Explanation

This risk was not identified. FDD Item 20 data from 2021 through 2023 shows very low franchisee turnover, with no terminations or non-renewals and only one unit ceasing operations for other reasons. Low turnover can be an indicator of a stable franchise system and franchisee satisfaction. However, you should still conduct your own due diligence by speaking with current and former franchisees.

Potential Mitigations

• It is still valuable to contact a diverse sample of current and former franchisees from the list in Exhibit F to discuss their experiences.
• A discussion with your business advisor about typical turnover rates in the full-service restaurant industry can provide useful context.
• Your attorney can help you formulate key questions to ask franchisees about their relationship with Crooked Pint.

Explanation

The risk of rapid growth straining franchisor resources was not identified. FDD Item 20 data indicates that the system has been growing at a slow and manageable pace, which may suggest that the franchisor's support infrastructure is not currently overextended. This can be a positive sign, indicating a focus on stability over rapid expansion.

Potential Mitigations

• In discussions with the franchisor, it's wise to ask about their future growth plans and how they intend to scale support systems.
• Conversations with franchisees, guided by your business advisor, can reveal whether the current level of support is adequate.
• An accountant's review of the franchisor's financials in Item 21 can help assess their capacity for future growth and support.

Explanation

This risk was not identified. According to FDD Item 1, the franchisor has been offering franchises since 2012, indicating over a decade of experience operating a franchise system. This length of history suggests the business model is established and not an unproven, startup concept. A longer track record can provide more data for your due diligence.

Potential Mitigations

• Speaking with franchisees who have been with the system for many years can provide valuable long-term perspective.
• It is still beneficial to review the system's evolution and historical performance with a business advisor.
• Having your attorney review the history of litigation in Item 3 can provide insights into the system's past challenges.

Explanation

The business concept, described in Item 1 as a restaurant with an "urban pub theme" serving beer, burgers, and sandwiches, does not appear to be a fad. This is a well-established and durable segment of the restaurant industry. This suggests a lower risk of sudden declines in consumer interest compared to trend-based concepts.

Potential Mitigations

• Engaging a business advisor to assess the long-term competitiveness of the pub concept in your specific local market is recommended.
• Reviewing the franchisor's menu development and innovation plans can provide insight into their strategy for staying relevant.
• A financial advisor can help you analyze the general economic resilience of the casual dining restaurant sector.

Explanation

This risk was not identified. FDD Item 2 shows that the key management team possesses extensive and long-term experience with the franchisor, its affiliates, and its predecessor companies, with most executives having been involved for over a decade. This depth of experience in both the specific industry and in franchising can be a significant advantage for providing effective franchisee support and strategic direction.

Potential Mitigations

• It is still a good practice to ask current franchisees about their direct experiences with the management team's accessibility and effectiveness.
• A business advisor can help you formulate questions for the franchisor about their management philosophy and long-term vision.
• Conducting independent online research on the key executives can sometimes provide additional, helpful context.

Explanation

Based on the information provided in FDD Item 1, the franchisor's parent company, Hightop Brands, LLC, appears to be a restaurant holding company rather than a private equity firm. This may suggest a focus on long-term brand operation rather than a short-term investment timeline, which can be a risk associated with some PE-owned franchise systems.

Potential Mitigations

• It is still beneficial to ask the franchisor about the ownership structure and long-term strategy of its parent company, Hightop Brands, LLC.
• An attorney should review the assignment clause in the Franchise Agreement to understand your rights if the system is sold.
• A business advisor can help research the parent company's history and reputation in the restaurant industry.

Explanation

This risk was not identified. FDD Item 1 clearly discloses the parent company, Hightop Brands, LLC, and its affiliates. The franchisor is not a new or thinly capitalized entity, and there is no indication that the parent company's financial statements are required but have been withheld. This level of transparency regarding corporate structure is a positive sign.

Potential Mitigations

• An attorney can confirm if, based on the franchisor's financials and structure, parent company financials should have been included under franchise law.
• You should ask the franchisor about the financial relationship and interdependencies between Crooked Pint and its parent company.
• An accountant can help assess the potential risks of the franchisor being part of a larger, multi-brand holding company.

Explanation

This risk was not identified. The FDD discloses predecessor entities in Item 1 and the experience of its management with those predecessors in Item 2. There are no disclosures of litigation or bankruptcy related to these predecessors in Items 3 and 4 that would indicate inherited systemic problems. This suggests a clean operational history is being presented.

Potential Mitigations

• When speaking with long-term franchisees, asking about their experience under any predecessor entities can provide valuable historical context.
• A business advisor could assist in researching the public record of any predecessor companies for additional information.
• Your attorney can verify that the disclosures related to predecessors appear to comply with franchise regulations.

Explanation

This risk was not identified. FDD Item 3 states that there is no litigation required to be disclosed. This absence of reported lawsuits initiated by or against the franchisor involving fraud, contract disputes, or franchise law violations can be a positive indicator of a healthy franchisor-franchisee relationship and a stable operating environment.

Potential Mitigations

• While the FDD is clean, it is still prudent to conduct independent online searches for any news or legal actions involving the franchisor or its affiliates.
• Your attorney can help you frame questions for current and former franchisees about any disputes they may be aware of, even if not disclosed.
• Always have your attorney review the dispute resolution clauses in Item 17 of the FDD and the Franchise Agreement.