The transfer fee of $20,000 is above the typical range for food and beverage franchises ($7,500-$17,500). What specific services or support justify this higher transfer fee?
#1
Your initial term of 7 years is shorter than the typical 7.75-10.0 years for comparable franchises. Why was this shorter duration selected, and does it provide adequate protection for franchisee build-out investments?
#2
The contract requires annual sales targets with potential termination for non-achievement. What are the specific sales targets for Year 1, Year 3, and Year 5, and how many franchisees have been terminated for failing to meet these targets?
#3
The renewal conditions require 50% of the initial franchise fee ($20,000) plus mandatory remodeling. What are the estimated costs of the required remodeling, and can you provide examples of what remodeling was required for recent renewals?
#4
Operational control requires exclusive purchasing from franchisor for 5 categories. What percentage of franchisee operating costs typically goes to franchisor-required purchases, and how do these prices compare to market alternatives?
#5
Can you provide the FDD Item 20 disclosure showing the history of all unit closures, terminations, transfers, and non-renewals for each of the past 3 years broken down by type?
#6
With only 2 units currently in the system, how were the financial projections in Item 19 calculated, and how many units provided data for the median and average gross sales figures?
#7
The late payment interest rate is Prime Bank Rate plus 4% (currently approximately 8-9%). Has any franchisee been assessed this interest, and what is the payment default rate?
#8
The non-compete clause is 2 years with no mileage radius specified. Does this mean the non-compete applies nationally, and has the franchisor enforced this clause against franchisees who have exited?
#9
Support & Training scores 80, which is below the typical range of 83.75-99.0 for comparable franchises. What specific training is provided at franchise opening and ongoing, and how many support staff are dedicated to franchisee support?
#10
Contract Terms score 56, below the typical 60.0-65.0 range. What specific contract provisions score unfavorably, and are there opportunities to negotiate certain terms before signing?
#11
The liability and indemnification clause requires personal guarantees covering 'all present and future obligations.' Does this unlimited personal guarantee structure remain in effect for the entire 14-year potential term?
#12
What is the current franchise fee structure, and have there been any increases to the initial franchise fee or transfer fee in the past 3 years?
#13
With a 25.99% three-year compound annual growth rate, what is the franchisor's unit growth target for the next 3 years, and how many franchises are in development?
#14
Can you provide a detailed breakdown of the $138 annual technology fee and explain what technology systems and support this covers?
#15
The franchisee must achieve sales targets to avoid termination. Are there any circumstances under which the franchisor waives or adjusts sales targets (e.g., new unit ramp-up period, market conditions)?
#16
Renewal requires completion of specified remodeling. If a franchisee declines renewal, can they continue operating without a valid agreement, and what happens to their customer list and brand assets?
#17
How many franchise applications have been received in the past 12 months, how many were approved, and how many were denied or withdrawn?
#18
Can you provide references for the current 2 franchisees, including their contact information and the dates their units opened?
#19