Explanation

This risk was not identified. Item 20 data shows a relatively stable franchise system over the last three years, with low rates of terminations, non-renewals, and other cessations. High franchisee turnover can be a red flag for systemic problems, such as unprofitability or poor franchisor support, so its absence here is a positive indicator.

Potential Mitigations

• It is still wise to ask current and former franchisees about their satisfaction and the reasons some operators have left the system.
• Your business advisor can help you analyze the data in Item 20 to calculate turnover rates for yourself.
• Before signing, asking your attorney to confirm there are no undisclosed terminations or a pattern of litigation is a good practice.

Explanation

This risk was not identified. Item 20 data indicates the Perkins system has been shrinking, not growing rapidly. While rapid growth can strain a franchisor's ability to provide support, a shrinking system presents different challenges, such as potential declines in brand recognition or advertising fund contributions, that you should consider.

Potential Mitigations

• Engaging a business advisor to analyze the potential impacts of a shrinking system on brand value and market presence is recommended.
• You should ask the franchisor about its strategies for stabilizing the system and returning to growth.
• An accountant can help you model the financial effects of a smaller advertising fund on your marketing budget.

Explanation

While the Perkins brand is very established (since 1958), the current franchisor entity, Perkins LLC, was formed in 2019 to acquire the system's assets out of bankruptcy. However, the risk associated with a new franchisor is substantially mitigated by the brand's long history and the extensive restaurant franchising experience of its affiliate, HHI, and its parent company.

Potential Mitigations

• Your business advisor should help you investigate the performance of the system since the 2019 acquisition and change in ownership.
• It would be beneficial to ask current franchisees about any changes in support or system direction under the new ownership.
• A review of the parent company's track record with other franchise concepts can provide valuable insight; your business advisor can assist.

Explanation

This risk was not identified. Perkins is a family-style restaurant, a well-established segment of the restaurant industry, and the brand has been in operation since 1958. This long history provides evidence of sustained consumer demand and suggests the business is not based on a short-term trend or fad.

Potential Mitigations

• A business advisor can help you analyze the long-term sustainability and market position of the family dining segment.
• You should still assess local competition and demand for this type of restaurant in your specific target market.
• Understanding the franchisor's plans for innovation and brand evolution to maintain relevance is important; you can ask them directly.

Explanation

This risk was not identified. Item 2 shows that the franchisor's key executives have extensive prior experience in the restaurant industry and in franchising, many with concurrent roles at its affiliate, Huddle House. An experienced management team is critical for providing effective support, strategy, and operational guidance.

Potential Mitigations

• It is still worthwhile to interview current franchisees about their direct experiences with the management team's competence and responsiveness.
• A business advisor can help you research the professional backgrounds of the key executives listed in Item 2.
• During your own discussions with the franchisor, you can assess the management team's professionalism and knowledge.

Explanation

This risk was not identified. Item 1 of the FDD provides a clear description of the ownership structure, including parent companies like Elysium Management. Full disclosure of the corporate hierarchy is important for you to understand who ultimately controls the franchise system and makes key decisions.

Potential Mitigations

• A franchise attorney should always review Item 1 to confirm that the ownership structure is clearly disclosed.
• If the franchisor were a new or thinly capitalized entity, it would be important for an accountant to verify if a parent company guarantee and financials are required and provided.
• Understanding the roles of all affiliated companies mentioned in the FDD is a key part of due diligence your business advisor can help with.

Explanation

This risk was not identified in relation to the current franchisor, Perkins LLC. Item 3 discloses past litigation involving the predecessor company, primarily employee-related claims. The current franchisor has initiated one standard enforcement action against a franchisee for breach of contract. An absence of significant franchisee-initiated litigation against the current franchisor is a positive sign.

Potential Mitigations

• Your attorney should still review the details of any disclosed litigation, even if it involves a predecessor, for potential lingering issues.
• Asking current franchisees about the franchisor's approach to dispute resolution can provide valuable insight.
• It is wise to have legal counsel conduct a search for any litigation not disclosed in the FDD.