Explanation

Juici Food Services LLC's (Juici Food) audited financial statements reveal significant and recurring net losses, resulting in a substantial negative net worth (Member's Deficit). This financial weakness is explicitly flagged as a "Special Risk" and triggered regulatory action in Illinois, requiring fee deferrals. This may call into question Juici Food's ability to provide long-term support and fulfill its obligations to you as it grows.

Potential Mitigations

• Engage an accountant to thoroughly analyze the financial statements, including the cash flow sources and the implications of the negative equity.
• A discussion with your financial advisor is essential to assess if the franchisor has sufficient capital to support its system growth and obligations to franchisees.
• Your attorney should explain the protections, if any, afforded by state-mandated actions like fee deferrals due to financial weakness.

Explanation

The franchisor has signed 24 agreements with only four outlets currently open and projects 11 new openings next year. This extremely rapid growth, especially for a new system with documented financial weakness, poses a risk that support resources like training and operational assistance could be stretched thin. This may lead to inadequate support for you and other new franchisees during the critical opening phase.

Potential Mitigations

• Your business advisor can help you question the franchisor on their specific plans to scale support staff and infrastructure to match this growth.
• It is crucial to ask the very first franchisees about the quality and timeliness of the support they are currently receiving.
• An accountant should review the franchisor's financials to assess whether they have the capital to fund the necessary support for this expansion.

Explanation

Juici Food is an emerging franchise system with a limited U.S. operating history, having opened its first franchised units in 2024. The FDD explicitly highlights "Operating History" as a special risk. Investing in a new system carries higher uncertainty, as the business model, brand recognition, and support structures are not yet proven over time. Your investment is therefore subject to the risks inherent in a new venture.

Potential Mitigations

• A business advisor should help you conduct extensive due diligence on the founders' experience in both the restaurant industry and franchising.
• Speaking with the first few franchisees listed in Exhibit E is essential to understand their early experiences and the reality of the support provided.
• Your attorney may be able to negotiate more favorable terms, such as reduced fees or enhanced support, to compensate for the higher risk.

Explanation

While Item 2 shows the management team has extensive experience with an affiliated brand in Jamaica, their direct experience in managing a U.S.-based franchise system is limited. The franchisor entity itself is new. This could present challenges in navigating U.S. market specifics, supply chains, and franchisee support requirements, which can differ significantly from operating as a franchisee or in another country.

Potential Mitigations

• In your discussions with the franchisor, inquire about what U.S.-specific franchise management expertise they have hired or consulted.
• Speaking with the initial U.S. franchisees is critical to gauge the quality of the support and guidance provided by this management team.
• A business advisor can help you assess whether their past experience is sufficiently transferable to the challenges of building a U.S. franchise network.

Explanation

The FDD discloses parent companies but does not include their financial statements or a parental guarantee of performance. Given that the franchisor entity itself has a significant net deficit, the financial health of its parent companies is highly material to assessing the overall stability of the system. Without this information, you cannot fully evaluate the parent's ability to support the franchisor if it faces financial distress.

Potential Mitigations

• Your accountant should stress the importance of understanding the financial health of the parent companies.
• Requesting the financial statements of the parent companies from the franchisor is a reasonable step; your attorney can help frame this request.
• A business advisor can help you assess the risks of investing in a system where the ultimate financial backing is unclear.