Explanation

This risk was not identified in the FDD package. An analysis of the franchisee status tables in Item 20 does not reveal an unusually high rate of terminations, non-renewals, or other cessations of business over the last three years. High turnover can be a significant red flag, often indicating systemic problems such as low franchisee profitability, inadequate support, or a flawed business model. It is a critical area for due diligence in any franchise system.

Potential Mitigations

• Engaging a business advisor to analyze the Item 20 tables for any concerning trends, even if not immediately obvious, is a valuable step.
• It is always recommended to contact a significant number of former franchisees listed in the FDD to understand their reasons for leaving the system.
• Your accountant can help you compare the system's turnover rates to available industry benchmarks for context.

Explanation

This risk was not identified. Monster LLC has been offering franchises since 2005, providing a long operational history. The key executives detailed in Item 2 also have extensive experience operating Monster Mini Golf outlets themselves. A new or unproven system presents higher risks, as it may lack refined operational procedures, established brand recognition, and a demonstrated track record of franchisee success. The long history here is a mitigating factor against this specific risk.

Potential Mitigations

• A business advisor can still help you research the company's history and its performance through different economic cycles.
• It is beneficial to speak with long-term franchisees about how the system and the support have evolved over time.
• Your attorney can help you investigate the history of any predecessor companies mentioned in Item 1 for additional context.

Explanation

This risk was not identified. The business concept of miniature golf and family entertainment has been a durable market segment for many decades, suggesting it is not a short-term fad. A business based on a fad carries a high risk of failure once public interest declines, potentially leaving you with a worthless business and ongoing contractual obligations. The long-standing nature of this industry mitigates this risk.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm sustained consumer demand for this type of entertainment in your specific area.
• It is still wise to ask the franchisor about their plans for innovation and adaptation to keep the concept fresh and competitive.
• Your accountant can help you model the business's potential resilience to economic downturns or shifts in consumer spending habits.

Explanation

This risk was not identified in the FDD. Item 2 indicates that the key executives of Monster LLC have extensive, long-term experience both within the family entertainment industry and specifically with operating Monster Mini Golf franchised outlets. Franchisors with inexperienced management can pose a significant risk, as they may lack the expertise to provide effective support, training, and strategic direction, which could jeopardize your investment.

Potential Mitigations

• A thorough review of the management team's background, as detailed in Item 2, with your business advisor is always a prudent step.
• Speaking with current franchisees about their direct experiences with the management team can provide valuable insight into their competence and supportiveness.
• Your attorney can help you verify the professional histories of the key executives if any concerns arise.

Explanation

This risk was not identified in the FDD. Item 1 notes the franchisor's history through various corporate mergers but does not name any predecessors from which it acquired the system. A predecessor is a different entity that previously operated the same franchise system. Concealing or minimizing a predecessor's negative history, such as litigation or high failure rates, can deprive a potential franchisee of crucial information needed to assess the system's historical challenges and long-term viability.

Potential Mitigations

• A thorough review of Item 1 with your attorney will help confirm the corporate lineage of the franchisor.
• Independent research into the company's history, using news archives or online searches, can sometimes uncover information about prior business structures.
• Asking long-tenured franchisees about the history of the company and any previous ownership structures can provide valuable context.

Explanation

This risk was not identified. Item 3 of the FDD states that there is no litigation that requires disclosure. A pattern of lawsuits, particularly those initiated by franchisees alleging fraud, misrepresentation, or breach of contract, can be a major red flag. It may suggest significant problems with the franchisor's business practices, disclosure integrity, or franchisee relations. The absence of such litigation is a positive indicator for the system.

Potential Mitigations

• It is still prudent to have your attorney perform an independent search for litigation involving the franchisor or its principals, as not all disputes may meet the threshold for FDD disclosure.
• Asking current and former franchisees about their experiences and any disputes, whether litigated or not, can provide deeper insight.
• Always consider the dispute resolution clauses in Item 17, as they dictate how any future disagreements would be handled.