Explanation

This risk was not identified in the FDD package. The franchise system is new and, as of the end of the last fiscal year, had no franchisee-operated outlets that had been open long enough to establish a history of terminations, non-renewals, or other cessations. High turnover in a mature system can be a major warning sign of franchisee dissatisfaction or lack of profitability.

Potential Mitigations

• It is advisable to ask your business advisor to help you monitor future Item 20 disclosures for any signs of increasing franchisee turnover.
• Speaking with the initial group of franchisees over time can provide early insight into system health and satisfaction.
• Your attorney can explain how unfavorable contract terms could contribute to franchisee turnover in the future.

Explanation

This risk was not identified in the FDD package. The business model is based on indoor golf simulators, which leverages technology within the large and established golf industry. While the specific application is modern, it does not appear to be tied to a short-term or fleeting trend, but rather a developing segment of a stable recreational market. The risk of the business being a short-lived fad seems low.

Potential Mitigations

• A discussion with your business advisor can help you assess the long-term consumer demand for this type of entertainment and training concept.
• You should evaluate the system's ability to adapt to new technologies to avoid becoming obsolete.
• Your financial advisor can help model the business's resilience to shifts in consumer spending on recreational activities.

Explanation

This risk was not identified in the FDD package. Item 1 states that GolfCave LLC is a 'family-owned business' and its parent is GolfCave Franchising Holdings LLC. There is no disclosure of ownership by a private equity firm. Therefore, risks often associated with PE ownership, such as a focus on short-term returns over long-term system health, do not appear to be present.

Potential Mitigations

• It is still wise for your attorney to review assignment clauses in the Franchise Agreement to understand who could own the system in the future.
• A business advisor can help you understand the pros and cons of different franchisor ownership structures.
• Regularly monitoring public records or news about the franchisor can alert you to any future change in ownership.

Explanation

This risk was not identified in the FDD package. The franchisor discloses its parent company in Item 1. There is no indication that the parent company guarantees the franchisor's obligations, which would typically trigger a requirement to include the parent's financial statements. Therefore, the absence of the parent's financials does not appear to be an improper non-disclosure under the FTC Rule.

Potential Mitigations

• Your attorney should confirm that no parent company guarantee exists that would necessitate the disclosure of its financials.
• An accountant can help you evaluate the franchisor's own financial statements on a standalone basis.
• A discussion with your business advisor can help clarify the relationship and flow of support between the parent and the franchisor.

Explanation

This risk was not identified in the FDD package. In Item 1, the franchisor explicitly states, 'We have no predecessors.' This means the company did not acquire the franchise system from another entity, so there is no prior history of litigation, bankruptcy, or franchisee turnover under a different ownership name to consider.

Potential Mitigations

• Your attorney can confirm this statement by reviewing the corporate history of the franchisor entity.
• Due diligence should focus on the history and experience of the current management team, as detailed in Item 2.
• A business advisor can help you assess the risks associated with a company that has no predecessor, which often correlates with a new system.

Explanation

This risk was not identified in the FDD package. Item 3 of the FDD states, 'No litigation is required to be disclosed in this Item.' Item 4 similarly states that no bankruptcy information is required for disclosure. This indicates the franchisor and its management have not been involved in the types of legal or bankruptcy proceedings that would require disclosure under franchise law.

Potential Mitigations

• It is wise to have your attorney perform an independent public records search to verify the absence of significant litigation.
• Speaking with the first group of franchisees can provide insight into whether any disputes have arisen that have not yet resulted in formal litigation.
• Your business advisor can explain the types of litigation that are common in franchise disputes.