ZAGG Retail Channel Partners

Can you provide detailed information about the 12 unit closures and 12 terminations that occurred in 2022? What specific factors or triggers led to this spike in exits?

Of the 30 total units that exited over the three-year period (2021-2023), how many were franchisor-initiated terminations versus franchisee-initiated closures or non-renewals?

Given the termination rate of 7.7%, significantly above the typical range of 0.0%-2.28%, what are the primary grounds for franchisor terminations and are there specific compliance issues the system is experiencing?

The single litigation case filed against the franchisor in the past 3 years—what were the circumstances and has it been resolved?

Median gross sales of $257,187 are 40% below the typical range for this category. Can you provide breakdown by unit maturity (new vs. established units) to understand whether this reflects ramp-up issues or a systemic revenue problem?

The 3-year initial and renewal term is substantially shorter than the typical 10-20 year range. Why were these terms set at only 3 years, and how does this short term affect franchisee investment decisions and long-term planning?

With a 2-year non-compete and no mileage radius specified, how will the non-compete be enforced geographically, and what are the specific product categories restricted?

Can you explain the structure of the 5 renewal conditions that must be met for renewal? Are these performance-based, compliance-based, or both?

The franchise fee of $15,000 is 40% below typical range and transfer fee of $5,000 is 40% below typical range. Are these intentionally discounted to rebuild system health, and could they increase with future contract renewals?

Item 19 financial performance data is available—can you clarify what percentage of current units are included in the financial performance statements and for what operating periods?

Given the 0.5% ad fund rate (half the typical 1.0%-2.0% range), how is the advertising fund allocation determined and what marketing support does this fund provide to franchisees?

The contract specifies cure periods ranging from 2 days for safety threats to 30 days for payment defaults, with 9 non-curable defaults. Can you detail what specific actions constitute non-curable defaults beyond criminal convictions?

All disputes must be resolved through binding arbitration in Cleveland, Ohio with no appeal rights. Has this arbitration clause been invoked in any of the system's disputes, and what were the outcomes?

The agreement requires sole-source purchasing from ZAGG and ZAGG-approved suppliers. How does the franchisor ensure competitive pricing on these mandatory purchases, and has this been a source of franchisee complaints?

With the territory marked as exclusive and exclusive protection confirmed, have there been any encroachment disputes or disagreements about territory definitions in the past 3 years?

Can you provide the specific operational metrics or performance thresholds that trigger the termination clause, particularly given the high 7.7% termination rate?

The System Health score of 28 falls significantly below the typical range of 32.25-70.0. What initiatives is the franchisor implementing to stabilize and grow the remaining 99 units?

Has the franchisor considered extending the initial and renewal terms beyond 3 years to provide franchisees with greater long-term security and investment confidence?