Given that the system has only 3 units with zero turnover reported, what is the franchisor's growth strategy and target system size over the next 3-5 years?
#1
The Financial Performance score of 40 falls below the typical range of 43-60. Why does the franchisor not provide Item 19 financial performance disclosure in their FDD?
#2
Can you provide historical financial performance data (revenues, profitability, expenses) for the existing 3 franchise units to help assess typical unit economics?
#3
Your royalty rate of 4.0% is significantly below the industry typical range of 6.0-8.13%. What is included in this rate, and are there any additional fees beyond royalties and the 1.0% ad fund?
#4
The transfer fee of $3,500 is notably lower than the typical range of $5,500-$15,000. Does this low fee structure apply to all types of transfers, and are there any other costs associated with transferring a unit?
#5
Your contract specifies 23 non-curable defaults, which is above the typical range of 14-22. Can you provide a detailed list of all non-curable defaults and explain the reasoning for each?
#6
The non-compete restriction of 10 miles is significantly narrower than the typical range of 21.25-50 miles. How does this limited restriction protect existing franchisees from direct competition in their territory?
#7
With only 3 units in the system and zero growth over the past three years, how are you currently marketing and recruiting new franchisees, and what is your realistic timeline for expansion?
#8
Can you provide detailed information about the support and training program that resulted in a perfect 100/100 score? What specific ongoing support is provided to franchisees?
#9
Given the franchisor-favorable termination clause with 23 non-curable defaults, have any franchisees ever been terminated for non-curable causes? If so, provide details on the circumstances.
#10
The renewal conditions require franchisees to agree to renovate facilities. What are the typical renovation costs and timeframe required for renewal?
#11
Can you clarify the 5 different supplier restriction categories and whether franchisees can source from alternative suppliers if franchisor-approved suppliers cannot meet their needs or pricing?
#12
What is the current supplier relationship structure? Are there preferred suppliers offering exclusive terms, or are all suppliers treated equally?
#13
The post-term non-compete includes the territory plus a 10-mile extension. Can you provide specific examples of how this restriction has been enforced in the past?
#14
What constitutes the joint and several personal guarantees required from all members of the Continuity Group and their spouses? What financial exposure does this create for franchisees?
#15
How has the franchisor managed the indemnification obligation requiring franchisees to defend and hold harmless the franchisor? Are there any limitations on this liability?
#16
Given the zero litigation history, is this due to the young age of the franchise system, strong franchisor-franchisee relationships, or the protective nature of the contract terms?
#17
Can you provide a breakdown of the $60,000 franchise fee and detail what specific items or training are included in this cost?
#18
What are the specific 8 conditions that must be met to qualify for renewal at the end of the initial 10-year term?
#19
For the 10-year initial term with a renewal fee of $3,500 for each 5-year renewal, what are the typical total franchise costs (including all fees and royalties) over the full 20-year potential term?
#20