Explanation

This risk is not identified in the FDD Package. Item 20 data shows the franchise system has been shrinking, not growing rapidly, over the past three years. Rapid growth can strain a franchisor's ability to provide adequate support. While not a risk here, you should always assess if a franchisor has the infrastructure to support its growth plans.

Potential Mitigations

• A business advisor can help you evaluate a franchisor's growth plans against their support staff and financial resources.
• Speaking with a mix of new and established franchisees can provide insight into the current quality of franchisor support.
• Your accountant should review the franchisor's financial statements to determine if they are investing sufficiently in support infrastructure.

Explanation

This risk was not identified. Which Wich Franchise, Inc. (WWFI) has been in business since 2003 and franchising since 2004, indicating an established system. For new franchises, it is crucial to assess the business model's viability and the management team's experience, as there is less historical data to rely on.

Potential Mitigations

• When evaluating a newer system, consulting with a business advisor to research the founders' industry and franchising experience is vital.
• An accountant should be engaged to scrutinize a new franchisor's capitalization and financial stability.
• Your attorney can help you negotiate more franchisee-favorable terms to compensate for the higher risks associated with an unproven brand.

Explanation

This risk is not identified. The franchise operates in the sandwich segment of the fast-casual restaurant industry, which is a well-established market rather than a short-term fad. When considering any franchise, it is wise to evaluate whether the core product has long-term consumer appeal beyond current trends.

Potential Mitigations

• A business advisor can help you research the long-term market trends for the specific industry to gauge sustainability.
• Reviewing a franchisor's plans for innovation and product development in Item 11 can provide insight into their strategy for staying relevant.
• An accountant can help you model the business's potential performance under various economic conditions, beyond the current market hype.

Explanation

This risk was not identified in the FDD. Item 2 indicates that the key leadership team has extensive and long-term experience with the brand and in the franchise industry. When evaluating a franchise, assessing the depth and relevance of the management team's experience is a key part of due diligence.

Potential Mitigations

• When analyzing a franchisor, a business advisor can help you investigate the background of each member of the management team.
• It is prudent to ask current franchisees about their direct experiences with the leadership team's support and strategic direction.
• Your attorney should review Item 2 to ensure the disclosed experience is relevant to managing a franchise system.

Explanation

This risk was not identified in the FDD. The franchisor does not appear to be owned by a private equity firm. When a PE firm owns a franchisor, it can introduce risks related to short-term profit motives that may not align with the long-term health of franchisees and the brand.

Potential Mitigations

• A business advisor can help you research the ownership structure of any franchisor to identify potential private equity involvement.
• If a PE firm is involved, it's wise to investigate its track record with other franchise brands it has owned.
• Your attorney should review the franchise agreement for terms that might change upon a sale of the franchise system.

Explanation

This risk was not identified. The FDD states the franchisor has no parent company. It does disclose several affiliated companies and the relationships between them, such as for operational support. A clear understanding of the corporate structure and any parent company's role is important for assessing financial backing and stability.

Potential Mitigations

• If a franchisor is a subsidiary, your attorney should confirm whether the parent company guarantees the franchisor's obligations.
• An accountant should review the financials of any parent company if they are provided or required by law.
• Understanding the flow of money between a franchisor and its parent with a business advisor can reveal important insights.

Explanation

This risk was not identified in the FDD, as the franchisor states in Item 1 that it has no predecessor. In cases where a franchisor has acquired the system from a predecessor, it is important to scrutinize the predecessor's history for any signs of litigation, bankruptcy, or high franchisee turnover.

Potential Mitigations

• Your attorney should carefully review Item 1 for any mention of predecessors or recent acquisitions of assets.
• A business advisor can help you research the history of a brand if it has operated under different corporate names.
• Asking long-tenured franchisees about their experiences under previous ownership can provide valuable context.

Explanation

This risk was not identified. Item 3 of the FDD states that no litigation is required to be disclosed. A pattern of lawsuits, especially those initiated by franchisees alleging fraud or misrepresentation, can be a significant red flag about a franchisor's practices and the health of the system.

Potential Mitigations

• Your attorney should always carefully review the details of any lawsuits disclosed in Item 3.
• It can be beneficial to have a business advisor help you understand the business implications of any disclosed litigation.
• Even if no litigation is disclosed, asking current franchisees about the general state of franchisee-franchisor relations is a prudent step.