Can you provide details on the 5 cases where DQ initiated litigation as plaintiff? What were the primary issues (non-payment, trademark violations, contract breaches)?
#1
What is the status and nature of the 3 pending litigation cases? Are any material disputes or ongoing regulatory investigations involved?
#2
The termination rate of 2.0% is elevated for this category. Can you explain the primary reasons franchisees are being terminated and how often cure periods are granted versus immediate termination?
#3
Why is the franchise fee of $45,000 positioned above the typical range of $25,000-$37,500? What additional value or services justify this premium?
#4
The technology fee of $446 monthly is above typical range. What specific technology and systems does this cover, and is it optional or mandatory?
#5
The ad fund rate of 5.0% combined with a 4.0% royalty creates a total 9.0% ongoing rate. Can you break down how the ad fund is allocated (national vs. local marketing)?
#6
Territory is non-exclusive with zero-mile non-compete protection. How do you prevent DQ from opening competing locations near franchisees? What encroachment safeguards exist?
#7
The initial term of 20 years is significantly longer than typical 10-15 years. What is the rationale for this extended commitment, and what flexibility exists for early exit?
#8
Can you provide the actual litigation case summaries for the 7 total cases? Specifically, what were the outcomes and settlements, if any?
#9
Four years of unit history show approximately 95-129 annual transfers. Are these franchisees voluntarily exiting due to poor economics, or are you repurchasing units?
#10
The renewal fee is $22,500 with 8 specified renewal conditions. If a franchisee fails any of these conditions, can the franchise be terminated, or is renegotiation possible?
#11
What are the 9 curable defaults and 9 non-curable defaults listed in your termination clause? Are some defaults subjective (like 'materially impair trademark goodwill'), and who makes that determination?
#12
All disputes are subject to binding arbitration in Minneapolis, Minnesota. What is the estimated cost to arbitrate a dispute, and are there any franchisor-funded or franchisor-biased arbitration provisions?
#13
Personal guarantee requirements are noted. Are guarantees limited to the franchise term, or do they extend beyond termination or non-renewal?
#14
Modernization and replacement provisions mention no cap on costs. Can you provide examples of modernization requirements franchisees have faced and typical associated expenses?
#15
Are there single-source or approved supplier requirements for products, equipment, or services? Does DQ receive rebates or revenue sharing from these suppliers?
#16
Median unit volumes are $1.34 million, but what percentage of franchisees achieve this volume, and what is the typical payback period on initial investment?
#17
The non-compete clause is only 1 year and 0 miles. If a franchisee terminates, can they immediately open a competing quick-service restaurant next to their former location?
#18
How many franchisees have failed to renew in the past 3 years, and what percentage of approaching renewals do you expect will continue versus discontinue?
#19
Can you clarify the circumstances of the 23-39 annual closures? Are these franchisee bankruptcies, franchisor conversions to company-operated units, or permanent closures?
#20