Explanation

The FDD does not provide financial statements for the franchisor, Orion Food Systems, LLC (OLM), but for its parent, Performance Food Group Company (PFG). While PFG appears financially strong and provides a performance guarantee, this limits your ability to assess OLM's specific operational health and stability. You are relying on the parent's backing rather than the franchisor's own financial standing. The parent's unaudited interim financials are also noted as such, which is standard.

Potential Mitigations

• An accountant should thoroughly review the parent company's financial statements and the terms of the performance guarantee.
• Discuss the financial relationship between the parent and the franchisor with your business advisor.
• Your attorney should be consulted to confirm the enforceability and scope of the parent's guarantee.

Explanation

This risk was not identified in the FDD. The franchisor, Orion Food Systems, LLC, and its predecessors have been involved in franchising since 1994, indicating a long history in the business. An unproven system can present risks because its operational methods, support infrastructure, and brand recognition may be underdeveloped, potentially leading to a higher failure rate for early franchisees. This does not appear to be the case here given the franchisor's extensive history.

Potential Mitigations

• A business advisor can help you evaluate the franchisor's long history and its relevance to the current market.
• In discussions with your attorney, confirm the history of the franchisor and its various brand concepts.
• Speaking with long-term franchisees can provide insight into how the system has evolved over time.

Explanation

The business model, providing branded food concepts like pizza within host facilities such as convenience stores, is a well-established industry segment. However, the success of your specific unit is highly dependent on the host facility's foot traffic and the intense competition from other quick-service food options. There is a risk that changes in consumer preferences or the local competitive landscape could impact long-term viability, a factor to consider for any retail food business.

Potential Mitigations

• A business advisor can help you conduct a thorough local market analysis to assess long-term consumer demand for this type of food service.
• It is wise to evaluate the stability and customer traffic of your proposed host facility.
• Developing a strong local marketing plan with a marketing professional can help you compete effectively.

Explanation

This risk was not identified. Item 2 shows that the key executives have extensive experience in the food service and related industries, with many having long tenures at major companies like US Foods, Ferrara, and Tyson Foods, or within OLM itself. This level of experience generally suggests that the management team is familiar with the industry's operational, sales, and financial aspects, which can be beneficial for the stability and support of the franchise system.

Potential Mitigations

• You can research the professional backgrounds of the key executives listed in Item 2 to gain further confidence.
• Discuss the management team's experience and strategic vision with your business advisor.
• When speaking with current franchisees, you might inquire about their confidence in the current leadership team.

Explanation

The franchisor is a subsidiary of Performance Food Group Company (PFG), a major, publicly-traded corporation in the food distribution industry. While this provides the potential for significant resources and stability, it also means that major strategic decisions could be driven by the parent company's objectives, which may focus on overall shareholder value rather than the specific needs of franchisees. The parent company provides a guarantee for the franchisor's performance, which is a positive factor.

Potential Mitigations

• Research the parent company's history and its management of other subsidiary brands with a business advisor.
• An accountant should review the parent company's financial statements provided in Exhibit D to assess its overall health.
• During discussions with existing franchisees, ask about the impact, if any, of the parent company's ownership on their business.

Explanation

This risk is not present. Item 1 clearly identifies Performance Manufacturing, LLC as a parent and its parent, Performance Food Group Company, as the ultimate parent. Furthermore, the FDD includes the financial statements for Performance Food Group Company in Exhibit D and a performance guarantee in Exhibit E. This level of disclosure provides significant transparency into the financial backing of the franchisor, which is a positive attribute.

Potential Mitigations

• Your accountant should review the provided parent company financial statements and the guarantee.
• It is good practice for your attorney to verify the corporate structure outlined in Item 1.
• A business advisor can help you understand the implications of having a large, public company as the ultimate parent.

Explanation

This risk was not identified. Item 1 provides a detailed history of the franchisor and its various predecessors and affiliates, dating back to 1986. The document outlines numerous corporate name changes, acquisitions, and the evolution of the different brands offered over time. This detailed disclosure gives you a clear view of the system's lineage and history, which is a positive sign of transparency.

Potential Mitigations

• A franchise attorney can help you interpret the detailed corporate history presented in Item 1.
• When speaking to long-term franchisees, ask about their experience during any of the corporate transitions mentioned.
• Reviewing the history with a business advisor can provide context on the stability and evolution of the franchise system.

Explanation

This risk was not identified. Item 3 states, "No litigation is required to be disclosed in this Item." The absence of disclosed litigation, especially franchisee-initiated lawsuits alleging fraud or misrepresentation, is a positive indicator. It suggests a potentially healthier relationship between the franchisor and its franchisees compared to systems with a history of such disputes. However, this does not guarantee the absence of all disputes, only those meeting the criteria for disclosure.

Potential Mitigations

• Your attorney can help you understand the specific legal criteria that trigger a litigation disclosure in Item 3.
• Conducting your own online searches for news articles or legal filings related to the franchisor can supplement the FDD.
• Asking current and former franchisees about their experiences with disputes is a key part of due diligence.