Explanation

This risk was not identified. The provided audited financial statements in Item 21 and Exhibit D show Piggly Wiggly Midwest, LLC ("PWM") to be profitable, with positive and growing member's equity and a strong balance sheet. Financial stability is crucial as it indicates the franchisor can support its franchisees, invest in the brand, and fulfill its obligations.

Potential Mitigations

• Have an accountant review the franchisor's financial statements for the past three years to assess trends in profitability, debt, and cash flow.
• During discussions with existing franchisees, asking about their perception of the franchisor's financial health and support levels is a useful step you and your business advisor can take.
• Your attorney should confirm that the financial statements are audited as required by franchise law for a non-startup franchisor.

Explanation

This risk was not identified. The data in Item 20 indicates the franchise system has a stable to slightly declining number of outlets over the past three years, not rapid growth. Rapid growth can be a risk because a franchisor's support systems may not be able to keep pace, leading to inadequate service for franchisees.

Potential Mitigations

• Even without rapid growth, it's wise to ask current franchisees about the quality and timeliness of franchisor support with your business advisor.
• Your accountant should review the franchisor's financial statements to ensure they are investing sufficiently in support systems for the existing network.
• When developing your business plan, have your attorney confirm the franchisor's support obligations as stated in the franchise agreement.

Explanation

This risk was not identified. Item 1 indicates that Piggly Wiggly Midwest, LLC has been franchising since 1982 and operating stores since 1949, making it a very mature and established system. New systems can be risky due to unproven business models and inexperienced management, but that does not appear to be the case here.

Potential Mitigations

• Speaking with long-term franchisees about how the franchisor has adapted to market changes over the years is a valuable discussion to have with your business advisor.
• Your attorney should review the history of the franchisor, including any predecessors, as disclosed in Item 1.
• Reviewing the experience of the current management team in Item 2 with your business advisor can confirm their relevant industry expertise.

Explanation

This risk was not identified. The franchise is for a retail grocery store, which is a long-established and fundamental consumer business, not a fad. Fad-based businesses carry a high risk of failure once consumer trends shift, but that risk is not applicable to this industry.

Potential Mitigations

• A business advisor can help you assess the local competitive landscape for grocery stores in your target market.
• Engaging a real estate professional to evaluate the long-term viability of your proposed store location is a critical step.
• Developing a business plan with your accountant that accounts for competition from various retail formats (e.g., big-box stores, online delivery) is prudent.

Explanation

This risk was not identified. The executive listed in Item 2 has extensive, high-level management experience in the retail grocery industry with major national companies. Inexperienced management can be a significant risk, but the leadership appears to be highly experienced.

Potential Mitigations

• It is still good practice to discuss the management team's accessibility and strategic direction with current franchisees.
• A business advisor can help you research the reputation and track record of the parent company, C&S Wholesale Grocers.
• Your attorney should review Item 2 for a complete picture of the management team responsible for the franchise system.

Explanation

This risk was not identified. Item 1 discloses that the franchisor is a subsidiary of C&S Wholesale Grocers, LLC, a major strategic player in the food wholesale industry. This is not typical private equity ownership, which can sometimes prioritize short-term returns over the long-term health of the franchise system.

Potential Mitigations

• A business advisor can help you research the parent company's reputation and its history with other brands it operates or supplies.
• Asking current franchisees about any changes in support or strategy since the 2021 acquisition can provide valuable insight.
• Your attorney should review the assignment clauses in the Franchise Agreement to understand your rights if the system is sold again.

Explanation

This risk was not identified. The parent company, C&S Wholesale Grocers, LLC, is clearly disclosed in Item 1. The franchisor's own audited financial statements appear strong, suggesting it is not a thinly capitalized entity dependent on an undisclosed parent for viability.

Potential Mitigations

• Your attorney should confirm that the disclosure of parent and affiliate relationships in Item 1 is complete.
• Understanding the relationship between the franchisor and its parent company is important; a business advisor can help research the parent.
• An accountant can help you assess whether the franchisor's own financials are robust enough to stand on their own without needing a parent guarantee.

Explanation

This risk was not identified. The franchisor states in Item 1 that it has no relevant predecessors, despite a detailed corporate history. There is no information in the FDD suggesting undisclosed negative history, such as litigation or bankruptcy, associated with past entities.

Potential Mitigations

• Speaking with long-term franchisees about their experience under previous ownership structures can provide valuable historical context.
• Your attorney should review the corporate history in Item 1 and confirm that the franchisor's statement about 'no relevant predecessors' is acceptable under franchise law.
• A business advisor can assist in researching public records for information on the entities mentioned in the corporate history.

Explanation

This risk was not identified. Item 3 of the FDD states that there is no litigation that requires disclosure. A pattern of litigation, particularly franchisee-initiated lawsuits alleging fraud or breach of contract, can be a major red flag about the health and integrity of a franchise system.

Potential Mitigations

• Your attorney can conduct independent public record searches for litigation involving the franchisor as a precautionary measure.
• Asking current and former franchisees about their experiences with disputes and dispute resolution is an important part of due diligence.
• It is wise to understand the dispute resolution clauses in the Franchise Agreement even in the absence of disclosed litigation.