Explanation

This risk was not identified in the FDD package. The system is not experiencing rapid growth; in fact, the number of franchised outlets has slightly decreased in the most recent year. While slow growth presents its own challenges, the specific risks associated with a franchisor's resources being strained by expanding too quickly do not appear to be present here. Uncontrolled growth can lead to diluted brand value and inadequate franchisee support.

Potential Mitigations

• Your business advisor can help evaluate whether the system's current growth pace aligns with your investment goals.
• A discussion with your accountant about the franchisor's allocation of resources for support versus expansion is always a worthwhile exercise.
• It is prudent to ask your attorney to review any development schedules or obligations if considering multi-unit opportunities.

Explanation

This risk was not identified as a major concern. The business model, centered on crepes, gelato, and cafe items, is part of the well-established quick-service restaurant industry. While subject to changing consumer tastes, the core products are not typically considered a short-term fad. However, any specialized food concept carries a risk if consumer preferences shift away from its niche offerings. Your success may depend on the brand's ability to adapt over time.

Potential Mitigations

• Your business advisor can help you research the long-term market trends for cafe and creperie-style restaurants in your local area.
• In discussions with the franchisor, inquire about their strategy for product innovation and menu evolution.
• Talking to long-standing franchisees about how customer demand has evolved over the years could provide valuable insight.

Explanation

This risk was not identified in the FDD. The executive team described in Item 2 appears to have substantial experience with the Crepe Delicious brand, either with the U.S. franchisor or its Canadian affiliate, with involvement dating back to 2003 and 2012 for key individuals. This long tenure suggests a deep familiarity with the business concept and operational procedures, which is a positive factor.

Potential Mitigations

• It is still advisable to discuss the management team's vision and strategic plans with them directly.
• A conversation with your business advisor can help you formulate questions for franchisees regarding the management team's effectiveness and support.
• Verifying the specific roles and accomplishments of the executive team with your attorney can provide additional context.

Explanation

This risk was not identified in the FDD package. There is no disclosure in Item 1 or elsewhere that indicates the franchisor is owned or controlled by a private equity firm. The ownership appears to be closely held. Therefore, the specific risks associated with a PE firm's potentially short-term investment horizon, such as pressure for rapid cost-cutting or a quick sale of the system, do not appear to be present.

Potential Mitigations

• Your attorney can help you verify the franchisor's corporate structure and ownership details.
• Inquiring about the long-term vision for the company during discussions with franchisor management is always a good practice.
• A business advisor can help you research the history of the company's ownership and any past changes.

Explanation

This risk was not identified in the FDD. Item 1 discloses the relationship with its Canadian affiliates, Crepe Delicious Holdings Corporation and Crepe Delicious Leasing Corp. The franchisor entity, Crepe Delicious, provides its own audited financial statements. There is no indication of a hidden parent company or that required financial statements from a guaranteeing parent have been withheld, making this a low risk.

Potential Mitigations

• Your attorney should still confirm the corporate structure and the roles of each affiliated entity.
• An accountant's review of the provided financials is crucial to ensure they stand on their own merit.
• Asking the franchisor to clarify the operational and financial relationship between the U.S. entity and its Canadian affiliates can provide additional clarity.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD explicitly states, "We have no predecessor or parent entities." This clear statement indicates that the current franchisor did not acquire the system from a previous entity, so there is no hidden history of predecessor litigation, bankruptcy, or franchisee turnover to be concerned about. The analysis is based on the history of the current franchisor and its affiliates.

Potential Mitigations

• It's good practice for your attorney to verify the corporate history through public record searches.
• Discussing the company's full history with long-tenured franchisees can provide anecdotal confirmation.
• Your business advisor can help you focus due diligence on the current franchisor's track record as disclosed.

Explanation

This risk was not identified in the FDD. Item 3 states, "No litigation is required to be disclosed in this Item." The absence of disclosed lawsuits against the franchisor alleging fraud, misrepresentation, or franchise law violations is a positive finding. This suggests the franchisor does not have a recent history of significant legal disputes with its franchisees, regulators, or other parties that would need to be reported here.

Potential Mitigations

• Your attorney can conduct independent searches of court records as part of due diligence to verify the 'no litigation' disclosure.
• Asking current and former franchisees about any past disputes, even those not rising to the level of disclosure, is a prudent step.
• A business advisor can help you assess the overall health of franchisee-franchisor relations through these discussions.