Explanation

This risk was not identified in the FDD package. The data in Item 20 does not suggest that the franchise system is currently undergoing a period of excessively rapid growth that might outstrip the franchisor's ability to provide adequate support. Instead, the system appears mature and is showing a slight contraction in the number of franchised units.

Potential Mitigations

• It is still valuable to have a business advisor help you evaluate the franchisor's support infrastructure relative to its size.
• Speaking with franchisees who have joined at different times can provide insight into the consistency of support, which your attorney can help facilitate.
• An accountant can review the franchisor's financial statements for signs of investment in support services and personnel.

Explanation

This risk was not identified. The FDD indicates that Jason's Deli is a well-established brand, with the first deli opening in 1976 and the franchisor corporation formed in 1983. Item 2 shows that the management team possesses many years of experience within the company and the restaurant industry. The system is mature, with a large number of company-owned and franchised outlets, indicating a proven business model rather than a new or untested one.

Potential Mitigations

• Even with a proven system, it is wise to have your attorney review the complete history of the franchisor as disclosed in the FDD.
• A business advisor can help you assess how the franchisor's long history might impact its adaptability to new market trends.
• Confirming the stability of a mature system by speaking with long-term franchisees is a prudent due diligence step.

Explanation

This risk does not appear to be present. The Jason's Deli concept is a modified New York-style delicatessen, a business model with a long history of consumer demand. The brand has been operating since 1976, demonstrating decades of market presence. This long operational history suggests the business is not based on a recent or fleeting consumer trend and has sustained itself through various economic cycles.

Potential Mitigations

• A business advisor can help you analyze the long-term prospects of the fast-casual delicatessen market in your specific area.
• It is still important to review the franchisor's recent history of innovation and menu development with existing franchisees.
• Your accountant can help you model the financial resilience of this business type in a potential economic downturn.

Explanation

This risk was not identified in the FDD. Item 2 details the business experience of the franchisor's officers and directors, revealing that key personnel have extensive, long-term careers with Jason's Deli itself, often spanning decades and in various operational and executive roles. This indicates a deeply experienced management team with specific knowledge of both the restaurant industry and the franchise system.

Potential Mitigations

• You should still review the backgrounds of the entire management team with a business advisor to understand the breadth of their collective experience.
• Interviewing existing franchisees about their perception of management's competence and support is a valuable step.
• Your attorney can help you understand the management structure and how it might impact your franchise relationship.

Explanation

This risk was not identified. Item 1 of the FDD states that Deli Management, Inc. is not owned by a parent entity and does not mention any ownership by a private equity firm. The company appears to be privately held, with a history suggesting long-term family and management ownership rather than control by a financial investment firm focused on short-term returns.

Potential Mitigations

• It is still a good practice to have your attorney verify the corporate ownership structure.
• A business advisor can help you research the history of the company's ownership to confirm its stability.
• Asking current franchisees about their experience with the ownership and any major changes in strategic direction is always recommended.

Explanation

This risk was not identified. The FDD states in Item 1 that the franchisor, Deli Management, Inc., does not have a parent company. Therefore, the issue of a parent company's existence and the potential non-disclosure of its financial statements is not applicable in this case.

Potential Mitigations

• Your attorney should always confirm the corporate structure described in Item 1 to ensure there are no undisclosed parent or affiliate entities.
• An accountant should review the provided financial statements for any notes that might suggest reliance on or guarantees from other entities.
• It remains important to assess the standalone financial health of the disclosed franchisor entity with your financial advisor.

Explanation

This risk does not appear to be present. Item 1 of the FDD states that Deli Management, Inc. has had no predecessors during the 10-year period before its most recent fiscal year-end. This indicates the current corporate entity has been operating the franchise system for at least the last decade, so there is no hidden history of a prior company to investigate.

Potential Mitigations

• Your attorney should still review the corporate history described in Item 1 to confirm the absence of predecessors.
• Independent research on the company's history, assisted by a business advisor, can provide additional comfort.
• Speaking with long-term franchisees can help verify the operational history of the brand as presented in the FDD.

Explanation

This risk was not identified in a significant way. Item 3 discloses three pending employment-related lawsuits alleging discrimination. While any litigation is a concern, these actions are not brought by franchisees and do not allege franchise law violations, fraud, or misrepresentation in the franchise sales process. A pattern of franchisee-initiated litigation, which would be a major red flag, is not present here.

Potential Mitigations

• Your attorney should review the details of the disclosed litigation and assess its potential indirect impact on the franchisor's finances or reputation.
• Ask the franchisor about its employment practices and how it plans to mitigate future employment-related legal risks.
• It is wise to have an accountant consider the potential financial impact of adverse judgments when reviewing the franchisor's overall financial health.