Explanation

This risk was not identified. The financial statements for Ruth's Chris Steak House Franchise, LLC (Ruth's Chris LLC) in Item 21 show it is highly profitable with a strong balance sheet. As a subsidiary of Darden Restaurants, Inc., a large, publicly-traded company, the franchisor appears to have substantial financial backing and stability, which is a significant positive factor for prospective franchisees.

Potential Mitigations

• An accountant should still review the financial statements, including the footnotes and the substantial intercompany receivables, to understand how cash flows within the larger Darden corporate structure.
• Discuss the long-term commitment of the parent company, Darden, to the Ruth's Chris brand with your business advisor.
• It is wise to have your attorney confirm that the entity you are contracting with is the one whose strong financials are presented.

Explanation

This risk was not identified. The data in Item 20's tables indicates a very stable franchise system over the past three years. There were no terminations, non-renewals, or franchisor reacquisitions reported for franchised outlets, and only a single unit ceased operations for other reasons. This extremely low turnover rate is a positive indicator of franchisee satisfaction and system health.

Potential Mitigations

• You should still contact current and former franchisees from the lists provided in the FDD to discuss their experiences directly.
• In discussions with the franchisor, inquiring about the reasons for the one noted closure can provide additional insight.
• Your business advisor can help you compare this low turnover rate to industry benchmarks as part of your due diligence.

Explanation

This risk does not appear to be present. FDD Item 20 data shows that the number of franchised units has remained stable, not grown rapidly. While the number of company-owned restaurants has increased, this growth is managed by Darden, a very large and experienced restaurant operator. The risk of support systems being strained by uncontrolled growth seems low.

Potential Mitigations

• It is still valuable to ask current franchisees about the quality and responsiveness of the support they receive from the franchisor.
• Engaging a business advisor can help you evaluate the franchisor's capacity to support its network effectively.
• Understanding the franchisor's future growth plans, for both franchised and company-owned units, can inform your long-term view.

Explanation

This risk was not identified. Ruth's Chris is a legacy brand founded in the 1970s with a long-established operational history. Its parent company, Darden, is one of the largest and most experienced full-service restaurant operators in the world. This is a mature and proven system, not a new or speculative venture.

Potential Mitigations

• When speaking with current franchisees, you can inquire about how the system has evolved and adapted over the years.
• A business advisor can help you assess how this mature brand is positioned against current market trends and competitors.
• Your attorney can review how the brand's long history is reflected in the strength and protection of its trademarks.

Explanation

This risk was not identified. The FDD describes an upscale steakhouse, a well-established and enduring segment of the restaurant industry. The concept does not appear to be based on a fleeting trend, suggesting a lower risk of demand disappearing due to changing consumer tastes. The brand has demonstrated long-term market relevance.

Potential Mitigations

• A business advisor can help you analyze the local market demand for high-end steakhouses and assess the competition.
• During your due diligence, consider the brand's ability to adapt its menu and experience to evolving consumer preferences.
• Discuss the brand's long-term vision and plans for innovation with the franchisor.

Explanation

This risk was not identified. Item 2 shows that the key executives of the franchisor are seasoned professionals from the parent company, Darden. They possess extensive experience in the restaurant industry and in managing large franchise systems. This level of management expertise is a significant strength and reduces risks associated with inexperienced leadership.

Potential Mitigations

• During discussions with the franchisor, you can seek to understand the management team's specific vision for the Ruth's Chris brand.
• When speaking with current franchisees, it's beneficial to ask about their direct interactions with and support from the leadership team.
• A business advisor can help you research the public track record of the parent company's management.

Explanation

This risk was not identified. The FDD's Item 1 clearly discloses the franchisor's parent company, Darden Restaurants, Inc., and its role. Although the franchisor's own financial statements are provided, the context of its ownership by a major public corporation gives a fuller picture of the system's financial backing. The disclosure appears to be transparent.

Potential Mitigations

• It is prudent for your accountant to review the financial statements of the publicly-traded parent company, Darden Restaurants, Inc., for a complete picture of the overall enterprise's health.
• Your attorney can clarify the legal relationship and any formal support guarantees between the parent and the franchisor entity.
• Inquire about the operational autonomy of the franchisor within the larger parent company structure.

Explanation

This risk was not identified in the FDD. Item 1 discloses the franchisor's predecessors, and Items 3 and 4 report no history of material litigation or bankruptcy involving them. The historical lineage of the brand appears to be free of the negative legal or financial events that this risk category addresses.

Potential Mitigations

• You can still perform independent online searches for news articles or other information regarding the brand's history under previous ownership.
• Asking long-tenured franchisees about their experiences under any predecessor companies can provide valuable historical context.
• Your business advisor can help you understand the timeline of ownership changes and its potential impact on the system.

Explanation

This risk was not identified. Item 3 of the FDD states that no litigation is required to be disclosed. This is a significant positive factor, as it suggests the franchisor does not have a history of major legal disputes with its franchisees, government agencies, or other parties related to fraud, contract violations, or other material claims.

Potential Mitigations

• While the FDD is clean, conducting a brief online search for news related to the franchisor can sometimes uncover minor or recent disputes.
• It is always a good practice to ask current franchisees about their relationship with the franchisor and whether disputes are handled amicably.
• Your attorney can confirm that the scope of the Item 3 disclosure complies with federal and state requirements.