Explanation

This risk was not identified in the FDD package. Item 20 tables do not show any franchisee terminations, non-renewals, or other cessations of business for the reported periods. High turnover can be a major red flag indicating potential systemic problems, such as lack of profitability or poor franchisor support. As a very new system, there is no history of turnover to analyze yet, which is itself a form of risk related to the unproven nature of the system.

Potential Mitigations

• It is wise to have your accountant help you analyze the Item 20 tables in any FDD to calculate the franchisee turnover rate.
• Engaging a business advisor to research typical turnover rates for the industry can provide valuable context for your analysis.
• Your attorney can help you formulate questions for current and former franchisees about their experiences and satisfaction with the system.

Explanation

This risk was not identified in the FDD package. The business model, centered on Neapolitan-inspired pizza, is part of a well-established and durable food category. While it incorporates modern elements like "craft-style" preparation, the core product is not based on a new or fleeting trend, reducing the risk that consumer interest will wane and make the business unviable long-term.

Potential Mitigations

• A business advisor can help you assess the long-term market demand and competitive landscape for the core product in your specific area.
• When evaluating any franchise, it is prudent to consider its resilience to economic shifts and changing consumer tastes with a financial advisor.
• Your attorney should review the Franchise Agreement to understand your obligations if you need to adapt to future market changes.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor and its parent companies are LLCs and corporations, with no mention of ownership by a private equity firm. Therefore, the specific risks associated with PE ownership, such as a focus on short-term returns over long-term brand health or a predetermined exit strategy, do not appear to be present here.

Potential Mitigations

• When reviewing any FDD, your attorney should help you understand the ownership structure described in Item 1.
• If a franchisor is owned by a private equity firm, a business advisor can help you research the firm's history with other franchise brands.
• It's wise to ask existing franchisees if they have noticed changes in franchisor priorities or support after any ownership change.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses the existence of two parent companies, Tomcal Inc. and Buck Ventures Inc., and an affiliate, Cascadia Pizza Co. LLC. While financials for the parent companies are not provided, there is no indication they are required to be, as they do not appear to guarantee the franchisor's obligations. The structure, while complex, appears to be disclosed.

Potential Mitigations

• Your attorney should always confirm that the FDD discloses all parent companies and affiliates as required by law.
• An accountant can help determine if a parent company's financial statements should have been included based on FTC rules.
• If a parent company guarantees the franchisor's performance, ensure your attorney confirms the guarantee is included as an exhibit.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD explicitly states, "We do not have any predecessors." This means the current franchisor did not acquire the system's assets from a prior entity, and there is no previous franchising history under a different corporate name to investigate for potential issues like past litigation or high franchisee turnover.

Potential Mitigations

• It is important for your attorney to review Item 1 to confirm whether a franchisor has any predecessors.
• If a predecessor is disclosed, a business advisor can assist you in researching that entity's history for any red flags.
• When a predecessor exists, asking long-tenured franchisees about their experience under the prior ownership can provide valuable insights.

Explanation

This risk was not identified in the FDD package. Item 3 states, "No litigation is required to be disclosed in this Item." This indicates there are no pending or recent material lawsuits against the franchisor or its management involving claims of fraud, misrepresentation, or violations of franchise law. A clean litigation history is a positive sign, though not a guarantee of future performance.

Potential Mitigations

• Your attorney should always carefully review the disclosures in Item 3 for any patterns of litigation.
• If litigation is disclosed, engaging a business advisor to understand the context and potential impact on the franchise system is crucial.
• A high volume of lawsuits, especially those initiated by franchisees, should be discussed in detail with your legal counsel.