Explanation

This risk was not identified. Item 20 data shows the system is small and not growing; it shrank by one unit in 2024. While this avoids risks of overstretched support from rapid expansion, the lack of growth may present its own challenges. The stability and appeal of a static or shrinking system should be a key point of your due diligence investigation.

Potential Mitigations

• Understanding a franchise's growth trajectory is important; have your business advisor analyze the system's size and development plans.
• Your accountant can help assess if the franchisor has the financial resources to support future growth.
• Legal counsel should review any development schedules or obligations if you plan to open multiple units.

Explanation

This risk was not identified. The business concept, Italian beef sandwiches, has a long history of consumer demand, particularly in its home market of Chicago. While subject to general restaurant industry competition and changing consumer tastes, the core product is not based on a recent, fleeting trend, which reduces the risk of it being a short-lived fad.

Potential Mitigations

• Assessing the long-term market demand for the product or service in your specific geographic area with a business advisor is a sound practice.
• It is prudent to evaluate the franchisor's plans for innovation and adaptation to stay relevant, which can be discussed with your business advisor.
• A financial advisor can help you consider the sustainability of the business model beyond current trends and its resilience to economic downturns.

Explanation

This risk was not identified in the FDD. Item 1 does not indicate that AIBF is owned or controlled by a private equity firm. The principals appear to be family members with a long history with the brand. However, the franchise agreement does permit the franchisor to sell the system, so future ownership could change.

Potential Mitigations

• It is wise to research the ownership structure of any franchisor with your business advisor.
• Speaking with current franchisees can provide insight into the franchisor's long-term philosophy versus short-term profit motives.
• An attorney can explain the implications of the franchisor's right to sell the system and how that might affect you in the future.

Explanation

This risk was not identified. Item 1 of the FDD clearly states that AIBF does not have any parent companies. All financial information and disclosures pertain directly to the franchisor entity, providing a clear view of its structure and financial standing. This transparency reduces the risk of hidden issues from an undisclosed parent entity.

Potential Mitigations

• It is always a good practice for your attorney to verify the corporate structure if there is any ambiguity about a controlling parent entity.
• When a parent company is involved, your accountant should ensure the parent's financial statements are provided and properly reviewed.
• A business advisor can help you understand the relationships between a franchisor and its parent to assess where control and support truly reside.

Explanation

This risk was not identified. The FDD discloses that Chicago Beef, Inc. is a predecessor. Information regarding this predecessor's history, including the absence of litigation or bankruptcy, appears to be provided. This allows for a more complete assessment of the system's lineage. However, you should confirm this history during your due diligence calls with other franchisees.

Potential Mitigations

• Your attorney should carefully review all information related to predecessors in Items 1, 3, and 4 of the FDD.
• When a system has been acquired, independent research into the predecessor's track record can provide valuable context; a business advisor may assist.
• Asking long-term franchisees about their experience under any predecessors is a key part of due diligence.

Explanation

This risk was not identified. Item 3 of the FDD states that there is no material litigation that requires disclosure. The absence of a pattern of lawsuits, particularly claims of fraud or breach of contract brought by other franchisees, is a positive indicator. This suggests a potentially more stable and less contentious franchisor-franchisee relationship.

Potential Mitigations

• Your attorney should still review the litigation disclosures in any FDD to understand the nature of past or pending disputes.
• It's beneficial to conduct independent online searches for any informal complaints or legal issues not meeting the threshold for FDD disclosure.
• Asking current and former franchisees about any disputes they are aware of is a critical part of due diligence.