Explanation

The information in Item 20 of the FDD does not indicate an unusually high rate of franchisee turnover. Over the past three years, the annual rate of terminations, non-renewals, and other cessations has been low relative to the system's size. The system has also shown consistent net growth in the number of franchised outlets during this period. While any turnover is notable, the figures do not suggest a systemic problem or widespread franchisee dissatisfaction at this time.

Potential Mitigations

• It is still advisable to contact several current and former franchisees from the lists provided in the FDD to discuss their experiences.
• A discussion with your business advisor can help you benchmark these turnover rates against industry averages for context.
• Your attorney can help you formulate questions for the franchisor regarding the reasons for the transfers and terminations that did occur.

Explanation

This specific risk was not identified in the FDD package. Rapid system growth can sometimes be a concern because a franchisor's support infrastructure may not keep pace with the number of new franchisees. This can lead to diluted support, training, and resources for all operators in the system. The data in Item 20 shows steady, but not excessively rapid, growth in the number of franchised outlets over the past three years, which suggests this is not a current issue.

Potential Mitigations

• It is beneficial to ask the franchisor about their plans for scaling support services to match future growth.
• In discussions with existing franchisees, asking about the current quality and responsiveness of franchisor support can provide valuable insight.
• A business advisor can help you evaluate if the franchisor's management team has the experience to manage continued system growth effectively.

Explanation

This specific risk was not identified in the FDD package. McAlister's Deli is a well-established brand with a long operational history. The predecessor entity began franchising in 1991, and the current franchisor has been offering franchises since 2017. The management team described in Item 2 has extensive experience in the restaurant and franchise industries, largely through their roles within the larger GoTo Foods portfolio of brands. Therefore, the risks associated with an unproven system are not present.

Potential Mitigations

• When evaluating any franchise, it is important to have your attorney review the history of the franchisor and its predecessors in Item 1.
• A thorough review of the business experience of the management team in Item 2 with your business advisor is a key due diligence step.
• Consulting with your accountant to analyze the financial statements in Item 21 provides a quantitative measure of a franchisor's stability and history.

Explanation

This risk was not identified in the FDD package. A fad business is one based on a short-lived trend, posing a risk to long-term profitability. McAlister's Deli operates in the well-established fast-casual restaurant sector with a diversified menu of deli sandwiches, salads, and soups. This type of restaurant concept has demonstrated sustained consumer demand over many years and is not dependent on a fleeting trend, mitigating the risk of it being a fad business.

Potential Mitigations

• A business advisor can help you research the long-term consumer trends in any industry you consider entering.
• It is wise to assess a concept's adaptability and plans for future menu innovation with the franchisor.
• Reviewing the franchisor's history and performance through economic cycles with an accountant can help gauge long-term viability.

Explanation

This risk was not identified in the FDD package. Item 2 of the FDD details the business experience of the key executive officers. The management team for McAlister's and its parent companies consists of individuals with many years of experience in the restaurant industry and in managing large franchise systems. Many executives have held senior roles within the GoTo Foods portfolio (which includes several other major franchise brands) or other large restaurant companies, indicating significant relevant experience.

Potential Mitigations

• It is always a crucial step to have your business advisor and attorney review the backgrounds of the key personnel listed in Item 2.
• Speaking with current franchisees about their perception of the management team's competence and support is an effective due diligence tactic.
• Assessing the stability of the management team and noting any recent, significant turnover is a worthwhile exercise.

Explanation

This risk was not identified in the FDD package. Item 1 clearly identifies McAlister's LLC as the predecessor entity that offered franchises from 1991 to 2017. The FDD provides historical context about the brand's transfer to the current ownership structure. There is no indication that negative history related to litigation (Item 3), bankruptcy (Item 4), or franchisee turnover under the predecessor has been obscured or downplayed. The provided information appears to be a straightforward account of the brand's lineage.

Potential Mitigations

• It is always good practice to have your attorney review the predecessor disclosures in Item 1 for completeness.
• If possible, speaking with long-term franchisees who operated under the predecessor can offer valuable historical context.
• A business advisor can assist in researching the public record of any predecessor entity for additional information.

Explanation

This specific risk was not identified in the FDD package. Item 3 discloses litigation involving certain affiliated brands (Arby's, Dunkin') related to no-poaching clauses and a data breach. However, it explicitly states, 'Other than these actions, no litigation is required to be disclosed in this Item.' There is no disclosure of litigation against McAlister's itself or a pattern of franchisee-initiated lawsuits alleging fraud or misrepresentation. The disclosed affiliate litigation does not directly impact the McAlister's brand.

Potential Mitigations

• A review of the litigation history in Item 3 with your franchise attorney is a crucial due diligence step in any FDD analysis.
• It is beneficial to conduct independent online searches for news articles or other public records of litigation involving the franchisor.
• Asking current franchisees if they are aware of any significant legal disputes within the system can provide additional insight.