Explanation

The FDD does not indicate that the system is experiencing excessively rapid growth that might outpace its support capabilities. Instead, the data in Item 20 suggests the system has been contracting over the last three years. Therefore, this specific risk of support systems being strained by overly rapid expansion was not identified.

Potential Mitigations

• A business advisor can help evaluate if the franchisor's current support infrastructure is appropriately sized for its existing franchisees.
• Even without rapid growth, it is wise to ask current franchisees about the quality and responsiveness of the support they receive.
• Your attorney should review the franchisor's contractual support obligations outlined in the Franchise Agreement.

Explanation

This specific risk was not identified. Huddle House was founded in 1964 and has been franchising since 1966, indicating a long operational history and an established brand. Therefore, it is not considered a new or unproven system. The primary risks appear to stem from its current financial condition and franchisee turnover rather than a lack of historical presence.

Potential Mitigations

• When evaluating any franchise, your attorney should still review the complete history disclosed in Item 1, including any predecessors.
• A business advisor can help you assess how a brand's long history might affect its adaptability to modern market trends.
• It is important to discuss with current long-term franchisees how the system has evolved over time.

Explanation

This specific risk of the business model being a 'fad' was not identified. Huddle House is a traditional, full-service, 24-hour restaurant concept focused on diner-style food, a category with a long-standing presence in the American market. Its longevity since 1964 suggests a durable business model rather than one based on a short-term trend.

Potential Mitigations

• A business advisor can still help you analyze the long-term viability and competitiveness of the traditional diner concept in your specific market.
• Investigate local competition and consumer dining trends to ensure the concept remains relevant in your area.
• Discuss with your financial advisor how economic cycles might impact a full-service restaurant compared to other models.

Explanation

This specific risk was not identified. The executives listed in Item 2 generally have extensive experience in the restaurant and franchising industries, including roles at Huddle House, its affiliate Perkins, and other major restaurant brands. For example, the CEO and Brand President have held senior leadership roles at other large restaurant chains. This suggests the management team possesses relevant industry experience.

Potential Mitigations

• A business advisor can help you research the professional reputations and track records of the key executives listed in Item 2.
• When speaking with current franchisees, you should still inquire about their perception of the management team's competence and strategic direction.
• Your attorney can help you understand the corporate structure and the roles of the various parent company directors.

Explanation

This risk was not identified. The FDD clearly discloses the parent companies, including Griddle Holdings, Inc., Huddle House Holdings, Inc., and the ultimate controlling entity, Elysium Management LLC. The financial statements provided in Exhibit E are for Huddle House, Inc. and its subsidiary, which appears to be the primary operating and franchising entity. There is no indication that required parent company financials are being withheld.

Potential Mitigations

• Your attorney should always confirm the corporate structure and identify all parent and affiliate companies disclosed in Item 1.
• It is important to have your accountant review the provided financial statements to assess the franchisor's stability, regardless of parent disclosures.
• A business advisor can help you understand the relationships between the franchisor and its various parent and affiliate entities.

Explanation

This risk was not identified. Item 1 describes the franchisor's history, including its acquisition in 2018, but does not indicate a complex or problematic history with predecessors from which significant liabilities or operational issues were inherited. The litigation disclosed in Item 3 pertains to actions involving the current franchisor, HHI.

Potential Mitigations

• Your attorney should always carefully review the predecessor information in Items 1, 3, and 4 of any FDD.
• A business advisor can help you conduct independent research on a franchisor's history if there are any signs of undisclosed predecessors.
• When speaking with long-term franchisees, asking about their experience under any previous ownership is a valuable due diligence step.