What were the specific reasons for the 20 franchisor-initiated terminations over the past 3 years? Can you provide details on the primary causes and whether these were performance-related, non-compliance, or other factors?
#1
Why is the termination rate of 21.6% so significantly higher than the category typical range of 0.0-5.05%? Is this rate increasing or expected to stabilize?
#2
What was the 1 litigation case initiated against the franchisor about, and has it been resolved? What was the outcome?
#3
Your franchise fee of $25,000 is considerably lower than the category typical range of $40,000-$49,875. Does the lower fee correlate with reduced franchisor support, training, or initial inventory provisions?
#4
Can you explain the significant performance gap between top quartile units ($1.48M) and bottom quartile units ($90K)? What factors contribute to this 16-fold variance?
#5
What is your strategy for reducing the high termination rate? Are there systemic issues with franchisee recruitment, training, or ongoing support that you're addressing?
#6
The renewal fee appears to be 50% of the then-current initial franchise fee. If the franchise fee increases substantially, how will existing franchisees be affected during renewal negotiations?
#7
With only one 5-year renewal option available, what happens after year 15? Do franchisees have any path to continued operation, or must they exit at that point?
#8
Can you provide details on the 7 conditions required for renewal? Are any of these conditions difficult or costly for franchisees to meet, and have any franchisees been denied renewal?
#9
How many of the 3-year unit closures/terminations were due to franchisee underperformance versus franchisor-initiated terminations for non-compliance or other reasons?
#10
What is included in your support and training program, given that the franchise fee is substantially lower than category peers? How many hours of initial training and ongoing support can franchisees expect?
#11
The non-compete restricts franchisees from operating competing pool services within 50 miles for 2 years post-termination. How do you enforce this, and have you taken legal action against former franchisees who violated this clause?
#12
Disputes must be resolved through binding arbitration in Franklin, Tennessee. What is the typical cost for a franchisee to pursue arbitration, and are there any fee-sharing arrangements?
#13
The agreement requires personal guarantees from all principals and spousal guarantees. Can you explain the rationale for requiring spousal guarantees, and are there any exceptions?
#14
With 37 current units but a turnover rate of 54.5% over 3 years, does your recruitment pipeline reliably attract replacements for terminated units? How many new franchisees have you recruited annually?
#15
What is your target territory density, and are you still granting exclusive territories? Have you had any encroachment disputes in the past 3 years?
#16
Given the financial performance variance, what are the key success factors for top-performing franchisees? Can you provide case studies or profiles of high-performing units?
#17
The transfer fee of $5,000 is below category norms. Are there any restrictions on who can acquire a transferred unit, or does the franchisor have right of first refusal?
#18
Have there been any regulatory actions, complaints to state franchise regulators, or FTC inquiries regarding your franchise system in the past 3 years?
#19
Can you provide your complete Item 19 financial performance statement, and clarify how many units reported their sales figures? What is the statistical significance of the performance data provided?
#20