Explanation

This risk was not identified in the FDD package. As a new franchisor that only began offering franchises in July 2024, there is no history of franchisee turnover. While this means no negative data exists, it also means there is no track record of franchisee success or retention to evaluate. The lack of data is itself a risk associated with a new system.

Potential Mitigations

• Given the lack of historical data, it is crucial to discuss the business model's viability and support structure with a business advisor.
• Your attorney should advise on contractual protections in case the new system proves to be unsuccessful.
• An accountant can help you create financial models that account for the higher risks of an unproven system.

Explanation

This risk was not identified in the provided FDD package. The business model, a coffee shop specializing in Yemeni-grown coffee, appears to be based on a specific cultural niche rather than a short-term trend. However, its long-term mass-market appeal is unproven. The success of the business will depend on sustained consumer interest in its specialized offerings beyond initial novelty.

Potential Mitigations

• A business advisor can help you conduct local market research to gauge the long-term demand for a niche coffee concept in your area.
• Inquire with the franchisor about their plans for product innovation and market adaptation to ensure the brand remains relevant over time.
• Your financial advisor should help you assess the business model's resilience to economic shifts and changing consumer tastes.

Explanation

This risk was not identified in the FDD package. The franchisor, Durar, is a new entity and is not disclosed as being owned by a private equity firm. Ownership appears to be held by the individuals listed in Item 2. Therefore, risks specifically associated with a private equity ownership model, such as a focus on short-term returns over system health, do not appear to be present.

Potential Mitigations

• It is still prudent to have your attorney verify the corporate ownership structure to confirm the absence of undisclosed controlling entities.
• Your business advisor can help you understand the goals and motivations of the current individual owners.
• An accountant should review the financial statements to ensure the company is self-sustaining and not reliant on outside investment infusions.

Explanation

This risk was not identified in the FDD package. Item 1 does not disclose the existence of a parent company. Durar appears to be the primary entity. Therefore, risks associated with an undisclosed parent or the failure to provide a parent company's financial statements are not applicable here. The primary financial risk stems from Durar's own disclosed financial weakness.

Potential Mitigations

• Your attorney should confirm the corporate structure and the absence of any parent or guarantor entities that should have been disclosed.
• An accountant's focus should be on the disclosed financial statements of the franchisor itself to assess its viability.
• A business advisor can help you understand the implications of investing in a standalone entity without the backing of a larger parent company.

Explanation

This risk was not identified in the FDD package. The franchisor, Durar, is a new entity established in December 2022 and does not list any predecessors. The business concept is based on an affiliate's operation, but the franchise system itself is new. Therefore, there are no predecessor issues, such as a hidden history of litigation or failures, to analyze.

Potential Mitigations

• While there is no predecessor history, a business advisor should help you research the history and reputation of the affiliate company, V60 Coffee, LLC.
• Your attorney can confirm that there are no undisclosed predecessor entities that should have been listed in Item 1.
• The lack of a predecessor means you must rely entirely on the limited history of the current franchisor and its management for your due diligence.

Explanation

This risk was not identified in the FDD package. Item 3 states that there is no litigation that requires disclosure. As a new franchisor with no operating franchisees yet, it is not unusual to have no litigation history. However, this also means there is no track record to evaluate how the franchisor handles disputes with its franchisees.

Potential Mitigations

• While there is no litigation history, it is crucial that your attorney reviews the dispute resolution clauses in the Franchise Agreement to understand how future conflicts would be handled.
• A business advisor can help you assess the potential for future disputes based on the terms of the agreement and the franchisor's inexperience.
• Speaking with future franchisees, as the system grows, will be important to monitor how the franchisor manages its relationships.