Given the 23.5% turnover rate in the past year, what specific factors or operational challenges do you believe contributed to 4 unit closures in 2024?
#1
Can you provide details on the 4 units that closed in 2024, including their locations, how long they operated, and stated reasons for closure?
#2
Why did the system experience unit closures (1 in 2022, 2 in 2023, 4 in 2024) while simultaneously growing from 13 to 17 units? What criteria are you using to evaluate franchisee viability before awarding new franchises?
#3
Median gross sales of $177,705 are approximately 19% below the category median. What is the typical path to profitability for a new franchisee, and at what sales level would a franchisee break even on their $44,500 initial investment?
#4
The minimum monthly royalty of $325 applies regardless of sales performance. How many of your current franchisees are paying only the minimum, and what percentage of franchisees report operating at a loss?
#5
Item 19 financial performance data shows significant variation between top quartile ($334,764) and bottom quartile ($102,045) sales. What are the primary operational differences between high-performing and low-performing units?
#6
Why is the initial franchise term only 5 years compared to the typical 10-year term in this category? What happens if a franchisee does not meet the 9 renewal conditions?
#7
Your contract requires a 2-year non-compete within 25 miles of any Stemtree location. For franchisees in territories with multiple locations, how does this restriction impact their exit options?
#8
The contract requires unlimited personal guarantees from all owners with 5% or greater interest. Can you explain the financial exposure franchisees face and provide examples of situations where personal assets have been pursued?
#9
All disputes must be resolved through binding arbitration. In the past 3 years, how many disputes or complaints have arisen between the franchisor and franchisees, and how were they resolved?
#10
What capital expenditures are typically required to maintain uniformity for renewal, and can you provide a cost estimate for franchisees planning for their renewal at year 5?
#11
Why is the technology fee of $110 monthly significantly lower than the category typical range of $122-$474? What services and technology platform are included, and will fees increase over time?
#12
Can you provide the complete Item 19 financial performance disclosure, including the number of units reporting, revenue ranges by year of operation, and typical operating expenses?
#13
How many franchisees have renewed their agreements (or attempted to renew) since the franchise system began, and how many were able to meet the 9 renewal conditions?
#14
Of the 4 units that closed in 2024, how long had they been operating, and did any attempt to renew or were they closures prior to the renewal decision point?
#15
What training and ongoing support does Stemtree provide to help new franchisees reach the category median sales of approximately $220,000+?
#16
The transfer fee is $10,000. In the past 3 years, have any franchisees attempted to sell or transfer their units, and if so, how many transfers were approved versus denied?
#17
Can you explain why your Risk Factors score of 45 falls significantly below the category typical range of 70.25-80.0, and what specific risks are present in this franchise model?
#18
Late payment fees of 1.5% monthly plus 18% annual interest are substantially higher than standard commercial rates. How frequently do franchisees fall behind on royalty payments, and has this resulted in any franchise terminations?
#19
What is the franchisee failure rate by year of operation, and what percentage of franchisees would you consider financially successful (profitable) after accounting for all fees, royalties, and operating expenses?
#20