Explanation

This risk was not identified in the FDD Package. As a new franchise system with no operating franchised units, there is no history of franchisee turnover to analyze. However, evaluating turnover is a crucial step in assessing more established franchise systems, as high rates can indicate systemic problems like a lack of profitability or poor franchisor support.

Potential Mitigations

• When evaluating any franchise, your business advisor can help you analyze the turnover rates presented in Item 20.
• An attorney can help you formulate questions for former franchisees to understand why they left the system.
• It is wise to have an accountant calculate the effective turnover rate over a three-year period to identify any negative trends.

Explanation

This risk was not identified in the FDD Package. With only two company-owned units and no franchised units reported in Item 20, the system is not currently experiencing rapid growth. For other franchise opportunities, you should be cautious about growth that outpaces the franchisor's ability to provide adequate support, as this can dilute the quality of training and operational assistance available to each franchisee.

Potential Mitigations

• For any franchise, your business advisor should help you assess whether the franchisor's support infrastructure is scaling with its unit growth.
• Speaking with both new and established franchisees can provide insight into the consistency of franchisor support.
• Your accountant can review the financials of a rapidly growing franchisor to see if they are reinvesting in support systems.

Explanation

This risk was not identified in the FDD Package. The business model, focusing on Indian BBQ, appears to be a modern take on an established cuisine type rather than a concept based on a fleeting trend. However, long-term consumer demand for any new restaurant concept is never guaranteed. A business tied to a fad could see its customer base disappear once the trend passes, leaving you with a long-term contract and a failing business.

Potential Mitigations

• Engaging a business advisor to research the long-term market trends for this specific cuisine and service style is recommended.
• You should evaluate the franchisor's plans for menu innovation and concept evolution to ensure long-term relevance.
• Your financial advisor can help assess the business's potential resilience during different economic cycles.

Explanation

This risk was not identified in the FDD Package. The management team disclosed in Item 2, particularly Manager Gregg Majewski, appears to have significant executive-level experience in the restaurant industry and with other franchise concepts under the parent company, Craveworthy Brands. This suggests the leadership has relevant operational and franchising knowledge, which can be a positive factor for a new system. However, their ability to successfully execute this specific concept remains to be proven.

Potential Mitigations

• Your business advisor can help you research the professional backgrounds and track records of the key executives listed in Item 2.
• Asking the franchisor direct questions about the management team's specific experience with start-up brands is a good practice.
• You should still speak with any available company-owned unit managers to get a sense of the operational leadership.

Explanation

This risk was not identified in the FDD Package. Item 1 indicates the franchisor's parent is Craveworthy LLC, but there is no disclosure of ownership by a private equity firm. Franchisees in PE-owned systems can sometimes face pressures from a focus on short-term investor returns, which may not align with the long-term health of franchisees. This can manifest as reduced support, increased fees, or a quick sale of the franchise system.

Potential Mitigations

• A business advisor can help you research the ownership structure of any franchisor to identify potential private equity involvement.
• If a system is PE-owned, it's wise to ask current franchisees about any changes in operations or support since the acquisition.
• Your attorney should review the franchisor's right to sell or assign the franchise agreement, which is a common feature in PE-owned systems.

Explanation

This risk was not identified in the FDD Package. The franchisor discloses its parent company, Craveworthy LLC, in Item 1. However, since Sigri LLC is a new entity with limited financials, the financial strength and commitment of the parent company are particularly important. The FDD does not include parent company financials or a parent guarantee, which limits your ability to fully assess the financial backing of the system.

Potential Mitigations

• Your accountant should review the provided franchisor financials and note the absence of parent company data.
• It is important to ask the franchisor about the financial relationship with and support from its parent company.
• A discussion with your attorney can clarify if a parent company guarantee should be requested.

Explanation

This risk was not identified in the FDD Package. Sigri LLC is a new entity and does not list any predecessors in Item 1. When evaluating other franchise opportunities, you should pay close attention to this section. A franchisor's predecessor history can reveal important information about the brand's origins and any historical issues, such as litigation or bankruptcy, that might have been associated with a previous owner of the system.

Potential Mitigations

• Your attorney should always carefully review Item 1 for any disclosed predecessors and related information.
• If predecessors are disclosed, a business advisor can help you conduct independent research on their business history.
• Questioning long-term franchisees about their experience under any previous ownership is a valuable due diligence step.