Explanation

This risk was not identified in the FDD Package. The franchisor began operations in 2015, indicating it is an established system rather than a new or unproven one. However, it's always important to assess a system's maturity and track record, as newer systems may have less brand recognition and underdeveloped support structures, posing a higher risk of failure. A long and stable history can be an indicator of a more resilient business model.

Potential Mitigations

• A business advisor can help you research the company's history and its performance through different economic cycles.
• Interviewing the longest-tenured franchisees can provide valuable insight into the system's evolution and stability.
• An analysis of the system's growth and turnover rates in Item 20 with your accountant can offer clues about its long-term viability.

Explanation

The business operates in the competitive 'eatertainment' space. While indoor golf is an established concept, its combination with a food and beverage focus relies on current consumer trends. You should consider the long-term sustainability of this specific business model and its ability to withstand shifts in consumer tastes or economic downturns. A business tied too closely to a passing trend could face declining demand, impacting your long-term return on a significant investment.

Potential Mitigations

• A business advisor can help you conduct independent market research to assess the long-term demand for this type of entertainment venue in your area.
• Questioning the franchisor about their plans for innovation and adaptation to stay ahead of market trends is a prudent step.
• Evaluating the business's appeal to a diverse customer base beyond a niche group can help gauge its sustainability.

Explanation

This risk was not identified in the FDD Package. The document does not indicate that the franchisor is owned by a private equity firm. This can be a concern because PE ownership may lead to a focus on short-term profitability and a quick exit, sometimes at the expense of franchisee support and long-term brand health. Decisions might prioritize investor returns over the needs of individual franchise owners.

Potential Mitigations

• It is always good practice for your attorney to verify the full ownership structure of the franchisor entity.
• Researching the background of the principal owners with a business advisor can provide insight into their long-term goals for the system.
• Asking current franchisees about any recent changes in ownership or management philosophy is a valuable check.

Explanation

This risk was not identified in the FDD Package. The franchisor's parent company, X GOLF America, Inc., is clearly disclosed in Item 1. The franchisor has its own audited financial statements, so under FTC rules, the parent's financials are not typically required. Failure to disclose a parent company can be a significant issue, as it may obscure the ultimate control and financial backing of the franchise system, hiding potential risks from prospective franchisees.

Potential Mitigations

• Your attorney can confirm the corporate structure and the relationship between the franchisor and any parent or affiliate entities.
• If a parent company provides a guarantee, your accountant should ensure the parent's financial statements are provided and reviewed.
• Understanding the flow of funds and services between the franchisor and its parent is a key discussion point for your financial advisor.

Explanation

This risk was not identified in the FDD Package, as no predecessors are listed in Item 1. When a franchisor has a predecessor, it's important to scrutinize their history for issues like bankruptcy, litigation, or high franchisee turnover. A negative track record could be inherited by the current franchisor, posing a risk to your investment. A clean history with no predecessors can be a positive sign, but it also means the current entity's track record is all that is available for review.

Potential Mitigations

• A business advisor can help you investigate the franchisor's full operational history, even if no official predecessors are listed.
• Your attorney should always confirm the accuracy of the disclosures in Item 1 regarding predecessors.
• Speaking with long-term franchisees can sometimes reveal information about prior ownership structures or informal system transfers.