Explanation

This risk was not identified. Item 20 data indicates the system is in a growth phase, expanding from 326 to 336 franchised outlets in the most recent year. Rapid growth can sometimes strain a franchisor's ability to provide support. While the growth here is notable, it does not appear to be dangerously explosive on its own, but it is a factor to monitor in conjunction with other risks.

Potential Mitigations

• Engaging a business advisor to assess the franchisor's support infrastructure in relation to its growth rate is a prudent step.
• In discussions with current franchisees, specifically inquire about the quality and timeliness of support they are currently receiving.
• Your accountant can review the franchisor's financials to determine if they are reinvesting sufficiently to support system expansion.

Explanation

This specific risk was not identified. The Carvel brand has a very long operating history dating back to 1934, and its predecessor has been franchising since 1947. The system is well-established and not considered new or unproven. A long history, however, does not eliminate other potential risks within the franchise system.

Potential Mitigations

• Even with a mature system, consulting with your business advisor to understand the brand's current market position is important.
• Your attorney should review the entire FDD for other risks that can exist even in established franchise systems.
• An accountant can help you assess if the mature brand still offers a strong potential return on investment in today's market.

Explanation

This risk was not identified. The Carvel brand, specializing in ice cream and frozen desserts, has demonstrated long-term consumer demand since 1934. The business model is not based on a recent or fleeting trend. While the market is competitive, the core product offering is not considered a fad.

Potential Mitigations

• A business advisor can help you analyze the long-term consumer trends in the frozen dessert market to confirm its stability.
• It's still valuable to ask your financial advisor to model how the business might perform during various economic cycles.
• Your attorney should review the franchisor's rights to change the business model in the future.

Explanation

This risk was not identified. The executives listed in Item 2 have extensive experience in the franchise and restaurant industries, many with long tenures at Carvel's parent company, GoTo Foods, or other major franchise systems like Inspire Brands and Jimmy John's. The management team appears to possess significant relevant experience in both franchising and the food service sector.

Potential Mitigations

• It is still worthwhile to research the specific track records of key executives with the help of a business advisor.
• When speaking with franchisees, ask about their direct experiences with the current management team's leadership and support.
• Your attorney can review the FDD for any recent, significant changes in the management team.

Explanation

This risk was not identified. The FDD clearly discloses the parent company structure, identifying GoTo Foods Systems LLC as the guarantor of Carvel LLC's obligations. The audited financial statements for this parent guarantor are included in Exhibit A as required, providing financial transparency for the entity backing the franchise obligations. This proper disclosure allows for a more complete risk assessment.

Potential Mitigations

• Your accountant should still carefully review the provided parent company financials and the specific terms of the guarantee.
• It is important for your attorney to confirm that the guarantee is legally sound and provides meaningful protection.
• A business advisor can help assess the operational relationship between the parent and the franchisor.

Explanation

This risk was not identified. Item 1 discloses that Carvel LLC's predecessor was Carvel Corporation, which was acquired and became affiliated with the current parent structure. The document provides a history of the brand's franchising activities under this predecessor. There is no indication that negative history related to litigation or bankruptcy under the predecessor has been obscured, as these are addressed in their respective FDD Items.

Potential Mitigations

• Even with disclosure, asking long-term franchisees about their experience under any predecessors can provide valuable context.
• Your attorney should still review Item 3 and Item 4 for any disclosed history related to the predecessor entity.
• A business advisor can help you research the public reputation of the predecessor brand during its time of operation.

Explanation

This risk was not identified regarding Carvel LLC itself. However, Item 3 discloses that affiliated franchisors (Arby's and Dunkin') have entered into settlements with multiple state attorneys general regarding the use of "no-poaching" clauses in their franchise agreements. While these actions do not directly involve Carvel, they show a pattern of regulatory scrutiny within the larger family of affiliated brands, which could indicate a broader corporate philosophy on such matters.

Potential Mitigations

• Your attorney should review the specifics of the affiliate litigation and assess if similar clauses exist in the Carvel agreement.
• It is wise to discuss the franchisor's relationship with its franchisees with a significant number of current operators.
• A business advisor can help you research the general reputation of the parent company, GoTo Foods, regarding franchisee relations.