The franchise fee of $30,000 is notably lower than the typical range of $35,000-$45,000 for this category. What factors contribute to this pricing strategy, and do you anticipate any changes to this fee structure?
#1
Can you provide detailed information about the 2 litigation cases initiated by the franchisor? What were the allegations, outcomes, and what specific issues do they highlight about franchisor-franchisee relationships?
#2
Your median gross sales of $519,202 fall below the typical range of $555,670-$1,240,107. What factors explain this performance gap, and what specific support would you provide to help new franchisees achieve higher-performing unit economics?
#3
The system shows 1 closure and 2 transfers annually over the past 3 years, but zero terminations. What does this pattern suggest about the health of existing franchisees, and are there specific challenges causing the annual exits?
#4
With only 5 renewal conditions on average (below the typical 7.0-9.0), which standard renewal obligations are you not requiring that competitors typically do? How does this affect franchisees renewing their agreements?
#5
The non-compete clause restricts former franchisees from operating any retail coffee shop deriving more than 5% of net sales from coffee-based beverages for 2 years within 25 miles. How strictly do you enforce this, and have former franchisees challenged its breadth?
#6
Can you explain the business reasons behind the 2 franchisor-initiated lawsuits? Were these against franchisees, and if so, for what breaches? Were they resolved favorably for the system?
#7
Your termination rate is 0.0%, which is positive, but 3 units closed in the past 3 years without termination. Can you break down the reasons for each closure (cash flow, owner decision, market conditions, etc.)?
#8
Item 19 financial data shows average gross sales of $665,300 but median of $519,202—a significant gap. What accounts for this distribution, and what percentage of units operate below the median?
#9
The territory is protected but not exclusive. Can you clarify what 'protected' means in practice, and under what circumstances would you allow encroachment by another franchisee or company-owned unit?
#10
What specific support and resources do you provide to help franchisees achieve sales performance above the median? Do you offer marketing co-op funding, operational consulting, or menu innovation assistance?
#11
Can you provide the names, contact information, and approval status of recent franchisees (past 18 months) who have agreed to be reference contacts? Are there any franchisees who declined to be references?
#12
The renewal fee is $5,000 with 5 conditions required. What are those 5 conditions, and how frequently do franchisees fail to renew due to inability or unwillingness to meet them?
#13
Your personal guarantee covers all franchise obligations with unlimited scope. Can you provide examples of circumstances where you've enforced personal guarantees against departed franchisees, and what typical recovery amounts were?
#14
With 33 current units and growth of 1 net unit annually, what is your 5-year unit growth projection, and what marketing or recruitment strategies support that growth plan?
#15
The indemnification clause requires franchisees to defend the franchisor against third-party claims. Can you provide examples of indemnification claims that have been triggered, and what costs franchisees have incurred?
#16
How do you define the 5% coffee-sales threshold for post-term non-compete enforcement? Can a former franchisee operate a smoothie or baked goods shop with some coffee sales, and how would you measure compliance?
#17
Have any franchisees filed complaints with state franchise regulators, and if so, what were the issues? Are there any ongoing regulatory investigations or compliance concerns?
#18