Explanation

This risk was not identified. The data in Item 20 does not show a pattern of rapid system expansion that might strain the franchisor's support resources. However, it is generally important to assess if a franchisor's growth is sustainable, as overly rapid expansion can sometimes lead to diluted support, a decline in franchisee quality, and other systemic problems.

Potential Mitigations

• When evaluating any franchise, your business advisor can help you assess whether the franchisor's support infrastructure is adequate for its current size and projected growth.
• An accountant's review of the franchisor's financials can help determine if they have allocated sufficient resources to franchisee support functions.
• Speaking with current franchisees about their satisfaction with the level of support is a crucial due diligence step.

Explanation

This risk was not identified. Kampgrounds of America, Inc. (KOA) is a very mature and established franchise system, having been in operation for over 60 years. With new or unproven systems, a prospective franchisee may face risks associated with an untested business model, lack of brand recognition, and inexperienced management. These specific risks do not appear to be present here.

Potential Mitigations

• For any franchise, it is wise to review the franchisor's history and the business experience of its management team, as outlined in Items 1 and 2.
• A business advisor can help you analyze the long-term viability and track record of the franchise concept.
• Speaking with franchisees who have been in the system for varying lengths of time can provide insight into the system's evolution and stability.

Explanation

This risk was not identified. The business of operating campgrounds and recreational vehicle parks is a long-standing and established industry, not a temporary fad. A fad business carries the risk that consumer interest may decline quickly, potentially leaving you with a worthless investment. KOA's business model is based on a mature market with a history of sustained demand.

Potential Mitigations

• When considering any business opportunity, a business advisor can help you research the long-term market trends and consumer demand for its products or services.
• Analyzing a franchisor's plans for innovation and adaptation, as described in Item 11, can provide insight into its long-term strategy.
• A financial advisor can help you assess the business model's resilience to economic shifts and changing consumer tastes.

Explanation

This risk was not identified. The executive biographies in Item 2 indicate that the management team has extensive and long-term experience with both Kampgrounds of America, Inc. (KOA) and the outdoor hospitality industry. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions and inadequate franchisee support. This does not appear to be a concern here.

Potential Mitigations

• For any franchise, it is good practice to review the backgrounds of the key executives listed in Item 2.
• A business advisor can help you evaluate the depth and relevance of the management team's experience in both franchising and their specific industry.
• Speaking with current franchisees about their confidence in the franchisor's leadership team is a valuable part of due diligence.

Explanation

This risk was not identified in the FDD. There is no indication that Kampgrounds of America, Inc. (KOA) is owned by a private equity firm. When a franchise is owned by a private equity firm, there can be a risk that decisions prioritize short-term investor returns over the long-term health of the brand and franchisees, which could affect support levels and fee structures.

Potential Mitigations

• When evaluating a franchise, understanding the ownership structure detailed in Item 1 is important.
• If a private equity firm is involved, your business advisor can help you research the firm's history with other franchise systems.
• Discussing any changes in franchisor philosophy or support since an ownership change with current franchisees can provide valuable insight.

Explanation

This risk was not identified. The FDD clearly discloses the parent company in Item 1, and the provided financial statements are consolidated. In some cases, a franchisor might be a thinly capitalized subsidiary, and the failure to provide financial information for a controlling parent company can obscure significant financial risks. That does not appear to be the case here.

Potential Mitigations

• Your attorney should always verify that the ownership structure and any parent companies are clearly disclosed in Item 1.
• If a parent company provides a guarantee or is a critical supplier, an accountant should confirm their financial statements are included and reviewed.
• Engaging legal counsel to confirm that all required disclosures have been made is a fundamental step in franchise due diligence.

Explanation

This risk was not identified, as the franchisor explicitly states in Item 1 that it has no predecessors. When a franchisor has acquired a business from a predecessor, it's important to review the predecessor's history for any signs of trouble, such as litigation or high franchisee turnover, as these issues could be inherited by the current franchisor.

Potential Mitigations

• Always have your attorney review Item 1 carefully for any mention of predecessor companies.
• If a predecessor is identified, a business advisor can help you investigate their track record and history.
• Questioning long-term franchisees about their experience under any previous ownership can provide valuable historical context.

Explanation

This risk was not identified. Item 3 discloses one recent intellectual property lawsuit initiated by a third party but does not reveal a pattern of litigation with franchisees concerning fraud or other systemic issues. A history of such lawsuits can be a major red flag indicating potential problems with the franchisor's business practices or franchisee relations.

Potential Mitigations

• It is crucial to have your attorney carefully review any and all litigation disclosed in Item 3.
• A business advisor can help you assess whether the nature and volume of litigation are typical for a system of that size and age.
• Discussing any disclosed litigation with current or former franchisees may provide additional perspective.