Explanation

The franchise system is very new, with only one franchised outlet open as of the FDD date. Therefore, the Item 20 tables do not yet show any history of franchisee terminations, non-renewals, or other cessations. While this specific risk is not present, the lack of an established franchisee base means there is limited historical data to assess long-term franchisee satisfaction and the system's stability.

Potential Mitigations

• With your business advisor, carefully consider the higher risks associated with investing in a new, unproven franchise system.
• Contacting the very first franchisees as they open will be crucial to get early feedback on their experience.
• Your attorney can help you understand the importance of monitoring future Item 20 disclosures as the system grows.

Explanation

This specific risk was not identified. Item 2 indicates that the key executives and training personnel have several years of experience with the Go Greek brand and in the food industry through affiliated companies, dating back to 2013-2014. In general, a management team without experience in both the specific industry and in managing a franchise network can be a significant risk, as they may lack the skills to provide effective support and strategic guidance.

Potential Mitigations

• It is still prudent to interview current franchisees about the quality and effectiveness of the management team's support and guidance.
• Your business advisor can help you assess whether the management team's prior experience is directly relevant to supporting a franchise network.
• Always verify the backgrounds of key personnel mentioned in Item 2 with your attorney.

Explanation

This risk was not identified in the FDD package. Item 1 discloses ownership by corporate entities, not a private equity firm. A franchise owned by a private equity firm can present unique risks, such as a focus on short-term profitability and a quick exit strategy, which may not always align with the long-term health of franchisees. This can sometimes lead to increased fees or reduced support.

Potential Mitigations

• Your attorney can help you investigate the ownership structure of any franchisor to identify potential private equity involvement.
• If a franchisor is PE-owned, a business advisor can help research the firm's track record with its other portfolio companies.
• Always ask current franchisees about any changes in system operations or philosophy after an ownership change.

Explanation

This risk was not identified. The FDD discloses parent companies in Item 1 and provides audited financial statements for the franchisor entity itself. Generally, if a franchisor is a thinly capitalized subsidiary of a larger parent, the parent's financial statements may be necessary to assess the true financial strength of the system. Failure to provide them in such a case would be a significant risk.

Potential Mitigations

• Your attorney can help verify the corporate structure of the franchisor and its parents.
• An accountant should always review the provided financial statements for any notes regarding parent guarantees or support.
• If a parent company's financials are provided, they should be reviewed with the same scrutiny as the franchisor's.

Explanation

This risk was not identified. Item 1 mentions a predecessor, Go Greek, Inc., that offered franchises from 2014-2016. However, Items 3 and 4 do not disclose any litigation or bankruptcy history for this predecessor. In general, it is important to scrutinize the history of any predecessors, as this can reveal inherited issues with the brand or operating model that may not be apparent from reviewing the current franchisor's history alone.

Potential Mitigations

• Your attorney should always carefully review the disclosed history of any predecessor entities in Items 1, 3, and 4.
• A business advisor can assist in researching the public record of predecessor companies for any relevant history.
• When possible, speaking with franchisees who operated under a predecessor can provide valuable insights.

Explanation

This risk was not identified. Item 3 states that no litigation is required to be disclosed. For any franchise, a pattern of lawsuits filed by franchisees alleging fraud or by the franchisor against franchisees can be a major red flag indicating systemic problems. Given this is a very new system, the lack of litigation is expected but provides little insight into how the franchisor will handle disputes in the future.

Potential Mitigations

• Your attorney should always review Item 3 of any FDD for litigation history, paying close attention to the nature of the claims.
• Speaking with current and former franchisees is a key way to learn about disputes that may not have risen to the level of litigation.
• With a new system, understanding the dispute resolution clauses in the Franchise Agreement is critical, which your attorney can explain.