I've done some work with franchisors, so I have some perspective from the other side.
$60K up front fee seems steep (I'm used to seeing $25K at the top end)
5% royalty seems reasonable (assuming it's based on net sales, and does not include sales tax - yes, this has happened)
2% marketing seems to be in line, I've seen 3%
The $400K to get up and running seems to be a touch high, but not out of line.
The biggest things are:
- Scrutinize the hell out of the FDD, especially the financials
- Make sure they can prove out the economics (not just a set of assumptions, but actual examples of the financial performance of other franchises)
- Spend some time with other franchisees and take their temperature and what is good and not so good
- Find out the turnover / success rate of other franchisees
There are three kinds of people, those who can count, and those who can't.