Why is the franchise fee set at $50,000 when the typical range for similar food & beverage franchises is $30,000-$40,000?
#1
What justifies the 8.0% royalty rate when comparable franchises typically charge 5.0-6.0%?
#2
Why is the initial franchise term limited to 1 year instead of the typical 7-10 years, and what is the rationale for such a short commitment period?
#3
Can you provide details on the renewal process and conditions? The agreement lists 6 renewal conditions—what are they, and how do they differ from industry standards?
#4
Given that renewal requires mutual consent for indefinite successive 1-year periods, what assurance can you provide that franchisees will be renewed beyond the initial year?
#5
The franchise system has only 4 units, all opened in 2024. What was the growth trajectory prior to 2024, and how many units are projected for the next 3 years?
#6
Are there any pending litigations or disputes with current franchisees that are not yet reflected in the 3-year litigation history?
#7
The agreement requires purchase of 7 product categories from approved suppliers only. How is pricing for these mandated purchases determined, and are there volume discounts available?
#8
Can you provide Item 19 financial performance data (sales, expenses, profits) from existing units to help assess the unit economics?
#9
What is included in the remodeling requirements referenced in renewal conditions, and what is the typical cost to franchisees?
#10
The non-compete is 2 years within 10 miles—how is compliance with this monitored, and what are the consequences for breach?
#11
Personal guarantees are required from all principals jointly and severally. If a franchisee defaults, will the franchisor pursue personal assets of individual owners or spouses?
#12
All disputes must be resolved through mandatory arbitration in New York. What are the typical costs and timelines for arbitration cases, and how frequently has the franchisor pursued disputes?
#13
What specific cure periods apply to different types of breaches? The agreement mentions 5 days for payment defaults and 30 days for other breaches—can you clarify which breaches fall into each category?
#14
Are there any transfer restrictions, and what is the process for transferring a franchise unit if you wish to exit?
#15
With only 4 units in operation, how many of these units are currently profitable, and do you have references from existing franchisees?
#16
What training and ongoing support are provided to franchisees, given the support score of 90/100?
#17
The franchise is very new—how long has the franchisor been operating company-owned locations, and what is their track record?
#18
What happens if the franchisor decides not to renew your franchise after the initial 1-year term, and what notice period is required?
#19
Are there any territorial encroachment protections written into the agreement, and how would disputes about territory be resolved?
#20