Explanation

This risk was not identified in the FDD package. Analysis of FDD Item 20 data for the past three years shows a very low number of franchise terminations, non-renewals, or other cessations of business. High franchisee turnover is a significant red flag in franchising, as it can indicate systemic problems such as franchisee unprofitability, dissatisfaction with the brand, or poor franchisor support. The low turnover rates disclosed here are a positive indicator.

Potential Mitigations

• It is still prudent to ask current franchisees about their satisfaction and profitability during your due diligence calls.
• Engage your accountant to calculate the turnover rates from Item 20 to confirm the low numbers for yourself.
• Your attorney can help you formulate questions for the franchisor about the reasons for any outlets that did cease operations.

Explanation

This risk was not identified in the FDD package. Playa Bowls Franchisor LLC (Playa Bowls LLC) began offering franchises in 2016 and, as disclosed in Item 20, has a substantial number of operating franchised and company-owned locations. This history suggests the business model and its operational systems are established and have been tested in the market over several years, which is a positive factor.

Potential Mitigations

• Asking long-tenured franchisees about the evolution of the system and brand can provide valuable historical context.
• Your business advisor can help you evaluate the brand's market position and its history of adapting to industry changes.
• Verifying the operating history with your attorney by reviewing the information presented in Item 1 is a good practice.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the key executives have extensive prior experience in managing and operating other well-known franchise systems in the food and beverage industry. Experienced leadership is a positive indicator, as it suggests the management team understands the complexities of running a franchise system and supporting its franchisees.

Potential Mitigations

• It is still a good practice to ask current franchisees about their perception of the management team's competence and support.
• Your business advisor can help you research the past performance of the other franchise brands listed in the executives' biographies.
• Confirming the experience listed in Item 2 with your own online research provides an extra layer of due diligence.

Explanation

This risk was not identified in the FDD package. Item 1 clearly identifies the parent company, PB Group Holdings, LLC, and Exhibit D includes its audited financial statements and a Guarantee of Performance. This level of transparency is a positive sign and allows you and your advisors to assess the financial strength of the entity backing the franchisor's obligations.

Potential Mitigations

• Having your accountant review the parent company's financials is a crucial step to validate its financial strength.
• Your attorney should analyze the terms of the Guarantee of Performance to confirm what obligations are covered.
• Understanding the relationship between the franchisor, its parent, and the ultimate private equity owner is important for assessing overall risk.

Explanation

This risk was not identified in the FDD package. Item 1 does not disclose any predecessors from whom Playa Bowls LLC acquired the business. The franchisor entity appears to have originated and developed the system itself since its formation in 2016. This provides a clear and consistent operational history to evaluate.

Potential Mitigations

• You should still ask early franchisees about the history and evolution of the brand and its systems.
• Verifying the corporate history with your attorney by reviewing the information presented in Item 1 is a sound practice.
• Your business advisor can help evaluate the consistency of the brand's development since its inception.

Explanation

This risk was not identified in the FDD package. Item 3, which requires the disclosure of certain types of litigation, states that there is no litigation that needs to be disclosed. The absence of a pattern of lawsuits filed by franchisees alleging fraud or by the franchisor against franchisees is a positive indicator for the health of the franchise system and its relationships.

Potential Mitigations

• It is still wise to ask current and former franchisees about any informal disputes or disagreements they may have had with the franchisor.
• Your attorney can conduct a public records search to see if any litigation exists that did not meet the specific disclosure thresholds for Item 3.
• A discussion with your business advisor about typical litigation levels in similar-sized franchise systems can provide useful context.