Our Business

Our family-oriented restaurants offer cafeteria and buffet-style quick service designed to minimize customer waiting time. Sbarro’s
diverse menu of authentic Italian food offers our customers a compelling alternative to traditional fast food. All of our entrees are
prepared fresh daily according to special recipes developed by the Company. We serve generous portions of quality Italian food at
attractive prices. Our average check price is approximately $8.09 and entree selections generally range in price from $4.99 to $7.99.
Pizza, which is sold predominantly by the slice and accounts for approximately 60% of restaurant sales, is sold for approximately
$3.20 a slice.
Our restaurants are generally open seven days a week serving lunch, dinner and, in a limited number of locations, breakfast, with
hours conforming to those of the major department stores or other large retailers in the mall or trade area in which they are located.
Typically, our mall restaurants are open to serve customers 10 to 12 hours a day, except on Sunday, when mall hours may be more
limited. Our sales are highest in the fourth quarter due to increased traffic in shopping malls during the holiday shopping season.
Our site selection philosophy is to locate restaurants in high-pedestrian-traffic locations such as shopping malls, downtown areas,
airports, casinos, universities and travel plazas. These highly visible locations have helped create a valuable brand with strong
recognition, evidenced by the concept’s estimated 50% unaided brand awareness. The Sbarro brand is respected not only by
consumers, but also by franchisees and real estate developers, who view Sbarro as a preferred component of their development plans.
Our company-owned restaurants are all located in North America in 46 states in the United States, the District of Columbia and
Canada and are comprised of 408 “f

We operate in two segments, our company-owned restaurant segment and our franchised restaurant segment. Our company-owned
restaurant segment is comprised of the operating activities of our company-owned QSR’s and other concept restaurants (owned and
joint ventures). Our franchised restaurant segment is comprised of our franchised restaurant operations which offer opportunities
worldwide for qualified operators to conduct business under the Sbarro name and other trade names owned by Sbarro

Our Restaurant Management
Our restaurants are managed by one general manager and one or two co-managers or assistant managers, depending upon the size of
the location. Managers are required to participate in Sbarro training sessions in restaurant management and operations prior to the
assumption of their duties. In addition, each manager is required to comply with an extensive operations manual containing
procedures for assuring uniformity of operations and consistent high quality of products. We have a restaurant management bonus
program that provides the management teams of company-owned restaurants with the opportunity to receive cash bonuses based on
certain performance-related criteria of their location.

Our Franchised Restaurants
Growth in franchised restaurants occurs through the opening of new QSR restaurants by new and existing franchisees. Over the last
few years, we have significantly reorganized and refocused our franchise operations. We currently employ a team of 9 experienced
franchise professionals, who oversee both franchise development and franchise operations.
As of December 27, 2009, we have 280 franchised restaurants in 38 states in the United States, Puerto Rico and the District of
Columbia and in 8 other countries in North America. The majority of our domestic franchised units are operated by food service
companies who manage food courts in high-pedestrian-traffic areas such as airports, universities and travel plazas. Our strategy is to
continue to partner with these institutional food service companies to drive our growth in such locations.
As of December 27, 2009, we have 275 international franchised restaurants in 30 countries outside of North America. We intend to
significantly increase our international presence in a targeted number of countries by entering into significant development
agreements with experienced restaurant operators. We currently have commitments for approximately 3,100 new restaurants with
experienced restaurant operators in countries such as Brazil, Japan, Turkey and Russia.
In order to obtain a franchise, we generally require payment of an initial fee and continuing royalties at rates of 4% to 7% of gross
revenues. We require the franchise agreements to end at the same time as the underlying lease, generally ten years, including a
renewal period of the underlying lease, if applicable. Since 1990, the renewal option has also been subject to conditions, including
remodeling or image enhancement requirements. The franchise and territorial agreements provide us with the right to terminate a
franchisee for a variety of reasons, including insolvency or bankruptcy, failure to meet development schedules in cases of territorial
rights, failure to operate its restaurant according to Sbarro standards, understatement of gross receipts, failure to pay fees, or material
misrepresentation on a franchise application.

Primary Factors Considered by Management in Evaluating Operating Performance
We focus on the following factors when evaluating our operating performance:
• comparable company-owned QSR unit sales;
• franchise location sales and their relationship to our franchise revenues;
• decisions to continue to operate or close company-owned QSR locations;
• percentage relationship of the cost of food and paper products and payroll and other benefit costs to our restaurant sales;
• level of other operating expenses (primarily occupancy costs) and their relationship to restaurant sales;
• relationship of general and administrative costs to revenues;
• provision for asset impairment and restaurant closings/remodels; and

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