Explanation

As a new franchise system, there are no existing or former franchisees. Therefore, there is no historical data in Item 20 to analyze franchisee turnover, terminations, or cessations. While this means no negative trends are apparent, it also means there is no track record of franchisee success or satisfaction to evaluate. The stability of the franchisee base is a crucial but currently unknown factor. You will be one of the first to test the system.

Potential Mitigations

• It is important to discuss with your business advisor the inherent risks of joining a new system with no franchisee performance history.
• Your attorney can help you understand that you will be setting the precedent for the franchisee-franchisor relationship.
• Closely monitor future FDDs with your accountant to track franchisee turnover rates as the system grows.

Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support to all franchisees. It is a potential risk to monitor if the system begins to sell franchises at a very fast pace, as it could impact the quality of training, site selection assistance, and ongoing operational guidance you receive.

Potential Mitigations

• In discussions with the franchisor, your business advisor can help you inquire about their plans for scaling support infrastructure to match franchise growth.
• Your accountant should periodically review the franchisor's financial health in future FDDs to see if they are investing in support systems.
• Engaging with other franchisees as they join the system will provide insight into whether support levels are keeping pace with growth.

Explanation

This specific risk was not identified in the FDD package. The business model, a firearm retail store and shooting range, serves a well-established market of firearm owners and enthusiasts. While market dynamics can change, the core business is not based on a recent, fleeting trend. Long-term viability will likely depend more on operational execution, location, and competitive landscape rather than the sustainability of a fad.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm sustained local demand for firearm retail and range services.
• Review the franchisor’s plans for future service and product development with a business consultant to gauge adaptability.
• Your accountant can help you model financial scenarios based on potential shifts in market demand or the regulatory environment.

Explanation

This risk was not identified in the FDD package. The disclosure in Item 1 does not indicate that the franchisor is owned or controlled by a private equity firm. The ownership appears to reside with the operational principals of the business. Therefore, risks specifically associated with private equity ownership, such as a focus on short-term returns over long-term system health, do not appear to be present.

Potential Mitigations

• Your attorney can help you verify the ownership structure of the franchisor through state business entity records.
• It is good practice to ask the franchisor about any plans for future sale of the company with your business advisor.
• Understanding the long-term vision of the current ownership is a key piece of due diligence.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses the parent company, Midwest Shooting Center Corporate Holdings, LLC. However, the parent company does not guarantee the franchisor's obligations, and its financial statements are not included. The franchisor entity itself is financially weak, and the lack of a parent guarantee means you may have no recourse against the more established parent or affiliate companies if the franchisor fails to meet its obligations.

Potential Mitigations

• Your accountant must analyze the franchisor's standalone financial statements to assess its ability to operate without parent support.
• It is important to discuss with your attorney the legal implications of the parent company not guaranteeing the franchisor's performance.
• A business advisor can help you assess the operational risks stemming from the legal separation between the franchisor and its affiliates.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD discloses a predecessor entity, Black Rifle Shooting Center, LLC, which was renamed to an affiliate, Midwest Shooting Center, LLC. However, the FDD does not indicate any negative history such as litigation, bankruptcy, or high franchisee turnover associated with this predecessor. The information appears to be presented in a straightforward manner.

Potential Mitigations

• Your attorney can assist in reviewing all disclosures related to the predecessor to ensure no negative history is overlooked.
• It may be beneficial to conduct independent online research on the predecessor entity with the help of a business advisor.
• You could ask the franchisor for more details about the history and performance of the predecessor entity.

Explanation

This risk was not identified in the FDD package. Item 3 states, 'No litigation is required to be disclosed in this Item.' This indicates that neither the franchisor nor its principals are currently involved in, or have recently concluded, legal proceedings that are material and required to be disclosed under franchise law. This includes actions by or against franchisees alleging fraud, as well as significant enforcement actions by the franchisor.

Potential Mitigations

• Your attorney can perform an independent search of public court records to verify the absence of litigation history.
• It is good practice to ask current business operators in the system about any past or pending disputes.
• As the system grows, reviewing Item 3 in future FDDs will be crucial for monitoring the franchisor's litigation patterns.