Erbert & Gerbert's Sandwich Shop

The system has contracted from 68 units (3 years ago) to 60 units today with a 16.7% annual exit rate. Can you explain the primary reasons franchisees are closing their units and whether there are specific geographic or operational factors driving closures?

Closures increased from 4 units in 2022 to 10 units in 2024. What changes in market conditions, operations, or support have occurred during this period that may have contributed to accelerating exits?

Median unit sales of $565,448 are approximately 31% below the typical range for quick service restaurants. What is the breakdown of operating expenses and typical unit profitability at this sales level?

The bottom quartile of units generates only $322,494 in annual sales. At what sales threshold does a unit typically become unprofitable, and how does the franchisor support underperforming locations?

You have zero terminations and zero non-renewals despite significant unit declines. How does the franchisor approach underperforming franchisees—do you offer financial support, operational assistance, or buyback options before they close voluntarily?

The technology fee of $100 monthly is below the typical range for this category. What technology services and support are included, and are there any additional technology costs or mandatory system upgrades not reflected in this fee?

The franchise agreement specifies only 12 termination causes compared to a typical range of 15-20. What are the 12 defined causes, and are there any grounds for termination not listed that could apply based on franchisor discretion?

Renewal conditions total 6 items compared to a typical 7-9. What specific upgrades or remodeling costs do franchisees need to budget for renewal, and are these costs in addition to the $5,000 renewal fee?

Can you provide details on the 2 litigation cases filed in the past 3 years, including the nature of each dispute, outcomes, and whether either case involved financial disputes, territory disputes, or operational disagreements?

The franchise agreement requires mandatory remodeling and equipment upgrades at renewal. Can you estimate the typical remodeling cost required at renewal and provide examples of what upgrades are typically mandated?

The non-compete clause is 2 years within 10 miles. Are there any carve-outs or exceptions to this non-compete, and does it apply if the franchisor initiates non-renewal or if you voluntarily exit?

The franchisor designates mandatory suppliers for 8 categories of items. What are these 8 categories, and can you provide a breakdown of typical costs associated with mandatory supplier relationships versus open-market sourcing?

Transfers declined from 11 units in 2022 to 3 units in 2024. Is there reduced buyer interest in acquiring existing Erbert & Gerbert's franchises, and what support or incentives does the franchisor offer to facilitate unit transfers?

Can you provide Item 19 financial performance data showing the breakdown of unit sales, expenses, and profitability by year and by location type (urban, suburban, highway)?

What percentage of current franchisees are operating at a loss, breaking even, or achieving profitability thresholds above 10%, 15%, and 20% net margin?

Termination requires 7-30 days notice depending on the cause. For curable defaults, what is the typical cure period provided, and can you provide examples of defaults that would trigger immediate termination without an opportunity to cure?

The dispute resolution process requires non-binding mediation followed by mandatory arbitration within 90 days. What are the typical costs of arbitration, who bears these costs, and what is the franchisor's historical arbitration outcome?

The personal guarantee requirement obligates spouses automatically. Are there any circumstances under which this personal guarantee can be limited, and what is the franchisor's typical enforcement approach if a franchisee defaults?

Operating hours must conform to franchisor standards. What are the required operating hours, and does the franchisor allow flexibility for local market conditions or reduced hours during off-peak seasons?

Can you clarify the timeline and cost estimates for complying with all 6 renewal conditions, and whether franchisees typically renew their agreements or exit when the renewal period approaches?