Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support. While Winger's projects some growth, the data in Item 20 does not show an unusually rapid expansion that would, on its own, suggest support systems are overstretched. However, monitoring the quality of support as the system grows is always important.

Potential Mitigations

• Engaging a business advisor to question the franchisor about their plans for scaling support staff and infrastructure to match future growth is a prudent step.
• You should speak with a range of existing franchisees about the current quality and responsiveness of the support they receive.
• Your accountant can help you review the franchisor's financial statements to assess if they are reinvesting sufficiently to support system growth.

Explanation

This risk was not identified in the FDD package. Winger's has been offering franchises since 1997 and its key management personnel have extensive experience in the restaurant industry. Therefore, it does not appear to be a new or unproven system. Evaluating a new system's viability requires extra scrutiny of its business model, financial backing, and management team's capabilities.

Potential Mitigations

• Even with an established system, it is wise to have your business advisor help you research the brand's current market position and competitive landscape.
• You should still speak with a broad range of franchisees to gauge their satisfaction with the system's direction and leadership.
• An accountant can help you verify the long-term financial stability and performance of the brand through its financial disclosures.

Explanation

This risk was not identified in the FDD package. The restaurant and alehouse concept is a well-established segment of the food and beverage industry, not a business based on a recent or fleeting trend. A fad business carries the risk that consumer interest could decline rapidly, potentially leaving you with a failing business and long-term contractual obligations.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm sustained consumer demand for the alehouse concept in your specific area.
• Review the franchisor's history of menu development and concept evolution with your business advisor to gauge their ability to adapt to changing tastes.
• You should always consider the long-term viability of any business concept beyond current market trends.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the key executives and directors of Winger's have many years, often decades, of experience in the restaurant and franchise industry with well-known brands. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions, weak support systems, and a higher chance of business failure.

Potential Mitigations

• A business advisor can help you verify the backgrounds and track records of the key management personnel.
• You should still ask current franchisees about their direct experiences with the management team's competence and accessibility.
• It is always a good practice to ask the franchisor about their long-term strategic vision for the company.

Explanation

This risk was not identified in the FDD package. Item 1 indicates Winger's is a subsidiary of Winger's USA, Inc. and describes the relationship, but there is no disclosure of ownership by a private equity firm. Private equity ownership can introduce risks related to a focus on short-term returns over the long-term health of the brand and its franchisees.

Potential Mitigations

• Your attorney can help you investigate the franchisor's ownership structure to confirm the absence of private equity involvement.
• It is wise to ask the franchisor about any potential plans for a sale of the company that could affect your investment.
• A business advisor can help you research the ownership history of the company for any past private equity involvement.

Explanation

This risk was not identified in the FDD package. The document clearly identifies Winger's Franchising, Inc. as the franchisor and its parent, Winger's USA, Inc., and states there are no other predecessors required to be disclosed. A predecessor is a company from which the franchisor acquired the main assets of the business, and their history can be important for understanding the franchise system's background.

Potential Mitigations

• Your attorney can help you verify the corporate history of the franchisor to ensure no relevant predecessors have been omitted.
• You should ask long-tenured franchisees about the history of the company and any previous ownership structures.
• Independent research on the brand's history can sometimes reveal information about prior business entities, which you can do with your business advisor.

Explanation

This risk was not identified in the FDD package. Item 3 states, 'No litigation is required to be disclosed in this Item.' The absence of disclosed litigation against the franchisor, particularly from franchisees alleging fraud or misrepresentation, is a positive indicator. A pattern of such lawsuits would be a significant red flag about the franchisor's practices and system health.

Potential Mitigations

• Your attorney can conduct an independent search of public court records to verify the absence of material litigation.
• You should still ask current and former franchisees if they are aware of any significant legal disputes with the franchisor.
• Understanding the franchisor's dispute resolution history, even informal disputes, provides valuable insight.