Given that Item 19 reports average gross sales of $3.16 million—roughly double the typical range for quick-service restaurants—can the franchisor provide a detailed breakdown of this revenue figure and clarify how many units reported this data?
#1
Why does the system show zero unit growth despite allegedly strong sales performance? What is the franchisor's expansion strategy, and are there plans to recruit new franchisees?
#2
The transfer fee of $17,500 exceeds typical ranges for this category. What specific services and franchisor involvement are included in processing a unit transfer?
#3
The ad fund contribution is 1.0%, significantly below the typical 2.0-4.0% range. How does the franchisor allocate this reduced fund, and what advertising support should franchisees expect?
#4
With 27 termination causes in the agreement (above the typical 15-20), can the franchisor provide examples of causes that have actually been enforced and explain the frequency of disputes?
#5
The contract includes 11 renewal conditions (above the typical 7-9). What are the specific conditions franchisees must meet to renew, and what is the approval rate for renewal requests?
#6
Why is the total potential term limited to 10 years when typical quick-service restaurant franchises offer 20-30 years? Will franchisees have the opportunity for multiple renewal terms?
#7
The non-compete clause restricts franchisees from operating similar food service businesses for 2 years within 10 miles post-termination. How is 'substantially similar' defined, and has this been tested in disputes?
#8
What are the specific curable and non-curable defaults listed in the franchise agreement, and how frequently do franchisees trigger these provisions?
#9
The agreement requires personal guarantees from anyone owning 5% or greater interest. Can the franchisor explain how this personal liability is enforced in practice and whether there are any circumstances where this requirement is waived?
#10
What claims has the franchisor indemnified franchisees against, and are there limits on franchisor liability under the indemnification clause?
#11
With zero litigation cases in 3 years, how many dispute resolution or mediation cases have been initiated, and what types of disagreements typically arise?
#12
Can the franchisor provide details on the single operating unit—its location, unit economics, and ownership structure—to assess whether this represents a viable franchise model or a test concept?
#13
Are there any franchise applications pending or recently approved that would increase the unit count, and if so, what is the target number of units over the next 3-5 years?
#14
The technology fee of $100/month is below typical ranges. What specific technology systems and support does this fee cover, and are there additional technology costs not included in this fee?
#15
What happens if the single franchisee decides to exit or transfer their unit? Will the franchisor attempt to recruit replacement franchisees, or is this system contracting?
#16
How does the franchisor handle encroachment protection given that the agreement does not include explicit encroachment protections? What prevents the franchisor from opening company-owned locations within a franchisee's territory?
#17
Can the franchisor provide references from the current franchisee and any former franchisees who have exited the system over the past 5 years?
#18
The Risk Factors score of 80 exceeds typical ranges. What specific risk factors triggered this high score, and what mitigation strategies has the franchisor implemented?
#19
The Contract Terms score of 55 is below typical ranges. Which specific contract provisions are below standard, and has the franchisor received complaints about contract fairness or requested amendments?
#20