Explanation

Item 20 tables show that the number of franchised Scoop Shops experienced a net decline of 12 units between the start of 2022 and the end of 2023, before a small net increase of 3 units in 2024. This recent history of system contraction, followed by modest growth, could suggest market saturation or other systemic challenges. The overall trend indicates the system is in a mature or potentially consolidating phase rather than a rapid growth one.

Potential Mitigations

• Asking the franchisor about their strategy for managing system size and supporting existing franchisees is a prudent step for a prospective owner.
• A business advisor can help you assess the market potential in your specific area, considering the system's overall growth trend.
• Your attorney should review the territory protections in Item 12 to understand how you are insulated from nearby store openings.

Explanation

This specific risk was not identified in the FDD Package. Ben & Jerry's is a well-established brand, and the franchise system has been operating for decades. For newer franchises, this can be a significant risk, as an unproven business model or lack of brand recognition can increase the likelihood of failure. An unproven system may also lack refined operational procedures and support structures, posing additional challenges for new franchisees.

Potential Mitigations

• When evaluating a newer franchise, it is wise to have a business advisor scrutinize the founders' industry and franchising experience.
• An accountant should carefully assess the capitalization of a new franchisor and its reliance on initial franchise fees versus ongoing royalties.
• Speaking with the very first franchisees in a new system is crucial for understanding the real-world performance and support levels.

Explanation

This specific risk was not identified in the FDD Package. Ben & Jerry's is a long-standing, globally recognized brand in the ice cream industry. However, a business concept tied to a short-term trend can be a significant risk. Such businesses may see a rapid decline in consumer interest after an initial boom, leaving franchisees with a failing business but still bound by a long-term franchise agreement. Evaluating the long-term sustainability of consumer demand is critical.

Potential Mitigations

• A business advisor can help you conduct market research to assess the long-term viability and consumer demand for the product or service.
• It is important to ask the franchisor about its plans for product innovation and adaptation to evolving market trends.
• Your accountant can assist in developing financial projections that consider the potential for declining sales if the concept is trend-dependent.

Explanation

This specific risk was not identified in the FDD Package. The executives listed in Item 2 appear to have substantial experience with either Ben & Jerry's or its parent company, Unilever. For other franchises, inexperienced management can pose a great risk. A leadership team lacking a track record in franchising or the specific industry may struggle to provide adequate support, training, and strategic direction, potentially jeopardizing the success of its franchisees.

Potential Mitigations

• A thorough review of the executive team's biographies in Item 2 with a business advisor is a crucial step.
• Contacting existing franchisees to inquire about their direct experiences with the management team's competence and support is advisable.
• Your attorney can help you investigate the franchisor's history and the past performance of its key personnel.

Explanation

The FDD clearly discloses that Ben & Jerry's is a subsidiary of Ben & Jerry's Homemade, Inc., which is ultimately owned by Unilever. The franchisor's financial statements are provided. While the parent company does not provide a separate financial guarantee, a parental support letter is mentioned in the notes to the financial statements. This structure means the franchisee must rely solely on the financial capacity of the subsidiary franchisor entity for performance.

Potential Mitigations

• Your accountant should carefully review the provided financial statements of the franchisor entity itself to assess its standalone health.
• A franchise attorney can clarify the legal limitations and enforceability of any parental support letters or guarantees mentioned.
• Understanding the specific entity you are contracting with and its individual resources is a key part of due diligence.

Explanation

This specific risk was not identified in the FDD Package. The franchisor clearly identifies its predecessor as Ben & Jerry's Homemade, Inc., from which it acquired the franchise system assets. For other franchises, a lack of clarity about a predecessor's history can obscure past issues like high failure rates or litigation. A seamless transition is not guaranteed, and a new owner may not have the same commitment or capability as the founder, creating risks for franchisees who joined based on the original system's reputation.

Potential Mitigations

• A business advisor can help you research the history and reputation of any disclosed predecessor entities.
• It is important to ask long-term franchisees about their experiences both before and after the current franchisor took over.
• Your attorney should carefully review the terms of the asset acquisition to understand what liabilities, if any, were assumed.