Explanation

This risk was not identified. The audited financial statements in Exhibit A show that Meet Fresh Franchising LLC (Meet Fresh LLC) is profitable, with significant and growing member's equity and positive net income over the past three years. Revenues are primarily from royalties, not initial fees, indicating a focus on ongoing operations. The balance sheet appears strong with low liabilities relative to assets and equity. This suggests financial stability and the ability to support the system.

Potential Mitigations

• An accountant should review the financial statements, including the notes on related-party transactions, to provide an independent assessment of the franchisor's financial health.
• Discussing the franchisor's financial strategy and capitalization with your financial advisor can provide deeper insight.
• Your attorney can help you understand any financial performance-related disclosures or risk factors mentioned elsewhere in the FDD.

Explanation

This risk was not identified in the FDD. Item 20 data shows a net increase of only three franchised units over the past three years, with periods of both decline and growth. This suggests a modest and controlled pace of expansion rather than rapid growth that could strain the franchisor's support systems. A measured growth rate can be a positive sign, indicating a focus on sustainable development over aggressive expansion.

Potential Mitigations

• A business advisor can help you analyze the system's growth trajectory in Item 20 to understand its market position and maturity.
• It is wise to ask existing franchisees about their perception of the franchisor's ability to support the current number of units.
• Your accountant can review the franchisor's financials in Item 21 to confirm it has the resources to manage its current size and planned growth.

Explanation

This risk was not identified. Meet Fresh LLC began franchising in 2016 and, as of the end of 2024, had 30 franchised outlets operating. With nearly a decade of franchising experience and a multi-unit system, it is not considered a new or unproven franchisor. The underlying brand has an even longer international history, suggesting a well-established concept. This experience can reduce risks associated with undeveloped systems or lack of brand recognition.

Potential Mitigations

• Engaging a business advisor to review the system's history in Item 1 and outlet data in Item 20 can confirm the maturity of the franchise.
• You should still speak with long-term franchisees to understand how the system has evolved and improved over time.
• Your attorney can verify that the franchisor has met all regulatory requirements for established, rather than startup, franchise systems.

Explanation

The business focuses on Taiwanese desserts and beverages, a niche market segment. While the brand has a significant operating history, indicating some staying power, niche concepts can be more susceptible to shifts in consumer tastes and trends than broader market concepts. You should consider the long-term demand for these specific products in your local market, as your 10-year contract will likely outlast any short-term popularity.

Potential Mitigations

• Conduct thorough local market research with a business advisor to assess the long-term viability and demand for this specific type of dessert concept.
• Question the franchisor about their strategy for product innovation and adaptation to evolving consumer preferences.
• Speaking with long-standing franchisees can provide insight into how the business has weathered market changes over time.

Explanation

This risk was not identified. Item 2 shows that the key executives have extensive and long-term experience with the Meet Fresh brand and its parent companies, dating back to 2003 for the founder. The General Manager has been with the company since its formation in 2016. This level of specific brand and industry experience suggests a deep understanding of the business operations and franchise system, which is a positive factor for franchisee support.

Potential Mitigations

• A discussion with your business advisor can help you formulate questions for the management team regarding their strategic vision.
• Interviewing existing franchisees about the quality of management's guidance and support remains a valuable due diligence step.
• Your attorney can confirm that the experience disclosed in Item 2 aligns with information from other public records.

Explanation

This risk was not identified. Item 1 indicates that the franchisor is part of a corporate structure owned by its parent company, Easy Way USA, Inc., and an ultimate parent, Easy Way Station Co., Ltd. There is no disclosure of ownership by a private equity firm. This typically means the leadership may have a longer-term focus on brand health rather than prioritizing a short-term exit strategy, which can be beneficial for franchisees.

Potential Mitigations

• It's still valuable to ask the franchisor about their long-term goals for the company during your due diligence discussions.
• Your attorney can help you understand the implications of the multi-layered corporate structure disclosed in Item 1.
• A business advisor can assist in researching the parent companies for any information that might affect the franchise system's stability.

Explanation

This risk was not identified. Item 1 clearly discloses the franchisor's parent and ultimate parent companies. Because the franchisor entity itself is financially stable and profitable as shown in the Item 21 audited financial statements, providing the parent company's financials is not required. The disclosure appears to be compliant and transparent regarding the corporate ownership structure.

Potential Mitigations

• Your accountant should confirm that the provided franchisor financials are sufficient for a thorough risk assessment.
• It is prudent for your attorney to review the roles and responsibilities of the parent companies as described in the FDD.
• You can ask the franchisor to clarify the relationship and any support agreements between itself and its parent entities.

Explanation

This risk was not identified. Item 1 of the FDD states, "We have no predecessors." While the document mentions a predecessor for the franchisor's parent company, the franchising entity itself, Meet Fresh LLC, is presented as the original entity for this franchise system. Therefore, there are no hidden historical issues from a predecessor to be concerned about.

Potential Mitigations

• Your attorney can confirm the corporate history of the franchising entity based on the information provided in Item 1.
• Asking long-term franchisees about the history of the company can provide additional context.
• A business advisor can help verify that there are no other related entities that might be considered predecessors under franchise law.

Explanation

This risk was not identified. Item 3 of the FDD explicitly states, "No litigation is required to be disclosed in this Item." The absence of disclosed litigation, particularly claims of fraud or misrepresentation from other franchisees, is a positive indicator. It suggests a franchise system that may have a healthier relationship with its franchisees and more straightforward business practices.

Potential Mitigations

• It is still a good practice to conduct independent online searches for any news or discussions regarding the franchisor, with the help of your business advisor.
• During discussions with current and former franchisees, you should still ask about any disputes they may have had, even if they didn't result in litigation.
• Your attorney can perform a public records search to double-check for any litigation that might not have met the threshold for disclosure.