Explanation

This risk was not identified. The franchisor, Keke's Franchise Organization, LLC (Keke's), is part of the Denny's Corporation system. Financial statements for the guarantor, DFO, LLC (a Denny's subsidiary), are provided and audited by KPMG. These financials show a profitable entity with significant assets and positive equity, suggesting a strong financial backing for the franchisor's obligations. A financially stable franchisor is better positioned to provide support and grow the brand.

Potential Mitigations

• Your accountant should review the provided financial statements for the guarantor (DFO, LLC) and parent company (Denny's) to confirm their financial health.
• Understanding the relationship between the franchisor, its parent, and the guarantor is critical; your attorney can explain the legal and financial implications of this structure.
• Ask your business advisor to assess if the franchisor's resources are being allocated effectively to the Keke's brand specifically, distinct from other parent company brands.

Explanation

This risk was not identified. A review of the franchisee turnover data in Item 20 for the past three years does not indicate a high rate of terminations, non-renewals, or other cessations of business. The system has seen steady growth with a very low number of outlets ceasing operations. Low turnover can be an indicator of a healthier franchise system and greater franchisee satisfaction.

Potential Mitigations

• With your business advisor, you should still contact a sample of current and former franchisees from the lists in Item 20 to discuss their experiences.
• It is advisable to ask the franchisor about the circumstances surrounding the single 'Ceased Operations' event in 2024 to understand the cause.
• Your accountant can help you calculate the annual turnover rates from Item 20 data to confirm the system's stability.

Explanation

The Keke's system is undergoing steady growth in franchised units and projects significant growth in company-owned outlets. While rapid expansion can strain a franchisor's support resources, this risk appears low here. The franchisor is owned by Denny's Corporation, a large, established company with extensive experience in managing a large-scale restaurant franchise system. This experience and the resources of the parent company may mitigate the typical risks associated with system growth.

Potential Mitigations

• It would be wise to ask the franchisor about their specific plans for scaling franchisee support services to match the projected growth.
• Discuss the quality and responsiveness of current support with franchisees who have opened recently; your business advisor can help you formulate questions.
• Your attorney should review the support obligations outlined in Item 11 to understand the contractually guaranteed level of assistance.

Explanation

The franchisor entity, Keke's Franchise Organization, LLC, was formed in 2022 after Denny's Corporation acquired the Keke's brand. While the franchisor itself is new, the business concept is established, and the ultimate parent company, Denny's, has decades of franchising experience. This established operational history and experienced parentage significantly reduce the risks typically associated with a new or unproven franchise system.

Potential Mitigations

• Your business advisor should help you evaluate the track record of the underlying Keke's brand prior to its acquisition by Denny's.
• It is prudent to ask current franchisees about any changes in system operations or support since the new franchisor took over.
• A thorough review of the management team's experience in Item 2 with your business advisor can confirm their qualifications.

Explanation

This risk was not identified. The Keke's Breakfast Cafe concept, focusing on breakfast and lunch, operates in a well-established and durable segment of the restaurant industry. It is not based on a new or fleeting trend, suggesting a lower risk of being a short-lived fad. A sustainable business model is crucial for long-term success, as your contractual obligations continue regardless of shifts in consumer trends.

Potential Mitigations

• It is still beneficial to have your business advisor analyze long-term consumer dining trends to confirm the stability of the breakfast and lunch restaurant segment.
• You should investigate the local market to assess the strength and number of long-standing competitors.
• Discuss the brand's customer loyalty and staying power with established franchisees.

Explanation

This risk was not identified. Item 2 of the FDD lists the executive team for the franchise, which includes individuals with extensive prior experience in the restaurant and franchise industries at major companies like Denny's, Red Lobster, and Bloomin' Brands. An experienced management team is more likely to provide effective support, make sound strategic decisions, and manage the system competently, which is a positive factor for prospective franchisees.

Potential Mitigations

• Verifying the specific roles and tenures of the key executives listed in Item 2 is a prudent step for your business advisor.
• It is wise to ask existing franchisees about their direct experiences and the quality of support received from the management team.
• Your attorney can help you research the professional reputations of the key leaders in the franchise industry.

Explanation

This risk was not identified. Item 1 discloses that the franchisor is ultimately owned by Denny's Corporation, a publicly traded company, not a private equity firm. This structure may suggest a focus on long-term brand health rather than the shorter-term investment horizons often associated with private equity ownership. Understanding the ownership structure is important as it can influence the franchisor's strategic priorities and relationship with franchisees.

Potential Mitigations

• As a public company, information about Denny's Corporation is widely available; your financial advisor can review their public filings for strategic insights.
• A discussion with your business advisor about the potential benefits and drawbacks of being part of a large, publicly-traded franchise system is recommended.
• Asking existing franchisees about the impact of the parent company's ownership on the Keke's brand is a worthwhile exercise.

Explanation

This risk was not identified. The FDD clearly discloses the franchisor's corporate structure in Item 1, including its parent, Keke's, Inc., and its ultimate parent, Denny's Corporation. Furthermore, the FDD provides audited financial statements for DFO, LLC, the Denny's subsidiary that guarantees the franchisor's performance. This level of transparency is a positive sign and provides a clearer picture of the financial backing of the franchise system.

Potential Mitigations

• Your attorney should review the Guarantee of Performance document in the exhibits to understand its terms and enforceability.
• It is important to have your accountant analyze the financial statements of the guarantor, DFO, LLC, to assess its capacity to back the franchisor's obligations.
• A discussion with your business advisor can help clarify the operational relationship between Keke's and its parent company, Denny's.

Explanation

This risk was not identified. The FDD discloses that the franchisor acquired the system from a predecessor, K2 Restaurants, Inc., in 2022. The document provides the required information about this predecessor and does not indicate any negative history, such as bankruptcy or significant litigation, associated with that entity. A clean history for a predecessor can suggest a more stable foundation for the franchise system you are considering joining.

Potential Mitigations

• Independent research into the history of the Keke's brand prior to its acquisition may provide additional context; your business advisor can assist with this.
• It is good practice to ask long-term franchisees who operated under the predecessor about their experience and the transition to the new ownership.
• Your attorney can confirm that all required predecessor disclosures have been properly made in the FDD.