The royalty rate of 15.0% significantly exceeds the business services category typical range of 6.0-10.0%. How does this compare to competitor franchises, and what additional value or support justifies this higher rate?
#1
The ad fund rate of 3.0% is above the typical 1.0-2.75% range. How is this fund allocated and deployed, and can you provide documentation of ad spend and results from the past 12 months?
#2
Can you explain the 25.99% three-year CAGR and clarify what drove the growth from 1 unit to 2 units? Are there documented pipeline franchises or expansion plans that support further growth?
#3
The franchise agreement lists 23 termination causes, above the typical range of 12.0-21.0. Can you detail these 23 specific causes and provide examples of their application or enforcement history?
#4
The minimum monthly royalty of $500 applies regardless of sales. How many franchisees currently pay this minimum, and what is the typical monthly revenue for existing units to assess this burden?
#5
Why does the franchise require a $500 minimum monthly royalty when the system has only 2 units? What is the rationale for this threshold, and is it negotiable?
#6
Late payment penalties include a $250 flat fee plus 18% annual interest. How frequently have these penalties been applied to franchisees, and are there any payment plans or grace periods available?
#7
The non-compete restriction extends 25 miles from the franchisee's territory and any system location. With only 2 current units, how does this geographic restriction impact your ability to operate in your target market?
#8
Can you provide the geographic locations of the current 2 franchised units and explain how exclusive territory boundaries are defined and enforced?
#9
The agreement requires personal guarantees from all principals and their spouses covering all monetary obligations and non-compete covenants. Will you negotiate to limit personal guarantees to principals only or cap spousal liability?
#10
Why was the franchise fee set at $39,500 and the renewal fee at $19,750 (50% of the then-current franchise fee)? If the current franchise fee increases, does the renewal fee scale accordingly?
#11
What happens if you attempt to renew after your initial 10-year term but the franchisor has terminated other franchisees? Are renewal conditions guaranteed or discretionary?
#12
The system shows zero litigation cases. Is this because no disputes have arisen, or have disputes been resolved through arbitration or settlement confidentiality agreements that prevent disclosure?
#13
Can you provide the Franchise Disclosure Document (FDD) Item 19 financial performance representations? If none exist, why not, and can you provide any voluntary financial disclosure from existing franchisees?
#14
What specific training and ongoing support are provided during the initial term and post-renewal periods? Are there differences in support between the initial term and renewal terms?
#15
The technology fee is $100 monthly. What technology platform is included, and is this fee subject to annual increases? Can you provide a breakdown of what the technology platform covers?
#16
With only 2 current franchised units, how robust is the franchisor's support infrastructure for recruitment, training, marketing, and ongoing operations?
#17
The post-term non-compete restricts employee and customer non-solicitation for 24 months. Can you provide examples of how this restriction has been enforced, if at all?
#18
Are there any current disputes, regulatory investigations, or complaints with the FTC or state attorneys general that have not yet resulted in formal litigation?
#19
What was the timeline and reason for the system growing from 1 unit (2022) to 2 units (2023-2024)? What is the franchisor's growth projection for the next 3-5 years?
#20