Explanation

This risk was not identified. The FDD does not indicate rapid system growth; in fact, Item 20 data shows a net decrease in the total number of franchised and company-owned outlets over the last three years. Uncontrolled growth can strain a franchisor's support systems, but that does not appear to be a current risk here.

Potential Mitigations

• A business advisor can help you evaluate a franchisor's growth strategy to ensure it is sustainable and supported by adequate infrastructure.
• When reviewing any franchise, it is wise to have your accountant analyze Item 21 financial statements to confirm the franchisor has the capital to support its stated growth.
• Consulting with your attorney about the franchisor's contractual obligations for support in Item 11 is a key due diligence step.

Explanation

This risk was not identified. The Giordano's brand has been in operation since 1974 and has a long history of franchising, as disclosed in Item 1. Investing in a new, unproven system carries higher risks due to a lack of brand recognition and untested operational support, which is not the case here.

Potential Mitigations

• When considering any franchise, a business advisor can help you research the brand's history and market position.
• It is always prudent to have an attorney review the franchisor's history and corporate structure disclosed in Item 1.
• Contacting long-standing franchisees from the list in Item 20 can provide insight into the system's evolution and stability.

Explanation

This risk was not identified. The franchise is centered on Chicago-style pizza, a well-established and recognized restaurant concept, not a business model based on a fleeting trend. Fad-based businesses carry a high risk of declining consumer interest over the long term, which does not appear to be a primary concern for this established food category.

Potential Mitigations

• A business advisor can help you assess the long-term consumer demand for any franchise concept's core products or services.
• Reviewing a franchisor's history in Item 1 and its plans for menu development in Item 11 can provide insight into its adaptability.
• Independent market research, with help from a marketing professional, can validate the sustainability of the business model in your specific area.

Explanation

This risk was not identified. Item 2 discloses that the key executives have extensive experience in the restaurant industry, with many holding senior positions at other well-known restaurant companies or having long tenures with the franchisor. An inexperienced management team can be a significant risk, but the leadership here appears to possess relevant industry expertise.

Potential Mitigations

• When evaluating any franchise, your business advisor should help you research the backgrounds of the key management team listed in Item 2.
• It is wise to ask existing franchisees about their direct experiences with the management team's competence and support.
• An attorney can help review the employment history for any potential red flags or gaps in critical areas of expertise.

Explanation

This risk was not identified. Item 1 of the FDD clearly discloses the parent company and affiliate structure. Failing to disclose a parent company that guarantees performance or is the primary source of support can hide significant financial or operational risks. This does not appear to be the case here, as the corporate structure is outlined.

Potential Mitigations

• Your attorney and accountant should always review Item 1 and Item 21 together to understand the full corporate structure and determine if parent company financials are required and have been provided.
• If a parent company guarantees the franchisor's performance, having an attorney ensure the guarantee is a formal exhibit to the FDD is critical.
• A business advisor can help research the parent company's stability and its relationship with the franchisor.

Explanation

This risk was not identified. Item 3 of the FDD states that there is no litigation that requires disclosure. A pattern of litigation, particularly those involving franchisee claims of fraud, can be a major red flag indicating systemic problems. The absence of such disclosed litigation is a positive indicator.

Potential Mitigations

• An attorney should always be engaged to review Item 3 of any FDD to assess the nature and potential impact of any disclosed litigation.
• Even with no disclosed litigation, a business advisor can help you conduct online searches for news articles or public records of disputes involving the franchisor.
• Discussing the franchisor's relationship with its franchisees with a broad sample of current operators can provide insight into the potential for disputes.