Explanation

This risk was not identified. The FDD reports in Item 20 that no franchises were terminated, ceased operation for other reasons, or were not renewed over the past three years. Low franchisee turnover is generally a positive indicator of system health and franchisee satisfaction, while high turnover can signal systemic problems such as unprofitability or poor support.

Potential Mitigations

• Speaking with former franchisees from the list in Exhibit H remains a crucial due diligence step to verify the reasons for their departure.
• Your business advisor can help you formulate insightful questions for current franchisees about their long-term satisfaction with the system.
• An attorney can advise on the importance of turnover rates as an indicator of a franchise system's overall health.

Explanation

This risk was not identified. IRMG has been franchising since 2000 and its key executives have significant tenure with the company and its affiliates, as disclosed in Items 1 and 2. An unproven system would present higher risks, including the potential for an untested business model, underdeveloped support systems, and minimal brand recognition, which does not appear to be the case here.

Potential Mitigations

• A business advisor can still help you assess the system's adaptability and competitiveness in the current market.
• It is still wise to discuss the franchisor's long-term strategic vision with their management team.
• Your attorney can review the stability of the business as reflected throughout the FDD.

Explanation

This risk was not identified. The Suki Hana concept, focused on Japanese-style food in shopping mall food courts, is part of a well-established and long-standing segment of the quick-service restaurant industry. The business model does not appear to be based on a recent or short-lived trend, which reduces the risk of customer interest fading quickly.

Potential Mitigations

• Your business advisor can help you research the long-term consumer demand and competitive landscape for this food category in your specific market.
• Evaluating the franchisor's plans for menu innovation and concept adaptation, as detailed in Item 11, is a prudent step.
• An accountant can help you analyze the financial sustainability of this business model beyond current market conditions.

Explanation

This risk was not identified. Item 2 of the FDD indicates that the key executives of IRMG have extensive and long-term experience within the company, its affiliates, and the food court restaurant industry. Franchisors with inexperienced management can pose a higher risk due to potential weaknesses in operational systems, franchisee support, and strategic direction.

Potential Mitigations

• Verifying the management team's reputation by speaking with current and former franchisees is still a valuable due diligence step.
• A business advisor can help you assess if the management team's experience aligns with your own business goals and support needs.
• You should still prepare to ask management insightful questions about their strategy for the brand's future growth and support.

Explanation

This risk was not identified. Item 1 indicates that IRMG is a privately held corporation, and there is no disclosure of ownership by a private equity firm. Private equity ownership can sometimes introduce risks related to prioritizing short-term returns over the long-term health of the franchise system, potentially affecting franchisee support levels and costs.

Potential Mitigations

• It is still prudent to ask the franchisor about any potential plans for sale or recapitalization of the company.
• Your attorney can review the assignment clauses in the Franchise Agreement to understand your rights if the system is sold in the future.
• A business advisor can help you research the ownership structure and reputation of the franchisor's principals.

Explanation

This risk was not identified. Item 1 does not disclose any predecessors for IRMG. When a franchisor has predecessors, it is important to review their history for any inherited issues, such as past litigation, bankruptcy, or high franchisee failure rates, as this could impact the current health and reputation of the system. The absence of a predecessor simplifies this aspect of due diligence.

Potential Mitigations

• You can still research the history of the Suki Hana brand and its founders to ensure there is no relevant undisclosed history.
• A business advisor can help investigate the brand's reputation and operational history in the marketplace.
• Your attorney can confirm the corporate history of the franchisor through public records.

Explanation

This risk was not identified. Item 3 of the FDD states that there is no litigation that requires disclosure. A pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, or a high number of suits filed by the franchisor against franchisees, can be a significant red flag indicating systemic problems or an overly aggressive franchisor.

Potential Mitigations

• Independent online searches for litigation involving the franchisor or its principals can sometimes reveal disputes not meeting the technical disclosure threshold.
• Your attorney can advise on the significance of a clean litigation history as part of the overall risk assessment.
• Asking current and former franchisees about their experience with disputes in the system is a valuable part of due diligence.