Explanation

The franchisor, National Hunting Lease Network, L.L.C. (NHLN), is a subsidiary. The provided audited financial statements are for its parent company, FNC, Inc. The parent company appears financially strong, with significant revenue, net worth, and positive net income. Furthermore, FNC, Inc. provides a full Guarantee of Performance for NHLN's obligations. This strong, guaranteed backing from a stable parent company significantly reduces the financial risk typically associated with a smaller franchisor entity.

Potential Mitigations

• An accountant should review the parent company's financial statements and the terms of the performance guarantee to confirm the franchisor's stability.
• It is important to have your attorney verify the enforceability and scope of the parent company's guarantee.
• Discuss the operational relationship between NHLN and its parent company with existing franchisees to understand the practical support available.

Explanation

This risk was not identified in the FDD package. The data in Item 20 shows a net decrease in the number of franchised outlets over the last three years, from 16 to 14. This indicates system shrinkage, not rapid growth. Uncontrolled growth can strain a franchisor's ability to provide adequate support to its franchisees.

Potential Mitigations

• Your business advisor can help assess if the franchisor's support infrastructure is appropriately sized for its current and planned number of franchisees.
• Engage an accountant to review the franchisor's financial statements for signs of investment in franchisee support systems.
• A discussion with your attorney regarding the franchisor's contractual support obligations is a prudent step.

Explanation

This risk was not identified in the FDD package. NHLN has been offering franchises since 2004, and its predecessor, Farmers National, has been in the same type of business since 1994. This indicates a long operational history and a well-established, rather than new or unproven, business concept. This extensive experience may contribute to more developed operational systems and support.

Potential Mitigations

• With your business advisor, you should still evaluate the system's current market relevance and competitive positioning despite its long history.
• Discussing the evolution of the business model over the years with long-term franchisees can provide valuable insights.
• Your attorney can help you understand if the long history has resulted in a more refined and fair franchise agreement.

Explanation

This risk was not identified in the FDD package. The business of managing hunting and fishing leases is a niche but established industry segment tied to land use and outdoor recreation, not a fleeting trend. The franchisor's predecessor has been involved in this business since 1994, suggesting a history of sustained market demand rather than a temporary fad.

Potential Mitigations

• A business advisor can help you research the long-term economic outlook and potential regulatory changes for hunting and land access in your specific territory.
• Investigate local competition and demand for this type of service to validate its sustainability in your market.
• An accountant can help you model the business's financial performance under various economic conditions to assess its resilience.

Explanation

This risk was not identified in the FDD package. The key executives listed in Item 2, Troy Langan and Charlie Leece, have been with NHLN since 2004 and 2010, respectively. This demonstrates significant, long-term experience within this specific franchise system and industry. This depth of experience can be beneficial for providing knowledgeable franchisee support and strategic direction for the brand.

Potential Mitigations

• When speaking with current franchisees, it is still advisable to inquire about their direct experiences with the management team's effectiveness and support.
• A business advisor can help you assess how the leadership's experience translates into effective training and operational systems.
• Your attorney should review the franchise agreement to see how management's discretion is defined in key operational areas.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor is part of FNC, Inc., a long-standing agricultural services company, not a private equity firm. This ownership structure may suggest a focus on long-term operational stability rather than the short-term investment returns typically associated with private equity ownership, which can sometimes be a risk for franchisees.

Potential Mitigations

• It is still prudent to have your attorney review any clauses in the franchise agreement that permit the franchisor to sell or assign the brand.
• A business advisor can help you understand the parent company's overall business strategy and how the franchise fits within it.
• Discussions with franchisees about their experience under the current ownership structure can provide valuable context.

Explanation

This risk was not identified in the FDD package. The franchisor clearly discloses its parent company, FNC, Inc., in Item 1. Furthermore, it provides the parent's audited financial statements in Item 21 and a formal Guarantee of Performance from the parent in Exhibit N. This level of transparency is a positive sign and meets disclosure requirements, allowing for a more complete risk assessment.

Potential Mitigations

• Have your accountant thoroughly review the provided parent company financial statements for a complete picture of the system's financial backing.
• Your attorney should examine the Guarantee of Performance to confirm its scope and enforceability.
• Always verify that all relevant parent and affiliate relationships are clearly disclosed in Item 1.

Explanation

This risk was not identified in the FDD package. The franchisor discloses Farmers National as its predecessor in Item 1 and notes its long history in the business. Items 3 (Litigation) and 4 (Bankruptcy) disclose no negative legal or financial history associated with the predecessor. This lack of adverse history is a positive indicator for the stability and integrity of the underlying business system you would be joining.

Potential Mitigations

• As part of due diligence, it can be useful to ask long-tenured franchisees about their experiences under the predecessor entity.
• Your attorney can help you confirm that the transfer of assets from the predecessor to the current franchisor was handled properly.
• A business advisor can help you research the public reputation of both the predecessor and the current franchisor.

Explanation

This risk was not identified in the FDD package. Item 3 explicitly states that there has been no litigation required to be disclosed involving the franchisor, its predecessor, or its management. A clean litigation record is a positive indicator, suggesting fewer systemic disputes with franchisees or other parties. The absence of lawsuits alleging fraud, misrepresentation, or breach of contract is particularly favorable.

Potential Mitigations

• While the FDD reports no litigation, your attorney might suggest a public records search as an extra layer of due diligence.
• When speaking with former franchisees, it is still prudent to ask if any unresolved disputes contributed to their departure.
• Ensure you understand the dispute resolution process outlined in the franchise agreement with your attorney, even if there is no history of litigation.