Explanation

This specific risk was not identified in the FDD Package. Item 20 data from 2022-2024 shows low annual franchisee exit rates (terminations, non-renewals, and other cessations) of approximately 1-2%. High turnover can signal systemic problems like unprofitability or poor franchisor support, so a low rate is a positive indicator for system stability.

Potential Mitigations

• It is still wise to have your accountant help you analyze the Item 20 tables for any concerning trends over the three-year period.
• A business advisor can help you frame questions for current franchisees about their satisfaction and the support they receive from the franchisor.
• Your attorney should confirm that the definitions used for closures and transfers in Item 20 are clear and not misleading.

Explanation

This risk was not identified in the FDD package. The growth of franchised outlets shown in Item 20 appears stable and moderate, not excessively rapid. A controlled growth rate suggests the franchisor may be better positioned to provide consistent support to its franchisees without overstretching its resources, which is a positive sign for the health of the system.

Potential Mitigations

• A discussion with your business advisor can help you assess whether the franchisor's support infrastructure is adequate for its current size and growth plans.
• Asking existing franchisees about the quality and responsiveness of franchisor support is a valuable due diligence step.
• Your accountant can help review the franchisor's financial statements to confirm they are investing adequately in support systems to match their growth.

Explanation

This risk is not present. Papa John's is a large, mature franchise system that has been in operation for several decades, as detailed in Item 1. An unproven system carries higher risks related to business model viability, brand recognition, and the quality of franchisor support, none of which are primary concerns with an established brand like this.

Potential Mitigations

• Your business advisor can still help you research the brand's current market position and competitive landscape.
• It is still prudent to ask your attorney to review the entire FDD package for any signs of recent negative changes in the system.
• Discussions with long-term franchisees can provide insight into how the system has evolved over time.

Explanation

This risk was not identified. The market for quick-service pizza restaurants is well-established and demonstrates long-term consumer demand, rather than being a temporary fad. The business model is based on a staple food item, which suggests a lower risk of obsolescence compared to trend-based concepts.

Potential Mitigations

• A business advisor can help you analyze the local competitive landscape for pizza restaurants in your desired market.
• Your accountant can help you model the financial viability of this established business concept based on your local market data.
• Discuss the brand's strategies for innovation and staying relevant with current franchisees.

Explanation

This risk was not identified. Item 2 of the FDD lists a management team with extensive experience in the restaurant and franchising industries, including leadership roles at other major brands like Wendy's, Domino's Pizza, and Inspire Brands. This level of experience suggests the leadership team is well-equipped to manage a large franchise system, which is a positive factor.

Potential Mitigations

• It is still a good practice to have your business advisor help you research the recent performance and reputation of the key executives.
• When speaking with franchisees, you can inquire about their direct experiences and the quality of their interactions with the corporate leadership team.
• Your attorney can review any recent news or public statements from the management team for insights into their strategic direction.

Explanation

This risk was not identified. Item 1 indicates the franchisor is a subsidiary of Papa John's International, Inc., a publicly traded corporation, not a private equity firm. Public companies have different reporting requirements and investment timelines than typical private equity firms, which can influence the stability and long-term strategy of the franchise system.

Potential Mitigations

• Engaging a financial advisor to review the public filings of the parent company can provide deeper insight into its financial health and strategic priorities.
• Your attorney can help you understand the legal structure and the relationship between the franchising entity and its public parent company.
• A business advisor can help you research the parent company's history and its management of other subsidiary brands, if any.

Explanation

This risk is not present in the FDD package. Item 1 clearly identifies the parent company as Papa John's International, Inc. (PJI) and explains the relationship between the franchisor entity (PJF) and its affiliates. The required financial statements for the franchisor entity are provided in Exhibit O. Full disclosure of parent and affiliate structures is important for assessing the overall financial stability and resources backing the franchise.

Potential Mitigations

• Your attorney can help you verify the corporate structure and the legal relationship between the franchisor and its parent company.
• Having an accountant review the public filings of the parent company, in addition to the FDD financials, can provide a more complete financial picture.
• A business advisor can help you research the roles and responsibilities of the various affiliated entities mentioned in Item 1.

Explanation

This risk was not identified. Item 1 of the FDD provides a clear history of the franchisor entity and its relationship with its predecessor and parent, Papa John's International, Inc. The document details the transfer of franchise agreements in 2021. Full transparency about predecessor history is crucial for understanding any inherited liabilities, past disputes, or systemic issues that could affect your investment.

Potential Mitigations

• It is still prudent for your attorney to review the predecessor information in Items 1, 3, and 4 for any potential concerns.
• Asking long-term franchisees about their experience before and after the 2021 corporate restructuring can provide valuable context.
• Your business advisor can help you research the public history of the predecessor entity for any relevant information.