Explanation

This risk was not identified in the FDD Package. The franchise system is new, with the first two franchisees having opened in 2024, so there is no history of franchisee terminations, non-renewals, or closures to analyze. While newness itself is a risk, a historical pattern of high turnover is not present. High turnover can signal systemic problems, so this is a key area to monitor in future FDDs.

Potential Mitigations

• Your business advisor should help you establish direct communication with the first few franchisees to monitor their satisfaction and operational health.
• An accountant can help you model different scenarios for profitability to understand the business's sensitivity to market conditions.
• Regularly review future FDDs with your attorney to track franchisee turnover rates as the system matures.

Explanation

This risk was not identified in the FDD Package. The business concept, specializing in bagels, cream cheese, and coffee, operates in a well-established and mature market segment. There is no indication that the business is based on a fleeting trend or fad, which reduces the risk of a sudden decline in consumer interest.

Potential Mitigations

• Your business advisor can help you analyze the local competitive landscape for similar food and beverage concepts.
• An accountant can help you assess the long-term financial viability based on the established nature of the market.
• Discuss the brand's strategies for differentiation and innovation with a marketing professional.

Explanation

This risk was not identified in the FDD Package. The management team described in Item 2 appears to have substantial and relevant experience in the franchise industry, particularly with the uBreakiFix franchise system. Key executives have prior roles as franchise officers and managers. This level of direct franchising experience is a positive factor and mitigates the risk of operational and support failures stemming from an inexperienced leadership team.

Potential Mitigations

• A business advisor can still help you research the specific track record and reputation of the management team and their previous franchise systems.
• Asking existing franchisees about their direct interactions with and assessment of the leadership team provides valuable insight.
• Your attorney can confirm the roles and responsibilities of the management team as described in the documents.

Explanation

This risk was not identified in the FDD package. Item 1 provides a clear description of the parent and affiliate company structure, including Jeff's Bagel Run Holdings Co and 1337 Capital Management LLC. Audited financial statements for the franchisor entity, JBR Franchise Co, are provided as required. There is no indication that a controlling parent company or its financial information has been improperly withheld.

Potential Mitigations

• Your attorney can verify the corporate structure and confirm that all necessary parent and affiliate entities have been properly disclosed.
• An accountant should review the provided financial statements to ensure they meet all disclosure requirements.
• It is prudent to ask the franchisor to confirm in writing that no other entities have a controlling interest in the franchise system.

Explanation

This risk was not identified in the FDD Package. Item 1 identifies TheBagel, LLC as a predecessor but states that it did not offer franchises or operate a similar business model. The document does not indicate any negative history, such as litigation or bankruptcy, associated with any predecessor entities that would need to be considered.

Potential Mitigations

• Your attorney can help you conduct public records searches to verify the history of any disclosed predecessor entities.
• A business advisor can assist in researching the business reputation of any predecessor companies and their principals.
• It is useful to ask the franchisor for more context regarding the transition from any predecessor to the current company.

Explanation

This risk was not identified in the FDD Package. Item 3 explicitly states, 'No litigation is required to be disclosed in this Item.' This indicates that there are no pending or recent material lawsuits involving the franchisor, its predecessors, or key personnel that allege fraud, franchise law violations, or other similar claims.

Potential Mitigations

• Your attorney can perform independent searches of court records to verify the absence of litigation.
• A discussion with a range of existing franchisees can help confirm whether there are any widespread disputes that have not yet resulted in litigation.
• It is wise to request that the franchisor confirm in writing that there are no pending legal actions or threats of litigation.