Explanation

This risk was not identified in the FDD package. Rapid, uncontrolled growth in the number of open outlets can strain a franchisor's ability to provide adequate support to all franchisees. While Mahana Fresh has sold many franchises that are not yet open, the rate of actual new openings does not appear to be unsustainably rapid based on the Item 20 data provided. The core risk appears to be in openings failing to materialize, not in being overwhelmed by too many openings.

Potential Mitigations

• Engaging a business advisor to review a franchisor's growth plans against their support infrastructure is a wise step.
• You should always question current franchisees about the quality and timeliness of the support they receive from the corporate office.
• An accountant can help analyze if the franchisor's financial statements show sufficient investment in support staff and systems to match growth.

Explanation

This risk was not identified in the FDD package. A 'fad' business is one based on a short-lived trend with limited long-term consumer demand. While the popularity of food concepts can change, the fast-casual bowl concept offered by Mahana Fresh is part of a broader, relatively established segment of the restaurant industry. The business model does not appear to be based on a temporary or novelty trend.

Potential Mitigations

• A business advisor can help you research the long-term consumer demand and market trends for any franchise concept you consider.
• You should evaluate a franchisor's commitment to research, development, and menu innovation to ensure the brand can adapt to changing tastes.
• With a financial advisor, consider the business model's resilience and its ability to weather economic shifts or changes in consumer preferences.

Explanation

This risk was not identified in the FDD package. Item 2 discloses the business experience of the key executives, including the CEO and COO. The disclosure indicates that the management team has prior executive experience in other restaurant and franchise concepts, such as Firenza Pizza and Great Food and Friends. This suggests they possess relevant industry and franchising experience.

Potential Mitigations

• It is always prudent to research the professional backgrounds of the key management team of any franchise system you are considering.
• Speaking with current franchisees can provide direct insight into their perception of the management team's competence and effectiveness.
• A business advisor can help you assess whether the management team's specific experience is a good match for the brand's concept and your goals.

Explanation

This risk was not identified in the FDD package. Private equity ownership can sometimes lead to a focus on short-term profits over the long-term health of the franchise system. The disclosures in Item 1 do not indicate that Mahana Fresh is owned or controlled by a private equity firm. The ownership structure appears to be a standard limited liability company.

Potential Mitigations

• For any franchise, your attorney should review the ownership structure disclosed in Item 1 of the FDD.
• If a franchise is owned by a private equity firm, a business advisor can help you research that firm's reputation and track record with other franchise brands.
• Discussing any changes in ownership or management philosophy with current franchisees is a key part of due diligence.

Explanation

This risk was not identified in the FDD package. The franchisor, Mahana Fresh, LLC, discloses its parent company, Mahana Fresh Group Holdings, LLC, in Item 1. The FDD includes audited financial statements for the franchisor entity itself as required. There is no indication that the parent company's financials are required for disclosure or are being withheld, nor is there a parent guarantee mentioned that would necessitate their inclusion.

Potential Mitigations

• Your accountant should always verify that the financial statements provided in Item 21 belong to the actual franchisor entity signing the agreement.
• If a parent company's guarantee is offered or required, your attorney should ensure the parent's financial statements are also provided and reviewed.
• A business advisor can help you understand the relationship between a franchisor and its parent company and any associated risks.

Explanation

This risk was not identified in the FDD package. A predecessor is a company from which the franchisor acquired the main assets of the business. Item 1 discloses a name change from a prior entity but does not indicate a history of predecessors with potentially negative track records that are being obscured. The franchisor appears to have originated the brand under its current ownership group.

Potential Mitigations

• Your attorney should always carefully review Item 1 for any mention of predecessors.
• If a franchisor has a predecessor, a business advisor can help you research the predecessor's history, including any past litigation or bankruptcy.
• Asking long-term franchisees about their experience under any previous ownership can provide valuable historical context.

Explanation

This risk was not identified in the FDD package. Item 3 is the section where the franchisor must disclose certain types of current and past litigation. The FDD for Mahana Fresh states, "No litigation information is required to be disclosed in this Item." This indicates there is no history of litigation meeting the specific disclosure requirements of franchise law, such as actions alleging fraud, violation of franchise law, or other material claims.

Potential Mitigations

• Although no litigation is disclosed, you can still perform independent online searches for any news or legal filings related to the franchisor.
• Your attorney can help you ask current and former franchisees about any disputes they may have had with the franchisor, even if they didn't result in litigation.
• Always have legal counsel review Item 3, as the type and volume of disclosed litigation is a critical indicator of system health.