Explanation

Because BBF LLC is a new franchisor, no franchised outlets have been terminated, have failed to renew, or have otherwise ceased operation. Therefore, a historical franchisee turnover rate cannot be determined. While this specific risk is not present, the complete lack of an operating history for franchisees is a significant risk factor in itself, which is addressed under the 'New/Unproven Franchise System' risk.

Potential Mitigations

• When a system is new, speaking with the initial franchisees who have signed agreements but not yet opened is essential; your attorney can help you prepare questions.
• Your business advisor can help you assess the risks of joining a system with no franchisee performance track record.
• An accountant should review the franchisor's financials to determine if they are primarily funded by initial franchise fees versus ongoing royalties.

Explanation

This specific risk was not identified in the FDD Package. The business model, which involves leasing salon suites to beauty professionals, is an established concept in the market with several large competitors. While success is not guaranteed, the business does not appear to be based on a short-term or fleeting trend. Therefore, it is less likely to be considered a 'fad' business.

Potential Mitigations

• A business advisor can help you conduct independent market research to assess the long-term demand for salon suite rentals in your proposed area.
• It is wise to evaluate the business model's resilience to economic shifts and changing consumer preferences with your financial advisor.
• Asking the franchisor about their plans for future innovation and adaptation can provide insight into their long-term vision.

Explanation

This specific risk was not identified in the FDD Package. The disclosures in Item 1 do not indicate that BBF LLC is owned or controlled by a private equity firm. Ownership appears to be held by an individual. Therefore, the specific risks associated with a private equity firm's typical investment horizon and focus on short-term returns do not seem to apply here.

Potential Mitigations

• Your attorney can help you verify the franchisor's ownership structure through public records to confirm the information in Item 1.
• Understanding who has decision-making authority within the franchisor is a key piece of due diligence a business advisor can help with.
• It's always prudent to ask about any anticipated changes in ownership structure.

Explanation

This specific risk was not identified in the FDD Package. Item 1 discloses an affiliate, Beauty Bungalows, Inc., which operates the corporate stores. There is no indication of any other controlling parent company whose financials or history might be relevant and undisclosed. The corporate structure appears to be transparent in the document.

Potential Mitigations

• A review of the roles and responsibilities of all disclosed affiliates with your attorney is important to understand their impact on your franchise.
• Your accountant can help analyze the financial relationship between the franchisor and its affiliates.
• Asking the franchisor to clarify the affiliate's role in providing products, services, or support to franchisees can prevent future misunderstandings.

Explanation

This specific risk was not identified in the FDD Package. Item 1 states that BBF LLC does not have any predecessors. As a newly formed franchising entity, there is no prior franchising history under a different corporate name to consider, which simplifies due diligence in this area.

Potential Mitigations

• Your attorney can help verify the franchisor's corporate history to confirm the absence of any predecessors.
• It's good practice to ask management about the origin of the business concept and system, even if there are no official predecessors.
• With your business advisor, you can still research the history of the affiliate company (BBI) to understand the concept's background.

Explanation

This specific risk was not identified in the FDD Package. Item 3 states that there is no material litigation, past or pending, involving the franchisor, its predecessors, or its management. For a new franchisor, the absence of litigation is expected but is still a positive data point.

Potential Mitigations

• An attorney can perform independent searches to verify the absence of litigation history.
• It is wise to ask existing franchisees if they are aware of any disputes, even if they have not escalated to formal litigation.
• Understanding the dispute resolution process in the Franchise Agreement is crucial should a conflict arise in the future; your lawyer can explain this.