Explanation

This risk was not identified in the FDD package. Item 20 data shows no franchise terminations, non-renewals, or cessations of operation for other reasons over the last three years. This is a positive indicator of system stability. Generally, high franchisee turnover can signal systemic problems, such as a lack of profitability or poor franchisor support, which would be a significant concern for any prospective franchisee.

Potential Mitigations

• It is still beneficial to discuss overall satisfaction and profitability with current franchisees from the list provided in Item 20.
• Developing a comprehensive business plan with your accountant can help you assess your own potential for success within the system.
• A business advisor can help you interpret the Item 20 data in the context of the overall franchise system's health and growth.

Explanation

This risk was not identified in the FDD. Item 20 data shows slow and controlled growth, with only one new franchise added in the past two years. This suggests the franchisor is not expanding at a rate that would likely strain its support systems. Rapid growth can sometimes stretch a franchisor's resources, potentially leading to inadequate training and support for franchisees.

Potential Mitigations

• Speaking with franchisees who opened at different times can provide insight into the consistency of the franchisor's support systems.
• Asking a business advisor to review the franchisor’s growth plans in conjunction with its financial statements can offer a more complete picture.
• Confirmation with your attorney of the support obligations detailed in the Franchise Agreement ensures you understand what is contractually guaranteed.

Explanation

This risk does not appear to be present. The business model, focused on culinary education and entertainment for children and families, serves a market with demonstrated and ongoing demand. While subject to trends in family activities, the core concept of cooking classes is well-established and less likely to be a short-term fad compared to more niche or novelty concepts. This suggests a greater potential for long-term viability.

Potential Mitigations

• It is wise to conduct your own local market research with a business advisor to gauge long-term demand for these services in your area.
• Assessing the business's adaptability to changing consumer preferences should be part of your due diligence process.
• Discuss the concept's long-term appeal with current franchisees to understand its resilience through different economic cycles.

Explanation

This risk was not identified in the FDD. Item 2 indicates that the key executives have substantial and long-term experience in this specific industry, with the founder operating a similar business since 2007 and offering franchises since 2013. This level of direct industry and franchising experience is a positive factor, as it suggests the management team has a deep understanding of the business operations and franchisee needs.

Potential Mitigations

• It is still valuable to interview current franchisees about their perception of the management team's competence and the quality of support provided.
• A business advisor can help you evaluate the information in Item 2 to confirm the management team's experience aligns with the system's needs.
• Your attorney can confirm that the support obligations outlined in the Franchise Agreement are clearly defined.

Explanation

The risk of private equity ownership does not appear to be present. Item 1 of the FDD does not disclose that Taste Buds LLC is owned by a private equity firm. The business appears to be founder-led. This can be a positive attribute, as it often means that decision-making is focused on the long-term health of the brand rather than short-term investor returns, which can sometimes be a concern with private equity ownership.

Potential Mitigations

• Verifying the ownership structure with your attorney ensures a clear understanding of who controls the franchise system.
• It is still prudent to ask the franchisor about any long-term plans for selling the company.
• A business advisor can help you understand the potential implications of any future change in ownership.

Explanation

This risk was not identified. The FDD discloses the relationship between the franchisor, Taste Buds LLC, and its affiliate, Taste Buds Kitchen, LLC, which operates corporate locations. The franchisor's financials are provided and audited. There is no indication of a hidden parent company whose financial status would be material to your investment decision. Proper disclosure in this area allows for a more transparent assessment of the franchise system's structure and backing.

Potential Mitigations

• Your accountant should review the provided financial statements to ensure they are complete and presented according to standard accounting principles.
• It is good practice for your attorney to confirm the corporate structure and the relationship between the franchisor and any affiliates mentioned.
• Asking the franchisor to explain the roles of any affiliated companies can provide additional clarity.

Explanation

This risk does not appear to be present. Item 1 indicates the franchisor has no predecessor company. The business was developed and has been operated by the current affiliated entities since their formation. This provides a clear and consistent operational history, avoiding potential risks that can sometimes be inherited from a predecessor, such as a negative brand reputation, past litigation, or a history of franchisee failures.

Potential Mitigations

• Your attorney can confirm the corporate history as disclosed in Item 1 during the due diligence process.
• Speaking with the longest-operating franchisees can provide valuable insight into the entire history of the franchise system.
• A business advisor can help you assess the stability and track record of the franchisor since its inception.

Explanation

This risk was not identified in the FDD. Item 3 states that no litigation is required to be disclosed. The absence of a pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, is a significant positive indicator. It suggests a healthier relationship between the franchisor and its franchisees and may reflect a more stable and transparent operating environment for the franchise system.

Potential Mitigations

• Although no litigation is disclosed, asking current and former franchisees about their experiences and any disputes is a valuable part of due diligence.
• Your attorney can conduct an independent search for litigation as a final check, although the FDD is the primary source for this information.
• Understanding the dispute resolution process outlined in Item 17 is important, even in the absence of past litigation.