Explanation

This risk was not identified in the FDD package. The franchisor is a startup and is not experiencing rapid growth; rather, it has no franchisees yet. Rapid growth can strain a franchisor's ability to provide support, so while not a current risk here, monitoring the pace of future expansion is important if you choose to invest.

Potential Mitigations

• If you invest, your business advisor can help you monitor the franchisor's growth rate and its corresponding investment in support infrastructure.
• Regularly communicating with other franchisees, as the system grows, will be vital to gauge the quality of franchisor support.
• Your attorney can review the franchisor's obligations for support in the Franchise Agreement to understand what is contractually required as the system expands.

Explanation

This risk was not specifically identified. The business is a convenience store, a well-established industry, not typically considered a fad. However, any retail concept's success depends on its ability to adapt to changing consumer tastes and local market competition. Your success will depend on management skills and adapting the product mix to local demand, within the franchisor's constraints.

Potential Mitigations

• A business advisor can help you analyze the local market to ensure the Teja Mart concept is a good fit for your community's long-term needs.
• Before investing, develop a business plan that assesses the sustainability of the product and service mix.
• Discuss the franchisor’s plans for future innovation and adaptation with your business advisor to gauge long-term vision.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that the franchisor is owned by a private equity firm. This type of ownership can introduce risks related to prioritizing short-term investor returns over the long-term health of the franchise system. Since it is not present here, it is not a direct concern for this investment.

Potential Mitigations

• An attorney can help you understand the franchisor's ownership structure and any potential plans for future sale of the company.
• As a general practice, your business advisor can help research the background of any franchise system's ownership.
• If the system were to be sold in the future, consulting legal counsel on the implications of the assignment clause in the Franchise Agreement would be critical.

Explanation

This risk was not identified in the FDD package. The FDD does not disclose a parent company. The franchisor, Teja Mart Inc., appears to be a standalone entity. Therefore, risks associated with an undisclosed or financially unstable parent company are not applicable based on the documents provided.

Potential Mitigations

• Your attorney can confirm the corporate structure and ensure there are no undisclosed parent or holding companies that could affect the franchise.
• An accountant should always review the provided financial statements to ensure they are for the correct legal entity granting the franchise.
• In any franchise investment, it's wise to have a business advisor help assess the overall financial strength and backing of the franchising entity.

Explanation

This risk was not identified in the FDD package. Item 1 indicates that Teja Mart Inc. does not have a predecessor. As a new company that started franchising in 2024, there is no prior corporate history to analyze for issues like litigation, bankruptcy, or franchisee failure under a previous name. The risk here is not from a hidden past but from the lack of any history at all.

Potential Mitigations

• A business advisor can help you perform due diligence on the personal and business history of the individual principals listed in Item 2.
• Your attorney should confirm that there are no undisclosed predecessor entities through public records searches.
• Given the lack of a business history, focusing due diligence on the franchisor's current financial state with your accountant is paramount.

Explanation

This risk was not identified in the FDD package. Item 3 states there is no litigation required to be disclosed. For a new franchisor with no franchisees, this is expected. However, the absence of litigation history also means there is no track record to evaluate how the franchisor handles disputes. You should monitor this area closely if the system grows.

Potential Mitigations

• Your attorney should review the dispute resolution clauses in the Franchise Agreement carefully, as this is the only indicator of how future conflicts might be handled.
• While there is no litigation history, it is still prudent to conduct public records searches on the franchisor and its principals with the help of a legal professional.
• A business advisor can help you assess the overall business practices of the franchisor's corporate-owned stores as an indicator of their operational standards.