The transfer fee of $20,000 is above typical ranges for this franchise category. How is this fee justified, and are there circumstances under which it might be reduced or waived?
#1
Your 3-year turnover rate of 18.7% significantly exceeds the typical 0.9-15.5% range. Can you provide specific reasons why 131 units closed or transferred during this period, and what changes are being implemented to improve unit retention?
#2
The System Health score of 42 is below the typical 50.0-75.0 range. What specific metrics or operational indicators drive this score, and what is the franchisor doing to address the underlying concerns?
#3
The system contracted 26 units in the most recent year with a 5.5% exit rate. Are there geographic clusters of closures, or are closures distributed across all markets? Are certain market types or unit sizes more affected?
#4
You initiated 2 litigation cases as plaintiff in the past 3 years, exceeding the typical 0.0-1.0 range. What were the nature of these cases, and what was the outcome? Are there unresolved disputes with franchisees?
#5
The initial contract term of 20 years exceeds the typical 10.0-15.0 range for this category. What is the rationale for this extended term, and how does it compare to competing franchise systems?
#6
Your non-compete radius of 3 miles is below the typical 5.0-10.0 range. Given the 18.7% turnover rate, how does this limited non-compete protection affect your ability to prevent former franchisees from competing in the same areas?
#7
The royalty rate of 4.0% is below the typical 5.0-6.0% range. How does this lower royalty rate impact franchisor support, marketing contributions, and ongoing system investments compared to competitors?
#8
With 6 renewal conditions versus the typical 7.0-9.0 range, what conditions must be met for renewal after the initial 20-year term? Are there capital expenditure, remodeling, or other requirements?
#9
Of the 131 unit exits over 3 years, how many were attributed to profitability issues, franchisee financial difficulties, operational challenges, or other specific factors?
#10
The 1-year net unit growth is -3.3%, with unit count declining from 787 to 761. How does the franchisor plan to stabilize or reverse this contraction over the next 2-3 years?
#11
Median gross sales are approximately $1.05 million. What is the typical profit margin or EBITDA range for franchisees at this sales level, and how many units are operating below the median?
#12
The dispute resolution clause requires binding individual arbitration with class action prohibitions. Have any franchisees challenged this clause, or has the pending litigation case involve disputes over arbitration provisions?
#13
The termination clause permits franchisor termination for health/sanitation violations with only a 24-hour cure period. How many times in the past 3 years has the franchisor exercised this right, and what documentation supports these terminations?
#14
You require use of only approved suppliers across 5 categories (food, beverages, ingredients, uniforms, packaging). Does the franchisor or any affiliated entity manufacture or distribute these products? Are there exclusive supply agreements that benefit the franchisor financially?
#15
The personal guarantee clause makes owners jointly and severally liable for all agreement obligations. Are there any limitations or carve-outs to this guarantee, such as for events beyond the franchisee's control?
#16
Given the 1 pending litigation case, what is the nature of this dispute, which party initiated it, what is the requested relief, and what is the expected resolution timeline?
#17
The technology fee is a fixed $190 per unit. What specific technology services, systems, and support does this fee cover, and how has this fee evolved over the past 5 years?
#18
With encroachment protection in place, how does the franchisor define and enforce exclusivity to prevent company-owned or franchised unit cannibalization in franchisee territories?
#19
The 2023 closure spike (59 units) was followed by moderation in 2024 (43 units). Do you anticipate continued closures, stabilization, or potential growth in 2025 and beyond?
#20