Explanation

This specific risk was not identified in the FDD Package. Shoot 360 LLC was formed in 2019, but its Operating Affiliate has been in business since 2012, and the management team has significant experience. An unproven system can be risky because the business model, brand recognition, and support structures are not yet well-established, which can increase the chance of business failure for early franchisees. This does not appear to be the case here.

Potential Mitigations

• Even with an established system, it is wise to have your accountant review the franchisor's financial statements for the past few years to verify stability and performance.
• Engaging a business advisor to research the brand's competitive position and market longevity is a prudent step.
• Your attorney should confirm that the experience of the Operating Affiliate directly translates to the support offered under the franchise.

Explanation

This specific risk was not identified in the FDD Package. A 'fad' business is one tied to a short-lived trend, which can be risky as your contractual obligations continue even if customer interest disappears. The Shoot 360 concept is based on basketball training, a well-established industry with consistent demand, rather than a temporary novelty. The use of technology appears to be an enhancement to a durable business model.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm the long-term demand for basketball training facilities in your specific area.
• Review the franchisor's plans for innovation and system evolution with your business advisor to gauge their commitment to long-term market relevance.
• An accountant can help you model different revenue scenarios to assess financial viability even if initial demand fluctuates.

Explanation

This specific risk was not identified in the FDD Package. Item 2 details the business experience of the management team, who appear to have substantial experience operating the same type of business through the Operating Affiliate since 2012. Inexperienced management is a risk because it can lead to poor strategic decisions, weak operational systems, and inadequate franchisee support, which does not seem to be a primary concern here based on the disclosures.

Potential Mitigations

• It is still prudent to interview current franchisees about their direct experiences with the management team's competence and responsiveness.
• A business advisor can help you perform background checks or online research on key executives to confirm their stated experience and reputation.
• Your attorney should confirm that the management team's roles and responsibilities are clearly defined.

Explanation

This specific risk was not identified in the FDD Package. Private equity ownership can be a risk because the firm's primary goal may be a profitable exit within a few years, which can sometimes lead to decisions that benefit short-term financials over the long-term health of franchisees. Item 1 indicates the franchisor is a subsidiary of its Operating Affiliate, not a private equity firm.

Potential Mitigations

• Your attorney should always confirm the ownership structure disclosed in Item 1 through public record searches.
• It remains valuable to ask the franchisor about their long-term vision for the brand and any plans for a future sale of the company.
• A business advisor can help you understand the potential impacts if the company were to be sold in the future.

Explanation

This specific risk was not identified in the FDD Package. Franchisors must disclose information about predecessors from which they acquired the business. A lack of transparency about a predecessor's history could hide past issues like high failure rates or litigation. Shoot 360 LLC does not disclose any predecessors in Item 1, indicating it started the franchise system itself, although it relies on the operating history of its affiliate.

Potential Mitigations

• Even without a formal predecessor, it's wise to ask long-tenured employees or early franchisees about the history of the brand and its development.
• Your business advisor can help you research the history of the Operating Affiliate to understand its track record.
• Your attorney can verify the corporate history disclosed in Item 1 to ensure no predecessor has been omitted.

Explanation

This specific risk was not identified in the FDD Package. Item 3 states, 'No litigation is required to be disclosed in this Item.' A pattern of lawsuits, particularly those initiated by franchisees alleging fraud or by the franchisor against franchisees for contract breaches, can be a major red flag about the health and integrity of a franchise system. The absence of such disclosures here is a positive sign, though it doesn't guarantee a dispute-free relationship.

Potential Mitigations

• It is still prudent to ask current and former franchisees about any informal disputes they may have had with the franchisor.
• Your attorney can conduct public record searches for litigation involving the franchisor that might not have met the technical threshold for FDD disclosure.
• A business advisor can help you research online forums or franchisee groups for discussions about the franchisor's reputation.