Explanation

The franchisee turnover rates disclosed in Item 20 do not appear to be high. However, the system is growing very rapidly, which can sometimes mask underlying issues. High franchisee turnover can be a critical warning sign of systemic problems, such as a flawed business model, lack of profitability, or poor franchisor support, which could jeopardize your investment.

Potential Mitigations

• Speaking with a diverse group of current and former franchisees from the Item 20 list is crucial to understand their satisfaction levels and reasons for leaving.
• Your business advisor can help you assess whether the franchisor's support infrastructure is keeping pace with its rapid growth.
• During your franchise term, participation in any franchisee association could provide valuable insight into ongoing system health.

Explanation

This risk was not identified in the FDD Package. The franchisor and its predecessors have been operating and franchising for many years. An unproven system, however, presents a higher risk of failure due to the lack of a track record, underdeveloped support systems, and minimal brand recognition. Careful due diligence on management experience and system viability is crucial with any new franchise.

Potential Mitigations

• A business advisor can help you research the history of the brand and the experience of its management team.
• It is always prudent to have an accountant review the franchisor's financial stability, regardless of its age.
• Your attorney can help you understand the legal history and any past issues by reviewing Items 3 and 4 of the FDD.

Explanation

This risk was not identified in the FDD Package. The travel center industry is well-established. However, investing in a business based on a short-term trend or fad can be very risky. Consumer interests can shift quickly, and if the business model is not adaptable, you could be left with a failing business while still being bound by a long-term franchise agreement.

Potential Mitigations

• A business advisor can help you conduct independent market research to assess the long-term consumer demand for the services offered.
• Reviewing the franchisor's history of innovation and adaptation can provide insight into their ability to evolve with market trends.
• Your financial advisor can help you assess the business's resilience to economic shifts and changing consumer tastes.

Explanation

This risk was not identified in the FDD Package. The management team described in Item 2 appears to have extensive experience in the relevant industries. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions, inadequate franchisee support, and an unproven operating model. It is important to vet the backgrounds of key executives.

Potential Mitigations

• A business advisor can help you research the backgrounds and track records of the franchisor's key management personnel.
• Speaking with current franchisees about their perception of the management team's competence and support is a valuable due diligence step.
• Your attorney can help review the business history of the executives as disclosed in Item 2.

Explanation

This risk was not identified in the FDD Package. The franchisor clearly discloses its parent company, BP Corporation North America Inc., and provides its financial statements and a performance guarantee. When a franchisor is a subsidiary, the parent's financial health can be critical. A failure to disclose a parent or provide its financials when required could hide financial instability or a lack of resources to support the system.

Potential Mitigations

• An accountant should always confirm if the franchisor is a subsidiary and assess if parent company financials are required and have been provided.
• If a parent company guarantee is offered, it's wise to have your attorney review its terms to ensure it is robust and enforceable.
• A business advisor can help you investigate the relationship between the franchisor and any parent entity.

Explanation

This risk was not identified in the FDD Package. The franchisor and its predecessors have a long history which is detailed in Item 1. It is important to review a franchisor's predecessor history, as it can reveal inherited issues, a pattern of failures, or other challenges that may not be immediately apparent. Inadequate disclosure can prevent you from understanding the true historical context of the franchise system.

Potential Mitigations

• Your attorney should always carefully review the predecessor information disclosed in Items 1, 3, and 4.
• A business advisor can assist in researching the history of the brand and any predecessor companies if they are identified.
• When speaking with long-term franchisees, it is useful to ask about their experiences under any previous ownership.