Explanation

Analysis of Item 20 data from 2022-2024 reveals very low franchisee turnover, with no terminations, non-renewals, or cessations for franchised units. This is a positive indicator of system stability and franchisee satisfaction. However, the franchisor's affiliate closed four company-owned locations in the same period, two of which were attributed to a wildfire. The reasons for the other two closures are not specified.

Potential Mitigations

• You should still contact current and former franchisees listed in Item 20 to discuss their experiences and satisfaction levels.
• Your business advisor can help you inquire with the franchisor about the circumstances surrounding the two non-wildfire company store closures.
• Continuing to monitor Item 20 in future FDDs for any changes in these positive trends is a prudent step.

Explanation

The business model is centered on high-quality Hawaiian shave ice, a popular dessert item. While the brand has been operating since 2008, the broader market for specialty, high-end dessert concepts can sometimes be influenced by trends. You should consider the long-term, sustained consumer demand for this specific product in your local market beyond novelty or seasonal appeal. The business is noted as potentially seasonal, which could affect year-round revenue streams depending on location and climate.

Potential Mitigations

• Engaging a business advisor to conduct local market research is essential to gauge the year-round demand for shave ice in your area.
• You should discuss the business's seasonality with current franchisees in various climates to understand its impact on profitability.
• An accountant can help you model the financial effects of seasonal sales fluctuations on your cash flow and profitability.

Explanation

This specific risk was not identified in the FDD Package. The management team, including the founding members, appears to have significant, long-term experience operating the Ululani's Hawaiian Shave Ice concept since 2008 through an affiliate company, and have been managing the franchise system since 2016. In franchising, inexperienced management can lead to poor support and strategic errors. It is a positive factor that the leadership has substantial brand and operational history.

Potential Mitigations

• It is still advisable to interview current franchisees about their direct experiences with the management team's support and strategic direction.
• A business advisor can help you research the professional backgrounds of the key executives listed in Item 2.
• Seeking information from franchisees about the quality of training and operational guidance can provide insight into management's effectiveness.

Explanation

This specific risk was not identified in the FDD Package. Item 1 does not indicate that the franchisor is owned or controlled by a private equity firm. When this ownership structure exists, there can be a focus on short-term returns over the long-term health of the franchise system, which may affect decisions regarding fees, support, and overall strategy. It is a positive factor that this risk is not present.

Potential Mitigations

• Your attorney can help you verify the ownership structure of the franchisor through public records.
• During discussions with the franchisor, it is always a good practice to inquire about any potential future plans for a sale of the company.
• A business advisor can help you understand the different types of ownership structures common in franchising.

Explanation

This specific risk was not identified in the FDD Package. The franchisor, UHSI FRANCHISE, LLC, was formed in 2015 and does not disclose any predecessors from which it acquired the business. The history of the brand's concept is tied to its affiliate, which is clearly disclosed. Therefore, there are no obscured historical issues related to a predecessor entity's litigation, bankruptcy, or franchisee failures to consider.

Potential Mitigations

• Your attorney can confirm the corporate history and verify the absence of undisclosed predecessors.
• When speaking with long-term franchisees, you can inquire about the history of the brand and its management.
• A business advisor can help you research the brand's reputation and history through public sources.

Explanation

This specific risk was not identified in the FDD Package. Item 3 states, "No litigation is required to be disclosed in this Item." The absence of a pattern of litigation, particularly franchisee-initiated lawsuits alleging fraud or franchisor-initiated suits against franchisees, is a significant positive factor. It suggests a potentially healthier franchisor-franchisee relationship compared to systems with extensive legal disputes.

Potential Mitigations

• Your attorney can still conduct public record searches for litigation as part of a thorough due diligence process.
• It is always a good practice to ask current and former franchisees about any disputes they may be aware of, even if not disclosed in Item 3.
• You should understand the dispute resolution process outlined in Item 17 with your attorney in case a conflict arises in the future.