Explanation

This risk was not identified in the FDD package. New or unproven franchise systems can present higher risks due to untested operating models and support structures. This franchisor, while a relatively new entity formed in 2019, acquired a long-standing system with predecessors dating back to 1989. The management team also has prior experience with the brand or competing brands, which reduces the risks associated with a completely new venture.

Potential Mitigations

• Verifying the track record and reputation of a franchisor's management team is a critical due diligence step a business advisor can assist with.
• An attorney can help investigate the history of any predecessor companies for undisclosed issues or liabilities.
• Speaking with the longest-tenured franchisees can provide valuable insight into the system's historical performance and evolution.

Explanation

This risk was not identified in the FDD package. The D.P. Dough concept, focused on calzones and late-night delivery, has been in operation since the late 1980s. While any restaurant concept is subject to changing consumer tastes, the brand's longevity and focus on a staple food item in college markets suggest it is not a short-term fad. A business's long-term success often depends on its ability to adapt to market changes.

Potential Mitigations

• A business advisor can help you conduct independent market research to assess the long-term consumer demand for the core product in your target area.
• Evaluating a company's history of innovation and adaptation is a key part of assessing its resilience to market shifts.
• Financial projections should be developed with an accountant, considering various market scenarios beyond current trends.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the key executives of Calzone King have extensive experience either with the D.P. Dough system under its prior ownership or with a competing calzone restaurant chain (Calios). This relevant industry and brand-specific experience mitigates the risk of a management team that is unfamiliar with the business model or the challenges of franchising.

Potential Mitigations

• Engaging a business advisor to help you vet the backgrounds and specific experience of a franchisor's key leadership team is always a prudent measure.
• It is beneficial to ask current franchisees about their direct experiences with the management team's competence and support.
• An attorney can help you investigate the public records of key personnel for any undisclosed issues that could impact their leadership.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that the franchisor is owned by a private equity firm. The ownership structure appears to be a standard limited liability company. Therefore, the specific risks associated with private equity ownership, such as a focus on short-term returns over long-term brand health, do not appear to be present here. The franchisor is Calzone King, LLC.

Potential Mitigations

• Verifying the ownership structure of a franchisor with your attorney is a key step in understanding its governance and strategic priorities.
• A business advisor can help research the reputation and track record of any parent company or major investor.
• In any franchise, discussing the franchisor's long-term vision with existing franchisees provides valuable context.

Explanation

This risk was not identified in the FDD package. The franchisor, Calzone King, does not disclose a parent company. It operates as a New York LLC. While it has a wholly-owned subsidiary, D.P. Dough Franchising, LLC, the FDD states this subsidiary has no assets, liabilities, or operations, and its accounts are consolidated. Therefore, the financials presented in Item 21 appear to represent the complete franchising entity, mitigating this specific risk.

Potential Mitigations

• Your attorney should always confirm the legal structure of the franchisor and identify any parent companies or significant affiliates.
• If a parent company exists and provides guarantees, an accountant must review its financial statements for stability.
• Understanding the full corporate structure helps a business advisor assess where operational support and financial backing truly originate.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses two predecessors: The Original Calzone Company and D.P. Dough Franchising, LLC. The document appears to provide the required information regarding their history. Furthermore, Item 3 (Litigation) and Item 4 (Bankruptcy) do not disclose any negative history associated with these predecessors that would suggest hidden systemic problems are being inherited by the current franchisor.

Potential Mitigations

• Your attorney should review the disclosures related to any predecessor companies for completeness and potential red flags.
• Independent research into a predecessor's history, with help from a business advisor, can sometimes uncover issues not detailed in the FDD.
• Speaking with long-tenured franchisees who operated under a predecessor can provide invaluable historical context.