Explanation

This risk was not identified in the FDD package. Item 20 data shows that as of the end of 2024, no franchised outlets had yet become operational, so there were no terminations, non-renewals, or other cessations to report. High franchisee turnover is a critical red flag in established systems, often indicating franchisee dissatisfaction or lack of profitability. It is a key metric you should monitor in future FDDs if you invest in this new system.

Potential Mitigations

• With your business advisor, you should plan to regularly communicate with other franchisees to stay informed about their satisfaction and operational health.
• An accountant can help you establish benchmarks to track your own performance against any future system-wide data that becomes available.
• If future FDDs show high turnover, a franchise attorney can help you understand your rights and the potential implications for your business.

Explanation

This risk was not identified in the FDD package. Item 20 data indicates the system is in its infancy, with only one company-owned store and one franchise agreement signed as of year-end 2024. Therefore, the system is not experiencing rapid growth. While not a current risk, should the system expand quickly in the future, it could strain the franchisor's ability to provide adequate support.

Potential Mitigations

• A business advisor can help you monitor the pace of future system growth against the franchisor's expansion of its support infrastructure.
• Maintaining open communication with other franchisees will be important for gauging the quality of support as the system grows.
• An accountant can analyze future financial statements to see if the franchisor is investing profits back into support systems.

Explanation

This risk was not identified in the FDD package. Item 1 indicates ownership is held by a corporation, Food Links International, Inc., which is in turn owned by individuals. There is no disclosure suggesting that a private equity firm owns or controls the franchisor. Therefore, the specific risks associated with a private equity firm's typical investment horizon and priorities do not appear to be present here.

Potential Mitigations

• It is good practice to ask your franchise attorney to conduct a corporate search to confirm the ownership structure of the franchisor and its parent.
• A business advisor can help you understand the potential impacts if the franchise were to be sold to a private equity firm in the future.
• When speaking with the franchisor, you might inquire about their long-term vision and any plans for future sale of the company.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses the franchisor's current parent company, Food Links International, Inc., as well as its immediate former parent. There does not appear to be an attempt to obscure the ownership structure. The financial statements provided are for the franchisor entity itself.

Potential Mitigations

• Your attorney can verify the corporate structure and the relationship between the franchisor and its parent company.
• An accountant's review should confirm if the financials of any guaranteeing parent entity are required and have been properly included.
• A business advisor can help you research the parent company's history and reputation.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD states that the franchisor does not have any predecessors. The document presents GYUSHIGE U.S.A. LLC as a relatively new entity that started the Wagyu Street brand itself, rather than acquiring it from a prior company. Therefore, risks associated with a hidden or problematic history from a predecessor entity are not applicable here.

Potential Mitigations

• A business advisor can help you research the history of the affiliate brand, Gyushige, to gain more insight into the management team's operational history.
• Your attorney can confirm the corporate history to ensure there are no undisclosed predecessor entities.
• When interviewing management, you should ask about the lessons learned from their other business ventures.

Explanation

This risk was not identified in the FDD package. Item 3 states that there is no litigation required to be disclosed. This is expected for a brand that is new to franchising and has no operating franchisees yet. The absence of litigation is a positive factor, but it provides little insight into the franchisor's practices at this early stage.

Potential Mitigations

• Your attorney can perform an independent public records search to verify that no undisclosed litigation exists against the franchisor or its principals.
• A business advisor can help you establish a process for monitoring any litigation that may arise as the system grows.
• It is prudent to ask management about their dispute resolution philosophy to gauge how they might handle future conflicts.