Given the royalty rate of 62.5% and ad fund of 33.3% (totaling 95.8% in ongoing fees), how do these rates compare to other franchisors in the quick-service restaurant space, and what specific support or returns justify these rates?
#1
The transfer fee of $200,000 is substantially higher than industry norms. What is the franchisor's rationale for this fee, and are there circumstances under which it could be waived or reduced?
#2
Can you provide documentation explaining why there have been zero litigation cases, terminations, or closures across the 3-year history? Are there any pending disputes not yet reflected in official filings?
#3
The system grew 50% in the past year (3 net new units) from a base of 6. What are the growth targets for the next 3-5 years, and what support infrastructure exists to maintain quality with rapid expansion?
#4
With 15 termination causes listed in the contract (above the typical 10), what are the most commonly invoked reasons for unit termination or non-renewal?
#5
The initial term is 10 years with 2 renewal options of 5 years each. What conditions must be met to qualify for renewal, given there are 7 renewal conditions listed? Are there financial performance thresholds?
#6
What is the renewal fee of $4,500 used for, and does it cover any retraining, equipment upgrades, or facility updates required at renewal?
#7
The non-compete clause is 2 years / 20 miles. If a franchisee chooses not to renew after 20 years, are there any modifications or relief available from this restriction?
#8
Can you explain the structure and expectations around the personal guarantees and spousal liability mentioned in the Owners Agreement? What specific indemnification obligations exist?
#9
Of the 9 current units, how many are company-owned versus franchisee-owned, and what is the franchisor's strategy regarding company ownership?
#10
What specific support, training, and ongoing assistance is included for the 62.5% royalty rate? Can you provide a detailed breakdown of franchisor services?
#11
Are there any unit-level financial performance requirements, and if a unit falls below certain thresholds, what remedies does the franchisor have besides termination?
#12
Has the franchisor ever initiated termination proceedings against any franchisees, even if not litigated? If so, what were the outcomes?
#13
What is the expected payback period and return on investment based on the Item 19 financials (if available), or can you provide average unit volume or profitability data?
#14
Given the exclusive territory protection, how is territory size determined, and what population or revenue minimums define each territory?
#15
Are there plans to open additional units in existing franchisee territories, or does the exclusive territory protection include indefinite encroachment protection?
#16
What happens to the transfer fee if a franchisee wants to sell to a family member versus an outside buyer?
#17
Can you provide references from franchisees who have been in the system for at least 5 years, including any who have considered renewal or exit?
#18
What is the franchisor's policy on unit underperformance? At what point would a franchisee be considered at risk of termination, and what remediation options exist?
#19