Explanation

This risk was not identified. The audited financial statements for TOUS LES JOURS INTERNATIONAL CORP. (TLJIC) show significant profitability, positive net worth, and strong revenue growth, indicating financial stability. Franchisor financials are important because a financially weak franchisor may be unable to provide promised support, invest in the brand, or even remain in business, jeopardizing your investment. TLJIC appears to be financially healthy based on the provided statements.

Potential Mitigations

• An experienced franchise accountant should review the franchisor's financial statements, including footnotes and the auditor’s report, for a comprehensive understanding of their financial health.
• Discuss the franchisor's financial condition and their plans for supporting the system with your business advisor.
• It is wise to ask your accountant to analyze revenue sources to confirm the franchisor relies on ongoing royalties rather than one-time franchise fees for its income.

Explanation

This risk was not identified. The data in Item 20's tables for 2022-2024 shows very low franchisee turnover, with only one or two terminations per year against a growing base of over 100 outlets. High turnover can be a major red flag indicating systemic problems such as lack of profitability or franchisee dissatisfaction. The low turnover and high number of new openings in this system suggest a stable and growing franchisee base.

Potential Mitigations

• Your business advisor can help you calculate the annual turnover rate from Item 20 data to confirm system stability.
• Speaking with current and former franchisees from the lists in Item 20 is a crucial step to verify satisfaction levels.
• Your attorney should help you frame questions for the franchisor regarding the circumstances of any terminations or transfers.

Explanation

This risk was not identified. TLJIC has been franchising since 2009 and, as disclosed in Item 20, has over 100 operating outlets. An unproven system presents higher risks because its business model, brand recognition, and support structures are not yet time-tested. This franchise has a significant operating history and a substantial number of franchisees, indicating it is an established system.

Potential Mitigations

• When evaluating any franchise, it is crucial to have your business advisor assess the franchisor's history and the maturity of its systems.
• An accountant can analyze the financial statements to determine if the business shows a history of stable, long-term operations.
• Your attorney should help you investigate the track record of the brand and its management team.

Explanation

This risk was not identified. The business is a French-Asian style bakery-café, which is a concept within the well-established and durable food and beverage industry. A fad business is one tied to a fleeting trend, creating risk that consumer interest will decline, leaving you with a failed business and long-term obligations. This concept appears to be based on a stable market sector.

Potential Mitigations

• A business advisor can help you research the long-term market trends for any industry you consider entering.
• Assessing a company's plans for product innovation and adaptation is key to determining its long-term viability.
• Your financial advisor can help evaluate a business model's resilience to economic shifts and changing consumer tastes.

Explanation

This risk was not identified. Item 2 of the FDD indicates that the key executives at TLJIC have extensive and long-term experience with the parent company, CJ Foodville, and in the food service industry, including with direct competitors. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions and inadequate support for franchisees. The management team here appears to be highly experienced.

Potential Mitigations

• Reviewing the résumés of the management team in Item 2 with a business advisor is a critical due diligence step.
• It is always wise to ask existing franchisees about their direct experiences with the franchisor's management team and the quality of support they provide.
• An attorney can help investigate the public track record and reputation of the franchisor's key personnel.

Explanation

This risk was not identified. FDD Item 1 shows that TLJIC is a subsidiary of a large, publicly-traded international corporation (CJ Foodville), not a private equity firm. PE ownership can sometimes introduce risks related to short-term profit motives that may not align with the long-term health of the franchise system. This franchise is under corporate ownership.

Potential Mitigations

• A business advisor can help you investigate the ownership structure of any franchisor to understand their strategic goals.
• It is prudent to ask your attorney to review any clauses in the franchise agreement that relate to the sale or transfer of the entire franchise system.
• Talking to other franchisees about any changes since an ownership change can provide valuable insight.

Explanation

This risk was not identified. Item 1 of the FDD indicates TLJIC has no predecessors. A predecessor is a company from which the franchisor acquired the business, and their history can sometimes hide past problems like litigation or high franchisee failure rates. As there is no predecessor history to consider, this specific risk is not applicable here.

Potential Mitigations

• Your attorney should always verify the predecessor history disclosed in Item 1 to ensure it is complete.
• If a predecessor exists, researching its public record for issues like litigation or bankruptcy can be a key due diligence step with a business advisor.
• When a predecessor is involved, it is wise to speak with long-term franchisees who operated under the previous ownership.

Explanation

This risk was not identified. FDD Item 3 states that no litigation is required to be disclosed. A pattern of lawsuits, especially those initiated by franchisees alleging fraud or misrepresentation, is a significant red flag indicating potential systemic problems. Similarly, a high volume of lawsuits initiated by the franchisor against franchisees can suggest an overly aggressive or litigious culture. No such pattern is disclosed here.

Potential Mitigations

• Your attorney should carefully review any litigation disclosed in Item 3 to understand the nature and potential impact of the claims.
• A business advisor can help you conduct independent online searches for any news or discussions regarding litigation involving the franchisor.
• Asking current and former franchisees about their awareness of any legal disputes within the system is a crucial part of due diligence.