Explanation

This risk was not identified in the FDD package. The fast-casual Mediterranean restaurant concept is a well-established and recognized segment of the restaurant industry, not a temporary or novelty trend. Therefore, the risk of the business being a fad with limited long-term consumer demand appears low.

Potential Mitigations

• A business advisor can help you research the long-term consumer trends and competitive landscape for the fast-casual Mediterranean market in your area.
• You should evaluate the franchisor's plans for menu innovation and brand development with your marketing advisor to gauge their strategy for continued relevance.
• Review industry reports and publications with a business consultant to assess the overall health and future prospects of this market segment.

Explanation

This risk was not identified in the FDD package. The management team described in Item 2 includes individuals with long-term experience with the brand concept. The founder, Nir Giat, has been with the company since 2013, and the Director of Franchising has been in his role since 2019, suggesting a degree of continuity and experience within the leadership team.

Potential Mitigations

• It is still prudent to research the professional backgrounds of the key executives listed in Item 2 with the help of your business advisor.
• When speaking with current franchisees, asking about their perception of management's competence and vision for the brand can provide valuable insight.
• Your attorney can help you understand the roles and responsibilities of the management team as outlined in the franchise documents.

Explanation

This risk was not identified in the FDD package. Item 1 states that HR Franchising does not have any parent entities. The disclosure does not indicate that the franchisor is owned or controlled by a private equity firm, which can sometimes bring a different set of priorities and risks to a franchise system.

Potential Mitigations

• Your attorney can help you verify the ownership structure of the franchisor through public records to confirm the absence of a private equity owner.
• During due diligence calls, you can ask current franchisees if they are aware of any recent or pending changes in ownership.
• A business advisor can explain the potential pros and cons of private equity ownership in franchising for your general knowledge.

Explanation

This risk was not identified in the FDD package. Item 1 clearly states that HR Franchising does not have a parent company. An affiliate, New Age Healthy Food Company, LLC, is disclosed as the owner of the trademark, but there is no indication of a parent entity whose financials would be material to understanding the franchisor's stability.

Potential Mitigations

• Your attorney can confirm the corporate structure and the relationship between the franchisor and its disclosed affiliate.
• It is a good practice to ask your accountant to review the disclosures in Item 1 and Item 21 to ensure all required financial information has been provided.
• Understanding the role of affiliates is important, and a business advisor can help clarify their potential impact on your franchise.

Explanation

This risk was not identified in the FDD package. Item 1 states that the franchisor has no predecessors. This means the company did not acquire the business from a prior entity, and the historical data presented, such as litigation and bankruptcy history, pertains directly to the current franchisor.

Potential Mitigations

• For any franchise, it is wise to have your attorney verify the corporate history presented in Item 1.
• A business advisor can explain why understanding a predecessor's history is important for assessing potential inherited issues in other franchise systems.
• Always confirm with current franchisees if they are aware of any prior owners or brand names for the system they joined.

Explanation

This risk was not identified in the FDD package. Item 3 explicitly states that there is no litigation required to be disclosed. This suggests an absence of significant legal disputes with franchisees, suppliers, or government agencies that would meet the criteria for disclosure, which is a positive indicator.

Potential Mitigations

• Even with no disclosure, an attorney can conduct a public records search to look for any litigation that may not have met the threshold for disclosure.
• Asking current and former franchisees about their experiences with disputes, whether they led to litigation or not, can provide valuable insight.
• Your attorney can explain the specific types of litigation that are required to be disclosed in Item 3 for your general understanding.