Explanation

This risk was not identified. The audited financial statements in Item 21 show that Ben's Soft Pretzels Franchising Corporation (Ben's Pretzels) is financially stable. It has consistent profitability, positive and growing net worth, and a healthy balance sheet. A strong financial position suggests the franchisor has the resources to support its franchisees and grow the brand, which is a significant positive factor.

Potential Mitigations

• It is still prudent for your accountant to review the franchisor's financial statements and footnotes to understand their financial health and business model.
• A business advisor can help you assess if the franchisor's financial strength translates into robust franchisee support systems.
• Your attorney should confirm that the financial statements provided are audited and meet all federal disclosure requirements.

Explanation

This risk was not identified. The franchise system has been growing at a steady and seemingly manageable pace, as shown in the Item 20 tables. The franchisor's financial statements in Item 21 appear strong, suggesting it has the resources to scale its support systems in line with its unit growth. Rapid, unsupported growth does not appear to be a current issue for this system.

Potential Mitigations

• Engaging a business advisor to review the franchisor's growth plans in relation to its support infrastructure remains a valuable step.
• It is a good practice to ask current franchisees about the quality and responsiveness of the support they receive from the franchisor.
• Your accountant can help you correlate the growth data in Item 20 with the financial capacity shown in Item 21.

Explanation

This risk was not identified. Ben's Pretzels began franchising in 2013, and its affiliates have operated stores since 2008. With over a decade of experience and a significant number of outlets across many states, the system is established and appears to have a proven business model. It is not considered a new or unproven franchise.

Potential Mitigations

• It is still beneficial to discuss the system's history and market position with current franchisees.
• A business advisor can help you analyze the company's trajectory and competitive landscape to assess its long-term viability.
• Having your attorney review the full history as presented in the FDD is a standard part of due diligence.

Explanation

This risk was not identified. The business concept, selling soft pretzels, is a well-established category in the food service industry with a long history of consumer demand. It is not based on a recent or fleeting trend, suggesting a lower risk of being a fad business.

Potential Mitigations

• A business advisor can still help you research your local market to confirm sustained demand for this type of product.
• Assess the franchisor's plans for menu innovation and brand development to ensure long-term relevance.
• Consider the brand's resilience through various economic cycles by discussing its history with long-tenured franchisees.

Explanation

This risk was not identified. While the franchisor entity itself does not directly operate stores, its key executives, as detailed in Item 2, have extensive experience operating and managing the brand's stores through affiliate companies since 2008. This long tenure provides them with significant operational and industry experience relevant to the franchise.

Potential Mitigations

• It is wise to verify the management team's reputation and effectiveness by speaking with current franchisees.
• Engaging a business advisor can help you assess how the management structure might impact direct support to franchisees.
• Your attorney should review the roles and responsibilities of the various affiliate companies disclosed in Item 1.

Explanation

This risk was not identified. Item 1 of the FDD indicates the franchisor is a privately held corporation and does not disclose ownership by a private equity firm. The key management appears to consist of the company's founders. Therefore, risks associated with a private equity ownership model are not applicable here.

Potential Mitigations

• It is still a good practice to ask the franchisor about any long-term plans for the sale of the company.
• Your attorney can verify the corporate ownership structure to confirm the absence of undisclosed controlling entities.
• Understanding the franchisor's long-term vision for the brand is a key due diligence step to discuss with a business advisor.

Explanation

This risk was not identified. The FDD clearly discloses the franchisor's affiliate companies in Item 1 and details the financial relationships and required purchases from them in Item 8. The franchisor provides its own audited financial statements in Item 21. There does not appear to be an undisclosed parent company whose financial condition is being hidden.

Potential Mitigations

• Having your accountant review the disclosed affiliate relationships in Item 8 is important to understand potential conflicts of interest.
• Your attorney should confirm that all necessary financial disclosures for the franchisor and its affiliates have been made.
• Asking existing franchisees about their dealings with the affiliate companies can provide practical insight.

Explanation

This risk was not identified. Item 1 of the FDD does not list any predecessor entities from which Ben's Pretzels acquired its assets or that previously offered franchises for this system. This means the historical performance and data presented relate directly to the current franchisor and its affiliates.

Potential Mitigations

• Your attorney should confirm the absence of any predecessor history in the FDD.
• Speaking with the longest-tenured franchisees can help verify the company's historical narrative.
• A business advisor can help you research the company's background to ensure no undisclosed history exists.

Explanation

This risk was not identified. Item 3 of the FDD states that there is no litigation that requires disclosure. This suggests the franchisor has not been involved in significant legal disputes with franchisees or regulators concerning issues like fraud, misrepresentation, or violations of franchise law. This is a positive indicator for the health of the franchise relationship.

Potential Mitigations

• It is still prudent to have your attorney conduct an independent search for any litigation involving the franchisor or its principals.
• Asking current and former franchisees about their experiences with disputes can provide valuable context.
• A business advisor can help you research online forums or franchisee groups for any discussions of disputes.