Explanation

This risk was not identified in the FDD. Item 20 data does not show any franchisee terminations, non-renewals, or cessations of operation over the past three years. While the system is young, this is a positive indicator. It is generally important to scrutinize this data, as high turnover can signal systemic problems with profitability or franchisor support.

Potential Mitigations

• It is always wise for a business advisor to calculate the turnover rate from Item 20 data to assess system stability.
• Contacting current and former franchisees listed in the FDD provides direct insight into franchisee satisfaction, which an attorney can help facilitate.
• Having your accountant review Item 20 footnotes for how the franchisor defines categories like 'transfer' or 'cessation' is a prudent step.

Explanation

This specific risk was not identified. The core business is ice cream, a product with a long history of consumer demand. The original location has operated since 1926, indicating the brand itself has long-term staying power and is not based on a fleeting trend. A key consideration for any franchise is the long-term viability of its core offering.

Potential Mitigations

• A business advisor can help you assess the long-term market demand for the specific products and services offered.
• In any franchise, it is prudent to evaluate the franchisor's plans for innovation and adaptation to changing consumer tastes.
• Reviewing the competitive landscape in your local market with a business advisor is a valuable exercise.

Explanation

This risk was not identified. Item 2 and Item 11 show that the management team, largely drawn from the affiliated Buona Beef franchise system, possesses extensive experience in both the restaurant industry and franchise operations. This level of experience can be a significant asset in providing effective franchisee support and strategic direction.

Potential Mitigations

• It is always a good practice to vet the specific experience of the key personnel who will be directly supporting your operations.
• Discussing the quality of management and support with existing franchisees provides valuable firsthand insight.
• Working with a business advisor to review the management team's background as disclosed in Item 2 is a recommended due diligence step.

Explanation

This risk was not identified in the FDD. Item 1 indicates the franchisor is a privately held LLC and does not appear to be owned by a private equity firm. This is important because private equity ownership can sometimes lead to a focus on short-term returns over the long-term health of the franchise system.

Potential Mitigations

• In any franchise investment, asking your attorney to help you understand the complete ownership structure is a crucial step.
• It is beneficial to research the ownership group's track record with other businesses or brands if they have any.
• Engaging a business advisor can help you assess how the ownership structure might influence the franchisor's long-term strategy and support.

Explanation

This risk does not appear to be present. Item 1 of the FDD clearly identifies the franchisor and its relevant affiliates and states there is no parent company. Proper disclosure of parent companies and their financial standing is crucial when a franchisor is a subsidiary, as the parent's financial health can significantly impact the system's stability.

Potential Mitigations

• Having your attorney verify the corporate structure and identify all relevant entities is a fundamental part of due diligence.
• It is wise to ask your accountant to review the provided financial statements to ensure they belong to the correct entity granting the franchise.
• In cases where a parent company exists, your attorney should confirm if a parent guarantee of the franchisor's obligations is provided.

Explanation

This risk was not identified. Item 1 of the FDD states that the franchisor has no predecessors. A predecessor is a prior entity that offered franchises for the same system, and their history, including any litigation or bankruptcy, must be disclosed. The absence of a predecessor means you are evaluating the history of the current management team only.

Potential Mitigations

• It is a good practice to confirm with your attorney that the franchisor's definition and use of 'predecessor' comply with FTC rules.
• Your business advisor can help you research the history of the brand and its operators, even if there is no legal predecessor.
• A review of the litigation and bankruptcy history in Items 3 and 4 for the current franchisor remains a critical step.

Explanation

The FDD discloses in Item 3 that there is no litigation required to be reported. The absence of a pattern of lawsuits, especially those initiated by franchisees alleging fraud or misrepresentation, is a positive sign. A history of significant litigation can indicate underlying problems with the franchise system or the franchisor's business practices.

Potential Mitigations

• It is still advisable to conduct an independent public records search for litigation involving the franchisor or its principals, which your attorney can assist with.
• Asking current and former franchisees about their experiences and any disputes they may have had is a crucial due diligence step.
• Engaging a franchise attorney to review the entire FDD is the best way to identify any potential legal or contractual risks.