Explanation

The franchisor, Beggars Pizza Franchise, LLC (Beggars Pizza LLC), appears to be financially stable. The audited financial statements in Item 21 show consistent profitability and positive members' equity over the past three years. No significant red flags such as operating losses, high debt, or a going concern note from the auditor were identified. Therefore, the risk of franchisor instability due to poor financial health seems low at this time, suggesting it can likely meet its support obligations.

Potential Mitigations

• An experienced franchise accountant should still review the complete, audited financial statements and all footnotes to confirm this assessment.
• Ask your accountant to analyze the franchisor's cash flow and reliance on initial franchise fees versus ongoing royalties for its income.
• During your due diligence calls, ask existing franchisees about their perception of the franchisor's financial commitment to supporting the system.

Explanation

This risk was not identified. The data in Item 20's tables indicates a very stable franchise system over the past three years, with zero terminations, non-renewals, or other cessations of operation reported. This low turnover rate is a positive indicator, suggesting a potentially healthy relationship between Beggars Pizza LLC and its franchisees and a viable business model. High turnover is typically a major red flag for prospective franchisees, so its absence here is significant.

Potential Mitigations

• You should still contact current and former franchisees listed in Item 20 to confirm their experiences and satisfaction levels.
• A business advisor can help you analyze the Item 20 data in the context of the system’s age and size.
• Always ask franchisees you speak with about the primary challenges of operating within this specific system.

Explanation

This risk was not identified in the FDD package. The outlet data in Item 20 shows a stable to modest growth pattern over the past three years, adding three new franchised units in 2022 and maintaining that number through 2024. This does not suggest the franchisor is growing too quickly for its support systems to handle. A controlled growth pace can be a sign of a mature and responsible franchising strategy.

Potential Mitigations

• A discussion with your business advisor about the franchisor's growth plans can provide additional context.
• In your conversations with existing franchisees, it is wise to inquire about the quality and timeliness of the support they receive.
• An accountant can analyze the franchisor's financial statements to ensure they are reinvesting adequately to support system growth.

Explanation

This risk was not identified. Beggars Pizza LLC has been franchising since 2004, and its management team, as detailed in Item 2, has extensive, long-term experience with both the brand and the pizza industry. The system has 21 franchised and 7 affiliate-owned locations, indicating a mature, proven concept rather than a new or untested one. The financial statements in Item 21 also reflect a stable, ongoing business concern.

Potential Mitigations

• It is still beneficial to speak with a range of franchisees, both new and long-standing, about their experiences with the system.
• Engaging a business advisor can help you evaluate the franchisor's track record and overall system health.
• A thorough review of the entire FDD with your attorney is crucial to understand all aspects of this established system.

Explanation

This risk does not appear to be present. The franchise operates in the pizza restaurant industry, which is a mature and established market sector with sustained consumer demand. The business model is not based on a new or fleeting trend, and the brand itself has been in operation for many years. This suggests a lower risk of the business being a short-lived fad compared to concepts based on novel or niche trends.

Potential Mitigations

• It is still prudent to conduct your own market research with a business advisor to assess local competition and demand.
• Ask the franchisor and existing franchisees about how the business adapts to changing consumer tastes and economic conditions.
• Developing a business plan with your accountant will help verify the long-term viability of this model in your specific market.

Explanation

This risk was not identified. Item 2 details the business experience of the franchisor's key executives, who possess extensive and long-term experience with the Beggars Pizza brand and its affiliate operations, some stretching back decades. This deep experience in the specific business and industry is a positive factor, suggesting a strong understanding of operations, marketing, and franchisee support, which can reduce risks associated with inexperienced management.

Potential Mitigations

• A business advisor can help you further evaluate the management team's track record and strategic vision for the company.
• When speaking with franchisees, ask specifically about their interactions with and the effectiveness of the leadership team.
• Your attorney can help you understand how management's experience translates into the obligations outlined in the Franchise Agreement.

Explanation

This risk was not identified in the FDD package. There is no disclosure in Item 1 or elsewhere that suggests Beggars Pizza LLC is owned or controlled by a private equity firm. The management appears to consist of long-term owner-operators. The absence of PE ownership means decisions may be more focused on the long-term health of the brand and its franchisees rather than short-term investor returns, which is a potential positive.

Potential Mitigations

• It remains important to understand the ownership structure and any plans for future sale of the company.
• Your attorney should confirm the ownership structure and explain the implications of the franchisor's right to assign the agreement.
• A business advisor can help you investigate the franchisor's long-term goals and philosophy.

Explanation

This risk was not identified. Item 1 does not disclose any parent company for Beggars Pizza LLC. While it has affiliates, such as Begcom and Beg Adv, these are presented as related companies, not parent entities that would control the franchisor. The franchisor provides its own audited financial statements in Item 21 as required. There is no indication of a hidden ownership structure that would obscure the true financial backing of the system.

Potential Mitigations

• Your attorney should confirm the corporate structure and the roles of the disclosed affiliates.
• It is wise for your accountant to review the related-party transactions described in the financial statement footnotes.
• Asking the franchisor directly about the relationship between the LLC and its affiliates can provide additional clarity.

Explanation

This risk was not identified in the FDD package. Item 1 explicitly states, "We have no predecessors." This indicates the current franchisor, Beggars Pizza LLC, did not acquire the system from a prior entity and has been the operator of the franchise system since it began. Therefore, there is no hidden or negative history from a predecessor company to be concerned about.

Potential Mitigations

• Verifying the franchisor's history through public records can be a final due diligence step for your attorney.
• Asking long-term franchisees about the history of the company can confirm the information provided in the FDD.
• A business advisor can help research the brand's history to ensure no other entities were involved.

Explanation

This risk was not identified. Item 3 of the FDD states, "No litigation is required to be disclosed in this Item." The absence of disclosed litigation, especially claims from other franchisees alleging fraud, misrepresentation, or breach of contract, is a significant positive indicator. It suggests a potentially healthy franchisor-franchisee relationship and a lower risk of systemic legal or operational problems that often lead to disputes.

Potential Mitigations

• An attorney can still conduct independent searches of public court records to verify the absence of material litigation.
• When speaking with current and former franchisees, it is prudent to inquire about any past or pending disputes they are aware of.
• Your business advisor can help you assess this lack of litigation as a key positive factor in your overall risk assessment.