Explanation

The franchisor projects opening 50 new franchised outlets in the next fiscal year, a significant increase from the 33 opened in 2024. While the parent company is large, rapid expansion can strain a franchisor's ability to provide adequate site selection support, training, and operational assistance to all new and existing franchisees. You should assess if the support system is robust enough to handle this growth without diluting the quality of assistance you may receive.

Potential Mitigations

• Inquire with the franchisor about their specific plans to scale support infrastructure to match the projected growth in franchise units.
• Contacting a number of existing franchisees, especially recent ones, could provide insight into the current quality and responsiveness of franchisor support.
• Your business advisor can help you evaluate whether the franchisor's support staff and systems appear adequate for the planned expansion.

Explanation

This risk was not identified in the FDD package. Tim Hortons is a long-established brand, founded in 1964, and its U.S. franchisor entity has been operating since 2007 under a large, experienced parent company, RBI. An unproven system would lack a track record, established brand recognition, and experienced management, increasing the risk of business failure. This does not appear to be the case here.

Potential Mitigations

• When evaluating any franchise, your business advisor should help you investigate the franchisor's history and the experience of its key management.
• An accountant's review of the system's growth and franchisee turnover rates over several years can provide insight into its stability.
• Consulting with a franchise attorney is crucial to understand the risks associated with investing in a newer, less-established franchise system.

Explanation

This risk was not identified as being high for this FDD. Tim Hortons is a well-established coffee and bakery concept with decades of history and broad brand recognition. A fad business is one based on a new or fleeting trend that may not have long-term consumer demand, posing a risk of failure once the novelty wears off. While the fast-food industry is competitive, the core product offering is not based on a short-term fad.

Potential Mitigations

• With any franchise, a business advisor can help you research the long-term market demand and competitive landscape for its core products or services.
• It is prudent to evaluate the franchisor's plans for innovation and adaptation to changing consumer tastes.
• An accountant can help you model financial scenarios based on potential shifts in market trends.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the directors and officers have extensive experience in the quick-service restaurant industry, often holding various high-level positions within the parent company, RBI, and its other major brands like Burger King and Popeyes. Inexperienced management can be a major risk, as it may lead to poor strategic decisions, weak operational systems, and inadequate franchisee support.

Potential Mitigations

• Before investing, you should always review the biographies of the franchisor's key personnel in Item 2 with a business advisor.
• Speaking with current franchisees can provide valuable insight into their direct experiences with the management team's competence and support.
• Your franchise attorney can help you assess if the management team's experience is relevant to the specific industry and to franchising.

Explanation

This risk was not identified in the FDD package. The franchisor, Tim Hortons USA Inc., clearly discloses its relationship with its parent companies, Restaurant Brands International Limited Partnership (RBILP) and Restaurant Brands International Inc. (RBI). The FDD includes audited consolidated financial statements for both RBI and RBILP, which provide transparency into the financial health of the overall organization. Both parent entities also provide a performance guarantee.

Potential Mitigations

• In any franchise investment, your attorney should verify that all parent companies and material affiliates are properly disclosed in Item 1.
• If a parent company guarantees the franchisor's obligations, your accountant should ensure the parent's financial statements are included and audited.
• A business advisor can help you understand the corporate structure and assess the stability of the entire system, including all parent entities.

Explanation

This risk was not identified in the FDD package. Item 1 discloses The THD Group LLC as a predecessor that conducted franchise activities in the U.S. before merging with the current franchisor entity in 2007. The disclosure appears straightforward and does not seem to obscure any negative history. A lack of transparency about predecessors could hide past issues like high failure rates or litigation, which does not appear to be the case here.

Potential Mitigations

• Your attorney should always review the predecessor history disclosed in Item 1 for completeness and potential red flags.
• If a system was acquired from a predecessor, speaking with long-term franchisees about their experience under the prior ownership can be insightful.
• A business advisor can help you conduct independent research on a predecessor's business history if concerns arise.