Explanation

This risk was not identified. Item 20 data for 2021-2023 shows no franchise terminations, non-renewals, or cessations of operation. High franchisee turnover is a significant red flag in franchising, as it can indicate systemic problems such as a lack of profitability, poor franchisor support, or an unsustainable business model. The absence of such turnover in the data presented is a positive indicator for system stability.

Potential Mitigations

• It is still crucial to contact a representative sample of current franchisees listed in Item 20 to discuss their experiences and satisfaction, which your business advisor can help facilitate.
• Ask your attorney to help you formulate questions for franchisees about their relationship with the franchisor and their profitability.
• Your accountant can help you analyze the growth data in Item 20 to understand how rapidly the system is expanding.

Explanation

This risk was not identified. The business model of a specialty coffee cafe is well-established and generally not considered a fad. However, any business must adapt to changing consumer tastes. Success will depend on the brand's ability to maintain its appeal and evolve over the ten-year contract term, a period during which market trends can shift significantly.

Potential Mitigations

• Engage a business advisor to research the long-term market trends for specialty coffee and assess the brand's specific market niche.
• Question the franchisor about their long-term vision and plans for product development and innovation to stay relevant.
• Your financial advisor can help you assess the business model's resilience to economic shifts and changing consumer preferences.

Explanation

This risk was not identified. Item 1 of the FDD does not indicate that Qamaria LLC is owned or controlled by a private equity firm. This type of ownership can sometimes lead to a focus on short-term profitability over the long-term health of the franchise system. The absence of private equity ownership may suggest a different set of priorities for the brand.

Potential Mitigations

• Your attorney should always confirm the full ownership structure of the franchisor entity as disclosed in Item 1.
• A business advisor can help you understand the potential impacts of different ownership structures on a franchise system.
• Inquire with current franchisees about their perception of the franchisor's long-term commitment to the brand.

Explanation

This risk was not identified. The FDD discloses that Qamaria LLC is the franchising entity and does not mention any parent companies. Financial statements are provided for Qamaria LLC itself. When a franchisor is a subsidiary, the financial health of a parent company can be crucial, and its omission could hide risks. That does not appear to be the case here.

Potential Mitigations

• It is good practice for your attorney to verify the corporate structure to ensure there are no undisclosed parent or controlling entities.
• An accountant can confirm that the financial statements provided are for the correct legal entity offering the franchise.
• Always ask your attorney to check for any guarantees from parent or affiliated companies that might affect the franchisor's obligations.

Explanation

This risk was not identified. Item 1 does not disclose any predecessors for Qamaria LLC, as it is a relatively new company that started franchising in 2021. A predecessor is a company from which the franchisor acquired the business concept. The absence of a predecessor means the history presented in the FDD is the complete history of this franchise system.

Potential Mitigations

• Your attorney should always confirm the predecessor history disclosed in Item 1 of the FDD.
• If a predecessor were listed, a business advisor could help you research its history for any signs of trouble.
• Speaking with the longest-tenured franchisees can provide insight into the system's entire history, which a business advisor can facilitate.

Explanation

This risk was not identified. Item 3 states, "No litigation is required to be disclosed in this Item." This is a positive sign, as a pattern of lawsuits, especially those initiated by franchisees alleging fraud or misrepresentation, can indicate significant systemic problems. The absence of such disclosed litigation suggests a less contentious history, though it doesn't preclude future disputes.

Potential Mitigations

• Your attorney should still consider conducting a public records search for any litigation not required to be disclosed in Item 3.
• A discussion with current and former franchisees, facilitated by a business advisor, can provide insight into the franchisor-franchisee relationship.
• Understanding the dispute resolution process in the Franchise Agreement with your attorney is crucial for preparing for any future conflicts.