Explanation

This risk was not identified, as Item 20 indicates there are no existing or former franchisees. While there is no history of turnover, this also means there is no track record of franchisee success or satisfaction. This lack of an operating history with franchisees is a distinct and significant risk in itself.

Potential Mitigations

• Interviewing the franchisor's management about their long-term vision and support plans is critical, a topic to discuss with your business advisor.
• Your attorney can help you understand the risks associated with being one of the first franchisees in a new system.
• An accountant should help you model a worst-case financial scenario given the lack of historical franchisee performance data.

Explanation

This risk was not identified, as the franchisor is a new entity and has not yet experienced any franchise system growth. However, you should be aware that if the franchisor does begin to sell franchises rapidly, its support infrastructure could become strained, which is a key area for ongoing monitoring.

Potential Mitigations

• In discussions with the franchisor, your business advisor can help you probe their plans for scaling support services if they achieve rapid sales.
• Your attorney should review the support commitments in the franchise agreement to ensure they are specific and enforceable.
• Before investing, your accountant can help assess if the franchisor's current financials could support even a modest number of new franchisees.

Explanation

This risk was not identified in the FDD. The franchisor is disclosed as being owned by its parent company, with no indication of private equity involvement. This avoids the specific risks associated with investment firms that may prioritize short-term returns over the long-term health of the franchise system.

Potential Mitigations

• Asking your attorney to confirm the ownership structure through public records can verify the absence of private equity involvement.
• During discussions, your business advisor can help you understand the long-term goals of the current ownership.
• It's wise to have your attorney review the 'Assignment' clause in the franchise agreement to see how easily the system could be sold.

Explanation

This specific risk was not identified, as Item 1 clearly discloses the existence of the parent company, Bang Cookies Corporation. However, the parent company's financial statements are not included. Given the franchisor is a new entity with limited capital, the financial health of the parent is a key factor in its ability to provide support, a point to discuss with your accountant.

Potential Mitigations

• Your accountant should analyze the franchisor's balance sheet, noting the large "Due from related parties" which indicates financial dependence on the parent.
• It would be prudent to request the parent company's financial statements to better assess the overall financial health of the enterprise.
• Your attorney can help you understand the legal relationship and obligations between the parent and the franchisor LLC.

Explanation

No predecessors are identified for Bang Cookies LLC in Item 1. The business appears to have been developed and operated by its current parent company and affiliates prior to franchising. This avoids the potential risks associated with inheriting historical problems, litigation, or a negative brand reputation from a prior owner of the system.

Potential Mitigations

• During your due diligence, asking management about the complete history of the "Bang Cookies" brand is a good practice for your business advisor.
• Your attorney can confirm the corporate history through public records searches to ensure no undisclosed predecessors exist.
• Speaking with the longest-serving employees of the affiliate company, if possible, could provide additional historical context.

Explanation

The FDD's Item 3 discloses no litigation. As a new franchisor with no operating franchisees, this is expected. The absence of litigation provides no information about how the franchisor will handle disputes, but it avoids the red flag of a pre-existing pattern of lawsuits with franchisees.

Potential Mitigations

• Your attorney can conduct a public records search to verify that no litigation has occurred since the FDD was issued.
• Reviewing the dispute resolution clauses in the Franchise Agreement with your attorney is crucial to understand how future conflicts will be handled.
• Asking management about their philosophy on resolving franchisee disputes can provide insight, a topic to raise with your business advisor.