Explanation

This risk was not identified in the FDD package, as the US system is brand new with only one franchised outlet (a converted company store) at the end of 2024. High turnover is a critical indicator of systemic problems in mature systems. While not currently applicable, you should monitor these figures in future FDDs if you become a franchisee, as they are a key measure of system health and franchisee satisfaction.

Potential Mitigations

• It is advisable to ask your business advisor to help you track system growth and turnover rates in future FDDs to monitor system health.
• Your attorney can help you formulate questions to the franchisor about their strategies for franchisee retention and success.
• An accountant can help you understand the financial implications of high turnover rates on brand value and support systems.

Explanation

This risk was not identified in the FDD package. Pakistani cuisine is an established and long-standing food category, not a business model based on a fleeting trend. The long-term viability of the business depends more on operational execution and local market factors rather than the sustainability of a short-lived fad. Therefore, this specific risk is not a primary concern for this franchise opportunity.

Potential Mitigations

• It is still wise to have a business advisor help you assess local market demand and competition for this type of cuisine.
• Your accountant can help you develop financial projections based on the performance of similar, established restaurant types.
• Legal counsel can review the agreement to ensure you have some flexibility to adapt to changing local consumer tastes over the long term.

Explanation

This risk was not identified in the FDD package. The executive team, while new to the US entity, has managed the same brand in Canada since 2018. The President also has prior experience as a multi-unit franchisee of a different brand. This background suggests a degree of relevant industry and franchising experience, which may reduce the risks typically associated with a new franchisor's management team. This prior experience is a positive factor.

Potential Mitigations

• It is still valuable to have a business advisor help you conduct independent research on the management team's track record and reputation.
• Your attorney can help you ask targeted questions about how their Canadian experience will translate to supporting US franchisees.
• An accountant can help assess if the management's experience is reflected in sound financial planning for the US expansion.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor is a subsidiary of a Canadian parent corporation, not a private equity firm. Therefore, the specific risks associated with a PE firm's typical investment horizon and focus on short-term returns over long-term brand health do not appear to be present in this ownership structure.

Potential Mitigations

• It's always prudent to have your attorney verify the franchisor's ownership structure and identify all parent and affiliate companies.
• A business advisor can help you understand the strategic goals of the parent company, even if it is not a PE firm.
• Your accountant can review any financial transactions between the franchisor and its parent for terms that could be unfavorable to franchisees.

Explanation

This risk was not identified in the FDD package. Item 1 clearly states that the franchisor has no predecessor company. The business was developed by its Canadian parent and is now being offered in the US through a new entity. Therefore, there are no hidden risks related to the history, litigation, or bankruptcy of a prior owner of the system.

Potential Mitigations

• Your attorney can confirm the corporate history as stated in the FDD through public records searches.
• A discussion with a business advisor about the pros and cons of investing in a system without a predecessor can be informative.
• Your accountant can focus on the financial health of the current entity and its parent, as there is no predecessor history to analyze.

Explanation

This risk was not identified in the FDD package. Item 3 states that there is no litigation that requires disclosure. This suggests the franchisor and its management are not currently involved in legal disputes with franchisees or regulators concerning issues like fraud, misrepresentation, or breach of contract. A clean litigation history is a positive sign, especially for a new franchisor.

Potential Mitigations

• While the FDD reports no litigation, it's a good practice to have your attorney conduct an independent search for any legal actions.
• A business advisor can help you research online for any informal complaints or disputes that wouldn't appear in Item 3.
• Speaking with any existing franchisees is a key step your business advisor can facilitate to uncover any unreported dissatisfaction.