Explanation

As a new franchisor that only began offering franchises in 2025, Hello Franchise has no operating history for franchised outlets. Item 20 tables show zero franchisees, meaning there is no data on franchisee turnover, terminations, or closures. While this specific risk is not present as a negative trend, the complete lack of data means you are entering a system without any track record of franchisee success or failure, which is a significant risk in itself.

Potential Mitigations

• Given the lack of data, it is crucial to discuss the inherent risks of an unproven system with your business advisor.
• An accountant can help you create financial projections, but they will be purely speculative without historical franchisee data.
• Your attorney can help you assess the overall risk profile of investing in a system with no franchisee performance history.

Explanation

This risk was not identified in the FDD Package. The franchisor is new and has not yet begun significant expansion, so the risk of growing too quickly and straining support systems has not materialized. However, as a prospective franchisee in a new system, you should be aware that if the franchisor does sell franchises rapidly, its limited resources, as noted in its financials, could be quickly overwhelmed, potentially affecting the quality of support you receive.

Potential Mitigations

• Question the franchisor about their controlled growth plan and how they will scale support infrastructure with a business advisor.
• An accountant should review the franchisor's financials to assess their capacity for funding support services as the system grows.
• During your due diligence, ask the franchisor what their target is for new franchise sales in the next few years.

Explanation

This risk was not identified in the FDD Package. The business concept of a shawarma restaurant is a well-established category within the fast-casual and quick-service restaurant industry, not a temporary fad. However, as with any restaurant, long-term success will depend on factors like quality, service, location, and the ability to adapt to changing consumer tastes and local competition, which you should carefully evaluate.

Potential Mitigations

• Assess the long-term local market demand for this specific type of cuisine with your business advisor.
• Evaluate the business model's resilience to economic downturns and changing food trends with your financial advisor.
• It is wise to research local competitors to understand the existing market landscape before investing.

Explanation

This risk was not identified in the FDD Package. Item 1 indicates the franchisor is a new, privately-held LLC and does not disclose any ownership by a private equity firm. This type of risk typically involves a focus on short-term returns which can sometimes conflict with the long-term health of franchisees. Since it is not present here, this specific concern does not apply.

Potential Mitigations

• It is still prudent to ask your attorney to confirm the ownership structure of the franchisor and its affiliates.
• Understanding the long-term goals of any business owner is a wise step; you can discuss this with a business advisor.
• Regularly reviewing FDD updates during your time as a franchisee can keep you informed of any future ownership changes.

Explanation

This risk was not identified in the FDD Package. Item 1 does not disclose any predecessors for the franchisor, as it is a new entity. Therefore, there are no concerns about a hidden negative history from a prior version of the company. Your investment risk is tied to the newness of the current company, not the history of a past one.

Potential Mitigations

• Even without a predecessor, a full review of the current franchisor's principals in Item 2 with a business advisor is a key step.
• An attorney can confirm the corporate history to ensure no predecessor has been omitted from the disclosure.
• Focus your due diligence on the current management team's experience and the viability of their new business plan.

Explanation

This risk was not identified in the FDD Package. Item 3 states that there is no litigation that requires disclosure. The absence of lawsuits, particularly from franchisees alleging fraud or misrepresentation, is a positive indicator. However, as a new franchisor with no franchisees yet, there has been limited opportunity for such disputes to arise. You should continue to monitor this as the system develops.

Potential Mitigations

• Your attorney can conduct independent searches for litigation against the franchisor or its principals as part of due diligence.
• Discussing the franchisor's approach to dispute resolution with them can provide insight into their philosophy.
• It is good practice to ask existing franchisees in any system about their experience with disputes, though none exist here yet.