Explanation

This risk was not identified in the FDD package. The franchise system is new and had no operational franchisees as of the FDD's issuance date, so there is no history of franchisee turnover to analyze. Generally, high turnover can signal systemic problems, such as a lack of profitability or poor franchisor support, making it a critical metric for established systems.

Potential Mitigations

• As one of the first franchisees, it is crucial to have your attorney negotiate strong protections and clear performance obligations for the franchisor.
• A business advisor can help you develop contingency plans for challenges that may arise in a new, unproven system.
• Once other franchisees are established, your attorney can assist in forming a franchisee association to address collective issues.

Explanation

This risk was not identified in the FDD package. The franchisor is new to franchising and has not yet established any operational franchised units. Rapid growth can become a risk when a franchisor's expansion outpaces its ability to provide adequate support to new locations. You should monitor the pace of growth if you join the system.

Potential Mitigations

• Your business advisor should help you assess the franchisor's infrastructure and capacity for providing support as the system grows.
• In discussions with the franchisor, inquire about their strategic plan for scaling support, training, and supply chain management.
• It is wise to have your franchise attorney review the support commitments outlined in the Franchise Agreement to ensure they are specific and enforceable.

Explanation

This risk was not identified in the FDD package. The business model, a restaurant specializing in wood-fired pizzas, pastas, and salads, operates in a well-established and durable segment of the restaurant industry. It does not appear to be based on a short-term trend or fad, which could threaten its long-term viability.

Potential Mitigations

• Your business advisor can help you research long-term consumer trends in the fast-casual restaurant industry to confirm the concept's sustainability.
• An accountant can assist in analyzing the business model's resilience to economic shifts and changes in consumer tastes.
• When speaking with the franchisor, ask about their plans for menu innovation and concept evolution to ensure long-term relevance.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the executive team is composed of individuals from large, established parent companies like MTY Food Group and Kahala Brands. These executives have extensive experience in managing large, multi-brand restaurant and franchise systems, which suggests a high level of industry and franchising expertise.

Potential Mitigations

• A business advisor can help you independently verify the backgrounds and track records of the key executives listed in Item 2.
• It is still prudent to ask the franchisor about the specific team members who will be providing your direct day-to-day support.
• Your franchise attorney can confirm that the support obligations outlined in the Franchise Agreement are specific and adequate, regardless of management's experience.

Explanation

This risk was not identified in the FDD package. According to Item 1, the ultimate parent company is MTY Food Group, Inc., a publicly-traded corporation, not a private equity firm. While publicly-traded companies also focus on shareholder returns, the specific risks associated with a typical private equity ownership model, such as a short-term exit strategy, do not appear to be present here.

Potential Mitigations

• Your accountant can analyze the parent company's public financial reporting to understand its long-term strategy and financial health.
• A business advisor can help research the parent company's history with its other franchise brands to assess its management style.
• Your attorney can review the assignment clause in the Franchise Agreement to understand what happens if the franchisor is sold.

Explanation

This risk was not identified in the FDD package. Item 1 provides a detailed description of the corporate structure, including the immediate franchisor (BQ Concepts, LLC), its parent (BBQ Holdings, Inc.), the guarantor (MTY Franchising USA, Inc.), and the ultimate parent (MTY Food Group, Inc.). The required financial statements for the guarantor are also provided in Exhibit B, ensuring transparency.

Potential Mitigations

• Your attorney should review the corporate structure in Item 1 to confirm all relevant entities are properly disclosed.
• An accountant should verify that the provided financial statements in Item 21 belong to the correct entity named as the guarantor.
• If any ambiguity exists, it's wise to request a corporate organizational chart from the franchisor with help from your attorney.

Explanation

This risk was not identified in the FDD package. Item 1 identifies the 'Sauce Prior Owners' as the brand's predecessor. However, the FDD does not disclose any adverse history, such as bankruptcy or significant litigation, specifically related to these predecessors. The litigation disclosed in Item 3 pertains to other brands within the parent company's portfolio, not the direct predecessor of the Sauce brand.

Potential Mitigations

• Your attorney can help you perform independent searches for any public records related to the predecessor entities named in Item 1.
• A business advisor could assist in researching news archives or online forums for information about the brand's history under prior ownership.
• You should ask the franchisor for more details about the transition from the predecessor and the reasons for the sale.