Explanation

This risk was not identified. Ace Sushi has been offering franchises since June 2005, and its key executives have been with the company or its affiliate for many years. A new or unproven system presents risks because the business model, brand recognition, and support structures are not well-established. While this specific risk is not present, other significant stability risks concerning the franchisor's financial condition and high franchisee turnover have been identified in this report.

Potential Mitigations

• Your business advisor should still help you evaluate the overall stability of the system, considering all identified risks.
• An attorney can help you understand the history of the franchisor and its management team as disclosed in Items 1 and 2.
• Always have an accountant review the franchisor's full financial history to assess its long-term viability.

Explanation

This risk was not identified. The business model is centered on selling sushi and related Asian food items, which is a well-established and mainstream food category in the U.S. market rather than a temporary fad. A fad business carries the risk that consumer interest may decline quickly, potentially leaving you with a worthless investment long before your franchise agreement expires.

Potential Mitigations

• It is still wise to conduct independent market research with a business advisor to assess long-term consumer demand in your specific area.
• Your accountant can help you evaluate the business model's resilience to economic shifts and changing consumer tastes.
• Review the franchisor's plans for product innovation and system development in Item 11 with your attorney.

Explanation

This risk was not identified. The executive team disclosed in Item 2 has significant, long-term experience with Ace Sushi and its affiliate, Asiana Management Group, Inc., with some executives having been involved since the 1990s. Inexperienced management can be a risk because it may lead to poor strategic decisions and inadequate support for franchisees. However, based on the FDD, the leadership appears to have substantial experience in this specific industry.

Potential Mitigations

• Engaging a business advisor to review the qualifications of the management team in Item 2 is always a prudent step.
• It is advisable to speak with current franchisees to gauge their opinion of the management team's competence and support.
• Your attorney can help you understand the roles and history of the key personnel disclosed.

Explanation

This risk was not identified. Item 1 indicates the franchisor is a wholly owned subsidiary of Asiana Management Group, Inc., and does not suggest ownership by a private equity firm. Private equity ownership can sometimes lead to a focus on short-term profits and a quick resale of the franchise system, which may not align with the long-term interests of franchisees.

Potential Mitigations

• Your attorney can help you research the ownership structure of the franchisor and its parent company to confirm there is no private equity involvement.
• A discussion with your business advisor can help you understand the potential impacts of different ownership structures on a franchise system.
• Always ask the franchisor about any anticipated changes in ownership.

Explanation

This risk was not identified. The FDD clearly discloses the parent company, Asiana Management Group, Inc. (AMG), in Item 1. However, the financials for AMG are not provided, which can obscure the overall financial health of the combined enterprise. The risk of non-disclosure is that a financially weak or controlling parent company's influence is hidden from prospective franchisees.

Potential Mitigations

• Your accountant should analyze the disclosed relationship between the franchisor and its parent company, including the management fee arrangement.
• A business advisor can help you assess the potential risks of the franchisor being financially dependent on its parent.
• An attorney should review the FDD to ensure all required disclosures regarding the parent company have been made.

Explanation

This risk was not identified. Item 1 of the FDD states that the franchisor, Ace Sushi, has no predecessors. When a franchisor has predecessors, it is important to scrutinize their history for issues like bankruptcy, litigation, or high franchisee turnover, as these can indicate underlying problems with the business model that may have been inherited by the current franchisor.

Potential Mitigations

• It is always a good practice for your attorney to review Item 1 carefully to confirm the franchisor's corporate history and identify any predecessors.
• A discussion with your business advisor about the franchisor's history can provide context for its current operations.
• Your accountant should review financial statements to ensure they align with the stated corporate history.