Explanation

This risk was not identified because the Regional Developer franchise program is new, with only two franchisees in operation at the end of 2024. Meaningful franchisee turnover data does not yet exist. High turnover in a mature system can be a red flag for issues like unprofitability or poor support. For this system, the lack of data itself is a risk related to its unproven nature, which is addressed under the 'New/Unproven Franchise System' risk.

Potential Mitigations

• A business advisor can help you understand the risks associated with being one of the first franchisees in a new system.
• Consulting with your attorney about negotiating protections due to the lack of historical performance data is advisable.
• It is critical to speak with the few existing Regional Developers listed in Item 20 to understand their early experiences.

Explanation

This risk was not identified in the FDD. In some franchises, rapid growth can strain the franchisor's ability to provide adequate support to all units. While this system is new, the data in Item 20 does not yet show the kind of explosive growth that would trigger this specific risk. The primary risk here is the newness of the system itself, rather than its rate of growth.

Potential Mitigations

• Engaging a business advisor to monitor system growth against the expansion of support staff can provide early warnings.
• Regularly communicating with other franchisees about the quality of support is a good practice as the system grows.
• Your attorney should review the franchisor's contractual support obligations to ensure they are clearly defined.

Explanation

This risk was not identified. The Port of Subs brand has been in operation since 1972, indicating it is not a fad but an established concept with a long history of consumer demand. The risk for this franchise offering comes from the newness of the franchisor entity and the Regional Developer model, not from the underlying business concept being a short-lived trend.

Potential Mitigations

• A business advisor can help you research the brand's history and long-term consumer relevance in your specific market.
• In discussions with existing unit franchisees, it's wise to ask about the brand's ability to adapt to changing consumer tastes.
• Understanding the franchisor's plans for future innovation and brand development is important for long-term security.

Explanation

This risk was not identified. While the franchisor entity is new, Item 2 shows that its key executives have extensive experience in the franchise industry with large, established brands such as RE/MAX and Kahala Brands, as well as with the predecessor Port of Subs company. This experienced management team may help mitigate some of the risks associated with a new franchise system.

Potential Mitigations

• A business advisor can help you perform background checks on key executives to verify their track record and reputation.
• When speaking with other franchisees, asking specific questions about their interactions with and confidence in the management team is advisable.
• Your attorney can help you understand the roles and responsibilities of the management team as outlined in the FDD.

Explanation

This risk was not identified in the FDD. Item 1 indicates that the ultimate parent is Area 15 Ventures, LLC, which appears to be a private investment firm rather than a traditional private equity fund with a defined exit timeline. However, the business model of such firms can be similar, prioritizing investor returns. You should still investigate their strategy and history.

Potential Mitigations

• A business advisor can help you research the parent company's history and its typical investment strategies.
• When speaking with franchisees of other brands owned by the parent company, asking about changes in fees or support is important.
• Your attorney should analyze the franchisor's right to sell the system and the potential impact on your agreement.

Explanation

This risk was not identified. Item 1 clearly discloses the parent companies (POS Holdings, LLC and Area 15 Ventures, LLC). The financial statements in Item 21 are for the franchisor entity itself, POS Franchising, LLC. As the franchisor is a new and thinly capitalized entity, the financial health of its parent companies is relevant, but there is no indication that required disclosures about them have been omitted.

Potential Mitigations

• Your accountant should assess if the franchisor is adequately capitalized or overly reliant on its parent.
• An attorney can advise if the lack of a parent company guarantee for the franchisor's obligations presents an unacceptable risk.
• Inquiring about the parent company's financial commitment to the franchise system is a reasonable due diligence step.

Explanation

This risk was not identified. Item 1 clearly discloses that POS LLC acquired the assets of a predecessor, Port of Subs, Inc., in 2023. The FDD provides information on this predecessor and its long history. While you should investigate the predecessor's past performance, the franchisor appears to have met the disclosure requirements regarding its history.

Potential Mitigations

• A business advisor can assist you in researching the history and reputation of the predecessor brand, Port of Subs, Inc.
• Asking long-term unit franchisees about their experience under the previous ownership can provide valuable context.
• Your attorney should confirm that the asset purchase agreement details what liabilities, if any, were assumed from the predecessor.