The transfer fee of $17,500 is above the typical range for QSR franchises. How does Zaxby's justify this fee relative to competitors, and is there flexibility in negotiating this amount?
#1
Financial performance metrics (average sales of $2.78M) significantly exceed typical QSR ranges. Can the franchisor provide details on the units included in Item 19, geographic concentration, and whether these figures represent mature vs. newer locations?
#2
Investment Costs score of 20 is substantially below the typical range of 69-78. What are the initial capital requirements and why does the franchisor believe investment costs fall outside the typical range?
#3
The contract includes 23 termination cause provisions, exceeding the typical range of 15-20. Can you provide a breakdown of the specific termination causes and clarify which are performance-based vs. administrative?
#4
Personal guarantees are required from multiple family members (spouses, siblings, parents, children). How is this enforced in practice, and what happens to family members' obligations if an individual owner passes away or becomes incapacitated?
#5
The renewal condition requires payment of a renewal fee equal to 50% of the then-current initial franchise fee ($17,500). What variables will determine the then-current fee in 10 years, and is there any cap on how much this could increase?
#6
All inventory must be purchased from franchisor-designated or approved suppliers. What markup or benefit does the franchisor receive from these supplier relationships, and how are suppliers selected or approved?
#7
Termination has increased from 0 cases in 2022 to 6 cases in both 2023 and 2024. What are the specific reasons for these terminations, and do they reflect a change in enforcement policy or declining franchisee performance?
#8
Territory is protected but not exclusive. What specific protections exist against franchisor-owned or company-operated locations, and have any encroachment disputes occurred despite the protection claim?
#9
With no litigation cases reported, how are franchise disputes typically resolved? Are there mandatory arbitration or mediation requirements, and what are the associated costs?
#10
The indemnification scope is described as very broad. Can you clarify the specific claims franchisees must indemnify the franchisor against, and are there any caps on indemnification liability?
#11
The franchisor retains right to modify operations and require refurbishment. What is the typical timeline and cost for major refurbishment, and how frequently has this been required of existing franchisees?
#12
Risk Factors score of 79 exceeds the typical range. Which specific operational or market factors contribute to this elevated risk profile?
#13
Why does the franchise require a 2-year, 10-mile non-compete agreement? How is this enforced, and have there been legal challenges to its scope or duration?
#14
Transfer rate of 7.0% is substantial. Can you provide data on how many existing franchisees have sold their units in the past 3 years, and what was the typical holding period before sale?
#15
What percentage of units reporting financial data in Item 19 are franchisee-operated vs. franchisor-owned or company-operated locations, as this affects the comparability of sales figures?
#16
The franchisor reserves operational control over specific categories of suppliers. Which categories have the highest costs or most frequently lead to franchisee disputes?
#17
No terminations occurred in 2022, but 6 occurred in each of 2023-2024. Were there policy, performance standard, or compliance changes implemented that triggered increased terminations?
#18
Given the 20-year total potential term, what happens to franchisees at the end of their renewal term if they cannot or choose not to renew?
#19
How many franchisees have exercised their renewal option to date, and what percentage have not renewed when their initial 10-year term expired?
#20