Explanation

The audited financial statements for Family Fare, LLC (Family Fare) in Exhibit C appear stable, showing positive net income and member's equity for the years presented. The auditor's opinion is unqualified, and there are no notes indicating significant financial distress or going concern issues. Therefore, this specific risk of financial instability was not identified.

Potential Mitigations

• An experienced franchise accountant should still review the complete financial statements, including all footnotes, to confirm the company's financial health and stability.
• During discussions with the franchisor, you can inquire about their financial strategy and plans for future growth and franchisee support.
• Your accountant can help you analyze the financial statements to understand revenue sources and assess the system's long-term sustainability.

Explanation

This specific risk was not identified. Item 20 data tables show that the Caroco franchise system has been static with only one franchised unit over the last three years. While the lack of growth is a separate concern, the data does not indicate a high rate of terminations, non-renewals, or other cessations that would typically signal franchisee distress or dissatisfaction within the system.

Potential Mitigations

• It is still advisable to speak with the current franchisee listed in Item 20 to understand their experience and satisfaction level.
• A business advisor can help you assess the risks associated with a static or very small franchise system.
• Your attorney can help you understand the conditions under which the franchisor can terminate your agreement, as outlined in Item 17.

Explanation

This risk was not identified in the FDD. In fact, the opposite condition exists. Item 20 data reveals that the Caroco brand has had zero growth over the last three years, remaining a single-unit franchise system. The risk here is not rapid expansion straining resources, but rather a lack of proven system growth.

Potential Mitigations

• A business advisor can help you evaluate the potential risks and opportunities of joining an unproven, non-growing franchise system.
• You should ask the franchisor about their specific, actionable plans for future growth and brand development.
• Speaking with the single current franchisee can provide insight into their perspective on the system's growth prospects and support levels.

Explanation

This risk was not identified. The franchise operates in the convenience store and fuel sales industry, which is a long-established and stable business sector, not a new or trendy concept. While subject to economic cycles and competition, the core business model is not considered a fad.

Potential Mitigations

• A business advisor can still help you analyze the long-term competitive landscape for convenience stores in your specific market.
• You should investigate local market demand and competitive factors before making an investment.
• Discuss the franchisor's strategies for staying competitive and relevant with your business advisor.

Explanation

This risk was not identified. Item 1 indicates that Family Fare is privately owned by an individual and an affiliated company. There is no disclosure of ownership by a private equity firm, so risks typically associated with that ownership structure, such as a focus on short-term returns, do not appear to be present.

Potential Mitigations

• It is still prudent to have your attorney confirm the ownership structure and identify all controlling parties.
• Understanding the long-term goals of the current ownership can provide insight into the future direction of the franchise system.
• Your business advisor can help you research the reputation and track record of the individual owner and affiliated companies.

Explanation

This risk was not found. Item 1 clearly identifies the parent and affiliate companies, M. M. Fowler, Inc. and BFP Limited Liability Company, and describes their roles in the franchise system. The franchisor's financials are provided, and while a parent guarantee is not offered, the structure is disclosed, not hidden.

Potential Mitigations

• Your attorney should carefully review the disclosed relationships between the franchisor and its affiliates to ensure you understand all dependencies.
• An accountant can help you analyze the financial interplay between the franchisor and its affiliates based on the provided disclosures.
• It is important to understand which entity holds which obligations, for instance, that your lease and inventory consignment are with an affiliate, not the franchisor.

Explanation

This risk was not identified. Item 1 clearly discloses M. M. Fowler, Inc. as a predecessor and affiliate. The FDD appears to properly attribute litigation history from the related brand to the franchisor and its affiliates in Item 3 and discloses no bankruptcy history in Item 4. There is no indication of obscured negative history related to the predecessor.

Potential Mitigations

• A franchise attorney should review the predecessor and affiliate disclosures in Item 1 to ensure they are complete and compliant.
• Investigating the business history of the predecessor entity with your business advisor can provide additional context.
• You can ask the franchisor to explain the history of the relationship with any predecessor and how it impacts the current system.