Explanation

This risk was not identified. Item 20 data indicates the number of franchised outlets has been stable over the past three years, not experiencing the kind of rapid expansion that can strain a franchisor's resources. A franchise system growing too quickly may struggle to provide adequate support to all its franchisees.

Potential Mitigations

• Engaging a business advisor to review the franchisor's strategic plans for growth can provide insight into future stability.
• Your accountant can assess whether the franchisor's financial statements reflect a sustainable and controlled growth model.
• Legal counsel should review the franchisor's support obligations to ensure they are well-defined.

Explanation

This risk was not identified. The FDD indicates that Häagen-Dazs has been franchising since 1983, making it a very mature and established system. Investing in a new or unproven franchise system typically carries higher risks related to brand recognition, operational track record, and the franchisor's ability to provide long-term support.

Potential Mitigations

• A business advisor can help you evaluate the maturity and stability of any franchise system you consider.
• It's wise to have an accountant review the financial history of a franchisor to gauge its long-term viability.
• Speaking with long-term franchisees can provide valuable perspective on the system's evolution and stability.

Explanation

This risk was not identified. The franchise is centered on premium ice cream, a product category with a long history of sustained consumer demand. A business based on a fad or fleeting trend would present a significant risk of declining sales once consumer interest fades, which does not appear to be a concern here.

Potential Mitigations

• Consulting with a business advisor can help you assess the long-term market trends for any product or service.
• An independent analysis of industry reports can provide insight into the stability of the market segment.
• Your financial advisor can help model the potential impact of shifting consumer tastes on your business plan.

Explanation

This risk was not identified. The executive team detailed in Item 2 of the FDD demonstrates extensive and long-term experience specifically with the Häagen-Dazs brand and with franchising. Inexperienced management can pose a significant risk to a franchise system's operational support, strategic direction, and overall stability, which does not appear to be an issue here.

Potential Mitigations

• It is always a good practice to research the backgrounds of the key executives of any franchise you consider.
• Speaking with current franchisees can offer direct insight into their confidence in the franchisor's leadership team.
• A business advisor can help you evaluate the depth and relevance of the management team's experience.

Explanation

This risk was not identified. Item 1 of the FDD provides a detailed description of the franchisor's corporate ownership structure, including its various parent companies. When a franchisor's parent company is not disclosed, it can obscure the true financial backing and controlling interests of the franchise system, but that is not the case here.

Potential Mitigations

• Your attorney can help verify the corporate structure and identify all relevant entities in any franchise opportunity.
• An accountant should review whether parent company financial statements are required and provided, especially if the parent guarantees obligations.
• Understanding the complete ownership chain is critical for assessing who ultimately controls the brand you are investing in.

Explanation

This risk was not identified. Item 1 of the FDD describes the franchisor's history, including its prior ownership under another company. There is no indication of negative history, such as bankruptcy or significant litigation, associated with any predecessors that would suggest there are inherited systemic problems with the brand or its operating model.

Potential Mitigations

• It's good practice to have your attorney review any predecessor information in the FDD for potential red flags.
• A business advisor can help you conduct independent research on a predecessor's track record if one is disclosed.
• Speaking with long-tenured franchisees can provide valuable firsthand accounts of the system's history under previous ownership.

Explanation

This risk was not identified. Item 3, which requires disclosure of certain types of litigation, states that there are no cases to report. A pattern of litigation, especially lawsuits from other franchisees alleging fraud or from the franchisor against franchisees, can be a major warning sign about the health of the franchise relationship, but it is not a concern based on this disclosure.

Potential Mitigations

• An attorney can help you understand the significance of any litigation disclosed in an FDD.
• Independent online research can sometimes reveal litigation history not required to be disclosed in Item 3.
• Talking to former franchisees can often provide context for past or present legal disputes.