The non-compete radius of 20 miles is below the typical 25-40 mile range for this category. How was this reduced distance determined, and what protections does it provide against encroachment by other franchisees or competing concepts?
#1
Transfer fee of $24,750 exceeds the typical range by 50-65%. What does this fee cover, and are there circumstances under which it may be waived or negotiated?
#2
Your royalty rate of 5% is below the typical 6-7% range. Is this rate locked in for the entire contract term, or does it increase upon renewal or after a certain period?
#3
The system has contracted from 12 to 11 units over the past year, with a negative 2.86% three-year compound annual growth rate. What is the franchisor's growth strategy, and what are the expansion plans for the next 3-5 years?
#4
One unit in 2024 listed as 'ceased other' rather than closed or transferred. What does 'ceased other' mean, and why did this unit exit the system?
#5
The transfer rate of 9.1% is above the typical 0-6.35% range, with 1 transfer occurring in 2024. Are outgoing transfers primarily driven by retirement, relocation, or dissatisfaction? Can you provide details on the motivations behind recent transfers?
#6
Your system health score of 14/100 is significantly below the typical 50-70 range. What specific factors contributed to this low score, and what improvements are being made to address system health concerns?
#7
Renewal conditions include 'modernization of premises.' What specific modernization requirements are expected, what are typical upgrade costs, and how often are franchisees required to modernize?
#8
The monthly technology fee of $100 is below the typical $156.50-$599 range. What specific technology services and software are included in this fee, and are there additional technology costs not captured in this monthly amount?
#9
Personal guarantees are required from all shareholders covering post-term restrictions. If a franchisee cannot meet the 2-year, 20-mile non-compete obligation, what are the legal and financial consequences?
#10
The disclosure document includes Item 19 financial performance data. Can you provide a detailed breakdown of how the reported median and average gross sales of $2.3-2.5 million are calculated, and what percentage of franchisees achieve these sales levels?
#11
What percentage of current 11 franchisees are in their initial 10-year term versus renewal term, and what percentage of franchisees have successfully renewed their contracts?
#12
The franchisor requires purchase of 8 product categories from approved suppliers only, with franchisor reservation of pricing control. How does this purchasing requirement affect franchisee margins, and what is the annual cost of required purchases as a percentage of gross sales?
#13
Can you explain the difference in emphasis between your exceptionally high support/training score (100) and your very low system health score (14)? What training is provided, and why does the overall system health lag?
#14
The renewal fee is 25% of the then-current franchise fee. If the franchise fee increases, does the renewal fee increase proportionally, and when is the renewal fee amount determined—at renewal or earlier?
#15
Spouses must sign confidentiality agreements as part of the personal guarantee. What specific information is covered under this confidentiality obligation, and what are the penalties for breach?
#16
Have there been any disputes or complaints from franchisees in the past 3 years that did not result in formal litigation? If so, how were these disputes resolved?
#17
The territory is exclusive with encroachment protection. Can the franchisor modify territory boundaries, add new formats (such as 'More Space Place' mentioned in non-compete language), or place corporate-owned units within my territory?
#18
What is the average unit volume (AUV) for the system, and how many of the 11 current units are profitable? Can you provide profitability data by unit age or location type?
#19
Given the recent unit exit in 2024 and the system's contraction trend, what safeguards are in place to ensure the franchisor remains financially stable and able to provide ongoing support to remaining franchisees?
#20