What is the status and nature of the 4 pending litigation cases currently filed against the franchisor? When do you expect these cases to be resolved?
#1
The system has declined from 2 units to 1 unit over 3 years. Can you provide details on the closure in 2023 and the reasons the remaining franchisee has not renewed or exited?
#2
Why does the monthly technology fee of $1,020 significantly exceed the typical range for hotel franchises, and what specific services and tools does this fee provide?
#3
The royalty rate of 6.0% is above the typical 5.0-5.5% range. How is this higher rate justified, and are there any circumstances under which it could be reduced?
#4
Can you explain the financial performance gap? The franchise does not provide Item 19 financial information, and System Health scores at 35 of 100. What financial metrics should prospective franchisees expect?
#5
The franchise agreement includes 12 non-curable default causes, which is below the typical range. What specific events trigger non-curable defaults, and can you provide examples?
#6
The transfer fee equals the original franchise fee at $75,000. How often do transfers occur in the system, and are there circumstances under which this fee could be waived or reduced?
#7
Why are there zero renewal options after the 20-year initial term? What happens to the franchisee's business and assets at the end of the agreement if no renewal is offered?
#8
The support and training score of 71 is below the typical range of 73.0-86.0. What specific training and ongoing support programs are provided to franchisees, and how frequently are they updated?
#9
Territory is non-exclusive with no encroachment protection. Can the franchisor or other franchisees establish competing units in your service area without restrictions?
#10
All disputes require mandatory binding arbitration in Maryland. For a franchisee located outside Maryland, what are the practical costs and challenges of defending a dispute thousands of miles away?
#11
Personal guarantees are required from principal owners. If a spouse is not an owner, could the franchisor claim marital assets in a dispute or judgment?
#12
Can you detail the specific third-party indemnification obligations? What liability exposure would a franchisee face for issues beyond their direct control?
#13
The system currently has only 1 operating unit. How does this small system size affect your ability to negotiate rates, services, and support compared to franchisees in larger systems?
#14
Investment costs score 7 of 100, significantly below typical ranges. What are the total startup costs a franchisee should expect, and why is this score so low compared to industry standards?
#15
Termination requires only 10 days to cure non-payment issues. If a franchisee faces a temporary cash flow problem, what communication or forbearance options exist before termination is enforced?
#16
How many of the 4 pending litigation cases involve disputes with franchisees versus other parties like suppliers or regulators? What are the key issues in each case?
#17
The franchise has experienced a -20.6% CAGR over 3 years. What is the franchisor's strategy to stabilize and grow the system, and what milestones must be achieved?
#18
Does the non-compete clause of 0 years and 0 miles mean a franchisee can operate a competing hotel brand or business immediately after exit? If so, why is there no non-compete protection?
#19
Given the pending litigation and small system size, what contingency plans exist if the franchisor becomes unable to provide support or declares insolvency?
#20