What is the composition of the 12 current units in terms of franchisee experience and background? Are they primarily company-converted units or third-party franchisees?
#1
Given the franchise system grew from 0 to 12 units in approximately 2 years, what is the sales pipeline for unit growth over the next 12-24 months?
#2
The average gross sales of $2.8M significantly exceed typical Technology & Communications franchises—what are the primary revenue drivers, and are these figures adjusted for seasonality or one-time revenue events?
#3
Why does the royalty rate of 10.0% exceed the typical range of 6.0-7.5% for this category? What additional support or services justify the higher ongoing fee structure?
#4
The ad fund rate of 4.0% is double the typical range of 1.0-2.0%—how are these funds allocated, and what marketing performance metrics or ROI data can be provided to franchisees?
#5
The transfer fee of $25,000 is $10,000 above the typical range—is this fee waived or reduced in certain circumstances, such as transfers to immediate family members?
#6
What specific conditions must be satisfied to renew the franchise agreement for the second 10-year term? Are there financial performance thresholds or system-wide compliance requirements?
#7
Has the franchise system experienced any franchisee inquiries about non-renewal or exit discussions, even if no formal exits have occurred? What is the attrition rate among prospective franchisees during the evaluation process?
#8
The non-compete restriction of 3 years within 30 miles exceeds typical ranges—what is the business rationale, and how is this enforced post-termination?
#9
Given zero litigation in the system's 3-year history, have there been any informal disputes, complaints to the franchisor, or regulatory inquiries that were resolved outside formal litigation?
#10
What is the franchisee satisfaction or Net Promoter Score (NPS), and are there any franchisee advisory councils or feedback mechanisms in place?
#11
Can you provide detailed Item 19 financial performance data broken down by unit age, geographic region, or franchisee tenure to assess performance variability?
#12
What is the median time to profitability for franchisees, and what was the initial investment range required to launch a unit?
#13
Are the reported gross sales figures inclusive or exclusive of product returns, refunds, or service credits? What is the net revenue retention rate?
#14
Given the $25,000 transfer fee and renewal fee structure, what happens if a franchisee fails to meet renewal conditions—can the fee be applied toward a corrective action plan?
#15
Has the franchise disclosed all material litigation involving franchisees in any state regulatory filings, or are there cases that may not be reflected in the Item 3 disclosure?
#16
What post-term obligations apply beyond the 3-year non-compete? Are there restrictions on using proprietary systems, customer databases, or confidential information?
#17
In the binding arbitration clause, is there a cap on the franchisor's liability exposure, and who bears the costs of arbitration and mediator fees?
#18