Explanation

This risk was not identified. The franchise system is currently shrinking, not experiencing rapid growth, according to Item 20 data. Rapid growth can strain a franchisor's ability to provide adequate support, but that is not the apparent risk here. Instead, the risk is system decline.

Potential Mitigations

• An accountant can help evaluate the financial implications of a shrinking system on brand value and advertising fund effectiveness.
• Discuss with a business advisor the potential reasons for system decline and its impact on your long-term prospects.
• Your attorney should review contract terms related to brand standards and support, considering the context of a declining system.

Explanation

This risk was not identified. The underlying business concept, focused on soups, salads, and sandwiches, is well-established in the fast-casual dining sector and does not appear to be tied to a short-term trend. However, long-term success still depends on the brand's ability to innovate and adapt to changing consumer tastes.

Potential Mitigations

• A business advisor can help you assess the long-term market demand for the product and service offering in your specific area.
• It is wise to evaluate the franchisor's plans for innovation, menu development, and staying relevant as disclosed in Item 11.
• Consider the sustainability of the business model beyond current trends and its resilience to economic downturns with your financial advisor.

Explanation

This risk was not prominently identified. Item 2 shows that the key executives of Zoup LLC and its parent, WOWorks, have extensive experience in the restaurant and franchise industries with various established brands like Schlotzsky's, Fuzzy's Taco Shop, and Saladworks. This experience may mitigate some risks associated with franchisor operations.

Potential Mitigations

• Even with an experienced team, it is beneficial to speak with current franchisees about the quality and effectiveness of management's support.
• A business advisor can help you vet the management team's specific track record with the brands listed in their Item 2 biographies.
• Your attorney can help you understand how management's background might influence the enforcement of the franchise agreement.

Explanation

This risk was not identified. Item 1 clearly discloses the parent company structure leading up to Restaurant Co., LLC (dba WOWorks). Furthermore, the FDD includes audited financial statements for Restaurant Co., LLC as an exhibit and a formal Guarantee of Performance. This provides transparency into the financial condition of the ultimate parent entity that is guaranteeing the franchisor's obligations.

Potential Mitigations

• Your accountant should still carefully review the provided parent company financials and the specific terms of the guarantee.
• It is prudent to have your attorney confirm that the guarantee is legally sound and provides meaningful recourse.
• A business advisor can help assess whether the parent's other business activities could positively or negatively impact your franchise.

Explanation

This risk was not identified. Item 1 clearly discloses that Zoup LLC acquired the assets from a predecessor, Zoup! Systems, L.L.C., and provides its history. Items 3 and 4 state there is no litigation or bankruptcy history to disclose for the current franchisor, and there is no indication that any negative history from the predecessor has been obscured. However, understanding the transition is still important.

Potential Mitigations

• Seeking out and speaking with franchisees who operated under the predecessor can provide valuable context on the system's history.
• A business advisor can help you research the predecessor company for any public information regarding its performance or reputation.
• Your attorney should confirm that all liabilities from the predecessor have been properly handled in the asset acquisition.

Explanation

This risk was not identified in the FDD. Item 3 states, "No litigation is required to be disclosed in this Item." This indicates there are no current or recent lawsuits involving the franchisor that meet the legal criteria for disclosure, such as actions alleging fraud, misrepresentation, or franchise law violations. This lack of litigation is a positive sign but does not guarantee future disputes will not arise.

Potential Mitigations

• Although no litigation is disclosed, your attorney can conduct public record searches to see if any other legal actions exist.
• It is still crucial to speak with current and former franchisees about their experiences and any disputes they may have had.
• Your attorney should explain the dispute resolution process outlined in the franchise agreement, as this will be your recourse for future conflicts.