Explanation

The financial statements for Robeks Franchise Corporation (Robeks) appear stable. The company reported positive net income for the past three fiscal years, has a healthy balance sheet with significant stockholder equity, and its revenues are primarily derived from ongoing royalties rather than one-time franchise fees. This financial position suggests Robeks has the resources to support its franchisees and continue developing the brand. However, a significant portion of current assets is a receivable from its parent company.

Potential Mitigations

• Your accountant should review the franchisor's audited financial statements, including all footnotes, to independently assess their financial health.
• A thorough discussion with your financial advisor about the concentration of assets in the 'Due from Parent' account is recommended.
• Ask the franchisor about their plans for future growth and capital allocation to ensure continued support for the system.

Explanation

The franchise system has been experiencing steady growth, expanding from 85 to 103 franchised units over the past three years. This rate of growth does not appear to be so rapid as to suggest the franchisor's support systems would be overwhelmed. The management team's experience and the company's stable financial condition further mitigate risks associated with overly aggressive expansion. This risk was not identified as a major concern in the FDD package.

Potential Mitigations

• Your business advisor should help you question the franchisor about their infrastructure for supporting new and existing franchisees during growth periods.
• Discuss with current franchisees their perception of the quality and timeliness of support from the corporate office.
• An accountant's review of the franchisor's financials can confirm if they have allocated sufficient resources to support system growth.

Explanation

This risk is not present. Robeks has been franchising since 2001 and has over 100 operating units. The system is mature and established. Furthermore, the management team detailed in Item 2 possesses significant experience both within the Robeks system and in the broader franchise industry. Therefore, the risks associated with an unproven or new franchise system are not applicable here.

Potential Mitigations

• It is still valuable to have your attorney review the franchisor's corporate history in Item 1 for any details about predecessors or affiliates.
• Speaking with long-tenured franchisees can provide insight into the system's evolution and stability over time.
• Your business advisor can help you compare the brand's history and market position against its direct competitors.

Explanation

This risk was not identified. The business model, centered on smoothies, juices, and healthy food options, has demonstrated longevity and aligns with a sustained consumer trend toward health and wellness. The franchisor has been operating for over two decades, indicating that the business concept has persisted beyond being a short-term fad. The risk of the business model being a fleeting trend appears low.

Potential Mitigations

• Engaging a business advisor to research the long-term market trends for health-focused quick-service restaurants is a good practice.
• Discuss the brand's strategies for product innovation and adaptation to evolving consumer tastes with the franchisor.
• Your financial advisor can help you assess the business model's resilience to economic shifts and changing dietary trends.

Explanation

This risk was not identified. The executive team detailed in Item 2 has extensive experience in the franchise industry and with the Robeks brand specifically. Several key executives have long tenures with the company or have held senior roles at other major franchise systems like Wingstop and Dairy Queen. This level of experience suggests the management team is well-equipped to manage the franchise system and support its franchisees.

Potential Mitigations

• It is still beneficial to speak with current franchisees about their direct experiences and the quality of support they receive from the management team.
• Your business advisor can help you research the professional backgrounds of the key executives listed in Item 2.
• During discussions with the franchisor, you can ask about the management team's long-term vision and strategy for the brand.

Explanation

This risk was not identified in the FDD package. FDD Item 1 does not indicate that the franchisor is owned by a private equity firm. Ownership appears to be with the parent company, Robeks Corporation, and key executives have long-term involvement with the brand. Therefore, the specific risks associated with a private equity ownership model, such as a focus on short-term returns, are not present.

Potential Mitigations

• A consultation with your attorney to confirm the ownership structure detailed in Item 1 is always a prudent step.
• You can research the parent company, Robeks Corporation, to understand its history and ownership with the help of a business advisor.
• It is wise to ask the franchisor about any potential plans for a sale or change in ownership of the company.

Explanation

The FDD discloses that Robeks Franchise Corporation is a wholly-owned subsidiary of Robeks Corporation (Parent). The parent company's financials are not provided. However, the franchisor's own audited financial statements appear healthy, showing profitability and strong equity. While parent financials could offer more context, their absence here does not appear to be a high-risk factor given the franchisor's own stable financial condition.

Potential Mitigations

• Your accountant should review the relationship between the franchisor and its parent, particularly the significant 'Due from Parent' receivable on the balance sheet.
• It is advisable to ask your attorney whether, under these specific circumstances, parent company financial statements would typically be required.
• Discuss with the franchisor the nature of the financial relationship and inter-company transactions with its parent.

Explanation

This risk was not identified. Item 1 states that Robeks Franchise Corporation has no predecessors. The parent company, Robeks Corporation, developed and operated stores before starting the franchise program, which is a common and often positive history for a franchisor. There are no disclosed predecessor entities from which the franchisor acquired the system, so risks from a problematic history are not applicable.

Potential Mitigations

• Confirming with your attorney that there are no predecessors disclosed in Item 1 is a good final check.
• You can ask long-tenured franchisees about the early history of the company to ensure the FDD's narrative aligns with their experience.
• Your business advisor can assist in researching the public history of the Robeks brand for additional context.