Meritage Hospitality Group, Inc.

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International Guild of Hospitality & Restaurant Managers

Meritage Hospitality Group Inc., incorporated in 1986, is engaged in the quick-service restaurant business. The Company is a Wendy's Old Fashioned Hamburgers restaurant franchisee in the United States. Meritage serves approximately seven million customers annually through its operation of 40 Wendy's restaurants in western and southern Michigan. All restaurants are operated pursuant to franchise agreements with Wendy's International, Inc., the franchisor of the nationally recognized quick-service restaurant system that operates under the Wendy's brand name. The Company's Wendy's restaurants are operated by Wendy's of Michigan, a limited partnership that is owned by a wholly owned subsidiary of Meritage.

In 2001, Meritage opened eight new Wendy's restaurants and plans to open eight to 10 additional Wendy's restaurants in fiscal 2002. The Company's primary growth strategy is to expand its Wendy's business through the development of new restaurants within its designated market area, and through the development and/or acquisition of Wendy's restaurants in other market areas.

The Company's restaurants are located in the Michigan counties of Allegan, Calhoun, Ionia, Kalamazoo, Kent, Muskegon, Newaygo, Ottawa and Van Buren. This includes the metropolitan areas encompassing the cities of Grand Rapids, Kalamazoo, Battle Creek, Muskegon and Holland. This geographical area generally comprises Meritage's designated market area.

Each Wendy's restaurant offers a diverse menu containing a variety of food items featuring hamburgers and chicken sandwiches, all of which are prepared to order with the customer's choice of condiments. The Wendy's menu includes other items, such as chili, baked and french fried potatoes, chicken nuggets, freshly prepared salads, soft drinks, Frosty desserts and children's meals. Each Wendy's restaurant features soft drink products supplied by the Pepsi-Cola Company and its affiliates. Wendy's International maintains significant discretion over the menu items that are offered in the Company's restaurants.

The Company's restaurants typically range from 2,700 to 3,400 square feet, with a seating capacity of between 90 and 130 people, and are typically open from 10:00 a.m. until midnight. Generally, the dining areas are carpeted and informal in design, with tables for two to four people. All restaurants also feature a drive-through window. Sales from drive-through customers accounted for over half of the total restaurant sales in fiscal 2001.

Meritage operates its restaurants pursuant to various agreements, including one franchise agreement for each restaurant, with Wendy's International. These agreements grant privileges, such as the right to utilize Wendy's International's trademarks, service marks, designs and other proprietary rights, such as Wendy's and Wendy's Old Fashioned Hamburgers, in connection with the operation of its Wendy's restaurants. These agreements also impose requirements regarding the preparation and quality of food products, the level of service, capital improvements and general operating procedures. The franchise agreements in place expire in approximately 16 years. Subject to certain conditions, the Company can renew the franchise agreements for an additional 10 years.

The franchise agreements with Wendy's International provide that a change in the operational control of Wendy's of Michigan or the removal of a guarantor of the franchise agreements cannot occur without the prior consent of Wendy's International. In addition, any proposed sale of the Wendy's business, interests or franchise rights is subject to the consent of, and a right of first refusal by, Wendy's International. These agreements also grant Wendy's International wide discretion over many aspects of the restaurant operations, and often require the consent of Wendy's International to carry out certain operational transactions.

The Company competes with McDonald's, Burger King and Taco Bell.

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