Explanation

The FDD package does not indicate a high rate of franchisee turnover. Item 20 data shows a low number of terminations and cessations over the past three years. This is generally a positive sign, as high turnover can signal systemic problems like lack of profitability or poor franchisor support.

Potential Mitigations

• Discussing the reasons for the few departures that did occur with former franchisees can provide valuable insight.
• Your business advisor can help you compare the system's stability metrics with industry averages for context.
• It's always wise to ask your attorney to review Item 20 footnotes for how terms like "transfer" are defined.

Explanation

This risk was not identified in the FDD package. While rapid growth can strain a franchisor's support systems, the Item 20 data for Ralph's Famous Italian Ices Franchise Corp. (Ralph's) shows a stable to slightly shrinking system size over the last three years, not rapid expansion. Therefore, the specific risks associated with outpacing support infrastructure do not appear to be present.

Potential Mitigations

• It's prudent to discuss the franchisor's future growth plans and how they intend to scale support services with a business advisor.
• When speaking with current franchisees, asking about their perception of the adequacy and quality of ongoing support is a valuable step.
• Your accountant can review the franchisor's financials to assess their capacity for any planned future growth.

Explanation

This risk was not identified. The FDD indicates that Ralph's has been franchising since May 2001 and its key executives have been with the company since its inception in 2000. This suggests a long operational history and an experienced management team, which are generally positive factors for system stability.

Potential Mitigations

• Confirming the system's maturity and management's reputation by speaking with long-term franchisees is a valuable due diligence step.
• A business advisor can help you evaluate how the franchisor has adapted its model over its long history.
• Your attorney should still review the complete history of the business as detailed in Item 1.

Explanation

This risk appears low. The business model, focused on Italian ices and frozen desserts, has a long history, with family involvement dating back to 1928 and franchise operations since 2001. While the business is seasonal, its longevity suggests it is a well-established concept rather than a short-term fad. This reduces the risk of a sudden collapse in consumer demand.

Potential Mitigations

• Assessing the long-term consumer demand for this type of product in your specific local market should be done with a business advisor.
• Discussing the business's seasonality and strategies for managing it with current franchisees is a wise precaution.
• Your financial advisor can help model the potential impact of the seasonal nature on your annual cash flow.

Explanation

This risk was not identified. FDD Item 2 indicates that the principal officers of Ralph's have been in their roles since the company's inception in 2000 and have even longer experience with the affiliated manufacturing company, JMS. This long tenure suggests a management team with deep experience in this specific business and in franchising.

Potential Mitigations

• Speaking with current franchisees about their opinion of the management team's competence and support is still a valuable due diligence step.
• A business advisor can help you assess how the management team's experience translates into effective franchisee support.
• Verifying the backgrounds of the key personnel mentioned in Item 2 is a standard part of due diligence.

Explanation

This risk was not identified. FDD Item 1 indicates ownership by the Scolaro and Silvestro families and does not mention any parent company or private equity firm involvement. This suggests the franchisor is a family-controlled business, which can sometimes mean a greater focus on long-term brand health over short-term investor returns.

Potential Mitigations

• It is still prudent to confirm the ownership structure with your attorney to ensure no undisclosed controlling entities exist.
• Asking current franchisees about their relationship with the ownership can provide insight into the company culture.
• Your business advisor can help you understand the potential pros and cons of a family-owned franchise system.

Explanation

This risk was not identified. FDD Item 1 does not disclose any parent company. It does disclose an important affiliate, JMS Ices, Inc., which manufactures the core products. However, as the franchisor itself provides audited financial statements, the key financial risks are transparently presented in Item 21, mitigating the need for parent financials.

Potential Mitigations

• A franchise accountant should analyze the financial relationship between Ralph's and its affiliate, JMS, to understand any interdependencies.
• Your attorney can confirm that all required affiliate disclosures in Item 1 and Item 8 are complete.
• Discussing the reliability and pricing of the required affiliate supplier, JMS, with current franchisees is an important step.

Explanation

This risk was not identified in the FDD package. Item 1 states that the franchisor has no predecessors. This simplifies due diligence, as there is no hidden history of a prior company's performance, litigation, or bankruptcy that you need to uncover.

Potential Mitigations

• It is always good practice for your attorney to verify the corporate history to confirm the absence of any undisclosed predecessors.
• Your due diligence can focus on the single, continuous operational history of the current franchisor entity.
• A business advisor can help you assess the franchisor's track record as presented in the FDD.