Explanation

This specific risk was not identified in the FDD Package. Item 20 data for the last three fiscal years shows zero terminations, non-renewals, or other cessations of operations for franchised outlets. While positive, this data reflects a very young system. High turnover can be a major red flag in other systems, indicating potential franchisee dissatisfaction or lack of profitability.

Potential Mitigations

• A business advisor can help you calculate and monitor turnover rates as the system matures.
• It is wise to ask current franchisees about their satisfaction and future intentions during your due diligence calls.
• Your attorney can help you understand the standard default and termination clauses that could lead to turnover in the future.

Explanation

This specific risk was not identified in the FDD Package. The "focused facial bar" concept operates within the broader, established beauty and wellness industry. While specific treatments or product trends can be faddish, the core business of providing facials and skincare services has demonstrated long-term consumer demand. Therefore, the business model does not appear to be based on a short-lived fad.

Potential Mitigations

• Your business advisor can help you research long-term trends in the beauty and wellness industry to confirm sustained demand.
• Ask current franchisees about their customer demographics and repeat business to gauge the stability of the client base.
• An accountant can help you model the financial impact of potential shifts in consumer preferences.

Explanation

This specific risk was not identified in the FDD Package. Item 1 discloses the parent and grandparent companies but does not indicate they are private equity firms. The ownership structure appears to be a set of holding companies for the system's founders and management, rather than a third-party financial investor with a short-term exit strategy. This avoids the specific risks associated with PE ownership.

Potential Mitigations

• It is always prudent to have your attorney review the ownership structure disclosed in Item 1 to confirm the nature of the controlling entities.
• A business advisor can help you understand the potential impacts of different ownership structures on a franchise system's strategy.
• Asking the franchisor about their long-term vision for the company can provide insight into their operational philosophy.

Explanation

This specific risk was not identified in the FDD Package. The franchisor properly discloses its parent and grandparent companies in Item 1. Although the FDD does not contain a parent guarantee or the parent's financial statements, this is not a mandatory disclosure unless the parent guarantees the franchisor's obligations or is otherwise financially critical to the system. The disclosure itself is compliant.

Potential Mitigations

• An accountant should evaluate the franchisor's stand-alone financials, noting the absence of a parent guarantee.
• Your attorney can explain the legal separation between a franchisor and its parent company in the absence of a guarantee.
• Understanding the franchisor's financial stability on its own merits is a key task for your financial advisor.

Explanation

This specific risk was not identified in the FDD Package. Item 1 does not disclose any predecessor entities from which Face Foundrié Franchising L.L.C. acquired its assets or that previously offered franchises for this system. The franchisor entity appears to have been formed specifically for this franchise, avoiding risks associated with an undisclosed or troubled predecessor history.

Potential Mitigations

• Your attorney can confirm the corporate history disclosed in Item 1 and explain the implications of having no predecessors.
• A business advisor can help you research the background of the brand itself, even if there is no legal predecessor entity.
• Always verify information provided in the FDD with your own independent research.

Explanation

This specific risk was not identified in the FDD Package. Item 3 states, "No litigation is required to be disclosed in this Item." The absence of a pattern of litigation, particularly claims of fraud or misrepresentation brought by other franchisees, is a positive indicator for the health and integrity of the franchise system. This suggests a lower risk of disputes arising from the franchisor's sales or operational practices.

Potential Mitigations

• It is still prudent to have your attorney conduct a public records search to confirm the absence of litigation.
• During due diligence calls, you can ask current franchisees about their relationship with the franchisor and if they are aware of any disputes.
• Understanding the dispute resolution process in the Franchise Agreement with your attorney is important for any future issues.