Explanation

This risk was not identified. The franchisor's audited financial statements in Item 21 show consistent profitability, positive net worth, and substantial revenue growth. The franchisor, Nekter Franchise, Inc. (Nekter), appears to be financially stable and relies on royalties for the majority of its income, which is a positive indicator for system health.

Potential Mitigations

• It is still advisable for your accountant to review the full financial statements and footnotes to confirm the company's financial health and capitalization.
• Engaging a business advisor to assess the franchisor's business model sustainability, even with positive financials, provides an additional layer of diligence.
• Your attorney should confirm that there are no outstanding financial issues mentioned in state-specific addenda that could contradict the main financial statements.

Explanation

This risk was not identified. Nekter began franchising in 2012 and has grown to over 150 locations, as detailed in Items 1 and 20. This indicates an established brand with a long operational history and a developed business model, rather than a new or untested franchise system.

Potential Mitigations

• Even with an established system, consulting a business advisor to review the brand's current market position and competitive landscape is a prudent step.
• Your attorney should still verify the franchisor's registration status and compliance history in your state.
• Reviewing the system's growth and turnover trends in Item 20 with your accountant remains a valuable exercise to understand its maturity and stability.

Explanation

The juice bar and health-food concept has shown significant popularity, but consumer tastes and dietary trends can change over time. While the business has a strong track record, you should consider the long-term sustainability of the specific product offerings and the potential for market saturation or shifts in consumer preferences that could affect your investment's viability over the 10-year contract term.

Potential Mitigations

• A business advisor can help you conduct independent research on the long-term market trends for health-centric food and beverage products.
• Discuss the franchisor's strategy for product innovation and adaptation to evolving consumer tastes with your business advisor.
• It is important to assess the business model's resilience to economic shifts and increased competition with your financial advisor.

Explanation

This risk was not identified. The executive biographies in Item 2 demonstrate that the management team has extensive and long-term experience both within the Nekter system and the broader food and beverage industry. The leadership appears to be stable and knowledgeable about operating and franchising this type of business.

Potential Mitigations

• When speaking with current franchisees, it is still a good practice to ask about their perception of management's competence and support.
• A business advisor can help you research the professional reputations and track records of the key executives listed in Item 2.
• Your attorney can confirm that there is no disclosed litigation in Item 3 related to management misconduct or incompetence.

Explanation

This risk was not identified. Item 1 indicates the franchise is offered by Nekter Franchise, Inc., which is owned by its parent, Nekter Juice Bar, Inc. The founders remain in key leadership roles, as shown in Item 2. There is no disclosure of ownership by a private equity firm, which can sometimes introduce risks related to short-term investment horizons.

Potential Mitigations

• Your attorney should confirm the corporate ownership structure as disclosed in Item 1 and verify there are no undisclosed controlling entities.
• Engaging a business advisor to research the company's history can provide additional assurance about its ownership and strategic direction.
• During discussions with franchisees, you can inquire about any recent changes in ownership or management philosophy.

Explanation

This risk was not identified. Item 1 clearly discloses that the parent company is Nekter Juice Bar, Inc. The franchisor entity provides its own audited financial statements in Item 21, which demonstrate financial stability. Therefore, a lack of disclosure or reliance on an undisclosed parent entity is not a concern here.

Potential Mitigations

• Your accountant should review the affiliate and parent company disclosures in Item 1 and the financial statements in Item 21 to understand the full corporate structure.
• An attorney can help you understand any guarantees or obligations that may exist between the franchisor and its parent company.
• A business advisor can help research the parent company to ensure it has a positive reputation and history.

Explanation

This risk was not identified. Item 1 of the FDD explicitly states that the franchisor has no predecessors. This means the disclosed history of litigation, bankruptcy, and outlet performance relates directly to the current franchisor entity, providing a clear and direct track record for your evaluation.

Potential Mitigations

• Your attorney should confirm the accuracy of the 'no predecessor' statement by reviewing the company's formation documents and history.
• A business advisor can help you research the origin of the brand to ensure no prior entities operated the system under a different name.
• Even without predecessors, a thorough review of the franchisor's own history in Items 3, 4, and 20 with your professional advisors is crucial.

Explanation

This risk was not identified. Item 3 discloses only one recent legal action, which was an arbitration initiated by the franchisor against a franchisee for abandoning their store. There is no disclosed pattern of litigation brought by franchisees alleging fraud, misrepresentation, or breach of contract, which would be a more significant concern.

Potential Mitigations

• Your attorney should still review the details of the disclosed litigation to understand the franchisor's approach to contract enforcement.
• A business advisor can help you conduct online searches for any undisclosed legal disputes or patterns of franchisee complaints.
• In your discussions with former franchisees, it is wise to inquire about any legal disagreements they may have had with the franchisor.