Explanation

This risk was not identified in the FDD package. Wayback LLC has been offering franchises since 2002, indicating it is an established system. An unproven system can present higher risks, as it may lack a refined business model, established brand recognition, or experienced management, potentially leading to a higher rate of failure for new franchisees. It is generally safer to invest in a system with a demonstrated track record of success over several years.

Potential Mitigations

• When evaluating any franchise, it is prudent to have a business advisor help you research the franchisor's history and the track record of its management team.
• Your accountant can analyze financial statements to assess the stability and maturity of the franchise system.
• Consulting with an attorney to understand the legal history and structure of the franchisor is a key due diligence step.

Explanation

This risk was not identified in the FDD package. The Wayback Burgers concept, focused on hamburgers and milkshakes, operates in a well-established and long-standing segment of the restaurant industry, rather than being based on a new or fleeting trend. Investing in a fad business carries the risk that consumer interest may decline quickly, potentially leaving you with a failing business and long-term contractual obligations to the franchisor long after the trend has passed.

Potential Mitigations

• A business advisor can help you conduct independent market research to assess the long-term consumer demand for any franchise concept's products or services.
• Your accountant can help model the financial viability of a business beyond its initial popularity.
• An attorney should review the franchise agreement term to ensure you understand the length of your commitment.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the key executives at Wayback LLC have extensive experience in the franchise and restaurant industries. Inexperienced management can be a significant risk, as they may lack the necessary skills to provide effective training, support, and strategic direction. This can lead to operational inefficiencies and a higher risk of failure for franchisees who depend on the franchisor's guidance and expertise.

Potential Mitigations

• It is wise to have a business advisor help you thoroughly vet the backgrounds of the franchisor's key management personnel.
• Asking current franchisees about their direct experiences with the management team can provide valuable insights.
• An attorney can help you understand how the experience level of the franchisor might affect their legal and contractual obligations to you.

Explanation

This risk was not identified in the FDD package; Wayback LLC does not appear to be owned by a private equity firm. When a franchisor is owned by a private equity firm, there's a risk that decisions may prioritize short-term returns for investors over the long-term health of the franchise system. This can sometimes lead to reduced franchisee support, increased fees, or pressure to use specific vendors to increase profitability for the ownership group.

Potential Mitigations

• A business advisor can help research the ownership structure of any franchisor and the track record of any parent private equity firm.
• It is important to ask current franchisees about any changes in support or system direction after an acquisition.
• An attorney should review any clauses that give the franchisor broad rights to sell or assign the franchise system.

Explanation

This risk was not identified in the FDD package. Item 1 discloses affiliates, such as HubSpoke Brands LLC and Viddl's LLC, and Item 21 provides the required financial statements for the franchisor entity, Jake's Franchising, LLC. Failure to disclose parent companies or their financials when they guarantee obligations can hide significant risks, as the true financial stability and backing of the franchise system may be obscured from a prospective franchisee's view.

Potential Mitigations

• Your attorney should verify the corporate structure and ensure all relevant parent and affiliate companies are properly disclosed in Item 1.
• An accountant should confirm that all required financial statements, including those of any guarantor parent company, are provided and meet accounting standards.
• If a parent company's backing is a key selling point, a business advisor can help you assess the substance of that support.

Explanation

This risk was not identified in the FDD package. Item 1 does not disclose any predecessors from whom Wayback LLC acquired the business. When a franchisor has predecessors, it's important to scrutinize their history for issues like litigation, bankruptcy, or high franchisee failure rates. Incomplete disclosure can hide systemic problems that may have been inherited by the current franchisor, giving you an incomplete picture of the brand's historical challenges.

Potential Mitigations

• An attorney should always review Item 1 carefully for any mention of predecessors.
• If predecessors are mentioned, a business advisor can help you research their history and reputation.
• Speaking with long-term franchisees who operated under the predecessor can provide invaluable historical context.

Explanation

This risk was not identified in the FDD package. Item 3 states, 'No litigation is required to be disclosed in this Item.' While this is a positive sign, it does not mean a complete absence of legal disputes, only that none met the specific disclosure requirements of franchise law. A pattern of franchisee-initiated lawsuits alleging fraud or franchisor-initiated suits against franchisees can be a major red flag indicating systemic problems or an overly aggressive franchisor.

Potential Mitigations

• Your attorney should always review Item 3 and can conduct independent searches for litigation involving the franchisor.
• It is prudent to ask current and former franchisees about their experiences with disputes and the franchisor's approach to conflict resolution.
• A business advisor can help you assess whether any disclosed litigation points to broader operational or relationship issues within the system.