Explanation

This risk was not identified. The franchise system is not experiencing rapid growth; in fact, Item 20 data shows a net decrease in the number of outlets over the past three years. In general, excessively rapid growth can strain a franchisor's ability to provide adequate support, so slow or negative growth presents a different set of concerns about system viability.

Potential Mitigations

• Discuss the franchisor's current and future growth strategy with their management to understand their plans for system stability.
• Ask your business advisor to help you evaluate the risks and potential benefits of joining a mature or shrinking system versus a growing one.
• Inquire with current franchisees about the level of support they receive and their outlook on the brand's future.

Explanation

This risk was not identified. Red Mango has been franchising since 2007, indicating it is an established system, not a new or unproven one. When evaluating a franchise, a long operational history can be a positive sign, though it doesn't eliminate other risks like franchisee turnover or financial instability, which must be assessed separately.

Potential Mitigations

• Investigate the brand's history and evolution over its many years of operation with your business advisor.
• When speaking with long-term franchisees, inquire about how the system and franchisor support have changed over time.
• An attorney can help review the company's history as disclosed in Item 1, including any predecessors.

Explanation

This risk does not appear significant. The core business, frozen yogurt and smoothies, is a well-established market segment and not considered a short-term fad. A key consideration for any food business is its ability to adapt to changing consumer tastes and dietary trends, which is a different risk from the business concept itself being a fad.

Potential Mitigations

• Your business advisor can help you research the long-term consumer trends in the frozen dessert and smoothie market.
• Ask the franchisor about their process for new product development and adapting their menu to evolving customer preferences.
• Discuss with current franchisees how the menu has changed over time and how new product introductions have performed.

Explanation

This risk was not identified. Item 2 indicates that the key executives have substantial and relevant experience in the restaurant and franchise industries, including with major brands like TGI FRIDAYS and Friendly's. An experienced management team can be a significant asset, though it does not guarantee success or eliminate other potential business risks.

Potential Mitigations

• Even with experienced management, you should discuss their specific vision and strategy for the Red Mango brand with them.
• When speaking with current franchisees, ask for their direct feedback on the current management team's effectiveness and support.
• A business advisor can help you perform independent research on the professional reputations of the key executives.

Explanation

This risk was not identified, as the FDD clearly discloses the parent and ultimate parent companies in Item 1 and the notes to the financial statements. When a franchisor is part of a complex corporate structure, clear disclosure of all parent and affiliate entities is crucial for you to fully assess potential conflicts of interest and the overall stability of the enterprise.

Potential Mitigations

• Have your attorney review the corporate structure described in Item 1 to ensure you understand the relationships between all mentioned entities.
• An accountant can help you trace any financial guarantees or inter-company transactions mentioned in the notes to the financial statements.
• Discuss the role of the parent company in supporting the franchise system with current franchisees.

Explanation

This risk was not identified. While Item 1 mentions a predecessor from which the brand's intellectual property was acquired many years ago, there are no disclosures of negative history, such as litigation or bankruptcy, associated with any predecessors. A clean predecessor history is a positive factor, but you should still focus your due diligence on the current franchisor's recent performance and financial condition.

Potential Mitigations

• Your attorney can confirm the details of the predecessor history disclosed in Item 1.
• For any franchise system, it is good practice to ask long-tenured franchisees about their experiences under any previous ownership or corporate structure.
• A business advisor can help you assess if the brand's long history provides stability or indicates stagnation.

Explanation

This risk was not identified. Item 3 of the FDD states that there is no material litigation that requires disclosure. The absence of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, is a positive indicator. However, this does not eliminate other business risks, and you should still conduct thorough due diligence.

Potential Mitigations

• Your attorney can conduct independent public record searches to confirm the absence of significant litigation.
• When speaking with current and former franchisees, you can still inquire about any past or pending disputes they are aware of.
• A business advisor can help you understand that a lack of litigation is positive but not a guarantee of future success.