Explanation

This risk was not identified in the FDD package. High franchisee turnover can be a red flag indicating systemic issues, such as lack of profitability or poor franchisor support. The data in Item 20 for BJE does not show a high rate of terminations, non-renewals, or other cessations of business. The reported turnover rate appears low for a system of this size, suggesting a degree of franchisee stability.

Potential Mitigations

• Your business advisor should still recommend you contact a random sampling of current and former franchisees from the lists in Item 20 to discuss their experiences.
• Discuss the franchisor-franchisee relationship with your attorney to understand the dynamics suggested by the low turnover.
• It's wise to have your accountant help you build financial models based on conversations with franchisees, to confirm the potential for stability.

Explanation

This risk was not identified in the FDD package. Rapid system growth can sometimes strain a franchisor's resources, potentially leading to inadequate support for new and existing franchisees. The data in Item 20 shows that BJE's growth has been moderate and is slowing, which suggests the system is not expanding at a rate that is likely to overwhelm its support infrastructure. This indicates a more measured and potentially sustainable growth strategy.

Potential Mitigations

• A business advisor can help you evaluate the franchisor’s infrastructure to ensure it can support its current and projected number of units.
• In discussions with current franchisees, you should inquire about the quality and timeliness of the support they receive from the franchisor.
• An accountant's review of the franchisor's financials can provide insight into their investment in support systems relative to their growth.

Explanation

This risk was not identified in the FDD package. Investing in a new or unproven franchise system carries higher risk due to the lack of a track record. BJE began franchising in 2017 and, as of the end of 2024, had 44 franchised outlets in operation. This indicates the system has moved beyond the initial startup phase and has several years of operating history, making it a more established concept.

Potential Mitigations

• A discussion with your business advisor can help place the franchisor's age and size within the context of the broader franchise industry.
• Engaging with a range of franchisees, from the newest to the most tenured, can provide a comprehensive view of the system's evolution.
• Your attorney can help you understand the legal and contractual stability that comes with a more mature franchise system.

Explanation

This risk was not identified in the FDD package. A fad business is one tied to a fleeting trend, which can threaten its long-term viability. BJE operates in the healthy fast-casual market, offering items like juices, salads, and wraps. While elements of this market are trendy, the overall consumer demand for healthy food options has shown long-term sustainability rather than being a short-lived fad. The business model appears to be based on a durable market segment.

Potential Mitigations

• It is prudent to have your business advisor analyze the long-term consumer trends in the healthy fast-casual food sector.
• You should discuss the franchisor's strategy for menu innovation and adaptation to evolving consumer tastes.
• An accountant can help you model the financial resilience of the business against potential shifts in food trends.

Explanation

This risk was not identified in the FDD package. Inexperienced management can pose a threat to a franchise system's success. Item 2 shows that while the CEO is relatively new to the company, the President and other key directors have extensive, long-term experience with the BJE brand, some dating back to 2005. The core team responsible for operations, training, and innovation appears to have deep institutional knowledge, mitigating the risk of inexperienced leadership.

Potential Mitigations

• Your business advisor can help assess the balance of experience across the entire management team.
• In conversations with franchisees, inquire about their direct experiences with the leadership team's competence and support.
• Your attorney can help you understand the roles and responsibilities of key personnel as defined in the franchise documents.

Explanation

This risk was not identified in the FDD package. Private equity ownership can sometimes lead to decisions that prioritize short-term returns over the long-term health of the franchise system. According to Item 1, BJE does not appear to be owned by a private equity firm. The ownership structure seems to be centered around the system's founders and long-term management, suggesting a different set of strategic priorities.

Potential Mitigations

• Verifying the ownership structure with your attorney is a good practice to ensure there are no outside controlling interests.
• Your business advisor can discuss the potential long-term implications of the current ownership structure on system strategy.
• Understanding the franchisor's succession plan, if any, can provide insight into the future stability of the company.

Explanation

This risk was not identified in the FDD package. A franchisor might be a thinly capitalized subsidiary of a larger, undisclosed parent company. Item 1 of the FDD states, "We have no predecessor or parent." The document discloses a structure of affiliated companies for services like commissary and intellectual property, but all appear to be part of the same closely-held group, with no indication of a hidden or undisclosed parent entity.

Potential Mitigations

• Your attorney should review the corporate structure and affiliate relationships described in Item 1 to confirm there are no undisclosed controlling entities.
• An accountant's review of the financial statements can help assess whether the franchisor entity is self-sustaining or reliant on unstated support.
• A business advisor can help you understand the roles of the various disclosed affiliates in the overall franchise system.

Explanation

This risk was not identified in the FDD package. A predecessor is a company from which the franchisor acquired the business, and a history of issues with a predecessor can be a red flag. Item 1 of the FDD states, "We have no predecessor." This indicates the current franchisor entity developed the system itself, so there is no predecessor history to evaluate for potential inherited problems.

Potential Mitigations

• Your attorney can confirm the franchisor's corporate history to ensure the 'no predecessor' statement is accurate.
• Reviewing the business experience of the founders in Item 2 with your business advisor can provide context on the system's origins.
• Discussions with the longest-tenured franchisees can help verify the historical narrative of the brand's development.

Explanation

This risk was not identified in the FDD package. A pattern of litigation against a franchisor, especially franchisee-initiated lawsuits alleging fraud, can signal serious systemic problems. Item 3 discloses only one pending lawsuit, which was initiated by BJE against a former franchisee for collection and covenant enforcement. This is a common type of dispute and does not represent a pattern of litigation against the franchisor.

Potential Mitigations

• Have your attorney review the details of any disclosed litigation to understand its nature and potential implications.
• It is a sound practice to ask current franchisees about their awareness of disputes within the system.
• Your business advisor can help you understand what constitutes a normal level of litigation for a franchise system of this size.