Explanation

This risk was not identified in the FDD Package. The business concept, centered on biscuits, donuts, and chicken sandwiches, is part of the well-established quick-service and fast-casual restaurant industry. These food items have sustained consumer demand and are not tied to a fleeting trend, suggesting the business model is not based on a fad.

Potential Mitigations

• Even for established concepts, a real estate professional should help you analyze your local market to assess long-term demand and competition.
• Your business advisor can help you evaluate the brand's specific competitive advantages within this popular and crowded food segment.
• Review the franchisor's plans for menu innovation and brand evolution with your marketing advisor to gauge their strategy for staying relevant.

Explanation

This risk was not identified in the FDD Package. Item 2 indicates that the key executives, such as the Chief Operations Officer and Chief Financial Officer, have substantial experience both within the restaurant industry and specifically with the Rise brand, with many years of service. This suggests a stable and experienced leadership team is in place.

Potential Mitigations

• It is still advisable to research the professional backgrounds of the key management team members listed in Item 2.
• During discussions with existing franchisees, asking about their perception of the management team's competence and vision is a valuable due diligence step.
• Your business advisor can help you assess how the leadership team's experience aligns with the company's strategic goals.

Explanation

This risk was not identified in the FDD Package. While Item 1 discloses a parent company, Rise Holdings LLC, there is no indication that it is a private equity firm. Private equity ownership can introduce risks related to short-term profit motives over the long-term health of the brand, but that specific risk does not appear to be present here.

Potential Mitigations

• During due diligence, it remains prudent to ask the franchisor about its ownership structure and any plans for future sale of the company.
• An attorney can help you review the franchise agreement's assignment clause to understand what happens if the franchisor is sold to any type of new owner.
• Investigating the background of any parent company with your business advisor is a good practice to understand its business philosophy.

Explanation

This risk was not identified in the FDD Package. Item 1 clearly discloses the existence of a parent company, Rise Holdings LLC. The franchisor's own audited financial statements are provided, which is the primary requirement. Without a parent company guarantee, providing parent financials is not typically required, so there does not appear to be a disclosure issue here.

Potential Mitigations

• Your attorney can confirm that the franchisor has met all disclosure obligations regarding parent companies under federal and state franchise laws.
• An accountant should review the provided franchisor financials to determine if they are sufficient for a complete risk assessment.
• Understanding the relationship and any financial interdependencies between the franchisor and its parent is a worthwhile discussion with your business advisor.

Explanation

This risk was not identified in the FDD Package. Item 1 of the FDD does not disclose any predecessors for Rise Franchising, LLC. A predecessor is a company from which the franchisor acquired the major portion of its assets, which is not the case here.

Potential Mitigations

• It is always a good practice for your attorney to verify the corporate history of the franchisor entity.
• Asking early franchisees about the history of the company can sometimes reveal information not present in the FDD.
• Your business advisor can help you research the brand's origin story to ensure there are no unmentioned predecessor entities.

Explanation

This risk was not identified in the FDD Package. Item 3 of the FDD states that there is no litigation that requires disclosure. This is a positive indicator, as a pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, can be a significant red flag about a franchise system's health and integrity.

Potential Mitigations

• Your attorney can conduct independent searches of court records as an extra due diligence step to look for any litigation not disclosed.
• Asking current and former franchisees about any past or present disputes, even those not rising to the level of disclosed litigation, can be insightful.
• It is wise to have your attorney review the dispute resolution clauses in the franchise agreement to understand the process if a conflict does arise.