Explanation

This risk was not identified in the FDD package. The franchise system has experienced a net decline in franchised units over the past three years, indicating it is not undergoing a period of rapid growth. Rapid growth can sometimes strain a franchisor's ability to provide adequate support to new and existing franchisees. While not a risk here, monitoring a franchisor's support infrastructure relative to its system size is always a prudent measure for a prospective franchisee.

Potential Mitigations

• Your business advisor can help evaluate a franchisor's staffing and support systems in relation to its size and growth plans.
• It is wise to ask existing franchisees about the quality and timeliness of the support they currently receive from the franchisor.
• An accountant should review the franchisor's financials to assess whether they have the resources to support their existing system and future growth.

Explanation

This risk was not identified in the FDD. The MOOYAH brand has been in operation since 2006, and the current franchisor entity has been operating since 2017. With over 70 franchised outlets, it is an established system rather than a new or unproven one. Unproven systems carry higher risks related to the viability of the business model, brand recognition, and the adequacy of support systems, which does not appear to be the primary concern here.

Potential Mitigations

• A business advisor can help you investigate the history and track record of any franchise system you consider.
• When evaluating a newer system, it is crucial to speak with the initial group of franchisees to learn about their experiences.
• Your accountant should place extra scrutiny on the financial stability and capitalization of any new or unproven franchisor.

Explanation

This risk was not identified. The franchise operates in the fast-casual restaurant sector, focusing on hamburgers, fries, and shakes. This is a well-established and durable segment of the food service industry, not a temporary fad. A business based on a fad carries the risk that consumer interest may decline, potentially leaving you with a long-term contractual obligation for a business with diminishing demand. This does not appear to be a significant concern for this concept.

Potential Mitigations

• With any franchise, it is wise to have a business advisor help you conduct independent market research to assess long-term consumer demand.
• Evaluating a company's plans for product innovation and adaptation is a key part of due diligence.
• Your financial advisor can help assess a business model's resilience to changing economic conditions and consumer tastes.

Explanation

This risk was not identified in the FDD. Item 2 details a management team with extensive and relevant experience in the restaurant and franchising industries. For example, the Chairman has executive experience with several other well-known franchise brands. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions and inadequate franchisee support. However, the leadership team at MOOYAH Franchising, LLC (MOOYAH LLC) appears to be well-qualified.

Potential Mitigations

• A thorough review of the executive team's biographies in Item 2 with a business advisor is a critical step in evaluating any franchise.
• Asking existing franchisees about their confidence in and the performance of the current leadership team can provide valuable insight.
• Your attorney can help you research the public track record of key executives.

Explanation

This risk was not identified. The FDD clearly discloses the full ownership structure in Item 1, including the immediate parent (MOOYAH Parent LLC), the intermediate parent (Ba La Brands, LLC), and the ultimate owners (Gala Capital Partners, LLC and Balmoral Funds LLC). Failing to disclose a parent company can obscure the true financial backing and control of a franchise system. However, this FDD appears to be transparent in this regard.

Potential Mitigations

• Your attorney should always verify the corporate structure disclosed in Item 1 to ensure all controlling entities are identified.
• If a parent company guarantees the franchisor's obligations, an accountant should review the parent's financial statements if they are provided.
• Understanding the full ownership structure is key to assessing the stability and resources behind the franchise brand.

Explanation

This risk was not identified in the FDD. Item 1 discloses the predecessor entity, and Items 3 and 4, which require disclosure of litigation and bankruptcy for predecessors, are clean. Inadequate disclosure of a predecessor's history can hide past system failures, high franchisee turnover, or litigation. Based on the information provided, there are no disclosed negative history issues related to the predecessor.

Potential Mitigations

• It is good practice to have your attorney review the predecessor disclosures in Items 1, 3, and 4 for any red flags.
• When a system has a predecessor, speaking with long-term franchisees who operated under the previous ownership can provide valuable context.
• A business advisor can help you research the public history of a predecessor entity for a more complete picture of the system's past.

Explanation

This risk was not identified in the FDD. Item 3 states that there is no litigation that requires disclosure. A pattern of litigation, particularly franchisee-initiated lawsuits alleging fraud or franchisor-initiated lawsuits against franchisees, can be a major red flag indicating systemic problems. The absence of such disclosures is a positive sign, though it doesn't guarantee a dispute-free relationship.

Potential Mitigations

• Your attorney can conduct independent searches for litigation involving the franchisor that may not have met the technical requirements for disclosure in Item 3.
• Asking current and former franchisees about their experiences with disputes in the system is a critical due diligence step.
• A clean litigation history is positive, but your attorney should still review the dispute resolution clauses in the agreement.