Explanation

Item 20 tables show a relatively low rate of franchisee departures over the past three years, with no terminations. In the most recent year, there were 3 non-renewals and 2 units that ceased operations for other reasons out of a base of 182 outlets. While any departure warrants investigation, this data does not suggest a high turnover problem within the system at this time.

Potential Mitigations

• It is still valuable to contact some of the former franchisees listed in Exhibit C to understand their reasons for leaving the system.
• Your business advisor can help you interpret the turnover data in the context of the travel agency industry.
• When speaking with current franchisees, your attorney can help you formulate questions about system satisfaction and profitability.

Explanation

This risk was not identified. The franchise system has experienced slow, stable growth over the past three years, as shown in Item 20. Rapid growth can strain a franchisor's ability to provide support, so it's a factor worth considering, but it does not appear to be a concern here.

Potential Mitigations

• Discussing the franchisor's growth strategy and support infrastructure with a business advisor is a good practice.
• An accountant can review the franchisor's financial statements to assess if they have the resources to support future growth plans.
• Your attorney can review the support obligations outlined in the License Agreement.

Explanation

This risk is not present. Item 1 shows the franchisor has a long operational history dating back to 1984, operating through various corporate entities and mergers. This is an established system, not a new or unproven one, which would carry the risk of failure that can accompany emerging brands.

Potential Mitigations

• A business advisor can still help you research the franchisor’s history and reputation under its previous names.
• It is always wise to have an attorney review the franchisor's full corporate history as disclosed in Item 1.
• Even with established systems, having an accountant review several years of financial statements provides valuable insight.

Explanation

This risk was not identified. The franchise is for a travel agency, a long-established industry. While the travel industry evolves with technology and economic trends, it is not considered a fad business, which would carry the risk of declining consumer interest over time.

Potential Mitigations

• A business advisor can help you analyze the long-term trends and competitive landscape of the travel agency industry.
• Developing a business plan with your accountant that accounts for potential industry shifts is a sound strategy.
• Your attorney can review the franchise agreement for flexibility in adapting to future market changes.

Explanation

This risk was not identified. The management team detailed in Item 2 possesses extensive and long-standing experience within the travel and franchise industries at major companies. An inexperienced management team can be a significant liability for a franchise system, but that does not appear to be a concern here.

Potential Mitigations

• It can still be beneficial to perform your own research on the key executives' reputations and track records with the help of a business advisor.
• When speaking with franchisees, ask about their direct experiences and the quality of leadership from the management team.
• Your attorney can help you understand the corporate structure outlined in Item 1 and Item 2.

Explanation

This risk is not present. Item 1 outlines a detailed history of predecessor companies and mergers. The document does not indicate any current or recent negative history, such as litigation or bankruptcy, associated with these predecessors that would pose a present risk to you as a new franchisee.

Potential Mitigations

• A business advisor can help you perform independent research on the historical reputation of the predecessor companies.
• When speaking with long-tenured franchisees, asking about their experiences during previous ownership changes can provide valuable context.
• Your attorney can confirm that the predecessor disclosures in Items 1, 3, and 4 appear complete and compliant.

Explanation

This risk was not identified. Item 3 of the FDD states that there is no litigation that requires disclosure. A pattern of lawsuits, especially from franchisees alleging fraud, can be a major red flag about the health of the franchise relationship, but that concern is not raised by this document.

Potential Mitigations

• Your attorney can help you perform a public records search to independently verify if there is any litigation that might not have met the technical disclosure threshold.
• It is always a good practice to ask current and former franchisees about their experiences with disputes and the franchisor's approach to conflict.
• A business advisor can help you research the franchisor's general reputation in the industry.