Explanation

This risk was not identified. The franchise system has maintained a stable size over the last three years, according to Item 20 data. Rapid growth can strain a franchisor's ability to provide adequate support, so a stable or controlled growth rate is often a positive indicator for new franchisees seeking adequate assistance from the franchisor.

Potential Mitigations

• A business advisor can help you evaluate the franchisor’s projected growth plans to ensure they are sustainable.
• Speaking with your attorney about the franchisor's contractual obligations for support is a good practice, regardless of growth rate.
• Your accountant can review the franchisor's financials to confirm they have the resources to support future growth.

Explanation

This risk was not identified. The Chanello's Pizza concept, focused on pizza delivery and carry-out, has been in operation since 1987. This long history suggests a sustained consumer demand for its products and services, indicating that the business model is not based on a short-term trend or fad. This longevity can be a positive factor for long-term viability.

Potential Mitigations

• Assess the long-term market demand for the product or service in your specific local area with a business advisor.
• It is still prudent to evaluate the franchisor's plans for innovation and adaptation to stay relevant in a competitive market.
• Your financial advisor can help you consider the sustainability of the business model and its resilience to economic downturns.

Explanation

This risk was not identified. Item 2 shows that the key executives, Juliet Channell and William Shubert, have extensive, long-term experience with the Chanello's brand and restaurant operations, dating back to 1999 and 1988, respectively. This depth of brand-specific and industry experience is a positive factor, though their experience managing a franchise system is more recent.

Potential Mitigations

• A business advisor can help you vet the management team’s background and experience in relation to their ability to support a franchise system.
• Speaking with existing franchisees about the quality of management's support and guidance is a valuable due diligence step.
• Your attorney can help assess how management's experience translates into the support obligations outlined in the franchise agreement.

Explanation

This risk was not identified in the FDD. Item 1 does not indicate that OTT Pizza is owned by a private equity firm. The company appears to be privately held by its founding individuals. The absence of private equity ownership can sometimes mean a greater focus on the long-term health of the brand rather than short-term investor returns.

Potential Mitigations

• A business advisor can help you research the ownership structure of any franchise system you consider.
• It is always a good practice to speak with franchisees about any changes in support or system direction.
• Your attorney should review the franchise agreement for any terms that would be concerning regardless of ownership type.

Explanation

This risk was not identified. The FDD's Item 1 clearly discloses the relationship between the franchisor, OTT Pizza, and its affiliates, such as JUL, LLC, which owns the trademarks, and CPI, which is a key supplier. The franchisor's financials are provided. The ownership and roles of these affiliated entities appear to be disclosed.

Potential Mitigations

• Have your attorney review the disclosed corporate structure and the relationships between all affiliated entities.
• Your accountant should analyze the financial statements of any parent or guarantor entity if they are provided.
• Clarifying the specific roles and obligations of each affiliated company with the franchisor is a key due diligence step.

Explanation

This risk was not identified. Item 1 indicates that an affiliate, Chanello's Pizza International, Inc., may be considered a predecessor due to its historical licensing activities. However, the FDD does not suggest a problematic history or attempt to obscure the relationship. The information provided appears to be a straightforward account of the brand's evolution into the current franchising entity.

Potential Mitigations

• An attorney should review the predecessor information in Items 1, 3, and 4 of any FDD.
• In any system with a predecessor, it's wise to research the predecessor's track record independently if possible.
• Asking long-term franchisees about their experience under any predecessors can provide valuable historical context.

Explanation

This risk was not identified. Item 3 of the FDD states that no litigation is required to be disclosed. The absence of a pattern of litigation against the franchisor, particularly claims of fraud or misrepresentation from other franchisees, is a positive indicator. It suggests a healthier franchisor-franchisee relationship and potentially more reliable disclosure and sales practices.

Potential Mitigations

• Your attorney should always carefully review Item 3 for any disclosed litigation and explain its potential implications.
• It's a good practice to conduct independent online searches for any news or legal actions involving the franchisor.
• Asking current and former franchisees about their experiences and any disputes they may have had is a crucial due diligence step.