Explanation

The data in Item 20's tables does not indicate an unusually high rate of franchise unit closures or terminations. Over the last three years (2022-2024), only one franchise was terminated and one was reacquired by the franchisor. However, Exhibit G reveals that four separate franchisees had their development rights terminated in 2024. While not store closures, this may indicate issues with the development process or franchisee selection that could present a risk.

Potential Mitigations

• Speaking with a significant number of current and former franchisees is crucial to understand their experiences and satisfaction levels.
• Your attorney can help you formulate questions for the franchisor regarding the terminated development agreements noted in Exhibit G.
• An accountant should help you analyze the outlet data in Item 20 for any concerning trends, despite the low number of closures.

Explanation

This risk was not identified in the FDD package. Rapid expansion can strain a franchisor's ability to provide adequate support. The outlet data in Item 20 shows moderate and controlled growth, with a net increase of only one franchised unit in 2024. This suggests the system is not growing at a pace that would likely overwhelm its support infrastructure.

Potential Mitigations

• It is still prudent to ask current franchisees about the quality and timeliness of the support they receive from Flying Biscuit.
• Your business advisor can help you assess whether the franchisor's current support staff, as described in Item 2, is adequate for the system's size.
• A discussion with your attorney regarding the franchisor's contractual support obligations in Item 11 is recommended.

Explanation

This risk was not identified. Flying Biscuit has been franchising since 2006 and has a history of operations. Item 2 shows that its key executives have significant experience in the restaurant and franchise industries. The system is established and not in a startup phase, which generally reduces the risks associated with an unproven business model or inexperienced leadership.

Potential Mitigations

• Even with an established system, it is beneficial to discuss the franchisor's long-term vision with your business advisor.
• Your attorney should still review the FDD for any signs of recent, potentially disruptive changes in ownership or management.
• Talking to long-term franchisees can provide insight into the system's evolution and stability over time.

Explanation

This risk appears to be low. The Flying Biscuit concept is centered on breakfast and brunch foods, a long-standing and popular segment of the restaurant industry. While restaurant trends can change, the core offering is not based on a novel or fleeting fad. The business model has demonstrated demand over many years of operation, suggesting a degree of long-term viability.

Potential Mitigations

• A business advisor can help you analyze the long-term consumer demand for breakfast-focused restaurants in your specific market.
• It is wise to ask the franchisor about their plans for menu innovation and concept adaptation to stay relevant.
• Investigating the performance of local competitors with a similar focus will provide valuable market insight.

Explanation

This risk was not identified. The executives profiled in Item 2 appear to have substantial experience in both the restaurant industry and in franchising specifically. For instance, the President has been with the company since 2008 and holds leadership roles in other franchise systems, and the Director of Operations has experience with other major restaurant brands. This level of experience may reduce risks associated with unseasoned management.

Potential Mitigations

• It's still valuable to ask current franchisees about their direct experiences with the management team's competence and support.
• A business advisor can help you assess if the management team's skills align with the brand's current challenges and opportunities.
• Your attorney should confirm if there have been any recent, un-disclosed changes in key leadership.

Explanation

This risk was not identified in the FDD package. The franchisor, Flying Biscuit Franchising, Inc., is disclosed as a privately held Georgia corporation. There is no indication in Item 1 or elsewhere that it is owned or controlled by a private equity firm. Therefore, the specific risks associated with a PE firm's typical investment horizon and focus on short-term returns do not appear to be present.

Potential Mitigations

• You should still ask the franchisor about any potential plans for a future sale of the company.
• Your attorney can help you understand the 'Assignment by Franchisor' clause in the Franchise Agreement to know your rights if the system is sold.
• Verifying the current ownership structure with your business advisor remains a good due diligence step.

Explanation

This risk was not identified in the FDD. Item 1 discloses the existence of affiliates, such as Big Game Brands, LLC, but does not identify a parent company. The franchisor appears to be the primary entity. Since Flying Biscuit is not a thinly capitalized subsidiary and provides its own audited financials in Item 21, the non-disclosure of parent company financials does not appear to be a risk here.

Potential Mitigations

• Your attorney should confirm the corporate structure and the roles of all affiliates mentioned in Item 1.
• An accountant can help you verify that the provided financial statements are for the correct legal entity offering the franchise.
• Asking the franchisor to clarify the relationship and any financial interdependencies with its affiliates is a prudent step.