Registered letter McDonald's

SEBOL SA Monsieur Bernard COLLORAFI 2721 Chemin de Saint Claude Immeuble Keria 06600 ANTIBES Guyancourt, 27.03.1997 Registered letter AR Bernard, I am following up on the letter of the 12th received from your lawyer. The terms of his letter make me react strongly and lead me to think that he is unaware of how our network operates. 1) Regarding his remark about the so-called "claim": You sent us several letters in which you express: - your fears of seeing McDonald's restaurant openings develop in the surroundings of ANTIBES: restaurants to take part in this development, even claiming exclusive operation of these McDonald's favouring local dialogue with its contracting partners, you were able to express your point of view and obtain answers both from your Regional Director and from myself. During these discussions, we reminded you in particular that signing a McDonald's lease-management agreement (*location-gérance*) confers no territorial exclusivity (art. 7 "Non-exclusivity"), nor any right to operate a second restaurant (see below). 2) Regarding the selection of candidates and the allocation of sites: The selection of candidates is made on the basis of criteria taking into account both the financial and personal capacities of a candidate to operate a restaurant, or even two or more. On the basis of these criteria, McDonald's France evaluates the various candidates and, under its sole responsibility, makes its decision as to the allocation of sites. The fact that a candidate is already a lessee-manager confers on him no right to operate a second restaurant in the vicinity of the first; the text of the aforementioned article 7 of the lease-management agreement (which you signed in 1987) is in this respect particularly clear: "The lessee-manager expressly acknowledges that this agreement grants him only the right to operate the Restaurant in the premises defined above for the agreed term and confers on him no territorial concession, exclusivity or territorial protection. This agreement does not allow him to prevent or hinder the establishment or extension at any time of McDonald's restaurants". McDonaldS 3) Regarding the alleged discrimination: McDonald's has operated restaurants in France since 1972, the development of the network having been carried out through lease-management (*location-gérance*) since 1979. Of 550 restaurants opened to date, only 12% are operated directly by McDonald's. These figures show, if need be, that the development of the operation of restaurants is carried out harmoniously and for the benefit of the lessee-managers. The national average is 2 restaurants operated per lessee-manager. I note that with soon 3 restaurants under lease-management, you will be above this average. Moreover, there is absolutely no custom of allocating sites at McDonald's. Many towns have McDonald's restaurants operated by different lessee-managers. 4) Regarding the opening of new restaurants: Your lawyer's letter suggests that he denies McDonald's France the right to continue the development of its network by opening new restaurants. You will allow me to hold a different view. Like any company, McDonald's France has the legitimate ambition to develop. The current expansion of our network in the Alpes Maritimes is no different from the one we have in the other French départements. If this development may nevertheless appear rapid in the region where you are located, it rather reflects the catching up of the delay incurred by our brand in the exploitation of this market. The "catchment area" mentioned by your counsel is an economic and not a legal notion. Market studies reflect a constant evolution of urbanisation zones and of the economic fabric. They are the photograph of an economic situation at a given moment whose evolution will be more or less rapid depending on the region but which will evolve. If there is any economic common sense, it is there! 5) Regarding the profitability of the restaurants: McDonald's never "promises" levels of turnover or profitability to its operators. These are, just like us, independent traders who carry on an activity in a field where risk is an essential notion. We are, to say the least, as concerned as you that the investments made at the ANTIBES sites be made profitable thanks to the turnover they will generate. Our own investments are four times greater than yours on these sites! Likewise, we never force anyone to operate our sites! If you freely agreed to operate the restaurants of ANTIBES NORD and ANTIBES OUEST, it can only be after having exercised your responsibility as a business owner and therefore having judged, given your own knowledge of a market in which you have worked for 10 years, that the profitability prospects of the said restaurants are real. Finally, you know very well that in the event of financial difficulties linked to a difficult economic context, McDonald's plays the partnership and fairness card fully. You were thus able recently to verify this responsible attitude of McDonald's, new financial conditions having been granted to you for ANTIBES NORD I hope that these few elements of reply will dispel your counsel's misunderstandings and I remain, Bernard, yours sincerely. Denis HENNEQUIN Chairman and Chief Executive Officer c.c. Maître Jean-Paul CLEMENT