Explanation

This risk was not identified in the FDD package. Item 20 data for the last three years shows zero terminations, non-renewals, or other cessations for the very small number of existing franchisees. High franchisee turnover is a critical red flag in a franchise system, as it can indicate systemic problems such as lack of profitability, franchisee dissatisfaction, or poor franchisor support. Continuous monitoring of these figures in future FDDs is important.

Potential Mitigations

• With your business advisor, you should still contact current and former franchisees listed in Item 20 to inquire about their satisfaction and profitability.
• An accountant can help you analyze the Item 20 tables in future FDDs to spot any negative trends in unit turnover.
• Your attorney can help you understand the different categories in Item 20, such as the distinction between a 'transfer' and a 'termination'.

Explanation

This risk was not identified in the FDD package. The franchisor's system, while new, shows steady and controlled growth in affiliate-owned stores, and the audited financial statements indicate sufficient profitability and capital to support this expansion. Uncontrolled, rapid growth can strain a franchisor's ability to provide adequate site selection, training, and ongoing operational support to its franchisees, but that does not appear to be the case here.

Potential Mitigations

• It is still prudent to ask the franchisor about their future growth plans and the corresponding expansion of their support staff.
• A discussion with your business advisor can help evaluate if the franchisor’s infrastructure can handle its projected growth.
• Reviewing the franchisor's financial statements with an accountant will help verify they have the resources for planned expansion.

Explanation

This risk was not identified. Jollibee is a well-established international brand in the quick-service restaurant industry, not a concept based on a new or fleeting trend. The business model, centered on popular food items like fried chicken and spaghetti, has demonstrated long-term consumer demand globally. A fad business carries the risk of declining consumer interest, which could jeopardize your long-term investment, but that does not appear to be a primary concern here.

Potential Mitigations

• A business advisor can help you analyze the long-term sustainability and competitiveness of the Jollibee brand in your specific local market.
• Independent research into the quick-service restaurant industry trends can provide additional context for the brand's market position.
• Speaking with long-standing franchisees about the brand's evolution and staying power is a valuable due diligence step.

Explanation

This risk was not identified. While the franchisor entity itself is new, the management team detailed in Item 2 consists of individuals with extensive and long-term experience within Jollibee's parent company, Jollibee Foods Corporation (JFC), and its affiliates, as well as the broader restaurant industry. This suggests that while the corporate entity is new, the leadership has significant operational and brand experience, which helps mitigate the risks typically associated with an inexperienced management team.

Potential Mitigations

• It is still beneficial to discuss the management team's direct experience in supporting a franchise system with your business advisor.
• Asking current franchisees about the quality and effectiveness of the support they receive from the management team is recommended.
• Your attorney can help verify the roles and responsibilities outlined for the key executives in Item 2.

Explanation

This risk was not identified in the FDD package. Jollibee Foods Corporation, the ultimate parent, is a publicly traded company, not a private equity firm. The ownership structure appears to be strategic and long-term, focused on brand operation rather than the short-term investment horizons often associated with private equity. This reduces the risk of sudden strategy shifts or cost-cutting in support services driven by a private equity firm's need for a quick exit.

Potential Mitigations

• A business advisor can still help you research the parent company's history and its management of other subsidiary brands.
• Understanding the corporate structure and the relationship between the franchisor and its parent companies is a valuable discussion to have with your attorney.
• Reviewing the parent company's public financial reports with an accountant can provide insight into its overall strategy and stability.

Explanation

This risk was not identified. Item 1 clearly discloses the franchisor's parent companies, up to the ultimate parent, Jollibee Foods Corporation (JFC), a publicly traded entity based in the Philippines. While JFC's financials are not included, the franchisor (JBM LLC) has provided its own audited financials. A failure to disclose a parent company can obscure financial instability or conflicts of interest, but the franchisor appears transparent about its corporate structure here.

Potential Mitigations

• Your attorney can help you understand the complex web of parent and affiliate companies described in Item 1 and their respective roles.
• An accountant should review the provided JBM LLC financials to ensure they meet disclosure standards, despite the parent's financials not being included.
• A business advisor can help research the public information available on the ultimate parent, JFC, for a broader view of the enterprise.

Explanation

This risk was not identified. Item 1 discloses that an affiliate, Honeybee Foods Corporation, previously offered franchises in the U.S. from 2018 to 2022 and that those agreements have been transferred to the current franchisor, JBM LLC. The FDD does not indicate any negative history, litigation, or bankruptcy associated with this predecessor. A lack of transparency about a predecessor's history could hide systemic problems, but the disclosure here appears straightforward.

Potential Mitigations

• It is still prudent to ask long-tenured employees or franchisees about the transition from the predecessor franchisor.
• Your attorney can confirm the legal status of the transfer of franchise agreements from the predecessor entity.
• A business advisor can help you research any public information available about the predecessor, Honeybee Foods Corporation.

Explanation

This risk was not identified. Item 3 states, "No litigation is required to be disclosed in this Item." This indicates that the franchisor, its parent, and its management have not been involved in the types of litigation that the FTC rule deems material for disclosure, such as actions involving fraud, franchise law violations, or other significant legal troubles. A clean litigation history is a positive sign, though it doesn't guarantee future disputes will not arise.

Potential Mitigations

• Your attorney can conduct an independent public records search to verify the absence of significant litigation.
• Even without disclosed litigation, discussing dispute resolution procedures in the Franchise Agreement with your attorney is crucial.
• Inquiring with current and former franchisees about their experiences with disputes can provide valuable, practical insight.