The franchise fee of $150,500 is significantly above the typical range for hospitality franchises. What specific value or services justify this premium fee compared to competitors?
#1
You have 8 total litigation cases with 6 filed against the franchisor—above the typical range for this category. Can you provide details on the nature of these 6 cases where the franchisor was defendant and the current status of the 3 pending cases?
#2
The agreement provides no renewal options after the 20-year initial term. What happens to franchisees at the end of year 20—can existing franchisees renegotiate, or must they exit the system?
#3
Your 1-year unit growth of 29.79% significantly exceeds the typical range. What drove this rapid expansion, and do you expect this growth rate to be sustainable?
#4
The termination clause specifies only 10 days to cure payment defaults. How frequently do you exercise this termination right, and what percentage of franchisees have been terminated for non-curable defaults?
#5
Since territory is non-exclusive with no encroachment protection, how do you prevent the franchisor from opening competing units in the same market as an existing franchisee?
#6
3 units closed in 2022, followed by only 1 in 2023 and 2 in 2024. What caused the higher closure rate in 2022, and what changes did you implement to reduce closures?
#7
The agreement requires personal guarantees from all owners and spouse co-signatures in community property states. If a franchisee defaults, what is the typical collection process and success rate?
#8
Item 19 is available—what are the median and average gross sales figures for operating units, and how many franchisees provided this data?
#9
The technology fee is $734 annually. What specific technology services and systems does this cover, and has this fee increased since you began collecting it?
#10
With a $50,000 transfer fee, how many unit transfers have been requested in the past 3 years, and what approval criteria must franchisees meet to transfer their units?
#11
The 6 cases initiated against the franchisor in litigation—how many involved franchisee claims, and what were the outcomes or settlements?
#12
Given the strong 3-year growth rate of 14.16%, what is your current pipeline of new franchise applications, and are there geographic regions where expansion is planned?
#13
The non-compete clause provides 0 years and no mileage radius—what restrictions, if any, apply to franchisees who leave the system and want to operate in the same market?
#14
You have 3 pending litigation cases. What is the nature of these cases, expected resolution timeline, and potential financial exposure?
#15
The agreement has 15 non-curable default categories. Can you provide examples of what constitutes a non-curable default that would result in termination without opportunity to remedy?
#16