The royalty rate of 10.0% is above the typical range of 6.0-8.0% for sports and recreation franchises. What justifies this higher rate, and is there any negotiation flexibility on this percentage?
#1
The non-compete radius of 100 miles is significantly above the typical 10-25 mile range. How was this distance determined, and what specific geographic areas would be restricted under this clause?
#2
What is the current status and performance of the 2 existing franchisees, and would you be willing to provide contact information for reference checks?
#3
The franchise agreement requires binding arbitration in Southern Pines, North Carolina with no jury trial rights. What is the rationale for this specific location, and what are typical arbitration costs franchisees have experienced?
#4
Personal guarantees are required from all individuals owning 5% or greater interest, plus spouses and adult family members involved in the business. Can you provide examples of situations where spouses or family members have been held personally liable?
#5
Renewal requires satisfaction of 7 conditions at the franchisor's sole and absolute discretion, including execution of a general release. What specifically does this general release require franchisees to waive, and has any franchisee been denied renewal?
#6
Minimum monthly royalty payments begin at $1,000 in months 13-18, increasing to $2,000 (months 19-30) and $3,000 thereafter. Can you provide guidance on typical monthly revenues for the 2 existing units to assess if these minimums are realistic?
#7
Late payment interest is charged at 18% per annum. Has any franchisee experienced late payment penalties, and how frequently do payment issues occur in the system?
#8
The system has only 2 units with no unit history prior to 2023. What expansion targets and timelines are projected, and what marketing support will the franchisor provide to help achieve growth?
#9
Item 19 financial performance data is available. Can you provide the actual Item 19 disclosure, and does it include data on the performance of the 2 existing units?
#10
All products, services, equipment, tools, inventory, supplies, and software must be purchased from franchisor-designated or approved suppliers. What are the typical markup percentages on these required purchases, and can franchisees source alternatives at lower costs?
#11
The franchise fee is $55,000 plus $15,000 transfer fee. What is included in the initial franchise fee, and what additional startup costs should a franchisee expect before opening?
#12
The initial term is 10 years with 2 potential 5-year renewals. What happens if a franchisee wants to exit before the end of the initial 10-year term, and what are the financial and legal consequences?
#13
With zero litigation cases reported, have there been any disputes between the franchisor and franchisees that were settled informally or resolved through arbitration without formal litigation?
#14
The technology fee is $500 annually. What specific technology services and software are included, and are there additional technology costs not included in this fee?
#15
Can you explain the escalating royalty minimums ($1,000 to $3,000 monthly) and provide examples of how long it typically takes franchisees to exceed these thresholds based on the 2 existing units' performance?
#16
The non-compete clause is 2 years post-termination or non-renewal. If a franchise is terminated due to a dispute, can the former franchisee still operate a competing water-based facility after 2 years, or are there additional restrictions?
#17
What support and training are provided to franchisees, and how much of this is included in the initial franchise fee versus ongoing costs?
#18
Are there any performance benchmarks or sales minimums that franchisees must achieve to maintain compliance with their franchise agreement?
#19