Explanation

The franchisor's audited financial statements appear stable, showing profitability and positive net worth for the fiscal years ended 2023 and 2024. This financial position suggests a reduced risk of the franchisor being unable to meet its support obligations. However, a notable portion of revenue comes from supplier rebates rather than solely from system royalties, a factor to consider in the overall financial structure. The risk of immediate financial instability appears low based on the provided statements.

Potential Mitigations

• An experienced franchise accountant should review the complete, audited financial statements, including all footnotes, to confirm financial health.
• Discuss the franchisor's reliance on supplier rebates versus royalties for its revenue with your financial advisor to understand the business model.
• Ask your accountant to assess the franchisor's cash flow and capitalization to verify its ability to support the system long-term.

Explanation

The risk of excessively rapid growth straining franchisor resources was not identified. Item 20 data indicates the system size has been stagnant or slightly shrinking over the last three years, not growing rapidly. This suggests the franchisor's support infrastructure is unlikely to be overextended due to explosive growth. The key risk here appears to be stagnation rather than unmanageable expansion. The franchisor's financial statements in Item 21 appear stable enough to support the current system size.

Potential Mitigations

• Your business advisor can help you evaluate the pros and cons of joining a mature, slow-growth system versus a rapidly expanding one.
• Discuss the franchisor's future growth plans and strategies for revitalization with their management team.
• Ask current franchisees about their perception of the brand's momentum and the quality of franchisor support.

Explanation

This specific risk was not identified. The franchisor, Regent Subs Franchise, LLC, was formed in 2020, but it acquired a long-standing system with a predecessor dating back to 2003 and brand history to 1989. The management team described in Item 2 has extensive experience with the Milio's brand, both as corporate employees and, in some cases, as franchisees themselves. This indicates a mature system and an experienced leadership team, not an unproven startup.

Potential Mitigations

• With your business advisor, you should still perform due diligence on the brand's recent performance since the current franchisor entity took over.
• In discussions with current franchisees, ask about any changes in system operations or support since the 2020 ownership change.
• An attorney can help you understand any legal implications of the predecessor structure outlined in Item 1.

Explanation

This specific risk appears low. Milio's operates in the sandwich shop industry, a well-established and competitive market segment rather than one based on a novel or short-term trend. The brand has a long operating history stretching back to 1989. This longevity suggests sustained consumer demand and a business model that is not dependent on a temporary fad, though it faces significant competition from other established national and regional brands.

Potential Mitigations

• A business advisor can help you analyze the local competitive landscape for sandwich shops to assess market saturation.
• Review the franchisor's marketing plans and product development pipeline to gauge their strategy for staying competitive and relevant.
• When speaking with franchisees, ask about local market trends and how the brand differentiates itself from competitors.

Explanation

This specific risk was not identified. Item 2 shows that the key executives have extensive, long-term experience with the Milio's brand, the predecessor company, and the restaurant industry. Several executives have been with the system for over a decade, and the CEO has been a franchisee of the system since 2008. This level of direct brand and industry experience in leadership is a positive factor, suggesting a deep understanding of the business operations.

Potential Mitigations

• A business advisor can help you formulate questions for the management team regarding their strategic vision for the brand's future.
• When interviewing franchisees, ask about their direct experiences and the quality of support they receive from the leadership team.
• It is always wise to research the professional backgrounds of key executives to supplement the information provided in Item 2.

Explanation

This specific risk was not identified. Item 1 indicates the franchisor, Regent Subs Franchise, LLC, is a Wisconsin limited liability company. There is no disclosure of ownership by a private equity firm. The management team listed in Item 2 appears to be comprised of individuals with long-term ties to the brand, not third-party financial investors, suggesting a focus on operational continuity rather than a short-term investment exit strategy.

Potential Mitigations

• It is good practice to ask an attorney to help you verify the ownership structure of the franchisor LLC.
• You could ask the franchisor about their long-term ownership plans and vision for the company's future.
• A business advisor can help you research the history of the company and its principals for any past private equity involvement.

Explanation

This risk was not identified. Item 1 clearly identifies the franchisor, its predecessor, and its affiliate, Milios Subs Forever, LLC (MSF), which operates company-owned stores. The franchisor itself, Regent Subs Franchise, LLC, provides its own audited financial statements in Item 21. There is no mention of a parent company that guarantees obligations or whose financials would be necessary for a full risk assessment, so the disclosures appear to be compliant.

Potential Mitigations

• Your attorney should confirm that the disclosed corporate structure is complete and that no other entities exert material control.
• An accountant should review the affiliate relationship disclosed in Item 1 and the financial statements to ensure all related-party transactions are transparent.
• Always ask your attorney to verify if the provided financials meet all federal and state disclosure requirements.

Explanation

This risk appears low. Item 1 discloses a predecessor entity, Big Mike's Super Subs Franchise Systems, Inc., and outlines the history of the brand. Items 3 and 4, which would disclose litigation or bankruptcy history for the predecessor, are clean. The franchisor appears to have provided the required information about its lineage. The continuity of key personnel from the predecessor to the current entity also suggests a transparent transition.

Potential Mitigations

• Your attorney should review the predecessor disclosures in Item 1 to ensure they are complete and compliant with franchise law.
• Asking long-term franchisees about their experiences under the predecessor entity can provide valuable historical context.
• A business advisor can help you research the public record of the predecessor company for any additional information.

Explanation

This specific risk was not identified. Item 3 of the FDD states, "No litigation is required to be disclosed in this Item." This indicates that in the last fiscal year, there has been no material litigation of the types that must be reported, such as actions involving fraud, violation of franchise law, or significant operational disputes. The absence of such litigation is a positive indicator, suggesting a lower potential for systemic legal issues.

Potential Mitigations

• An attorney can help you conduct an independent public records search to confirm the absence of significant litigation.
• You should always ask current and former franchisees about any disputes they may have had, even those not rising to the level of disclosed litigation.
• It is wise to have your attorney explain the specific types of litigation that are material and must be disclosed under franchise law.