WINGS OVER KNOXVILLEACQUISITION OPPORTUNITY

AUGUST 30TH, 2020

TYLER SHINE; VICE PRESIDENT, STRATEGY & CORPORATE DEVELOPMENT

TABLE OF CONTENTS

• Executive Summary

• Site Overview

• Financial Analysis

• Market / Competitive Set Details

• Key Opportunities

• Key Risks / Mitigants

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

• Wings Over, a 40-unit fast casual restaurant operator with geographic density in the

Northeast and Midwestern United States (www.wingsover.com) is offering a chance to

buy into a currently-operational store in Knoxville, TN.

• The store is located on Cumberland Avenue, on the campus of the University of

Tennessee, and currently meets 100% of corporate-defined standards for renovation

quality and technology suite integrations (will not require incremental capital

deployment for ~5 years).

• Unit is corporate-operated today; company strategy has shifted such that Knoxville

area is no longer a priority for long-term expansion and unit density

EXECUTIVE SUMMARY (CONT.)

• Incoming operator will pay franchise fees of $30,000 to cover cost of franchise

agreement origination and execution

• Operator will not be required to pay royalty fees to Wings Over for the first twelve

months of ownership

• After first twelve months of ownership, operator will be responsible for payment of a)

5% of monthly gross sales in the form of a royalty payment; b) a percentage of gross

sales for contribution to a national advertising fund; and c) 20-30% of net operating

profit shared with Wings Over in perpetuity

SITE OVERVIEW

SITE OVERVIEW

• Location is on the heart of University of Tennessee campus and directly adjacent to

downtown Knoxville demand drivers: Knoxville Convention Center, regional medical

center, football stadium, and university.

• Population density, household count, and median household income all in line with

highest-performing Wings Over units in system

• Visibility of site equivalent to highest-grossing downtown restaurant locations

• No concerns around ingress/egress, signage, or parking ability relative to highest-

performing units in Wings Over system

SITE OVERVIEW (CONT.)

• Direct fast casual competitive set includes Chipotle, Panera, and Panda Express. Units

in all three systems rank either “A” or “B” within their respective branding, confirming

feasibility of fast-casual restaurant product in geography.

• Secondary quick-service competitive set includes McDonalds, Jimmy Johns, Chick-Fil-A,

and Taco Bell: these restaurants tend to be indicators of total restaurant demand in an

immediate geography, but are not indicative of market share concerns

• Significant student housing density in walkable area substantiate high-margin walk-up

traffic through dinner and late-night dayparts.

SITE OVERVIEW (CONT.)

SITE OVERVIEW (CONT.)

FINANCIAL ANALYSIS

SUMMARY CONCLUSIONS

• Upside exists in transaction value: Store’s average check is well below system

average, which indicates opportunity to be driven by local market share improvements

/ direct ordering platform shift / new menu ramp-up.

• Third-party mix will be further optimized: Although the store has not had a

chance to leverage its direct ordering platform and late-night menu for walk-up

businesses, its 3P mix is already strong relative to corporate-operated average

• Marketing costs will decrease substantially over time: The more limited use of

localized marketing techniques, paid equity and media channels (i.e. Facebook, Spotify),

and discounts on various food items will improved operating margins over time

SUMMARY CONCLUSIONS (CONT.)

• Occupancy costs are manageable and predictable: The rent resets outlined in

the lease are at or below market, which is reflective of the restaurant’s new

construction status

• Initial 12 months of royalty forgiveness will assist in operator ramp: Having

flexible operating leverage as the store’s marketing competencies and revenue base

increase market share minimizes operating risk in the asset.

• Cash on cash yield and IRR are attractive for range of investors: Both financial

investors and operating partners, when operating the restaurant to full potential, will

find enough “skin in the game” to deem the investment attractive.

DRIVERS OF GROWTHWings Over Knoxville: Drivers of Growth

2021 2022 2023 2024 2025 Comments

DOG Stats

Start Date of Construction 1/1/2021 Assumed transition date to franchisee of 1/1/2021

End Date of Construction 1/9/2021 Likely to open and operate on day of transition: no capex needed

Square Footage 2,390 Validated per

Inflation Rate 2.3% Assumes normalized inflationary environment through and after pandemic

Federal Tax Rate 21.0% Unchanged through hold period

Maintenance Capex Assumption (as % Revenues) 0.5% Per M.Blinn R&M standards shared with stores

Revenue Drivers

Revenue / Transaction $ 17.00 $ 17.39 $ 17.79 $ 18.20 $ 18.62 Assumes increased delivery and take-out mix, improved upsell from new menu

Transaction Count 51,500 77,250 92,700 92,700 92,700 $150 / hour in first year; top-line comps up 60% months 13-24 / 20% months 25-36

Direct Revenue Mix 40.0% 47.5% 50.0% 50.0% 50.0% Using historical Lunchbox launches as proxy: potentially conservative given college campus

Third Party Revenue Mix 35.0% 30.0% 25.0% 25.0% 25.0% Difficult to roll off 3P volume in ramping store

Other Income (as % Revenue) 25.0% 22.5% 25.0% 25.0% 25.0% Large-format (catering) business accounted for in top-line projections

Pre-GOP Expense Drivers

Food Cost (as % Revenues) 35.0% 34.0% 33.0% 33.0% 33.0% Columbus stabilizing between 34-35%; accounting for ops control in ordering / PAR sheets

Beverage Cost (as % Revenues) 0.5% 0.5% 0.5% 0.5% 0.5% Food & beverage cost mix inaccurate until beverage program determined

Discounts (as % Revenues) 5.0% 3.0% 1.8% 1.8% 1.8% Marketing budget ramps down over time as share stabilizes

Total Salaries & Wages Expense (as % Revenues) 35.0% 32.0% 31.0% 31.0% 31.0% Based on ramping store vs. stabilized store goals in system; Columbus 2019 was 35%

Salaries & Wages Expenses Mix

Payroll Expenses 86.8% 86.8% 86.8% 86.8% 86.8% Normalized spread of payroll expenses

Payroll Taxes 9.8% 9.8% 9.8% 9.8% 9.8%

Officer Salary 2.9% 2.9% 2.9% 2.9% 2.9%

Other Payroll 0.5% 0.5% 0.5% 0.5% 0.5%

Operating Expense Drivers

Third Party Processing Fees (as % 3rd Party Revenue) 15.0% 15.0% 15.0% 15.0% 15.0% Assumes industry consolidation reduces preferential rates

Driver Reimbursements (as % Revenues) 2.0% 1.0% 1.0% 1.0% 1.0% Conservative 3P rates, but assumes limited in-house delivery infrastructure

Advertising & Promotion (as % Revenues) 3.0% 2.0% 1.5% 1.5% 1.5% Additional marketing requirements beyond loyalty-focused tech (Lunchbox)

Other OpEx (as % Revenues) 11.0% 9.0% 8.0% 7.0% 7.0% From P&L analysis of corporate-owned Wings Over stores (including GM comp)

Sales Taxes (as % of Revenues) - - - - -

Rent (PSF) $ 29.50 $ 30.18 $ 30.87 $ 31.58 $ 32.31 Occupancy cost tieout from DCH-executed lease

Utilities (PSF) $ 8.00 $ 8.18 $ 8.37 $ 8.56 $ 8.76 Occupancy cost tieout from DCH-executed lease

CAM (PSF) $ 6.00 $ 6.14 $ 6.28 $ 6.42 $ 6.57 Occupancy cost tieout from DCH-executed lease

NOP Adjustments

Royalty Fees to Wings Over, Inc. (as % Revenues) - 5.0% 5.0% 5.0% 5.0% Fees may be discounted or eliminated for period of time after ownership transition

Other Income (Below the Line, as % Revenues) 0.5% 0.5% 0.5% 0.5% 0.5% From P&L analysis of corporate-owned Wings Over stores (no operating leverage)

Depreciation (absolute $) - - - - - No capital contribution, so no eligibiilty for bonus depreciation in structure

Amortization (absolute $) - - - - - No debt tied to store level

Ops Manager Salaries & Benefits (absolute $) - - - - - Acquirer unlikely to be multi-unit operator, so will not need district-level allocation

Assumption Notes

Transaction volume assumed to be stable two years post-acquisition: limited available unit count growth / low ancillary population in area decreased stabilized count

Advertising & promotion assumed to ramp down as local marketing tactics take hold, app downloads stabilize

P&L STATEMENT

Wings Over Knoxville: P&L 2021+F2021 2022 2023 2024 2025

Revenue

Revenues: Direct 350,200 638,141 824,613 843,579 862,981

Revenues: Third Party 306,425 403,036 412,306 421,789 431,490

Other Income 164,156 234,265 309,230 316,342 323,618

Total Revenue $ 820,781 $ 1,275,442 $ 1,546,148 $ 1,581,710 $ 1,618,089

Food COGS

Food COGS 287,273 433,650 510,229 521,964 533,969

Beverage COGS 4,104 6,377 7,731 7,909 8,090

Discounts 41,039 38,263 27,831 28,471 29,126

Total COGS 332,416 478,291 545,790 558,344 571,185

Gross Profit $ 488,365 $ 797,151 $ 1,000,358 $ 1,023,366 $ 1,046,904

Gross Profit % 59.5% 62.5% 64.7% 64.7% 64.7%

Salaries & Wages

Payroll Expenses 249,353 354,267 416,038 425,607 435,395

Payroll Taxes 28,153 39,998 46,972 48,052 49,158

Other Salaried Labor 8,331 11,836 13,900 14,220 14,547

Other Payroll 1,436 2,041 2,397 2,452 2,508

Total Salaries & Wages 287,273 408,142 479,306 490,330 501,608

Gross Operating Profit $ 201,091 $ 389,010 $ 521,052 $ 533,036 $ 545,296

Gross Operating Profit % 24.5% 30.5% 33.7% 33.7% 33.7%

Operating Expenses

Third Party Processing Fees 45,964 60,455 61,846 63,268 64,724

Driver Reimbursements 16,416 12,754 15,461 15,817 16,181

Rent 70,505 72,127 73,786 75,483 77,219

Utilities 19,120 19,560 20,010 20,470 20,941

CAM 14,340 14,670 15,007 15,352 15,705

Advertising & Promotion 24,623 25,509 23,192 23,726 24,271

Other OpEx 90,286 114,790 123,692 110,720 113,266

Total Operating Expenses 281,254 319,865 332,994 324,836 332,307

Net Operating Profit $ (80,162) $ 69,145 $ 188,058 $ 208,201 $ 212,989

Net Operating Profit % (9.8)% 5.4% 12.2% 13.2% 13.2%

NOP Adjustments

Manny Salary - - - - -

Other Income (Below the Line) 4,104 6,377 7,731 7,909 8,090

Royalty Fees - (63,772) (77,307) (79,085) (80,904)

Total NOP Adjustments 4,104 (57,395) (69,577) (71,177) (72,814)

Adjusted Net Operating Profit $ (76,058) $ 11,750 $ 118,481 $ 137,024 $ 140,175

Adjusted Net Operating Profit % (9.3)% 0.9% 7.7% 8.7% 8.7%

RETURNS TO ACQUIRERWings Over Knoxville: Returns Analysis

2021 2022 2023 2024 2025

Adjusted Net Operating Profit $ (76,058) $ 9,400 $ 88,861 $ 95,917 $ 98,123

Less: Depreciation & Amortization - - - - -

Adjusted NOP Less D&A (76,058) 9,400 88,861 95,917 98,123

Less: Cash Taxes @ 21% 15,972 (1,974) (18,661) (20,142) (20,606)

Tax-Effected Net Operating Profit (60,086) 7,426 70,200 75,774 77,517

Plus: Depreciation & Amoritzation - - - - -

Less: Capital Expenditures (4,104) (6,377) (7,731) (7,909) (8,090)

Plus / Less: Changes in Net Working Capital (25,000) - - - -

Unlevered Free Cash Flow (89,190) 1,049 62,470 67,866 69,426

Implied Discount Rate 20.0% Undiscounted Discounted

FCF Multiple (Low) 1.5x 147,184 59,150

FCF Multiple (High) 2.5x 245,307 98,583

Net Present Value of Unlevered Free Cash Flow @ 20% 23,184

Implied Enterprise Value (Low) 82,334

Implied Enterprise Value (High) 121,767

Internal Rate of Return 28.1%

Stabilized Cash-on-Cash Yield @ $30K Investment 208.2%

Stabilized ANOP Yield @ $30K Investment 296.2%

MARKET / COMPETITIVE SET DETAILS

KEY OPPORTUNITIES

KEY OPPORTUNITIES

• Store has not yet transitioned to new menu, which implies incremental revenue

and flow-through opportunity

• Wings Over launched a new menu in corporate-operated stores in June 2020 and began

rolling out this menu to franchisees in August 2020

• Data from menu performance vs. previous state implies stronger combo mix; improved

sandwich/wrap mix; reduced variability in food COGS; and sustained alacarte side and drink

sales (implying that, even netting out COVID impact, new menu drove incremental sales)

• On a gross operating profit per transaction basis, new menu shown to provide significantly

stronger flow-through vs. old menu

KEY OPPORTUNITIES (CONT.)

• Store has not yet transitioned to corporate-standard tech suite, which

implies margin expansion opportunity

• Wings Over shifted loyalty providers to a direct ordering platform called Lunchbox in

February of 2020: Lunchbox operates both a mobile and web ordering platform

• Since Lunchbox launch, direct sales mix has increased to over 50% in some units, with

directly-proportional decreases in third-party mix

• Lunchbox will launch loyalty system across enterprise in July 2021, which will provide

further customer development and valuation opportunities.

KEY OPPORTUNITIES (CONT.)

• Store has made limited efforts to penetrate UT student population in ~11

months since opening, implying growth in stabilized revenue base

• Only one fall semester of operating history: store opened late enough into semester

to not take full advantage of football and basketball seasons (which traditionally drive

highest-revenue days of business)

• Store shuttered during COVID given tax advantages exclusive to master franchisor

rather than P&L performance

• Dedicated marketing funds and resources set on gaining market share across student

population is likely to be high-ROI and assist in revenue ramp / stabilization

KEY OPPORTUNITIES (CONT.)

• Store has not captured value from master franchisor infrastructure

expansions, all of which will be live post-acquisition

• Since December 2019, master franchisor has driven a number of corporate-level

initiatives re: revenue growth and margin expansion opportunities for franchisees

• Initiatives include manufacturer rebates; price audits on broadliner invoices; gift card

expansion and standardization; national-level marketing campaigns; loyalty rewards

program; and expansion of direct deals with manufacturers to arbitrage pricing

• Combination of initiatives above imply material improvement left in COGS and

operating expense margins

QUESTIONS?TYLER SHINE: TYLER@WINGSOVER.COM

DANIEL LEYVA: DAN@WINGSOVER.COM