Methodology
 
   
QuikValueSM Method
Lenders to closely held businesses carefully examine the ability of those businesses to repay debt. They base amounts they are willing to lend to the operation of a business on, among other things, its sustainable Free Cash Flow emanating from that business's non-Real Estate Fixed Assets, which is defined as Cash Flow from Operations (after deducting applicable General & Administrative Expenses):

(1) adjusted for Market Rent, where the real property on which the restaurant operates is owned or controlled by the Client or a party that controls, is controlled by, or is in common control with the Client, and
(2) reduced by the amount of recurring Capital Expenditure that is required to sustain Revenues as of the Valuation Date, and
(3) reduced by the cost of maintaining Inventory, Receivables and Other Current Assets that are required to sustain Revenues as of the Valuation Date, and
(4) reduced by the amortization of one-time Capital Expenditures for Replacement of Capital Assets, such as Improvements to Land, Building & Leasehold, and Fixtures, Furniture and Equipment.

The amount of debt a lender is willing to extend to a business may be further affected by the overall Loan-to- Value ratio or by the Net Book Value of its Fixed Assets (which is the original cost of those assets minus the economic depreciation that has accrued to them since they were placed in use).

Lending terms being offered by lenders to the restaurant/foodservice market are collected by QuikValSM from the market, and analyzed and used in the calculation of the rate of return required by those lenders in exchange for their providing debt. Proprietary algorithms are used by QuikValSM to relate the rate of return required by lenders to that required by an equity holder who is either:
(1) a willing buyer in an acquisition of an enterprise, or
(2) an existing owner in the recapitalization of an enterprise.

These algorithms have been used to value businesses that are the subject of actual sale/purchase transactions and re-capitalizations; these algorithms and their attendant application methodologies continue to be refined as more data are collected from actual transactions in the marketplace. The QuikValueSM calculated by QuikValSM relies solely on the application of these algorithms to the data provided by the Client to QuikValSM and is designed to indicate of the center point of a value range. This QuikValuationSM is subject to the limiting conditions stated in Exhibit A to this report.

Summary
The QuikValuationSM Method marks to market, as of the Valuation Date, the assets of the subject company in three categories, Current Assets, non-Real Estate Fixed Assets, and Real Estate, as follows:
(1) Current Assets are marked to market based on advance rates and revolving interest rates,
(2) Non-Real Estate Fixed Assets are marked to market based on the sustainable Free Cash Flow of the business and on market lending rates and terms, and
(3) Real Estate is marked to market based on its recent appraised value or on its fair market rent, as provided by our Client, and on market lending rates and terms.

QuikValSM makes no attempt to mark any debt to market. It is assumed that all debt is fairly stated in the information provided to QuikValSM and can be repaid without penalty as of the Valuation Date.