Restaurant Incubator Index-Fact Sheet

August 2006

Index increased slightly by 0.1% during the month of August from 1018.23 to 1019.30. We revised the July 2006 index slightly (from 1018.24 to 1018.23) to better reflect base unit counts in post-merger situations.

Highlights:
Upside Momentum Provided By:

Salsarita’s added 38.5% more units;
Five Guys Burgers added another 20.7% more units;
Raising Cane’s added 18.9% more units; and,
Great Khan’s Mongolian Festival added 17.7% more units.

Downside Momentum Provided By:

Eatza Pizza lost 21.7% of units;
Damon’s Grill lost 14.1% of units;
Sub Linc Acquisition lost 11.1% of units;
Western Sizzlin lost 11.0% of units; and,
Benihana lost 4.1% of units.

The index reflects the change in the total number of units for our Restaurant Incubator tracking group. The group is designed to track the growth of small chains into large groups. Monthly integration is now possible and will reflect results each calendar month beginning in July 2006.

RII measures growth trends in the small chain segment of the greater multi-unit restaurant industry. Over 3,000 chains are reviewed each month and are used to adjust the index. The RII base is its 2,700 January 2006 members. These chains had a total of 53,914 units at the end of January 2006 and these units are represented in the base value of 1,000. The RII is the best measure of the growth in small restaurant chains available.

Construction/Methodology

Membership:

· A restaurant chain or group with at least 3 units.
· A restaurant chain or group with fewer than 200 units.
· A U.S. or Canadian company.
· A restaurant chain or group with reliable information available regarding unit counts and activity.

Weighting

· The indexes are weighted by the base unit count. The base unit count for each chain used in the index formula is the number of units for the chain at the time their addition occurred. The initial 2,700 chains and their 53,914 units are tied to the base value of 1,000. Chains added each month are excluded from the calculation in the month of addition. The unit count from new chains is added to the base units for use in future months’ calculations.

Index Calculation

Each month, the total number of units in member restaurant chains of the previous month is divided by the base unit count. This factor is then multiplied by 1,000.

Adjustments and Maintenance

Restaurant chains may be added to and deleted from the index over time. The following rules govern this activity:
· New chains may be identified with 3 or more units.
· Existing chains may be removed due to mergers, acquisitions, bankruptcies, information inconsistencies and a drop in unit count.
· New chains will not impact the index in the month they are added.
· Initial base unit counts for deleted chains will remain in the base unless there are information inconsistencies.
· Previous month index values may be restated if the activity caused by mergers, acquisitions and information inconsistencies warrants a complete removal of a chain.

Disclaimer

The information used in the Restaurant Incubator Index has been obtained from sources we believe to be reliable, but its accuracy and completeness are not guaranteed.
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