Explanation

This specific risk was not identified in the FDD Package. The system has grown from 15 to 23 total outlets over the last three years, a pace that appears manageable rather than dangerously rapid. Still, any growth requires a corresponding increase in support infrastructure. Monitoring the quality of franchisor support as the system expands remains a prudent step for any franchisee.

Potential Mitigations

• During your due diligence, asking current franchisees about the quality and responsiveness of franchisor support is a valuable step.
• Your business advisor can help you assess if the franchisor's support staff and systems seem adequate for the current number of units.
• It is wise to have your accountant review the franchisor's financials to confirm they are investing in infrastructure to support growth.

Explanation

This specific risk was not identified in the FDD Package. ACF began franchising around 2017 and has grown to over 20 locations. This suggests the system has moved beyond the earliest, most volatile startup phase. For any franchise, it is still important to evaluate its history and the stability of its business model over time.

Potential Mitigations

• It's a good practice to have your attorney and accountant review the franchisor's history and financial stability, regardless of its age.
• Your business advisor can help you research the brand's reputation and market position.
• Speaking with long-term franchisees can provide valuable insight into the system's evolution and stability.

Explanation

The business model is centered on southern-style seafood boils, a specific and trend-influenced segment of the restaurant industry. While this concept is established, its long-term mass-market appeal could be subject to shifting consumer tastes. A potential risk exists if the concept's popularity wanes and the system does not evolve, which could impact your business's sustained success over the full franchise term.

Potential Mitigations

• Your business advisor can help you conduct independent market research to assess the long-term demand for this specific restaurant concept in your area.
• Discuss the franchisor's strategy for menu innovation and concept evolution with management and existing franchisees.
• Creating a business plan with your accountant that models different scenarios for customer demand is a prudent step.

Explanation

This specific risk was not identified as a major concern. Item 2 indicates that key personnel have significant experience in the restaurant industry and franchising, with several support managers having worked for other large franchise brands. While the top executives' experience is primarily with the Angry Crab Shack brand itself, the overall management team appears to have a solid base of relevant industry knowledge and experience.

Potential Mitigations

• A review of the management team's background in Item 2 with your business advisor is always recommended.
• It is useful to ask current franchisees about their direct experiences with the management team's competence and support.
• Your attorney can help you verify the professional history of key executives if you have specific concerns.

Explanation

This specific risk was not identified in the FDD Package. The disclosures in Item 1 and Item 2 do not indicate that ACF is owned or controlled by a private equity firm. Franchisee prospects should always understand a franchisor's ownership structure, as a change in ownership, such as a sale to a private equity firm, could potentially alter the system's priorities and culture.

Potential Mitigations

• Your attorney can help you verify the franchisor's ownership structure and explain the implications of the 'Assignment by Franchisor' clause.
• A business advisor can help you understand the potential impacts of different ownership structures on a franchise system.
• Regularly monitoring news about the franchisor for potential sales or mergers is a sound business practice.

Explanation

This specific risk was not identified in the FDD Package. Item 1 clearly states that the franchisor does not have a parent company. The documents indicate that ACF is the primary entity responsible for the franchise system. In any franchise review, it is important to confirm there are no undisclosed parent or affiliate entities that could impact the business.

Potential Mitigations

• A franchise attorney should always review Item 1 and the corporate structure to confirm the identity of the franchisor.
• In cases with complex structures, an accountant can help analyze financials of all related entities to assess overall health.
• Asking the franchisor to confirm its ownership structure in writing provides additional clarity.

Explanation

This specific risk was not identified in the FDD Package. Item 1 of the FDD clearly states that ACF does not have any predecessors. Therefore, there are no hidden historical issues from prior entities to consider. A key part of due diligence is for your attorney to confirm the business history disclosed in Item 1 is accurate and complete.

Potential Mitigations

• Your attorney should always verify the information in Item 1 regarding predecessors.
• For any franchise, it is helpful to ask long-tenured franchisees about the history of the brand.
• A business advisor can assist in researching the brand's origins and any prior business names or entities.