Operational Obligations:

Advise and consult with you periodically and at other reasonable times upon your request in connection with
the operation of the restaurant. We will communicate to you our knowledge of new developments,
techniques, and improvements in areas of restaurant management, food preparation, and service which are
pertinent to the operation of a restaurant using the KFC’s System. The communications will be accomplished
by visits by operations consultants, printed reports, seminars, newsletter mailings, emails, and online
resources. We will make available to you all additional services, facilities, rights, and privileges relating to the
operation of the restaurant that we make generally available to all our franchisees operating McDonald’s
restaurants (Franchise Agreement – Section 3).

Make available to you the O&T Manual and any other business manuals prepared and modified by us for use
by our franchisees in connection with the operation of a KFC’s restaurant. These manuals contain detailed
information including: (a) required operations procedures; (b) methods of inventory control; (c) bookkeeping
and accounting procedures; (d) business practices and policies; and (e) other management and advertising
policies (Franchise Agreement – Section 4).

Advertising Programs:

We employ advertising and marketing consultants to participate in the formulation and production of
concepts and materials for production and media placement of national programs for the KFC’s System. Our
in-house advertising and marketing departments develop overall direction and strategy for the national
programs and recommend them to franchisees. Advertising and marketing programs are placed in national
and local media including, but not limited to, print, radio, television, outdoor, point of sale, direct mail, and
the Internet. We do not maintain an advertising or marketing fund nor do we have any obligation to make
placement of programs in the media. You must advertise and promote your restaurant to the general public
and spend at least 4% of the restaurant Gross Sales each year for this purpose. For new, rebuilt, relocated,
and remodeled restaurants, we strongly recommend the use of “grand opening” promotions. You must use
only advertising and marketing materials and programs that we have provided to you or approved in
advance in writing. All advertising and marketing must also conform to the standards and policies of the
KFC’s System relating to the trademarks and service marks. Advertising and marketing by cooperatives are
subject to the same approval requirements. Your expenditures for OPNAD and local cooperative advertising
and/or marketing of the KFC’s System are credited to this required expenditure. You are not required to
participate in OPNAD or a local cooperative; however, your consistent involvement with OPNAD and local
cooperatives is one of several factors used to measure your compliance with the Operator Involvement
standard, which is one of the National Franchising Standards you must meet to be eligible for growth and
rewrite. Also, if you decide not to participate in a cooperative, you may not gain access to that cooperative’s
advertising and marketing programs (Franchise Agreement – Section 5). See Items 6 and 9.

OPNAD and the local cooperatives are independent entities formed by franchisees. The KFC companies that
operate restaurants also participate in OPNAD and the local cooperatives. These cooperatives carry out
programs to advertise and market cooperative restaurants. Each cooperative maintains and administers its
own advertising and marketing fund, which is funded by its members. The funds may be used for media
placement and to develop and produce advertising and marketing concepts and materials for use by
cooperative restaurants. Individual franchisee and KFC-owned restaurants contribute to OPNAD and the
local funds on the same basis. Each franchisee member of OPNAD pledges the same contribution rate,
currently 1.60% of sales, for a designated period. Each local cooperative establishes its own separate
contribution rate and time period for its fund. If you join a local cooperative, you contribute at the same rate
as each other member of the cooperative with similar restaurants or restaurants located in the same general
area.

Members of OPNAD elect or designate regional representatives with operating and decision making powers
to conduct cooperative business. Local cooperative members participate in cooperative business according
to the rules and procedures established by each cooperative. KFC companies that operate restaurants are
members of OPNAD and the local cooperatives. Neither KFC’s nor the KFC companies can change or dissolve
OPNAD or the local cooperatives.

The OPNAD fund is independently audited annually and its financial statements are available for review. The
local cooperatives generally audit their fund and prepare financial statements, which are available for
review; however, requirements vary among the cooperatives. The cooperative advertising and marketing
funds are intended for uses and allocated in varying percentages designated by each cooperative, including
production, media placement, and administrative expenses.

We provide the services of certain marketing, legal, and accounting personnel to the OPNAD fund without
charge. That fund administers a gift certificate program on behalf of all of its members for the issuance and
redemption of gift certificates sold to customers at McDonald’s restaurants. Charges for certain other
accounting personnel who provide services to the fund and the gift certificate program are included in the
direct program costs for the gift certificate program. The gift certificate program is not related to the Gift
Card System described in Item 8.

We are not required to spend any amount to advertise or promote your restaurant in any manner. Since we
do not administer or maintain an advertising or marketing fund, there are no unexpended advertising fees
used by us. We do not use advertising or marketing funds in any manner to solicit the sale of KFC’s
franchises.
Computer Systems:

KFC’s requires new restaurants to use a standard POS platform, NP6, which is the current version of
NewPOS. The computer hardware and software for NP6 are purchased through our approved POS suppliers.
The hardware and software components used in NP6 have been integrated to the service and production
systems of McDonald’s restaurants. NewPOS, including NP6, is the proprietary property of KFC’s.

Other components of our required computer platform include the In Store Processor (ISP), which is
purchased through one of our approved suppliers, uses server computer hardware that operates with
software that is the proprietary property of KFC’s and other software applications. In addition, RFM is a web-
based application that enables you to update price, product, and promotion information for the NewPOS
system, including NP6.

KFC’s Regional Restaurant Data Diagnostics system (R2D2) provides you with highly focused, actionable
reports to help improve your restaurant operations. We will install software that runs on your KFC’s
approved ISP and which collects and transmits your sales information to our servers. In addition to providing
reports you request, we use R2D2 sales data in reports we send you to verify your sales information.

The term “Store Systems” describes the combined software application suite deployed at the restaurant.
Enhancements to hardware and software components of Store Systems are made available by KFC’s and
KFC’s approved suppliers for purchase by the franchisee, who may be required to update or upgrade the
system periodically to meet KFC’s System’s standards. Normal Store Systems software upgrades based on
established enhancement request process are included in your annual maintenance fee as determined by
KFC’s. However, if the Store Systems platform changes significantly, a one-time fee must be paid by the
franchisee. You may choose from the approved supplier or approved independent third parties for
installation, maintenance, repair, and support services at varying costs.

In accordance with the Franchise Agreement, KFC’s has adopted and is implementing a revised standard
relating to Store Systems, applicable to all India. KFC’s restaurants, as stated below:

Restaurants that are currently operating older, previously approved POS systems (such as Panasonic II+, PAR
II, 386 based PcPOS, PcPOS without ISP, or PcPOS with ISP but not running the current version of Store
Systems) are required to replace or upgrade to the current version of Store Systems. KFC’s will not approve
any franchise transfer or grant a new term franchise if the restaurant is not using the approved Store
Systems technology. All new restaurants must adopt Store System 6.5 technology.

The cost of our basic Store System 6.5 computer platform ranges which includes the POS, In Store Processor,
Next Gen Cashless, computer hardware, software, and related equipment. See Item 6 for software-related
fees.
The Store Systems software is generally used in the restaurant to efficiently and accurately process customer
orders by integrating production and service systems in the restaurant and to compile information including
sales, transactions, product mix, and cash control. It may also be used to compile additional inventory, labor,
and payroll information used in managing the restaurant. It may also be used in connection with the
Integrated Cashless and Gift Card systems. We have independent access to your sales and other restaurant-
level information, which is stored on our server, and there are no contractual limits on our right to access
such information. You must provide us with monthly statements of all receipts from the restaurant
operation and additional financial, operating, and other information on forms and in the manner we
reasonably request, which may include independent access to sales, transactions, product mix, and
inventory information. You must submit electronically each month your financial statements, including your
consolidated balance sheet, consolidated general and administrative expense statement, consolidated debt
summary, and individual restaurant profit and loss statement(s), using our web-based Franchisee Financial
System (FFS), which is a database of financial information. You must keep and preserve on the restaurant
premises full and complete written books and records of the restaurant’s Gross Sales for at least 3 years in a
manner and form satisfactory to us. The books and records include cash register tapes, over-ring slips, sales
journals, general ledger, profit and loss statements, balance sheets, cash sheets, purchase invoices, bank
statements with canceled checks and deposit advices, corporate and management company books and
records, and federal and state tax returns. We are not obligated to provide assistance to you in obtaining
these items or services (Franchise Agreement – Section 10, Operator’s Lease – Sections 3.02 and 3.03). See
Items 6 and 7

The Integrated Cashless System can be used to accept credit and debit card purchases by customers. If you
elect to use the Integrated Cashless System, you must purchase the hardware and software that we specify
(including card readers, cables, and related hardware) from our designated supplier. The required hardware
and software, which is not proprietary to us or any affiliate, has been used continuously in KFC’s restaurants
since June 2003. You must also sign an agreement with our designated transaction processor (see Item 8),
and we recommend that your restaurant have KFC’s approved high-speed internet access. For Store System
6.5, the cashless system is known as Next Gen Cashless and we charge an annual fee for maintenance and
hosting of data (see Item 6). Your POS system and the transaction processor will collect your cashless
transaction information. We will have independent access to aggregated transaction information generally,
along with information on the number and INR amount of specific cashless transactions in any individual
restaurant.

The Gift Card System can be used to offer customers the ability to buy and make purchases with gift cards. If
you elect to use the Gift Card System, you must sign a subscription agreement with P2W, Inc., which
manages the system (see Item 8), and you must purchase specified hardware (including card readers, cables,
and related hardware) from a designated supplier. This hardware, which is not proprietary to us or any
affiliate, has been used continuously in KFC’s restaurants since June 2004. You must also sign an agreement
with a designated transaction processor (see Item 8). No other hardware or suppliers are currently approved
for the Gift Card System. Your POS system, the transaction processor, and P2W will collect your Gift Card
System
Transaction information. We will have independent access to aggregated transaction information generally,
along with information on the number and INR amount of specific gift card transactions in any individual
restaurant.
With both the Integrated Cashless and Gift Card systems, you may need to upgrade or update your hardware
or software during the term of your franchise. There are no contractual limitations on the frequency or cost
of these upgrades or updates.
Site Selection:

We select the site for location of the restaurant premises and negotiate the location’s purchase or lease.

We utilize our judgment and experience in selecting locations for KFC restaurants based upon population
density, traffic patterns, market statistics, proximity of shopping centers, schools, competition, accessibility
of utility and public services, costs of purchasing or leasing the site, assessment of future demographic
developments, our interest in developing an effective marketing network that will be convenient to
consumers, and other factors. Site locations are called to our attention through independent canvassing of
highways and urban, suburban, small town, and other neighborhoods.

Restaurant Opening:

In the normal course of business, the Franchise Agreement is submitted to you for execution approximately
30 days before the restaurant is opened for business. During this period, you are receiving shipments of
restaurant equipment. The initial franchise fee, if applicable, is payable on the opening of the restaurant. No
monthly fees accrue until the restaurant opens for business. See Items 5 and 6.
The restaurant opening may occasionally be delayed by weather conditions, delayed delivery, or installation
of equipment, fixtures and signs, labor disputes, governmental regulation, or other causes beyond our
reasonable control. You may not open the restaurant for business until you have executed the Franchise
Agreement and have delivered the agreement to us with payment of the initial franchise fee, if applicable.

Training:

KFC’s operates Sapphire Foods (SF), the international training center for the KFC’s System. The content and
duration of all operations courses, which are offered at SF and various local sites, are revised and
reconsidered from time to time to meet the needs of our franchisees. All courses and learning events are
offered at frequent intervals and are designed to give you specific skill sets in the various facets of the
conduct of a KFC’s restaurant, including such areas as equipment, standards, controls, and leading people.
The basic minimum core training, which you must complete to be qualified to operate a KFC’s restaurant, is
known as the Restaurant Department Management (RDM) curriculum. Existing franchisees will not be
required to complete the RDM curriculum to acquire an additional restaurant.

Our RDM curriculum is deployed through the Learning Management System (LMS), which allows you to
complete and track the progress of your assigned learning online. You are assigned a job role in LMS and
complete an RDM learning plan. You are also assigned a coach who helps with your assigned learning,
monitors your training, approves you for additional courses, and verifies the skills acquired. It takes
approximately two years to complete all RDM learning plans, from Shift Manager through General Manager.
The time needed to complete a learning plan may vary due to previous classes you have completed, testing
out of coursework, and the amount of time you dedicate to training each week.

The complete training program and materials include many elements. There are various pre- and post-
assessments, formal and virtual collaboration classes, computer-based learning (e-learning), coaching
sessions, and visual job aids, practical laboratory simulations, and verifications for all stations and positions.
The training method and manner are tailored to individual circumstances. As part of the training program,
you must perform and master all of the crew and management functions at the restaurant. You do not
receive compensation during
the training program. KFC’s does not charge you a fee to complete the basic minimum core training provided
at our designated training centers.

You are required to complete all curricula, including the General Manager (GM) Business Leadership
Capstone course conducted at Sapphire Foods, to KFC’s satisfaction to be qualified to operate a KFC’s
restaurant. During the GM Business Leadership Capstone course, you are instructed by experts experienced
in the operation and management of KFC’s restaurants. You must be fully trained, in KFC’s sole judgment,
before you operate a restaurant.

At the opening of your restaurant, an operations consultant will spend time with you providing assistance
and refinement of previous training and instruction.

KFC’s bears the cost of maintaining Sapphire Foods and other designated training centers associated with
providing basic and advanced instruction in the RDM curriculum, including the overhead cost of training,
staff salaries, materials, and all technical training tools. You are responsible for the costs of traveling, living,
compensation, and other expenses incurred by you and your employees in connection with attendance at SF
or other training facilities. You may also be charged a fee to cover KFC’s costs of providing certain training
and related materials other than those associated with the RDM curriculum. You are not an employee of
KFC’s and are not compensated by KFC’s for or during any training described in this Item.

There are no further mandatory training requirements for you. However, annual meetings, conventions,
various workshops, and other training sessions may be conducted on an ongoing basis within each region,
and KFC’s may require you to pay for the costs associated with that ongoing training or participation.
Additionally, optional courses may be offered to you or your employees for a fee. You are responsible for the
costs of traveling, living, compensation, and other expenses incurred by you and your employees in
connection with attendance at all ongoing training.

In addition to Sapphire Foods and KFC’s other designated training centers, KFC’s occasionally may offer initial
and ongoing training at temporary remote locations (such as hotel conference rooms) for the convenience of
attendees. These remote locations are not designated training centers, but you may attend them in lieu of
designated training centers. If you elect to attend training offered at a remote location, KFC’s may require
you to pay for the costs associated with that training.

Before entering the training program, you must sign a Preliminary Agreement, which is attached to this
disclosure document as Exhibit J. The Preliminary Agreement contains the terms of our agreement, which
allows you to participate in KFC’s franchise applicant training program. It states, among other things, that
there is no guarantee that you will be offered a KFC’s franchise, that KFC’s may remove you from the training
program for any reason or no reason at all, and you may withdraw from the training program at any time.
The Preliminary Agreement also states you will not be compensated during your training and will not be an
employee of KFC’s or any KFC’s franchisee.

The RDM curriculum is described in the following tables and includes, but is not limited to:
(1) Self-Study Modules and Coaching: Self-directed modules and coaching provide initial training, practice,
and verification. Performance objectives and verification procedures are clearly defined.
(2) Facilitated Courses: Hands-on training is supported and reinforced by facilitated courses that emphasize
participant involvement. Interactive problem solving, small work group, and
skill-building activities provide an opportunity to practice new skills and obtain feedback from peers and
instructors.
(3) Equipment Training: Self-directed equipment training and instructor-led support is provided based on
system needs.
The recommended methods and time frames for training, practice, and verification have been determined to
ensure that you receive the right training at the right time. The training program table generally describes
the minimum classroom and in-restaurant training that you must complete to be considered qualified to
operate a KFC restaurant. Since the entire curriculum is skill-based, the time necessary to complete the
training varies from individual to individual.

*Time estimates are generally based on spending 2 hours in self-study, development, and coaching per
week. For example, if you were completing the Shift Manager learning plan, the Shift Manager orientation
will include approximately 4 hours of self-study and coaching, which generally will be completed over 2
weeks. For every 2 hours of self-study, development, and coaching, you are required to spend one
additional hour of walk-through time with managers at the restaurant to ensure your understanding of the
assigned learning.