Explanation

This risk was not identified in the FDD package. The franchise system is new, with no franchised outlets having operated and therefore none have terminated, failed to renew, or otherwise ceased operations. High franchisee turnover is generally a significant red flag indicating potential systemic problems, such as a lack of profitability or franchisee dissatisfaction. Its absence here is due to the system's infancy, not a proven record of stability.

Potential Mitigations

• To understand potential future turnover, your business advisor should help you carefully monitor the experiences of the first wave of franchisees.
• It is crucial to have your attorney review the default and termination clauses in the franchise agreement to understand how easily a franchise can be lost.
• Engage an accountant to develop conservative financial projections, as there is no franchisee performance history to validate the business model's success.

Explanation

This risk was not identified in the FDD package. The management team listed in Item 2 has extensive prior experience operating other established franchise systems, specifically Kung Fu Tea and TKK Fried Chicken. While they are new to franchising the Yasubee brand, their experience with affiliated franchise operations is a significant mitigating factor against the risk of inexperienced management. Their backgrounds suggest familiarity with franchisee support, supply chains, and franchise administration.

Potential Mitigations

• It's still important to ask the management team how their experience with other brands will translate to supporting this new ramen concept.
• A business advisor can help you assess whether the team's skillset aligns with the specific needs of a food-service concept like Yasubee.
• Contact franchisees from their other brands (Kung Fu Tea, TKK) to inquire about the quality of management and support they receive.

Explanation

This risk was not identified in the FDD package. Item 1 and the financial statements in Exhibit D indicate that the franchisor, Yasubee Franchising LLC, is a wholly owned subsidiary of Tokyo Ramen USA Inc., which is a joint venture. There is no disclosure of ownership by a private equity firm. Therefore, the specific risks associated with a PE firm's typical focus on short-term returns and a defined exit timeline do not appear to be present here.

Potential Mitigations

• It is still prudent to ask your attorney to confirm the ownership structure and inquire about any long-term plans for selling the company.
• A business advisor can help research the background of the parent company, Tokyo Ramen USA Inc., and its owners.
• Understanding the franchisor's long-term vision for the brand remains a crucial part of due diligence.

Explanation

This risk was not identified in the FDD package. Item 1 does not disclose any predecessors for Yasubee Franchising LLC. The franchisor entity is new, and while the brand has history in Japan, the U.S. operation appears to have started with the current ownership structure. Therefore, there are no predecessor histories involving litigation, bankruptcy, or franchisee turnover to analyze.

Potential Mitigations

• A business advisor can still research the history of the brand in its home country (Japan) for any relevant insights.
• It's wise to ask your attorney to confirm the corporate history to ensure no predecessors have been overlooked.
• Focus due diligence on the track record of the current management and their affiliated companies, as this is the most relevant history available.

Explanation

This risk was not identified in the FDD package. Item 3 states, "No litigation is required to be disclosed in this item." This indicates that over the past year, neither the franchisor, its predecessors, nor its key personnel have been involved in the types of material litigation that require disclosure, such as actions alleging fraud, franchise law violations, or other significant claims. This is a positive indicator.

Potential Mitigations

• While the FDD is clear, your attorney can perform a public records search to independently verify the absence of significant litigation.
• During your due diligence calls, you can still ask any current franchisees of affiliated brands if they are aware of any disputes.
• Continue to monitor for any litigation that may arise as the system grows by setting up news alerts for the franchisor's name.