Explanation

This specific risk was not identified in the FDD package. The data in Item 20 shows a shrinking system, not one undergoing rapid growth. Rapid growth can strain a franchisor's ability to provide adequate support, so its absence is notable. However, the system's decline presents its own set of significant risks.

Potential Mitigations

• You should still discuss the franchisor's historical growth patterns and future plans with your business advisor to understand their long-term strategy.
• An accountant can help you evaluate a franchisor's capacity to support its existing system, regardless of its growth rate.
• In discussions with your attorney, confirm that the franchisor’s support obligations are clearly defined in the franchise agreement.

Explanation

This specific risk was not identified in the FDD package. The concept of a quick-service Thai restaurant is part of an established segment of the fast-casual food industry. While subject to changing consumer tastes, it does not appear to be based on a short-term or fleeting trend that would jeopardize its long-term viability.

Potential Mitigations

• Working with a business advisor to research long-term consumer trends in the fast-casual dining space is still a valuable exercise.
• Your financial advisor can help you assess the business model's resilience to economic shifts and competition.
• It is wise to have your attorney review any terms that would lock you into a long-term contract, regardless of the business type.

Explanation

This specific risk was not identified in the FDD package. Item 2 details the business experience of the franchisor's management team. The executives listed generally have extensive backgrounds in the restaurant and franchising industries, many with long tenures at the parent company, MTY Food Group, or its large subsidiary, Kahala Brands. Management inexperience does not appear to be a concern.

Potential Mitigations

• You should still ask targeted questions during discussions with the franchisor to gauge the management team's direct involvement and vision for this specific brand.
• A business advisor can help you research the public reputation and track record of the key executives mentioned in Item 2.
• Verifying with current franchisees their opinion of the management team's competence and support is a valuable step.

Explanation

This specific risk was not identified in the FDD package. According to Item 1, the ultimate parent company is MTY Food Group, Inc., which is a publicly-traded corporation on the Toronto Stock Exchange. The specific risks associated with a private equity ownership model, such as a focus on short-term returns and a predetermined exit strategy, do not directly apply here.

Potential Mitigations

• An accountant can help you analyze the financial reports of the public parent company to understand its overall health and strategy.
• Your business advisor should still investigate the parent company's history with its other franchise brands to assess its management philosophy.
• Understanding the implications of being part of a large, publicly-traded portfolio of brands is a key topic to discuss with your attorney.

Explanation

This specific risk was not identified in the FDD package. Item 1 clearly discloses the relationship between the franchisor, MTY Franchising USA, Inc., its direct parent (MTY Canada), and its ultimate parent (MTY Food Group, Inc.). Furthermore, the FDD includes audited financial statements for the U.S. franchisor entity as required, so there is no failure to disclose a relevant parent or its financials.

Potential Mitigations

• A franchise attorney should always be consulted to confirm that the corporate structure is clearly disclosed and that all required financial statements are included.
• It is important for your accountant to analyze the financial relationship between the franchisor and its parent, as detailed in the financial statement notes.
• Discussing the complex corporate structure with a business advisor will help you understand how it might impact brand-level support and decision-making.

Explanation

This specific risk was not identified in the FDD package. The franchisor, MTY USA, clearly identifies its predecessors and affiliates, such as Kahala, Famous Dave's, and SweetFrog, throughout Item 1. The litigation history for these entities is detailed in Item 3. While the history itself presents risks, the FDD does not appear to be hiding the existence or history of these predecessor entities.

Potential Mitigations

• A careful review of the history of all predecessor entities with your attorney is crucial to understanding the background of the system you are joining.
• Your business advisor can help you research the public perception and history of these predecessor brands.
• Asking existing franchisees about their experience during any ownership transitions can provide valuable insight.