Explanation

The audited financial statements for Doc Popcorn Franchising L.L.C. (Doc Popcorn) show profitability and positive net worth for fiscal years 2023 and 2024. Furthermore, the ultimate parent company is J&J Snack Foods Corp., a large, publicly-traded corporation. Based on these disclosures, the franchisor entity appears to have sufficient financial resources to meet its obligations, and this specific risk was not identified.

Potential Mitigations

• An accountant should still review the complete, multi-year financial statements, including all notes, to confirm financial health and trends.
• It is beneficial for your business advisor to assess the stability of the parent company and its commitment to the franchise system.
• Legal counsel can help you understand any financial performance guarantees or support obligations mentioned in the Franchise Agreement.

Explanation

The data in Item 20 does not indicate overly rapid system expansion. The net number of franchised outlets has grown at a slow and steady pace over the past two years. Therefore, the risk that the franchisor's support systems may be strained by growing too quickly was not identified in the FDD package.

Potential Mitigations

• During your due diligence calls, asking existing franchisees about the quality and timeliness of franchisor support is a prudent measure.
• A conversation with your business advisor can help you assess whether the franchisor's support infrastructure is appropriate for its current size.
• It is wise to have your accountant review the franchisor's financial statements to evaluate its investment in support services.

Explanation

This risk was not identified. The franchise system's predecessor began operating in 2009, and the current franchisor has been in place since 2014. The brand is now part of a large, established parent company, J&J Snack Foods Corp. The system has a significant operational history and is not considered new or unproven.

Potential Mitigations

• It is still beneficial to speak with long-tenured franchisees about the evolution of the system and the franchisor's performance over time.
• Your business advisor can help you research the brand's history and its performance under previous ownership structures.
• Asking your attorney to review the predecessor and affiliate information in Item 1 provides a more complete picture of the system's lineage.

Explanation

This risk was not identified in the FDD package. The business model, which focuses on flavored popcorn and related snack items, is part of a well-established and long-standing consumer market. There is no indication that the core product is tied to a short-term trend or fad, suggesting a basis for sustained consumer demand.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm the long-term viability of the product category in your area.
• Inquiring with the franchisor about their plans for product innovation and system development is a useful due diligence step.
• Discussing the brand's resilience through different economic cycles with experienced franchisees can provide valuable insight.

Explanation

This specific risk was not found in the disclosure document. The executive team described in Item 2 possesses significant experience within the franchise system, its affiliates like Dippin' Dots, and its parent company, J&J Snack Foods Corp. Several key personnel have long tenures, indicating a stable and knowledgeable leadership team.

Potential Mitigations

• It remains a good practice to research the professional backgrounds of the key executives mentioned in Item 2.
• Asking current franchisees about their perception of the management team's competence and supportiveness provides direct insight.
• A discussion with your business advisor can help evaluate whether the management team's experience aligns with the company's strategic goals.

Explanation

This risk was not identified. Item 1 of the FDD clearly states that the franchisor is part of a corporate structure ultimately owned by J&J Snack Foods Corp., a publicly-traded company. It is not owned by a private equity firm, so risks typically associated with PE ownership, such as a focus on short-term returns, do not appear to be present.

Potential Mitigations

• A review of the parent company's public filings with your financial advisor can provide insight into its business strategy and long-term plans.
• Understanding the parent company's history with its other brands can be achieved through research with your business advisor.
• It's wise for your attorney to confirm the ownership structure as disclosed in Item 1.

Explanation

The risk of non-disclosure was not identified. Item 1 of the FDD describes the franchisor's corporate structure, including its immediate parent, Dippin' Dots Holdings, L.L.C., and its ultimate parent, J&J Snack Foods Corp. The relationships with various affiliates are also outlined, and the parent's financials are publicly available, providing a reasonable level of transparency.

Potential Mitigations

• Your attorney should review the corporate structure described in Item 1 to ensure you understand all the related entities and their roles.
• It is a good practice for your accountant to review the financial statements of the franchisor and its publicly traded parent company.
• Asking the franchisor to clarify the roles of and your relationship with each affiliate mentioned in Item 1 is a useful step.

Explanation

This risk was not identified. Item 1 discloses the franchisor's predecessor, and Items 3 and 4 indicate no reportable litigation or bankruptcy history for the current franchisor. While the predecessor's history is not detailed, the absence of inherited legal or financial issues for the current entity suggests this is not a significant area of concern.

Potential Mitigations

• Engaging your attorney to review the FDD's disclosures regarding the predecessor is a standard part of due diligence.
• A conversation with long-term franchisees about their experience with the system before and after the change in ownership can provide historical context.
• Your business advisor can assist you in researching any publicly available information about the predecessor entity.

Explanation

This specific risk was not identified in the FDD package. Item 3 explicitly states, 'No litigation is required to be disclosed in this Item.' This indicates an absence of the type of litigation patterns, such as franchisee claims of fraud or franchisor-initiated lawsuits against franchisees, that would typically signal this risk.

Potential Mitigations

• It is still prudent to conduct online searches for any news or legal actions involving the franchisor that may not have met the threshold for Item 3 disclosure.
• Your attorney can perform a more formal legal search for litigation involving the franchisor or its affiliates.
• Asking current franchisees if they are aware of any significant disputes within the system can provide valuable informal insight.