Papa Bello Enterprises Franchise Issues Chairman's Letter to Shareholders

SAN DIEGO // PRNewswire-FirstCall // --

To Our Shareholders:

Our semi annual shareholder letter provides a timely opportunity to communicate the ideas and actions that we are pursuing at Papa Bello (Pink Sheets: PAPA) and the logic behind them. I strive to explain, rather than promote, because doing so gives you a framework from which to evaluate your investment and our overall performance. We are creating a great company that can stand the test of both good and bad times.

2010 in Review

Under new management since September 2009, we have made great strides with Papa Bello through the first half of 2010. From the initial time of change in control of Papa Bello, we instituted an initiative to acquire multiple food concepts under the Papa Bello Enterprise umbrella and build out a franchise program for each concept. In following that approach, we acquired 3 additional concepts, Pastores Italian Deli, The Kebab Cafe and The Royal India Express.

In an aggressive, but well thought-out and calculated plan, new management has since the day of acquisition, grown from one corporate and one franchised Papa Bello Pizza location to a total of seven stores in operation and 12 more under development including 2 fully operational east and west coast franchise training facilities for all four brands.

The company is pleased to announce growth in two of its new concepts, Pastores and The Kebab Cafe, each adding a company owned location in the first half of 2010. Pastores has opened a concession in Ripken Stadium; a minor league baseball stadium in Maryland and the Kebab Cafe has opened an additional location in a large San Diego downtown mall. Both new locations are performing well and are expected to contribute positively to company growth. In addition, the company is seeing sustainable revenue growth from its Royal India Express location in San Diego. Finally, our original concept, Papa Bello Pizza, is continuing to work on expansion plans to develop additional locations, both nationally and internationally.

Over the past few months, all of our associates have worked hard to build on the attractiveness of our platform while repositioning us to become a diverse food service company in the 21st century. We continue to hone our vision and define what it will take to achieve it.

With over 20 years of experience in the financial markets, I fully understand the need for transparency in a public company. Since the time of acquisition, we have had a strong focus on not only making acquisitions of new concepts, but getting the past and current accounting procedures up to date, so that we can perform even more efficiently in the future. We engaged DBB MCkennon as our outside accounting firm that has organized each individual concepts accounting books and records and has also completed the consolidated numbers for 2009 and through the first 2 quarters of 2010. Our auditing firm, Hansen, Barnett and Maxwell are completing the consolidated audit for PBE through the same time period. As previously stated, once the audit is complete we will file a registration statement and all of the proper documentation to elevate the company's public status from a non-reporting pink sheet company to a fully reporting OTCBB company.

I believe that we are well positioned now at Papa Bello to operate through a difficult economy, and we are preparing to be a leader in the industry especially as the economy stabilizes and turns back up. Our short-term plan is to have 12 locations operational by the end of 2010 and 50 locations operational by the end of 2011.

Our goal remains to create long-term wealth for our shareholders. When you are leading a large organization, you need to lead by example and appreciate that this includes having targets that generate value, not simply targets that can be easily hit.

When businesses don't create value over time for their owners, it is very difficult for them to create value for their employees, customers, suppliers, investors and communities as well. I am proud of our staff and franchisees, over 100 strong. For over five years Papa Bello has served customers through good times and bad, and have continuously adapted to changes in society and the space we so proudly operate in.

It hasn't always been easy but our associates have always been up for the challenge. In the future there will be many opportunities for us and we intend to seize them with a bottom line focus on increasing shareholder value.


James Price


Cautionary Statement Regarding Forward-Looking Statements:

Certain statements contained in this letter contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements include, but are not limited to, statements about our ability to increase earnings, operate through a difficult economy, and increase our relevance to customers, as well as the future impact of our investments in technology. Forward-looking statements are subject to risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: our ability to offer merchandise and services that our customers want, including our proprietary brand products; our ability to successfully implement initiatives to improve inventory management and other capabilities; competitive conditions in the retail and related services industries; the impact of seasonal buying patterns, including seasonal fluctuations due to weather conditions, which are difficult to forecast with certainty; general economic conditions and normal business uncertainty, changes in consumer confidence, tastes, preferences and spending, the availability and level of consumer debt, and unanticipated increases in our costs; our dependence on sources outside the United States for significant amounts of our merchandise; our extensive reliance on computer systems to process transactions, summarize results and manage our business; our reliance on third parties to provide us with services in connection with the administration of certain aspects of our business; our ability to properly implement and realize the expected benefits from our new organizational structure and operating model; our ability to attract, motivate and retain key executives and other associates; the outcome of pending and/or future legal proceedings, including product liability claims and bankruptcy claims, including proceedings with respect to which the parties have reached a preliminary settlement; and our ability to successfully invest available capital. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available.

About Papa Bello Enterprises

Founded in 2005, Papa Bello Enterprises is a San Diego, California based corporation that owns, operates, and franchises food service restaurants in the United States and abroad. The company was founded on the principles of providing the consumer with the highest standards of quality, value, and service.

SOURCE Papa Bello Enterprises



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