Given the system has declined from 141 to 100 units over 3 years, what are the primary reasons franchisees cite for closures, and how does the franchisor support struggling locations?
#1
Can you provide details on the 43 units closed over 3 years—were these primarily in specific geographic markets or tied to specific performance issues?
#2
The minimum performance requirement mandates monthly gross revenue exceeding $23,600. What percentage of current franchisees consistently meet this threshold, and what happens to those who fall short?
#3
Your ad fund rate of 1.0% is below the typical 2.0% for fitness franchises. How is this lower contribution allocated, and what marketing support does it fund at the corporate and local levels?
#4
The non-compete radius of 1 mile is significantly below typical ranges of 10-25 miles. How does this protect existing franchisees from saturation or direct competition from nearby units?
#5
Can you explain the termination clause that allows cure periods of 14-30 days? How many franchisees have received termination notices in the past 3 years, and what percentage successfully cured defaults?
#6
The System Health score is 16/100, significantly below typical ranges. What specific metrics or operational issues are driving this low score?
#7
What is the investment payback period based on average unit economics, and at what point do most franchisees achieve break-even?
#8
Can you provide the breakdown of the 15 units transferred over 3 years—were these voluntary sales to new owners or forced transfers due to underperformance?
#9
The agreement requires purchasing from approved suppliers for 6 categories of items. Can you specify which categories and whether pricing is competitive with market rates?
#10
How many franchisees have exercised the renewal option in the past 5 years, and what percentage of franchisees become ineligible for renewal due to the 7 renewal conditions?
#11
Given the mandatory binding arbitration clause with class action waiver, are there any pending or historical disputes that franchisees have pursued individually or collectively?
#12
The personal guarantee clause makes principals and spouses jointly and severally liable. Can you provide examples of how this has been enforced in cases of franchisee default?
#13
What percentage of units are currently meeting the $23,600 monthly revenue minimum, and how many are on performance improvement plans or at risk of termination?
#14
Can you provide Item 19 financial data broken down by unit age, location type, and market size to help assess whether recent unit closures reflect market-specific issues or system-wide challenges?
#15
The 1.5% monthly late fee plus Prime Rate interest represents significant additional cost for cash flow issues. How frequently do franchisees incur late fees, and what payment terms are negotiable?
#16
Territory protection is exclusive, but with only 100 units nationwide, are there sufficient unit density and density targets in franchise agreements to prevent oversaturation in key markets?
#17
Can you clarify the operational control clause requiring franchisees to purchase designated items from approved suppliers—are these exclusively from the franchisor or true third-party approved vendors?
#18
What training and ongoing support resources does the franchisor provide to help franchisees meet monthly revenue requirements, especially given the high closure rate?
#19
Are there any contingent liabilities, pending regulatory investigations, or class action lawsuits filed against the franchisor that are not yet reflected in disclosed litigation?
#20