The Entrepreneur's Source

Can you explain the significant 25% royalty rate compared to the 6-10% typical for business services franchises, and what specific services or support justify this premium?

The $750 annual ad fund appears unusually high for this category. How is this fund allocated, and can you provide examples of marketing initiatives funded in the past year?

What accounts for the $75,000 franchise fee, which exceeds typical fees by $25,000-$44,000 for similar franchises?

You have had 2 litigation cases in 3 years versus a typical range of 0-1. Can you provide details about both cases, including their resolution and any impact on franchise operations?

Terminations increased to 9 units in 2024 from 5-6 in prior years. What specific issues or performance metrics led to these increased terminations?

Despite rapid system growth (26.9% in the past year), reported median sales of $103,000 are significantly below typical benchmarks. Can you explain this discrepancy and provide the units-reporting figure for Item 19?

Why do bottom quartile performers report $0 in gross sales? Are these newly launched units, inactive units, or how are these accounted for in financial reporting?

The 2-year/50-mile non-compete applies to 'all other TES Franchise locations.' Does this mean the radius expands if new locations open nearby, potentially restricting franchisee activity area?

Your agreement includes 2 curable and 9 non-curable defaults allowing immediate termination. Can you clarify the 9 non-curable defaults and whether franchisees have opportunity to cure before termination proceedings begin?

With mandatory binding arbitration in Southbury, Connecticut and waived jury trial rights, what is the typical cost and timeline for dispute resolution, and has this created barriers to franchisee claims?

Personal guarantees are required from all owners with 10%+ ownership. Has this personal guarantee requirement been enforced in terminations, and what are typical outcomes for franchisees with personal guarantees?

Territory is non-exclusive with no encroachment protection. How many franchisees operate in the same geographic area, and what guidance do you provide on territory management to prevent direct competition?

The transfer fee is $18,750 (25% of the franchise fee). What approval process and criteria does the franchisor use to approve or deny unit transfers between franchisees?

Only 1 transfer occurred in the past year versus 9 terminations. Are franchisees having difficulty selling their units, and if so, what resale support does the franchisor provide?

The renewal fee is $5,000 for a 10-year renewal. Are there other renewal requirements such as equipment updates, training, or facility improvements that franchisees must complete?

Can you provide a breakdown of the 50 units of growth by source—how many are new unit openings versus acquisitions or transferred units?

What support and resources does TES provide to the bottom quartile of performers who are generating minimal revenue, and at what point does underperformance trigger performance improvement plans or termination?

Of the 14 closures in 2024, how many were franchisee-initiated versus franchisor-initiated, and what were the primary reasons cited for closures?

Item 19 does not report the number of units surveyed for financial performance data. What percentage of system units reported their financial data, and does this represent a representative sample?

Given the high ongoing fee structure (25% royalty plus $750 ad fund), how do franchisees with $103,000 median sales maintain profitability after paying these fees and operating costs?