Explanation

This risk was not identified. The data provided in Item 20 tables for the past three years indicates very strong system stability. The franchisor reports zero terminations, zero non-renewals, zero re-acquisitions, and zero cessations of operations for other reasons. Low turnover can be an indicator of a healthy franchise system and general franchisee satisfaction. Maintaining this stability is key to the brand's long-term health and your potential success within the system.

Potential Mitigations

• To confirm the positive story in the data, it is still advisable to contact a broad sample of current franchisees from the list in Exhibit C.
• Discuss the reasons for the low turnover with existing franchisees to understand what aspects of the system contribute to their satisfaction.
• A business advisor can help you frame questions for franchisees to validate the positive trends shown in the FDD.

Explanation

The risk of excessively rapid growth was not identified. Item 20 data shows steady, controlled growth, with the number of franchised outlets increasing from 16 to 23 over a three-year period. This suggests the franchisor, Cabin Coffee Franchising, Inc. (CCF), may be expanding at a sustainable pace, which can allow it to maintain the quality of its support systems for franchisees. A measured growth strategy is generally a positive indicator for the long-term health of a franchise system.

Potential Mitigations

• In discussions with current franchisees, inquire about their perception of the franchisor's support quality as the system has grown.
• Asking the franchisor about their future growth plans can provide insight into how they intend to scale their support infrastructure.
• Your business advisor can help you evaluate whether the franchisor's support systems, as described in Item 11, are robust enough for their projected growth.

Explanation

This risk appears to be low. The franchisor has been offering franchises since 2007, and the underlying business concept has been in operation since 2002. The principals, as detailed in Item 2, have over two decades of experience operating the business. This longevity suggests a tested business model and experienced leadership, reducing the risks typically associated with a new or unproven franchise system. Item 20 data further supports a history of stable operations.

Potential Mitigations

• It would be prudent to discuss the evolution of the business model over the years with long-standing franchisees.
• A business advisor can help you assess how the franchisor's long history translates into mature and effective support systems.
• You should still perform thorough due diligence, as even established systems can face challenges.

Explanation

The risk of this business being a short-term fad appears low. The company has been in operation since 2002 and franchising since 2007, indicating a sustained market presence for its coffee café and restaurant concept. Specialty coffee is a well-established industry, not typically considered a fad. This long operational history suggests a business model with proven, long-term consumer demand rather than one based on a fleeting trend.

Potential Mitigations

• Analyze the local market with a business advisor to confirm sustained demand for specialty coffee shops in your prospective area.
• Discuss the brand's adaptability and menu evolution with current franchisees to gauge its ability to stay relevant.
• Your accountant can help assess the financial resilience of this type of business against economic shifts.

Explanation

This risk was not identified. Item 2 shows the principals have been owner/operators of the Cabin Coffee Co. business since 2002 and began franchising in 2007. This indicates significant, long-term experience in both the specific industry (coffee shops) and in managing a franchise system. Experienced leadership is a positive factor, as it can lead to more effective training, support, and strategic guidance for franchisees.

Potential Mitigations

• When speaking with franchisees, ask specifically about their opinion of the management team's competence and support.
• Engage a business advisor to review the management team's background as described in Item 2.
• Inquire with the franchisor about management's long-term vision for the company.

Explanation

This risk was not identified in the FDD. Item 1 indicates the franchise is owned by its founders, Angela and Brad Barber, not a private equity firm. This type of ownership can sometimes lead to a greater focus on the long-term health of the brand and franchisee relationships rather than on short-term financial returns for outside investors. This can be a positive for franchisees, but it is still important to assess the company's overall financial health and strategic direction.

Potential Mitigations

• It is still important for your attorney and accountant to confirm the ownership structure and review the financial health of the company.
• Discuss the long-term goals and vision for the company with the franchisor.
• Ask current franchisees about their relationship with the leadership team and their level of satisfaction.

Explanation

This risk was not identified. The FDD's Item 1 does not mention any parent companies. It describes Cabin Coffee Franchising, Inc. as the primary entity and identifies its affiliates, which appear to be related operating companies, not parent corporations. Therefore, the risk of a hidden, unstable parent company or one whose financials should be but are not disclosed, does not seem to apply based on the information provided.

Potential Mitigations

• Your attorney can help confirm the corporate structure to ensure there are no undisclosed parent entities with controlling interests.
• A franchise accountant should still review the franchisor's own financial statements carefully once they are provided.
• It is always good practice to ask the franchisor to describe their full corporate structure during due diligence.

Explanation

This risk was not identified. Item 1 of the FDD does not list any predecessors for Cabin Coffee Franchising, Inc. The document indicates the same principals have been operating the business since 2002 before starting to franchise in 2007. This lack of a predecessor means there is no hidden history of prior business failures, litigation, or bankruptcy under a different corporate name that you need to be concerned about, which simplifies due diligence.

Potential Mitigations

• It is still prudent for your attorney to conduct a public records search to confirm the business history provided.
• Ask long-term franchisees about the history of the company to ensure it aligns with the FDD's narrative.
• A business advisor can help research the brand's reputation since its inception.

Explanation

This risk was not identified. Item 3 explicitly states, "No litigation/arbitration is required to be disclosed in this disclosure document." The absence of disclosed litigation, particularly lawsuits from other franchisees alleging fraud or misrepresentation, is a positive indicator. It suggests a potentially healthier relationship between the franchisor and its franchisees and fewer systemic issues that typically lead to legal disputes. This reduces a significant area of risk for a prospective franchisee.

Potential Mitigations

• Although no litigation is disclosed, your attorney could still perform a public records search to verify this information.
• When speaking with current and former franchisees, it is still wise to ask about any disputes they may be aware of, even if not formal litigation.
• Maintain open and clear communication with the franchisor to prevent future disputes.