Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's resources, potentially leading to inadequate support for franchisees. While BPR's unit count has fluctuated, it does not demonstrate the type of explosive growth that typically triggers this specific concern. Nevertheless, a franchisor's ability to support its existing and new franchisees is a crucial factor for success.

Potential Mitigations

• A discussion with your business advisor can help assess if the franchisor's current support infrastructure is adequate for its size.
• Asking current franchisees about the quality and timeliness of support is a valuable due diligence step.
• Your accountant should review the franchisor's financial statements to determine if they are investing sufficiently in franchisee support.

Explanation

This risk was not identified. The franchisor and its predecessors have been involved in franchising in the United States and Canada since the 1980s and 1990s, indicating a long operational history. A new or unproven system can pose higher risks due to untested business models, minimal brand recognition, and a lack of established support structures. Evaluating the franchisor's track record is a key part of due diligence.

Potential Mitigations

• A business advisor can help you assess the maturity and stability of any franchise system you consider.
• Thoroughly vetting the industry and franchising experience of the management team is a critical step your attorney can assist with.
• Speaking with the earliest franchisees in a system provides valuable insight into its evolution and the franchisor's learning curve.

Explanation

This risk does not appear to be present. The casual dining and sports bar restaurant concept is a well-established and mature industry segment, not one based on a recent or fleeting trend. A business model tied to a fad carries the risk that consumer interest may decline, potentially harming your long-term investment even if your contractual obligations to the franchisor continue.

Potential Mitigations

• A business advisor can help you conduct market research to assess the long-term consumer demand for any franchise concept.
• Evaluating a franchisor's plans for innovation and adaptation is crucial for long-term viability.
• Consider working with your financial advisor to analyze a business model's resilience to economic shifts and changing consumer tastes.

Explanation

This risk was not identified. The executives detailed in Item 2, such as Chairman James Walter Treliving, possess extensive, multi-decade experience in the restaurant industry and with the Boston's Pizza brand specifically. While the current President is on a leave of absence, the management team as a whole appears to have significant operational and franchise experience. Inexperienced management can be a major risk, potentially leading to poor strategic decisions and inadequate support.

Potential Mitigations

• It is always prudent to have a business advisor help you evaluate the depth and relevance of the entire management team's experience.
• Engaging with current franchisees can provide valuable feedback on the management team's effectiveness and responsiveness.
• Your attorney can help you research the professional background of key executives for any potential concerns.

Explanation

This risk was not identified. The FDD indicates that the franchisor is owned by a series of holding companies tracing back to the Treliving family, not a private equity firm. Private equity ownership can sometimes introduce risks related to a focus on short-term returns over the long-term health of the franchise system, potentially leading to increased fees or reduced support. The ownership structure of a franchisor is an important factor in its strategic direction.

Potential Mitigations

• A business advisor can help you research the ownership structure of any franchisor and the track record of its principal owners.
• If a franchisor is owned by a private equity firm, discussing the impact of that ownership with current franchisees is a critical due diligence step.
• Your attorney should review any clauses related to the sale or assignment of the franchise system.

Explanation

This risk does not appear to be present. The FDD discloses a multi-layered ownership structure involving parent companies. However, given that BPR has negative net worth and is unprofitable, it appears the provided financial statements for the franchisor entity itself are sufficient to assess the direct financial risk. The FTC Rule requires parent company financials only under specific circumstances, such as when the parent guarantees the franchisor's obligations or is the sole source of support.

Potential Mitigations

• Your attorney should confirm if the conditions requiring parent financial disclosure under franchise law are met in this case.
• An accountant can help determine if the provided financials give a complete picture of the resources backing the franchise system.
• In any franchise, understanding the full corporate structure and where financial responsibility lies is crucial.

Explanation

This risk is not present. The FDD discloses that Boston Pizza Restaurants (USA), Inc. was a predecessor that offered franchises from 1995 to 2001. The franchisor appears to be transparent about its lineage. In some cases, franchisors may not fully disclose the history of predecessors, which could hide past issues like litigation or high failure rates that might be relevant to your decision.

Potential Mitigations

• A franchise attorney can help you review the predecessor history disclosed in Item 1 for completeness and potential red flags.
• Independent research on a system's history, especially if it was acquired from another company, can be a valuable step.
• Asking long-term franchisees about their experience under any previous ownership can provide important context.