CARSTAR

The franchisor has initiated 5 litigation cases as plaintiff in the past 3 years, significantly above the typical range of 0-1 cases for automotive franchises. What are the primary reasons for these 5 cases, and what is the current status of each?

With 3 litigation cases currently pending, what are the specific claims or disputes involved, and what is the estimated timeline for resolution?

The termination rate of 6.6% is more than 3 times higher than the typical range for automotive franchises. What are the most common reasons franchisors terminate franchise agreements?

The closure rate of 6.8% combined with a termination rate of 6.6% suggests that closures are primarily franchisor-initiated. Can you provide specific examples of units terminated in the past 2 years and the reasons for termination?

Your 3-year turnover rate of 20.0% significantly exceeds the category average. How does this impact new franchisee recruitment and the stability of the network?

Given that your initial term is only 5 years compared to the typical 10-15 year range, what is your renewal rate for franchises completing their initial term?

The total potential term is also only 5 years, limiting long-term security compared to competitors. How many renewal options are available, and what are the renewal fee terms?

Your franchise fee of $10,000 is substantially lower than typical fees of $25,000-$49,500. What is included in this fee, and does the lower fee reflect reduced support or training?

With a transfer fee of $0, compared to the typical range of $4,500-$13,750, how do you manage franchise transfer approvals and ensure quality of incoming franchisees?

Your median gross sales of $2,579,601 and average sales of $3,205,928 significantly exceed industry norms. Can you provide Item 19 documentation showing the number of units reporting, system-wide performance data, and whether these figures include or exclude outlier locations?

Given the strong financial performance data, what percentage of franchisees achieve sales volumes within 20% of the median and average figures provided?

What support and training do franchisees receive given the lower initial franchise fee, and how does this compare to competitors with higher upfront investment?

The non-compete clause specifies 1 year but lists mileage radius as N/A. Does this mean there is no geographic limitation on the non-compete, and can you clarify the exact restrictions?

With territory protection but not exclusive territory, what specific encroachment protections are guaranteed in the franchise agreement?

Can you provide a detailed breakdown of the 32 units that closed each year (2022-2024) and clarify how many were franchisor terminations versus voluntary closures or other causes?

What is the status and outcome of the 3 pending litigation cases, and how might potential judgments impact franchisee obligations or franchisor operations?

Personal guarantees are required from all owners. Can you clarify what specific obligations are personally guaranteed, and what recourse exists if a franchisee disputes the validity of the guarantee after a default?

The 14-day cure period for payment defaults is quite short. How is this enforced, and what happens if a franchisee submits payment on day 15?

Are there any circumstances where the franchisor has waived or extended cure periods for franchisees experiencing temporary financial hardship?

What is your policy on transfers versus re-acquisition, and has the system encouraged or discouraged transfers in recent years given the elevated termination activity?