Explanation

This specific risk was not identified in the FDD Package. While the system is growing from a small base, the rate of growth does not appear to be so rapid as to currently outpace the franchisor's ability to provide support. However, rapid expansion in any system can strain resources for training, site selection, and ongoing operational assistance. A franchisor expanding too quickly may not be able to adequately support all of its new franchisees.

Potential Mitigations

• In discussions with the franchisor, your business advisor can help you inquire about their plans for scaling support infrastructure as the system grows.
• Speaking with a range of existing franchisees about the current quality and responsiveness of franchisor support is a valuable due diligence step.
• Your accountant should periodically review the franchisor's financial health to ensure they are investing in support systems commensurate with growth.

Explanation

This specific risk was not identified in the FDD Package. The Taffer's Tavern concept operates in the established casual dining restaurant sector. While celebrity-driven concepts can have unique risks, the underlying business model is not based on a fleeting trend or novelty product, suggesting it is not a 'fad' business. A fad business could see a rapid decline in consumer interest, jeopardizing the long-term investment even if the contractual obligations remain.

Potential Mitigations

• Your business advisor can help you independently research the long-term market demand for the specific type of restaurant concept.
• It is wise to assess any business's resilience to economic shifts and changing consumer tastes with your financial advisor.
• Reviewing the franchisor's plans for menu innovation and concept evolution in Item 11 can provide insight into their long-term strategy.

Explanation

This specific risk was not identified in the FDD Package. The executive team, particularly Jon Taffer, has extensive experience in the hospitality and restaurant industry as described in Item 2. While experience in an industry is different from experience in franchising, the management team does not appear to be inexperienced. Inexperienced management can lead to poor support, weak systems, and flawed strategic decisions, increasing franchisee risk.

Potential Mitigations

• A business advisor can help you review the backgrounds of all key executives in Item 2 to assess their specific experience in franchising.
• Asking existing franchisees about their direct experiences with the management team's support and competence provides valuable insight.
• Seeking legal counsel to understand the franchisor's contractual obligations for support in Item 11 is a key diligence step.

Explanation

This specific risk was not identified in the FDD Package. Item 18 states that Jon Taffer is the sole investor, and there is no indication of private equity ownership. Private equity ownership can sometimes lead to a focus on short-term returns over the long-term health of the franchise system, potentially affecting franchisee support, fees, and the strategic direction of the brand. It may also increase the likelihood of the franchise system being sold.

Potential Mitigations

• Your attorney can help you verify the ownership structure disclosed in Item 1 of the FDD through public records.
• A business advisor can assist in researching the reputation of any ownership group, should one be involved.
• Understanding the 'Assignment by Franchisor' clause in the Franchise Agreement is important regardless of ownership structure.

Explanation

This specific risk was not identified in the FDD Package. Item 1 clearly states that Premier Taverns has no parent company. If a franchisor is a subsidiary of a parent company, the parent's financial health and any guarantees it provides can be material to your investment. A lack of disclosure about a controlling parent entity can obscure the true financial stability and decision-making structure of the franchise system.

Potential Mitigations

• It is good practice to have your attorney verify the franchisor's corporate structure as disclosed in Item 1.
• When a parent company is involved, an accountant should review both the franchisor's and the parent's financial statements.
• Your attorney should examine any parent guarantees mentioned in Item 21 or included as an exhibit to understand their scope.

Explanation

This specific risk was not identified in the FDD Package. Item 1 states the franchisor has no predecessors. When a franchisor acquires a system from a predecessor, it is important to understand the predecessor's history, including any litigation, bankruptcy, or franchisee turnover. Inherited problems from a predecessor can pose risks to new franchisees joining the system under the new ownership.

Potential Mitigations

• Your attorney should always confirm the accuracy of the predecessor information disclosed in Items 1, 3, and 4.
• If a predecessor exists, researching their history through public records and news archives can provide valuable context.
• When applicable, speaking with long-term franchisees who operated under a predecessor offers direct insight into the system's history.

Explanation

This specific risk was not identified in the FDD Package. Item 3 discloses no litigation history against the franchisor. A pattern of lawsuits, especially those initiated by franchisees alleging fraud, misrepresentation, or breach of contract, can be a major red flag. Similarly, a high volume of litigation initiated by the franchisor against franchisees might suggest an overly aggressive or unsupportive system.

Potential Mitigations

• Your attorney should carefully review any litigation disclosed in Item 3 to understand the nature and outcome of the disputes.
• A business advisor can help you assess whether the disclosed litigation indicates a systemic problem within the franchise.
• Discussing any disclosed litigation with current and former franchisees can provide valuable context beyond the FDD's summary.