Explanation

This risk was not identified in the FDD Package. The number of outlets has remained stagnant, not grown rapidly. Rapid growth can strain a franchisor's ability to provide adequate support to all franchisees. A system expanding too quickly may lack the infrastructure for training, site selection, and ongoing assistance, potentially harming both new and existing locations.

Potential Mitigations

• A business advisor can help you evaluate a franchisor's support infrastructure in relation to its growth rate.
• Speaking with franchisees who opened at different stages of the system's growth can provide insight into support consistency; your attorney can guide this process.
• Having your accountant review the franchisor's financials can help determine if they have the capital to support their expansion plans.

Explanation

The business operates in the fast-casual "build-a-bowl" segment. While part of the broader trend toward healthier food options, which has some sustainability, a heavy reliance on a specific trendy format could pose a risk if consumer preferences shift. Long-term success may depend on the system's ability to innovate and adapt beyond the current bowl trend. The risk of the business being a fad, while present, appears lower than the more immediate financial and operational risks disclosed elsewhere.

Potential Mitigations

• Engage a business advisor to research the long-term market trends for fast-casual bowl concepts versus broader restaurant categories.
• Question the franchisor about their long-term vision, menu innovation, and plans for adapting if the current trend fades.
• Analyzing the menu's flexibility and potential for diversification with a food service consultant could provide valuable perspective.

Explanation

This risk was not identified in the FDD Package. Item 2 indicates that the key executives, Dave Wood and Dave Baer, have prior experience in the restaurant industry and in franchising. Inexperienced management can be a significant risk, as it may lead to weak operational systems, inadequate franchisee support, and poor strategic decisions, but that does not appear to be the case here based on the disclosures.

Potential Mitigations

• A thorough review of the executive backgrounds in Item 2 with your business advisor is always a prudent step.
• Discussing the management team's philosophy and experience with current franchisees can provide real-world context to the FDD disclosures.
• Verifying the franchisor's claimed experience through independent research can be a valuable due diligence step for your attorney to undertake.

Explanation

This risk was not identified in the FDD Package. Item 1 does not indicate that Mahana LLC is owned or controlled by a private equity firm. When a franchisor is PE-owned, there can be a risk that decisions are focused on short-term investor returns rather than the long-term health of franchisees, but that does not appear to be a factor here.

Potential Mitigations

• Your attorney can help you research the ownership structure of any franchisor to identify potential private equity involvement.
• If a franchisor is PE-owned, a business advisor can help you research the firm's track record with other franchise brands.
• It is wise to ask current franchisees about any changes in system philosophy or support levels following an ownership change.

Explanation

This risk was not identified in the FDD Package. Item 1 clearly discloses the parent company, Mahana Fresh Group Holdings, LLC. While the parent company's financials are not provided, which is a concern given the franchisor's weak financial state, the existence of the parent is properly disclosed as required. A failure to disclose a parent can hide the true financial backing and control structure of a franchise system.

Potential Mitigations

• Your attorney can help confirm the corporate structure and identify any parent companies or key affiliates.
• If a parent company exists and provides guarantees or is a key supplier, your accountant should advise if their financial statements are necessary for a full risk assessment.
• Understanding the relationship and financial obligations between a franchisor and its parent is a key due diligence point for your financial advisor.

Explanation

This risk was not identified in the FDD Package. Item 1 notes a name change from Mahana Poke, LLC but does not indicate that the franchisor acquired its assets from a prior, separate entity. Therefore, there is no predecessor history to evaluate. A predecessor with a negative history of litigation, bankruptcy, or franchisee failures could be a significant red flag for a prospective franchisee.

Potential Mitigations

• Your attorney should always review Item 1 carefully for any mention of predecessors or asset acquisitions.
• If a predecessor exists, researching their public record for litigation or bankruptcy can be a critical due diligence step for your business advisor.
• Asking long-term franchisees about their experiences under any previous ownership can provide invaluable insight.

Explanation

This risk was not identified in the FDD Package. Item 3 states that there is no litigation required to be disclosed. A pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, can be a major warning sign of systemic problems within a franchise. Similarly, a high number of lawsuits initiated by the franchisor against franchisees might indicate an overly aggressive or litigious culture.

Potential Mitigations

• Your attorney should always carefully review any litigation disclosed in Item 3 for patterns, allegations, and outcomes.
• Independent online searches for news articles or legal proceedings involving the franchisor can sometimes reveal disputes not meeting the FDD disclosure threshold.
• Discussing the franchisor's relationship with its franchisees with a number of existing owners can provide context for any disclosed litigation.