Explanation

The audited financial statements for Wings Etc., Inc. (Wings Etc.) appear stable. The company reported consistent net income over the past three years and maintains a positive stockholders' equity. While there are no immediate signs of financial instability, the company paid out significant dividends in 2023 and 2024, totaling over $3.2 million, which could potentially limit funds available for future system investment. This presents a low risk to you.

Potential Mitigations

• An experienced franchise accountant should review the complete, audited financial statements, including all notes, to assess the franchisor's long-term financial health.
• Discuss the franchisor's capital allocation strategy, particularly regarding reinvestment versus dividend payouts, with your financial advisor.
• Ask your accountant to analyze the franchisor's cash flow statements to understand its operational liquidity and ability to support the system.

Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support. Wings Etc. has shown slow and stable growth in its franchised unit count over the last three years, which suggests that its support infrastructure is not likely to be overstretched by rapid expansion. The franchisor appears to be growing at a measured pace, mitigating this particular risk.

Potential Mitigations

• Your business advisor can help you assess if the franchisor's support staff and infrastructure, as described in Item 2, seem adequate for the current system size.
• When speaking with existing franchisees, it's wise to ask about the quality and timeliness of the support they currently receive.
• An accountant should review the franchisor's financial statements to confirm it has the resources to support its current and projected operational needs.

Explanation

This risk was not identified. Wings Etc., Inc. (Wings Etc.) has a considerable operational history, having offered franchises since 2005. Item 2 shows that its key executives have extensive, long-term experience within the company and the restaurant industry. The system is mature, with 80 total outlets operating at the end of 2024. Therefore, the risks associated with an unproven system or inexperienced management appear to be low.

Potential Mitigations

• A business advisor can help you review the management team's experience detailed in Item 2 to confirm its relevance and depth.
• Even with a mature system, consulting with both new and long-term franchisees about their experience with the system is a valuable exercise.
• Your attorney should still verify the franchisor's corporate history and status as disclosed in Item 1.

Explanation

This risk was not identified. The business model, a sports-themed grill and pub, is a well-established and long-standing concept in the restaurant industry rather than a new or trendy one. While market tastes can change, the core offering of food, beverages, and sports entertainment has demonstrated sustained consumer demand over many decades. This suggests the business is not based on a short-lived fad, which mitigates this particular risk.

Potential Mitigations

• Your business advisor can help you conduct independent market research to assess the long-term demand for sports-bar concepts in your specific area.
• When speaking with the franchisor, inquire about their strategies for menu innovation and concept evolution to stay relevant.
• Discussing the business's resilience to economic shifts and changing consumer habits with existing franchisees can provide valuable insights.

Explanation

This risk was not identified in the FDD. Item 2 shows that the key management personnel of Wings Etc., Inc. (Wings Etc.) have extensive and long-term experience, with most executives having been with the company or its affiliates for many years. The company itself has been franchising since 2005. This depth of experience in both the restaurant industry and in franchising specifically suggests a low risk of management-related operational problems.

Potential Mitigations

• Even with an experienced team, it is beneficial to have a business advisor review the backgrounds of key personnel in Item 2.
• In discussions with current franchisees, you should still ask about their perception of management's competence and the quality of support provided.
• Your attorney can help confirm that the business experience described in Item 1 and Item 2 is accurately represented.

Explanation

This risk was not identified in the FDD package. FDD Item 1 indicates that Wings Etc., Inc. (Wings Etc.) is owned by its stockholders, and there is no disclosure of ownership by a private equity firm. The risks typically associated with private equity ownership, such as a focus on short-term returns over long-term system health, do not appear to be present based on the information provided.

Potential Mitigations

• To be certain, your attorney can help you verify the ownership structure of the franchisor through public records.
• It remains a good practice to ask the franchisor about any potential plans for a sale of the company.
• A business advisor can help you analyze the franchisor's strategic direction to see if it aligns with long-term growth and franchisee success.

Explanation

This risk was not identified in the FDD. Item 1 discloses the existence of affiliate companies (the WEOC Entities) that operate company-owned restaurants, and these affiliates are owned by the same stockholders as Wings Etc., Inc. (Wings Etc.). While parent financials are not provided, the franchisor's own financials are audited and appear stable, and there is no indication that a parent guarantee is necessary or that the franchisor is a thinly capitalized subsidiary. The disclosure appears adequate.

Potential Mitigations

• Your accountant should review the related party transactions note in the franchisor's financial statements for a complete picture of inter-company dealings.
• An attorney can confirm if the disclosures regarding affiliates in Item 1 appear to comply with franchise disclosure rules.
• It is prudent to ask your business advisor to assess the overall health and relationship between the franchisor and its operating affiliates.

Explanation

This risk was not identified in the FDD. Item 1 states that the franchisor, Wings Etc., Inc. (Wings Etc.), has no predecessors. The document notes an assignment of trademarks from JHW, Inc. in 2005, but JHW, Inc. is not described as a predecessor in a way that would suggest an acquired franchise system with a hidden history. Therefore, risks associated with an undisclosed or negative predecessor history do not appear to be present.

Potential Mitigations

• Your attorney can review the disclosures in Item 1 to confirm their adequacy regarding any predecessor entities.
• A business advisor can assist in researching the company's early history and the entities mentioned to ensure there are no unstated issues.
• Asking long-tenured franchisees about the early days of the system can provide additional historical context.

Explanation

This risk was not identified in the FDD. Item 3 explicitly states, 'No litigation is required to be disclosed in this Item.' This indicates an absence of recent or pending material litigation involving the franchisor, its predecessors, or key personnel related to fraud, misrepresentation, or franchise law violations. This suggests a low risk of systemic problems that often manifest as a pattern of franchisee-initiated lawsuits.

Potential Mitigations

• Your attorney can conduct an independent public records search to verify the absence of significant litigation.
• It is still advisable to ask current and former franchisees if they are aware of any disputes, even if they did not result in formal litigation.
• A business advisor can help you assess whether the franchisor's operational practices seem designed to avoid disputes.