Explanation

This risk was not identified in the FDD package. As a new franchisor, VP LLC has no history of franchisee turnover to report in Item 20. High turnover is generally a significant red flag indicating potential systemic problems, franchisee dissatisfaction, or lack of profitability. You will be among the first franchisees, so there is no track record to evaluate. This lack of data is itself a risk associated with a new system.

Potential Mitigations

• A business advisor can help you understand the unique risks of being an early franchisee in a new system.
• It is vital to speak with the franchisor's affiliate, Travel Planners International, Inc., about their long-term dealer relationships.
• Your attorney can help formulate questions regarding the franchisor’s support plans to retain new franchisees.

Explanation

This risk was not identified, as the franchise system is new with no operating units. Rapid growth can strain a franchisor's resources, potentially leading to inadequate support for franchisees. While VP LLC projects opening several units, you should monitor whether their support infrastructure, which relies on an experienced affiliate, can scale effectively if growth accelerates in the future.

Potential Mitigations

• Engaging a business advisor to assess the franchisor's plan for scaling support infrastructure is recommended.
• Your accountant should review the franchisor's financials to see if they can support future growth.
• Discussing support capacity with the franchisor's management team would be a prudent step.

Explanation

This risk was not identified. The travel agency industry is a well-established and mature market, not a fleeting trend or fad. While the industry evolves with technology and economic conditions, the core service of travel planning has sustained consumer demand. The risk of the entire business concept becoming obsolete due to it being a short-term fad appears low.

Potential Mitigations

• A business advisor can help you analyze the long-term trends and competitive landscape within the travel industry.
• Researching the resilience of the travel agent model through economic cycles would provide valuable context.
• Discussing the franchisor's strategies for adapting to technological changes in the travel sector is recommended.

Explanation

This risk was not identified. The FDD does not indicate that VP LLC or its parent companies are owned by a private equity firm. Therefore, the risks often associated with PE ownership, such as a focus on short-term returns over long-term system health or a quick resale of the brand, do not appear to be present based on the disclosure.

Potential Mitigations

• Your attorney can confirm the ownership structure of the franchisor during due diligence.
• Understanding the long-term vision of the individual owners by speaking with them directly is advisable.
• A business advisor can help you research the background and reputation of the principal owners.

Explanation

This risk was not identified. The franchisor, VP LLC, does not appear to have a parent company whose financials would be required for disclosure. However, the heavy reliance on an affiliate for core services makes the affiliate's health material. It's important to understand this structure, even if it does not trigger a legal requirement for additional financial disclosures under franchise law.

Potential Mitigations

• Your attorney can help clarify the legal and operational relationship between the franchisor and its key affiliates.
• An accountant should analyze any potential financial dependencies between the franchisor and its affiliates.
• A business advisor can help you research the reputation and stability of the service-providing affiliate.

Explanation

This risk was not identified. Item 1 indicates the franchisor has no predecessors. A predecessor is a company from which the franchisor acquired the major portion of its assets. Without a predecessor, you must rely solely on the very limited history of the current franchisor entity, which carries its own risks related to it being a new, unproven system.

Potential Mitigations

• A business advisor can help you understand the risks of investing in a new system with no predecessor history.
• Your attorney should verify the franchisor's corporate history to confirm the absence of predecessors.
• Focus due diligence on the experience of the current management team, with help from your business advisor.

Explanation

This risk was not identified. Item 3 does not disclose any material litigation involving the franchisor, its predecessors, or its management. A pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, is a significant warning sign of systemic issues. The absence of such litigation is a positive factor, although the franchisor's operating history is very short.

Potential Mitigations

• Your attorney should still conduct an independent public records search for any litigation not required to be disclosed in the FDD.
• It is good practice to ask current franchisees, once available, about any disputes within the system.
• Asking a business advisor about common dispute areas in franchising can provide helpful context.