Explanation

This risk is not prominent, as the system is small and not growing rapidly. Item 20 shows no new Area Franchises have been established. However, the lack of growth combined with recent unit closures presents a different risk related to system stagnation rather than overly rapid expansion. Your business advisor should help you evaluate the viability of a system that appears to be shrinking rather than growing.

Potential Mitigations

• Question the franchisor directly about their capacity and plans for scaling support infrastructure if growth does occur.
• Interview a broad range of existing franchisees about the current quality and responsiveness of franchisor support.
• Your accountant should review the franchisor's financials in Item 21 to assess if they have the resources to support any future growth.

Explanation

This risk was not identified. The key executives listed in Item 2, particularly the CEO and Director of Operations, appear to have several years of direct experience with The Growler Guys brand and business operations, both before and after the current franchisor entity was formed. This experience may provide a degree of operational stability and understanding of the business model, although their experience in managing an Area Developer network specifically is unproven.

Potential Mitigations

• A business advisor can help you further vet the management team's background, particularly their experience with multi-level franchise structures.
• Discuss the quality of management and support with current and former unit franchisees.
• Clarify the specific roles and responsibilities of each management team member in supporting you as an Area Franchisee.

Explanation

This specific risk was not identified. Item 1 of the FDD does not indicate that the franchisor, Black Beer LLC, is owned by a private equity firm. The ownership appears to be held by private individuals or their closely held companies. Therefore, the specific risks associated with a private equity ownership model, such as a focus on short-term returns over system health, do not appear to be present here.

Potential Mitigations

• Your attorney should always confirm the ownership structure disclosed in Item 1.
• It is good practice to research the ownership of any franchise system with your business advisor to understand their background and history.
• Discuss any known ownership changes and their impact on the system with current franchisees.

Explanation

This risk was not identified in the documents. Item 1 appears to clearly identify the franchisor, Black Beer LLC, and its relevant affiliates. There is no indication of a parent company whose financials would be material to the franchisee's decision but have not been disclosed. The provided financials in Item 21 are for the franchisor entity itself.

Potential Mitigations

• Your attorney should always verify the corporate structure and identify any parent companies.
• If a parent company exists and guarantees the franchisor's performance, it is crucial for your accountant to review their financial statements.
• Understand the legal relationship between the franchisor and any parent or affiliate entities with the help of your attorney.

Explanation

Item 1 discloses that Black Beer LLC acquired the assets of a predecessor, The Growler Guys, LLC, in 2019. The FDD reports no required disclosures for litigation or bankruptcy related to this predecessor. While the disclosure appears compliant, you are inheriting a brand with a history under different ownership. Understanding this history is important for assessing the brand's long-term trajectory and any inherited reputational issues.

Potential Mitigations

• A business advisor can help you research the business reputation of the predecessor entity.
• When speaking with longtime franchisees, it's wise to ask about their experiences under the previous ownership.
• Your attorney can help you understand any liabilities or obligations that may have been assumed from the predecessor.

Explanation

This risk was not identified. Item 3 of the FDD states, "No litigation is required to be disclosed in this Disclosure Document." This indicates there have been no recent, material legal actions involving the franchisor related to fraud, franchise law violations, or other significant matters that would legally require disclosure. This is a positive indicator, though it does not guarantee the absence of all disputes.

Potential Mitigations

• Your attorney should confirm that the disclosure meets all state and federal requirements for litigation reporting.
• When interviewing franchisees, it is still prudent to ask about any disputes they are aware of, even those not meeting the threshold for disclosure.
• A business advisor can help you perform online searches for news or discussions related to the franchisor for additional context.