Explanation

The Blimpie system is shrinking, not growing rapidly. Item 20 data shows a consistent net decline in the number of franchised and total outlets over the past three years. Therefore, the specific risks associated with a franchisor outgrowing its support capabilities due to rapid expansion were not identified as a primary concern in this FDD package. System stability, rather than growth-related strain, appears to be the more relevant issue.

Potential Mitigations

• Your business advisor should help you investigate the reasons for the system's contraction rather than focusing on risks of rapid growth.
• An accountant can help you model the financial implications of joining a shrinking system, which may present different challenges than a rapidly growing one.
• Discuss with your attorney the franchisor's contractual obligations for support, regardless of the system's growth trajectory.

Explanation

The Blimpie brand and its franchisor, Kahala Franchising, L.L.C. (Kahala), have a long operating history dating back several decades through various predecessors, as detailed in Item 1. Therefore, the specific risks associated with an unproven or startup franchise system are not present. An investor's focus should be on the current stability and performance of this mature system rather than the risks of a new venture.

Potential Mitigations

• Engaging a business advisor to research the brand's current market position and competitive landscape is more relevant than assessing startup risks.
• An accountant should analyze the recent financial performance of this mature system, as past success does not guarantee future results.
• Your attorney can help you understand how the brand's long history might affect its current contractual obligations.

Explanation

This risk was not identified. The Blimpie brand, focused on submarine sandwiches, has been in operation for many decades and is a well-established concept in the quick-service restaurant industry. While the industry is competitive, the business model itself is not based on a recent or fleeting trend. Therefore, the risk of the business being a short-term fad is considered low for this specific franchise.

Potential Mitigations

• A business advisor can help you analyze the long-term trends in the sandwich and quick-service restaurant sectors to assess future viability.
• An accountant can help model financial performance based on the established, rather than speculative, nature of the business.
• Your attorney should review how the long-standing nature of the brand is reflected in its trademark protections.

Explanation

This risk was not identified in the FDD package. Item 2 details the business experience of the franchisor's key management personnel. Many executives have extensive experience within the Kahala Brands system or other relevant franchising companies, holding senior roles for many years. This suggests the management team has significant experience in both the food service industry and in managing franchise systems, which is a positive factor.

Potential Mitigations

• Engaging a business advisor to perform background checks on key executives can provide additional assurance regarding their history and reputation.
• It is wise to ask current franchisees about their direct experiences with the management team's competence and support.
• Your attorney can help confirm that the experience listed in Item 2 aligns with the support obligations outlined in the Franchise Agreement.

Explanation

This risk was not identified as the franchisor does provide financial statements for its parent, MTY Franchising USA, Inc., which also provides a Performance Guaranty. However, it's important to understand what this means. While parent financials are disclosed, the risk of financial weakness at the parent level, as noted in the 'Disclosure of Franchisor's Financial Instability' risk, still exists and directly impacts the franchisee.

Potential Mitigations

• Your accountant must carefully review the parent company's financial statements provided in Exhibit V to assess their financial health.
• It is wise to ask your attorney to evaluate the specific terms and legal enforceability of the Performance Guaranty in Exhibit W.
• A business advisor can help investigate the parent company's overall reputation and performance across its portfolio of brands.

Explanation

This risk was not identified. Item 1 provides a detailed history of the franchisor and its various predecessors, including Blimpie International, Inc. and Kahala Franchise Corp. Additionally, Item 3 and Item 4 disclose past litigation and bankruptcy history involving these predecessor entities. While the history is complex and includes notable legal actions, the FDD does appear to make the required disclosures regarding this history, allowing for an assessment of past system challenges.

Potential Mitigations

• Your attorney should carefully review the disclosed history of predecessors in Items 1, 3, and 4 to understand any inherited systemic issues.
• It is prudent to ask long-term franchisees about their experiences under the different ownership structures.
• A business advisor can help you research public information on these predecessor companies for additional context.