The franchise has declined from 142 units to 111 units over three years with 18.3% annual turnover. What factors does the franchisor attribute to this decline, and what specific strategies are being implemented to reverse the trend?
#1
Why does the 3-year exit data show 50 voluntary closures versus only 4 franchisor-initiated terminations? Are there specific market conditions, franchise model challenges, or operational issues causing franchisees to exit voluntarily?
#2
Your royalty rate of 20% is double the typical range for business services franchises (6.0-10.0%). How does this rate compare to competitors, and what justification exists for this above-range fee structure?
#3
The ad fund rate of 4.0% exceeds the typical range of 1.0-2.75%. How is this fund deployed, and can you provide specific examples of marketing initiatives and their measured ROI for franchisees?
#4
The technology fee of $20/month is significantly lower than the typical range of $100-$500. What systems and tools are included in this fee, and are there additional technology costs franchisees should anticipate?
#5
The agreement contains 22 non-curable defaults that allow immediate termination, above the typical range of 12-21. Can you specify which defaults are considered non-curable and provide examples of how these have been applied to existing franchisees?
#6
With 9 renewal conditions listed, above the typical range of 5-8, what specific conditions must franchisees meet to renew? Are these conditions more stringent than at initial franchise start?
#7
The total potential franchise term is 7 years with no renewal options, below the typical 10-20 year range. Why is the initial term not renewable, and what happens to franchisees' businesses and brand relationships after the 7-year term expires?
#8
The non-compete extends 2 years and 25 miles from territory boundaries and other TAB locations. How many other TAB locations exist within typical franchisee territories, and how does this restrict post-franchise business opportunities?
#9
The agreement mandates binding arbitration in Denver, Colorado for all disputes. What is the typical cost and timeline for arbitration, and have franchisees raised concerns about arbitration costs or the Denver venue requirement?
#10
Item 19 financial performance data is available. What are the median and average gross sales figures for active franchisees, and what percentage of franchisees meet or exceed these benchmarks?
#11
Can you provide a breakdown of the 50 voluntary closures over three years by reason (insufficient revenue, market conditions, personal circumstances, etc.)? What common patterns emerge?
#12
Of the franchisees who closed in 2021-2023, how many were first-term franchisees versus renewals, and at what point in their franchise lifecycle did they typically exit?
#13
The system health score is 15/100, below the typical range of 46-70. What specific metrics or factors contributed to this low score, and what corrective actions are underway?
#14
What is the current support and training model, given that the Support & Training category score is 90/100? How has this support evolved, and are there ongoing training requirements for franchisees?
#15
The cure period for payment defaults is 7 days while other curable defaults allow 30 days. How often have franchisees failed to cure within these timeframes, and what percentage of terminations result from payment versus other defaults?
#16
Can you provide the actual renewal fee ($5,000) and transfer fee ($7,500) in context—what do these cover, and are there additional hidden costs associated with renewal or transfers?
#17
Since the franchise has no litigation cases over three years, have there been any informal complaints, disputes resolved through mediation, or settlements with franchisees that did not result in formal litigation?
#18
What performance metrics or minimum requirements must franchisees achieve to avoid non-renewal or termination? Are there specific sales targets, membership numbers, or client acquisition benchmarks?
#19
Given the higher-than-typical royalty rate of 20%, can you clearly document what franchisees receive for this fee—training, marketing support, technology, operational systems, etc.—compared to competitors at lower royalty rates?
#20