Given the 1-year turnover rate of 3.9%, which is at the upper boundary of the typical range, can you provide details on why units are exiting? Specifically, how many closed due to franchisee business performance versus market conditions or other factors?
#1
The 3-year turnover rate of 13.6% exceeds the typical range. Can you explain the circumstances of the 3 closures in 2023 and identify any common factors across the 5 closures over the past 2 years?
#2
Your 3-year CAGR of 85.4% is significantly higher than the typical range of -2.1% to 26.0%. What strategies are driving this rapid expansion, and how sustainable is this growth rate?
#3
With a royalty rate of 8.0% compared to the typical 6.0% to 7.5% range, how is this higher rate justified relative to competitors, and what additional support or services does it fund?
#4
The contract includes 12 termination causes, which is below the typical 14.3 to 19.0 range. What specific causes are included, and are there any circumstances under which the franchisor can terminate with limited notice?
#5
Can you clarify the encroachment protection policy? While territory is protected, you note it is not exclusive—what prevents the franchisor from opening competing units near existing franchisees?
#6
The renewal conditions require satisfaction of 8 conditions and payment of $5,000 or 15% of the then-current initial franchise fee, whichever is greater. What happens if the then-current fee increases significantly—could renewal costs exceed the original $49,900?
#7
Regarding the personal guarantee requirement with 'unconditional, irrevocable, and continuing' terms covering the entire franchise term: does this guarantee remain in effect after franchise termination or expiration, and under what circumstances could it be enforced?
#8
The agreement requires purchasing from franchisor-designated or approved suppliers across 5 categories, with pricing control for figurines and 3D printing services. Can you provide a detailed breakdown of typical supplier costs and how they compare to open market pricing?
#9
Item 19 financial performance data is available. Can you provide the specific sales ranges, unit counts reporting, and whether data includes system-wide or unit-level metrics? What was the reporting period and sample size?
#10
Of the 4 unit exits in 2023 and 2024 (2 transfers and 2 closures per year), how many were related to franchisee inability to meet operational standards versus voluntary decisions to exit the system?
#11
Support and training scores at 74/100 fall below the typical range of 77.0 to 90.0. What specific training programs are provided to new franchisees, and what ongoing support exists if units underperform?
#12
The contract term allows for a total potential 20-year relationship (10-year initial plus two 5-year renewals). Are there any provisions for contract modifications or fee adjustments during renewal, and what happens if renewal is denied?
#13
Given zero terminations historically, can you walk through the enforcement process if a franchisee violates operational requirements or fails to meet performance metrics?
#14
Can you explain the rationale for a 2-year non-compete with no specified mileage radius? How is geographic enforcement determined, and are there exceptions for franchisees who transition out of the system?
#15
The investment score of 64/100 is below typical at 74.5 to 75.0. Beyond the $49,900 franchise fee, what are total startup costs including equipment, inventory, and working capital needed to launch a unit?
#16
Ongoing fees score at 61/100 matches the typical range precisely. Are the 8.0% royalty, 2.0% ad fund, and $250 monthly technology fee all mandatory, or are some discretionary based on service levels?
#17
With 51 current units across the system, how many have been profitable or met revenue benchmarks in their first, second, and third years of operation?
#18