Explanation

This risk was not identified in the FDD package. Item 20 data indicates that the system's growth has recently stalled and slightly declined, rather than expanding at a rate that might strain support resources. Rapid, uncontrolled growth can sometimes be a red flag, as it can overwhelm a franchisor's ability to provide adequate training and assistance to its new franchisees, potentially harming the entire system.

Potential Mitigations

• A business advisor can help you evaluate if the franchisor's current size and growth trajectory align with a sustainable support structure.
• In discussions with current franchisees, you might ask about the quality and timeliness of support they receive from the corporate office.
• An accountant's review of the franchisor's financials can offer insight into whether they are investing sufficiently in support infrastructure for their system size.

Explanation

The business operates in the trendy bubble tea market. While this sector is currently popular, there is a risk that it could be a long-term trend or a shorter-term fad. A decline in consumer interest in this specific beverage category could negatively impact your business's long-term viability, even if the brand itself is managed well. Your success may be tied to the sustained popularity of the bubble tea concept.

Potential Mitigations

• Conducting independent market research with a business advisor is important to assess the long-term consumer demand for bubble tea in your specific area.
• Question the franchisor about their strategy for product innovation and adaptation to evolving consumer tastes.
• Your financial plan should be developed with an accountant, considering the potential volatility of trend-based markets.

Explanation

This specific risk was not identified. The executives profiled in Item 2 appear to have several years of experience with the Tiger Sugar brand or in the broader food and beverage industry. For instance, key personnel have been involved in developing and operating Tiger Sugar stores in North America since 2019 or earlier. In franchising, inexperienced management can be a significant concern, potentially leading to weak support and poor strategic decisions.

Potential Mitigations

• It's always wise to have a business advisor help you research the backgrounds of the franchisor's key management team.
• When speaking with existing franchisees, asking about their perception of the management team's competence and vision is a valuable due diligence step.
• An attorney can help you understand the management structure and how decisions are made within the franchise system.

Explanation

This risk was not identified in the FDD package. The ownership structure detailed in Item 1 describes a parent company, Tiger Sugar International Co., Ltd., and various affiliates, but does not indicate that the franchisor is owned or controlled by a private equity firm. Private equity ownership can sometimes introduce risks related to short-term profit motives over the long-term health of the brand.

Potential Mitigations

• As a general practice, your attorney can help you verify the franchisor's corporate structure and ultimate ownership.
• Understanding the ownership of a franchise system is a key part of due diligence that a business advisor can assist with.
• When evaluating any franchise, it is helpful to research the ownership's track record with other businesses or franchise brands.

Explanation

This risk was not identified. Item 1 of the FDD clearly discloses the existence of a parent company, Tiger Sugar International Co., Ltd. Therefore, the franchisor is not concealing its parent entity. However, it is important to note that the parent company's financial statements are not included in the FDD, which can limit your ability to fully assess the financial strength of the organization providing support.

Potential Mitigations

• Your accountant should analyze the provided franchisor financials and the parent's letter of support to assess the overall financial picture.
• It is prudent to have your attorney review the parent's letter of support to understand the extent and enforceability of the commitment.
• A business advisor can help you understand the potential risks of a complex international corporate structure.

Explanation

This risk does not appear to be present, as Item 1 of the FDD states, "We have no predecessors." A predecessor is a company from which the franchisor acquired the business, and a review of their history can sometimes reveal past issues like litigation or bankruptcy. The absence of a predecessor means the franchisor's own history, as disclosed, is the relevant track record to evaluate.

Potential Mitigations

• Your attorney should always verify the information in Item 1 regarding predecessors and the franchisor's formation history.
• A business advisor can help you research the full history of the brand and its key executives, even if no formal predecessor is listed.
• When speaking to long-term franchisees, you can inquire about the history of the system and any prior ownership structures.