C
Cornhole Golf
Children & Education
Founded 20240Company Profile
Year Founded:2024
Cornhole Golf Franchise Cost
| Franchise Fee: | $28,000Key Metric |
| Total Investment: | $212,000 - $725,000Key Metric |
| Liquid Capital: | $70,000 |
| Royalty Fee: | 7% of gross sales |
| Marketing Fee: | Not specified |
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Based on Cornhole Golf's actual financial data
Outlet Counts by Year
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AI-Powered Due Diligence Analysis
Our advanced AI analyzes Franchise Disclosure Documents (FDDs) to identify potential risks and opportunities across 10 critical categories.
14
High Risk
Critical items
37% of total
21
Medium Risk
Monitor closely
55% of total
3
Low Risk
Manageable items
8% of total
38
Total Items
Factors analyzed
10 categories
6.45
Overall Score
Low RiskHigh Risk
010
Franchisor Stability Risks
3 risks identified
2
1
Limited Operating History
High
Explanation:
- Cornhole Golf, LLC was founded in 2024 and began franchising in February 2025. This very limited operating history and lack of franchising experience presents a significant risk. There's no established track record to demonstrate the viability and profitability of the business model, especially as a franchise.
- Item 20 shows zero franchised outlets at the end of 2024, indicating the franchise is brand new with no franchisees to learn from.
- The lack of historical data makes it difficult to assess the franchisor's ability to provide adequate support, training, and marketing to franchisees.
Potential Mitigations:
- Thoroughly research the management team's background and experience in related industries. Look for evidence of successful business ventures, even if not directly in franchising.
- Request detailed financial projections and understand the underlying assumptions. Scrutinize the franchisor's financial stability and ability to support franchisee growth.
- Speak with industry experts and consultants to assess the viability of the business model and the competitive landscape.
- Negotiate stronger protections in the Franchise Agreement, such as extended training and support periods.
FDD Citations:
- Item 1: "We are a limited liability company established under Pennsylvania law on September 10, 2024. We have offered franchises since February 2025."
- Item 20: Table No. 1 Systemwide Outlet Summary shows zero outlets for 2022-2024.
Untested Business Model
High
Explanation:
- The Cornhole Golf franchise concept is new and untested in the franchise market. While cornhole is a popular game, its adaptation into a structured, franchised business model, particularly aimed at children and adults, is novel and carries inherent risks.
- The FDD lacks data on customer acquisition costs, average revenue per customer, and other key performance indicators, making it difficult to assess the potential profitability of the franchise.
- The novelty of the concept may make it challenging to attract customers and establish a loyal customer base.
Potential Mitigations:
- Carefully analyze the market research provided in the FDD and conduct independent research to validate the franchisor's claims about market demand.
- Develop a detailed business plan that considers potential challenges and outlines strategies for attracting and retaining customers.
- Seek advice from experienced franchise consultants and business advisors to assess the viability of the business model.
FDD Citations:
- Item 1: "We grant qualified candidates the right to develop and operate either an indoor or outdoor Cornhole Golf business...directed toward children and adults."
- Item 20: Lack of franchisee data further underscores the untested nature of the model.
Competition
Medium
Explanation:
- The FDD acknowledges the competitive landscape of the family entertainment industry. Cornhole Golf faces competition from established businesses like mini-golf, theme parks, amusement parks, arcades, restaurants, and inflatable rental businesses.
- Competition from both regional and national chains and franchise systems could impact market share and profitability.
Potential Mitigations:
- Conduct a thorough competitive analysis in your target market to understand the existing landscape and identify potential differentiators for your Cornhole Golf franchise.
- Develop a strong marketing and advertising strategy to effectively reach your target audience and highlight the unique aspects of your business.
- Focus on providing excellent customer service and creating a memorable experience to build customer loyalty.
FDD Citations:
- Item 1: "Cornhole Golf competes primarily with other businesses that offer family oriented entertainment, including mini-golf, theme parks, amusement parks, arcades, restaurants and businesses that rent inflatable products for home parties, including regional and national chains and franchise systems."
Disclosure & Representation Risks
3 risks identified
1
2
Limited Territory Protection & Encroachment
High
Explanation:
- The FDD grants limited territorial protection, potentially leading to encroachment and increased competition. Indoor franchisees face the risk of Outdoor or Add-On locations operating in close proximity, even within the same shopping center. Outdoor and Add-On franchisees have no exclusive territory and may overlap with Indoor locations.
- The franchisor retains broad rights to grant franchises outside the territory, potentially impacting customer draw from within the designated territory.
- The franchisor and its affiliates can operate other businesses, including those featuring cornhole, within the territory without compensating the franchisee, as long as they don't use the "Cornhole Golf" marks.
- The franchisor can sell products and services under the "Cornhole Golf" name directly to customers within the territory without compensating the franchisee.
Potential Mitigations:
- Carefully review the territory definition and understand the potential for encroachment from other franchisees or franchisor-owned locations.
- Assess the competitive landscape within and surrounding the territory, considering existing cornhole businesses and other entertainment options.
- Negotiate for clearer territorial boundaries or limitations on franchisor encroachment, if possible.
- Develop a strong local marketing strategy to build brand loyalty and customer base within the territory.
FDD Citations:
- Item 2, Section 2.2: "Included in the Rider is a map or description of an area… (the “Territory”)."
- Item 2, Section 2.2.1: "We may… operate or allow another franchisee to operate an Outdoor Cornhole Golf or Add-On Cornhole Golf within close proximity to your Indoor Cornhole Golf…"
- Item 2, Section 2.2.3: "You acknowledge and agree that (i) we and our affiliates have the absolute and unrestricted right to grant other franchises or licenses… outside the Territory…"
- Item 2, Section 1.4: "We and our affiliates reserve any and all rights not expressly granted to you… including… the right to sell anywhere (including within the Territory) products and services… without any obligation to pay royalties…"
No Renewal Guarantee
Medium
Explanation:
- The FDD outlines renewal conditions but doesn't guarantee renewal, leaving the franchisee vulnerable after the initial term.
- Renewal is contingent upon meeting various conditions, including compliance with all agreements, renovations, and adherence to system standards, which can be costly and subject to franchisor's discretion.
Potential Mitigations:
- Thoroughly review the renewal requirements and understand the associated costs and obligations.
- Maintain consistent compliance with the franchise agreement and system standards throughout the initial term.
- Proactively communicate with the franchisor regarding renewal plans and address any potential issues early on.
- Consult with a franchise attorney to understand your rights and options regarding renewal.
FDD Citations:
- Item 3, Section 3.2: "You have the right to renew your franchise… provided you meet all of the following conditions…"
Obligation to Renovate/Re-equip
Medium
Explanation:
- The FDD requires franchisees to renovate and re-equip their businesses as deemed appropriate by the franchisor for renewal, potentially incurring significant costs.
- The franchisor's discretion in determining the scope of renovations and re-equipping creates uncertainty about future expenses.
Potential Mitigations:
- Inquire about the franchisor's typical renovation requirements and estimated costs.
- Establish a reserve fund for future renovations and equipment upgrades.
- Negotiate for clearer guidelines on renovation requirements and cost limitations, if possible.
FDD Citations:
- Item 3, Section 3.2.3: "You make, or provide for in a manner satisfactory to us, such renovation and reequipping of your Cornhole Golf Business as we deem appropriate…"
Financial & Fee Risks
6 risks identified
2
3
1
High Development Fee for Limited Units
High
Explanation:
- Item 2 mentions a Development Fee for the right to open and operate between 2 and 4 Cornhole Golf Businesses. This limited number of units for a potentially substantial fee (not specified in this excerpt) presents a high risk. The franchisee's return on investment is heavily reliant on the success of these few units, with limited opportunity for expansion within the initial agreement.
- Without knowing the exact Development Fee amount, it's difficult to assess its reasonableness. A high fee for only 2-4 units could significantly impact profitability and create financial strain, especially in the early stages of operation.
Potential Mitigations:
- Carefully review Item 5 for a complete breakdown of the Development Fee. Compare it to industry averages and other franchise opportunities to ensure it's reasonable for the rights granted.
- Negotiate with the franchisor for a lower Development Fee or the right to develop additional units at a later stage based on performance milestones.
- Develop a robust business plan with realistic financial projections that account for the Development Fee and the limited number of initial units. Ensure the model demonstrates profitability within a reasonable timeframe.
FDD Citations:
- Item 2: "The Development Fee is described in greater detail in Item 5 of this Disclosure Document, and this Development Fee is for the right to open and operate between 2 and 4 Cornhole Golf Businesses."
Uncertainty about Initial Investment Excluding Development Fee
High
Explanation:
- Item 3 states the initial investment figures exclude the Development Fee, which is a crucial part of the overall startup costs. This lack of transparency makes it difficult to assess the true financial commitment required and could lead to unexpected expenses.
- The broad investment range ($212,000 - $725,000) without the Development Fee included further complicates financial planning. The wide range suggests significant variability in startup costs, making it challenging to accurately budget and secure financing.
Potential Mitigations:
- Consult Item 5 and 7 thoroughly to understand the Development Fee and other startup costs. Request a detailed breakdown of all expenses from the franchisor.
- Develop a comprehensive financial plan that considers both the estimated initial investment and the Development Fee. Explore various financing options and secure pre-approval to ensure sufficient capital.
- Engage an experienced franchise attorney and financial advisor to review the FDD and assist with financial projections and negotiations.
FDD Citations:
- Item 3: "The range includes all the items outlined in Table A of this Item 7, except for the Initial Franchise Fee because it is accounted for in the Development Fee."
Potential Misinterpretation of Oral Representations
Medium
Explanation:
- Item 21.7 emphasizes the agreement supersedes all prior discussions and that no reliance should be placed on oral statements. However, this doesn't eliminate the risk of misinterpretations or misremembered conversations leading to disputes later.
Potential Mitigations:
- Document all communication with the franchisor, including emails, letters, and meeting notes. Confirm key understandings in writing to avoid ambiguity.
- Carefully review the FDD and Franchise Agreement with legal counsel to ensure all terms are clearly understood and aligned with expectations.
- Avoid relying solely on verbal assurances. Request written confirmation for any critical aspects of the franchise opportunity.
FDD Citations:
- Item 21.7: "You and we acknowledge that we want all terms of our business relationship to be defined in this written agreement..."
Franchisor's Discretionary Approval Power
Medium
Explanation:
- Item 21.8 grants the franchisor broad discretionary power to withhold approval for various matters without specific justification. This could potentially hinder the franchisee's operational flexibility and business decisions.
Potential Mitigations:
- Negotiate for more specific criteria for approvals and clearly define circumstances where the franchisor can withhold consent. Seek legal advice to ensure reasonable limitations on the franchisor's discretion.
- Request examples of situations where the franchisor has previously withheld approval to understand their decision-making process.
FDD Citations:
- Item 21.8: "Wherever our consent or approval is required in this Agreement, unless the provision specifically indicates otherwise, we have the right to withhold our approval in our discretion, for any reason, or for no reason."
Strict Timelines and Potential for Default
Medium
Explanation:
- Item 21.11 states that "time is of the essence," emphasizing strict adherence to deadlines. This creates a risk of default if unforeseen circumstances or delays occur, potentially jeopardizing the franchise agreement.
Potential Mitigations:
- Carefully review all deadlines and timeframes outlined in the agreement. Develop a realistic project plan with contingency buffers to account for potential delays.
- Maintain open communication with the franchisor and promptly notify them of any potential delays or challenges. Negotiate for reasonable extensions if necessary.
FDD Citations:
- Item 21.11: "Time is of the essence to this Agreement and any deadlines or time frames stipulated within this Agreement must be strictly adhered to."
California Regulatory Compliance
Low
Explanation:
- Item 6 mentions California-specific regulations, including a 10% annual interest rate cap and the website not being reviewed by the California Department of Financial Protection and Innovation. While not a direct financial risk to the franchisee, it highlights the importance of complying with state-specific regulations, which can vary significantly.
Potential Mitigations:
- If operating in California, ensure all financial practices comply with state laws and regulations. Consult with legal counsel specializing in California franchise law.
- Be aware of the specific disclosures required by California and ensure the franchisor is compliant.
FDD Citations:
- Item 6: "Item 6 of the FDD is amended to state the highest interest rate allowed by law in California is 10% annually."
- Item 6: "Our website has not been reviewed or approved by the California Department of Financial Protection and Innovation."
Legal & Contract Risks
3 risks identified
1
2
Undue Influence Prohibition (Virginia)
High
Explanation:
- The FDD highlights a specific provision in the Virginia Retail Franchising Act prohibiting franchisors from using undue influence to induce franchisees to surrender their rights.
- This suggests potential past issues or a heightened sensitivity to this issue in Virginia, which could indicate a broader risk of the franchisor exerting undue pressure on franchisees in other jurisdictions, even if not explicitly prohibited by law.
- While the franchisor acknowledges the restriction, the mere mention raises concerns about their potential behavior and the power dynamic between the franchisor and franchisee.
Potential Mitigations:
- Carefully review the Franchise Agreement and all other agreements for clauses that could be interpreted as allowing the franchisor to exert undue influence, such as overly broad termination clauses, restrictive non-competes, or limitations on franchisee association.
- Consult with an experienced franchise attorney specializing in Virginia law to assess the potential risks and ensure your rights are protected.
- Discuss this concern directly with the franchisor and seek clarification on their interpretation and application of this provision. Document their responses.
FDD Citations:
- Item 17(h): "Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for a franchisor to use undue influence…"
Missing Key Contracts
Medium
Explanation:
- Item 22 lists Exhibits A (Franchise Agreement), B (Area Development Agreement), and H (Sample General Release). It omits other crucial contracts typically included in an FDD, such as lease agreements, financing agreements, and any other vendor agreements required by the franchise system.
- The absence of these contracts makes it difficult to fully assess the legal and financial obligations of the franchisee.
Potential Mitigations:
- Request copies of all missing contracts, including lease agreements, financing agreements, and any mandatory vendor agreements.
- Review these contracts carefully with an attorney to understand all obligations and potential liabilities.
- Clarify with the franchisor why these contracts are not included in the FDD and ensure they are provided before signing any agreements.
FDD Citations:
- Item 22: "Exhibits A and G of this Disclosure Document contain all contracts proposed for use…"
Ambiguity in Contract Listing
Medium
Explanation:
- Item 22 states that Exhibits A and *G* contain all contracts, but then proceeds to list Exhibits A, B, and *H*. This discrepancy creates confusion about which exhibits actually contain the relevant contracts.
- This ambiguity could indicate errors in the FDD or a lack of attention to detail, which could raise concerns about the overall quality and accuracy of the document.
Potential Mitigations:
- Request clarification from the franchisor regarding the discrepancy between the listed exhibits and the statement that Exhibits A and G contain all contracts.
- Confirm which exhibits are actually relevant and ensure you receive copies of all agreements before making any decisions.
- Scrutinize the entire FDD for other potential inconsistencies or errors.
FDD Citations:
- Item 22: "Exhibits A and G of this Disclosure Document contain all contracts… including the following agreements: Exhibit A, Exhibit B, Exhibit H…"
Territory & Competition Risks
3 risks identified
2
1
No Exclusive Territory
High
Explanation:
- The FDD explicitly states that franchisees are not granted exclusive territories. This means multiple Cornhole Golf franchises, including corporate-owned locations and other distribution channels, can operate in close proximity, leading to direct competition and potential market saturation.
- This lack of territorial protection can significantly impact revenue potential and make it challenging to establish a loyal customer base.
Potential Mitigations:
- Carefully evaluate the proposed territory's existing competition and potential for future market saturation during the site selection process.
- Develop a strong local marketing strategy to differentiate your franchise and build brand loyalty within the community.
- Focus on operational efficiency and excellent customer service to gain a competitive edge.
FDD Citations:
- Item 12: "You will not receive an exclusive or protected territory, express or implied."
- Item 12: "You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control."
Competition from Other Channels
High
Explanation:
- The franchisor reserves the right to operate or license other distribution channels, including online sales, which could directly compete with franchisees within their territories.
- This competition from alternative channels could undercut pricing and erode franchisee profitability.
Potential Mitigations:
- Clarify with the franchisor the specific plans for online sales and other distribution channels within franchise territories.
- Negotiate for provisions in the franchise agreement that protect against direct competition from corporate-owned online sales within the territory.
- Focus on providing a superior in-person experience and localized services that cannot be easily replicated online.
FDD Citations:
- Item 12: "You may face competition from... other channels of distribution or competitive brands that we control."
- Item 12: "We and our affiliates will have the right... to use the Proprietary Marks and System... in alternative channels of distribution, including but not limited to sales via the Internet at any location, including within the Territory."
Close Proximity Competition (Non-Exclusive Territories)
Medium
Explanation:
- The franchisor explicitly states they may allow other Cornhole Golf businesses (franchised or company-owned) to operate in close proximity, even within the same territory, particularly for Indoor and Add-On models.
- This close proximity competition could lead to customer confusion and dilute market share.
Potential Mitigations:
- Thoroughly research the local market and assess the potential for close proximity competition before signing the franchise agreement.
- Develop a strong brand identity and marketing strategy to differentiate your franchise from competitors.
- Build strong relationships with the local community and focus on providing exceptional customer service.
FDD Citations:
- Item 12: "We may, in our sole discretion, operate or allow another franchisee to operate an Outdoor Cornhole Golf or Add-On Cornhole Golf within close proximity to your Indoor Cornhole Golf."
- Item 12: "own, operate or allow others to own or operate Cornhole Golf businesses in close proximity to your Cornhole Golf Business"
Regulatory & Compliance Risks
3 risks identified
3
Compliance with ADA and Building Codes
Medium
Explanation:
- Franchisees are responsible for ensuring their premises and construction plans comply with the Americans with Disabilities Act (ADA) and all applicable building codes and local ordinances. Failure to comply can result in fines, legal action, and delays in opening.
- The FDD places the onus of compliance entirely on the franchisee, potentially exposing them to significant costs and liabilities if not properly addressed.
Potential Mitigations:
- Engage an ADA specialist and experienced local architect/contractor familiar with relevant codes and regulations during the site selection and design phases.
- Budget adequately for ADA compliance and potential construction modifications.
- Obtain all necessary permits and inspections before opening.
- Implement a documented process for ongoing ADA compliance monitoring.
FDD Citations:
- Item 1: "You must ensure that these plans and specifications comply with the Americans with Disabilities Act (“ADA”), similar rules governing public accommodations for persons with disabilities, and other applicable local ordinances, building codes, and permit requirements."
Varied and Changing State and Local Regulations
Medium
Explanation:
- The FDD notes that regulations for operating a Cornhole Golf Business vary by state and can change over time. This creates uncertainty and potential compliance challenges for franchisees.
- The FDD emphasizes the franchisee's responsibility to stay informed, which can be burdensome and require ongoing legal consultation.
Potential Mitigations:
- Consult with legal counsel specializing in franchise law and the specific regulations of the target state.
- Establish a system for monitoring regulatory changes and updates.
- Join relevant industry associations to stay informed about best practices and regulatory developments.
- Factor potential compliance costs into the business plan.
FDD Citations:
- Item 1: "It is your responsibility to investigate, satisfy, and stay current on all local, state, and federal laws and regulations since they vary from place to place and can change over time."
Health and Sanitation Compliance
Medium
Explanation:
- Franchisees are required to comply with all local, state, and federal health and sanitation laws and regulations. Failure to comply can lead to penalties, closures, and reputational damage.
Potential Mitigations:
- Develop and implement comprehensive sanitation procedures and training programs for staff.
- Consult with local health authorities to ensure compliance with all requirements.
- Maintain detailed records of sanitation practices and inspections.
- Secure necessary permits and licenses related to food handling and sanitation (if applicable).
FDD Citations:
- Item 1: "You will also be required to comply with all local, state, and federal health and sanitation laws and regulations."
Franchisor Support Risks
3 risks identified
2
1
Limited Initial Training and Ongoing Support
Medium
Explanation:
- The FDD mentions initial training one month before opening but lacks detail on the content, duration, and quality. A new franchise concept in a specialized industry like children's education requires robust training to ensure franchisee success.
- Ongoing support is vaguely described as "information on new developments" and "suggested staffing guidelines." This lacks specificity and may not be sufficient for franchisees to navigate operational challenges, especially given the franchisor's limited experience (founded 2024).
Potential Mitigations:
- Request a detailed training program outline, including topics covered, training methods, instructor qualifications, and assessment procedures.
- Inquire about the franchisor's support infrastructure, including dedicated support staff, online resources, and frequency of communication.
- Negotiate for more comprehensive ongoing support, such as regular performance reviews, on-site visits, and access to subject matter experts.
FDD Citations:
- Item 7: "No later than 1 month before you open for business, provide an initial training program..."
- Item 7: "Provide you with information on new developments, techniques and improvements related to the system and to operations."
- Item 7: "Provide you with suggested staffing guidelines for hiring employees..."
Inadequate Marketing Support and Brand Development
High
Explanation:
- While the FDD mentions a potential National Brand Development Fund, it's not currently established. This leaves initial brand building and national marketing uncertain, crucial for a new concept like Cornhole Golf.
- The franchisor reserves the right to use up to 10% of the fund (if established) for franchisee recruitment, potentially diverting resources from brand building activities that benefit existing franchisees.
- Local advertising is mandatory but controlled by the franchisor, limiting franchisee flexibility and potentially hindering local market penetration.
Potential Mitigations:
- Request a detailed marketing plan for the first 2-3 years, including budget allocation, target audience, and key performance indicators.
- Clarify the timeline and criteria for establishing the National Brand Development Fund and ensure adequate representation of franchisee interests in its management.
- Negotiate for greater autonomy in local advertising, while adhering to brand guidelines, to allow for tailored campaigns based on local market conditions.
FDD Citations:
- Item 7 (Advertising): "We currently do not have a National Brand Development Fund..."
- Item 7 (Advertising): "...a portion of which can be used to explain the franchise offering and solicit potential franchisees."
- Item 7 (Advertising): "You are not permitted to conduct any local advertising unless we pre-approve such advertising in writing."
Unproven Business Model and Limited Operating History
High
Explanation:
- Cornhole Golf, founded in 2024, has a very limited operating history. This increases the risk of unforeseen challenges, unproven systems, and potential adjustments to the business model, impacting franchisee profitability.
- The combination of a new concept and a young franchisor presents a higher risk compared to established franchises with proven track records.
Potential Mitigations:
- Thoroughly research the management team's experience and expertise in the children's education and entertainment industry.
- Request detailed financial projections and supporting data to assess the viability of the business model.
- Speak with existing franchisees (if any) to gain insights into their experiences and challenges.
- Consult with experienced franchise attorneys and financial advisors to evaluate the risks and potential rewards.
FDD Citations:
- General FDD information indicating the founding year 2024.
Exit & Transfer Risks
5 risks identified
1
3
1
Restrictive Transfer Provisions in Virginia
Medium
Explanation:
- Item 17(h) highlights Virginia's Retail Franchising Act, which prohibits franchisors from using undue influence to induce franchisees to surrender their rights. While this protects franchisees, it can also create complexities and potential disputes during transfer or exit. Ambiguity around what constitutes "undue influence" could lead to legal challenges, delaying or preventing a sale.
Potential Mitigations:
- Carefully review the Franchise Agreement and any related documents for provisions related to transfer and termination, paying close attention to any clauses that could be interpreted as restricting your rights.
- Consult with an experienced franchise attorney in Virginia to understand your rights and obligations under the state's Retail Franchising Act before signing any agreements.
- Document all communications and interactions with the franchisor regarding transfer or termination to create a clear record of events.
FDD Citations:
- Item 17(h): “Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for a franchisor to use undue influence to induce a franchisee to surrender any right given to him under the franchise."
Choice of Law and Forum Selection (Illinois)
Medium
Explanation:
- The Illinois addendum mandates Illinois law and courts for disputes, regardless of the franchisee's location. This can be burdensome and costly for franchisees outside Illinois, requiring travel and potentially higher legal fees due to unfamiliarity with local counsel.
Potential Mitigations:
- Factor the potential travel and legal costs associated with litigating in Illinois into your overall investment assessment.
- Consult with an attorney specializing in Illinois franchise law to understand the implications of this provision.
FDD Citations:
- Item G-5 (Illinois Addendum): "Sections 4 and 41 and Rule 608 of the Illinois Franchise Disclosure Act states that court litigation must take place before Illinois federal or state courts..."
Waiver of Compliance Void (Illinois)
Low
Explanation:
- The Illinois addendum clarifies that any provision waiving compliance with Illinois law is void. This is generally positive for franchisees, but it also emphasizes the importance of understanding Illinois law, as it will govern the franchise relationship in that state.
Potential Mitigations:
- Familiarize yourself with the Illinois Franchise Disclosure Act and consult with an attorney specializing in this area to ensure compliance.
FDD Citations:
- Item G-5 (Illinois Addendum): "Section 41 of the Illinois Franchise Disclosure Act states that “any condition, stipulation or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of this Act or any other law of this State is void.”"
Hawaii's Lack of FDD Endorsement
Low
Explanation:
- The Hawaii addendum explicitly states that filing the FDD does not constitute approval or endorsement by the state. While this is standard practice in most states, it's important to remember that the state is not verifying the accuracy or completeness of the FDD.
Potential Mitigations:
- Conduct thorough independent due diligence, including financial analysis and legal review of the FDD, to verify the information provided by the franchisor.
FDD Citations:
- Item G-3 (Hawaii Addendum): "FILING DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENDORSEMENT BY THE DIRECTOR OF COMMERCE AND CONSUMER AFFAIRS OR A FINDING...THAT THE INFORMATION PROVIDED...IS TRUE, COMPLETE AND NOT MISLEADING."
California Interest Rate Disclosure and Lack of Website Review
Medium
Explanation:
- The FDD mentions California's 10% annual interest rate cap and clarifies that the website is not reviewed by the California Department of Financial Protection and Innovation. This raises potential concerns about financing arrangements and the accuracy of information presented online, particularly for franchisees in California.
Potential Mitigations:
- Carefully review any financing agreements offered by the franchisor, ensuring compliance with California's interest rate limitations.
- Independently verify information presented on the franchisor's website, especially regarding financial performance representations and other key aspects of the franchise opportunity.
- Consult with a California franchise attorney to understand the specific legal requirements and protections for franchisees in the state.
FDD Citations:
- Item 6 Addendum: "Item 6 of the FDD is amended to state the highest interest rate allowed by law in California is 10% annually."
- Item 6 Addendum: "Our website has not been reviewed or approved by the California Department of Financial Protection and Innovation."
Operational & Brand Risks
3 risks identified
1
2
Inconsistent Application of State Franchise Laws
High
Explanation:
- The FDD includes numerous state-specific addenda outlining variations in franchise laws and regulations. Inconsistencies between these state laws and the standard franchise agreement create complexity in legal compliance and operational procedures.
- Navigating these differing requirements across multiple states can lead to administrative burdens, potential legal challenges, and increased operational costs.
- Failure to comply with specific state regulations can result in penalties, lawsuits, and damage to the brand's reputation.
Potential Mitigations:
- Develop a robust legal compliance program with expert legal counsel specializing in franchise law in each applicable state.
- Create standardized operational procedures that incorporate variations required by state laws, ensuring consistent application across all locations.
- Implement a comprehensive training program for franchisees that emphasizes state-specific regulations and compliance requirements.
FDD Citations:
- Item 8 and 17.h: State Specific Addenda (Virginia, Washington, Wisconsin)
- Ex. F: State Specific Addenda to Franchise Disclosure Document
Restrictive Covenants Enforceability Issues
Medium
Explanation:
- The Washington addendum highlights limitations on non-compete and employee solicitation covenants, potentially impacting the franchisor's ability to protect its intellectual property and brand.
- The income thresholds for enforcing non-compete clauses against employees and independent contractors in Washington State may limit their effectiveness.
- Restrictions on soliciting employees of other franchisees or the franchisor could hinder talent acquisition and growth within the franchise network.
Potential Mitigations:
- Carefully review and revise restrictive covenants to comply with Washington State law, focusing on protecting legitimate business interests without unduly restricting franchisees or employees.
- Implement strong confidentiality and trade secret protection measures to safeguard intellectual property.
- Develop alternative strategies for talent acquisition and retention within the franchise network, such as robust training programs and incentivized performance-based rewards.
FDD Citations:
- Ex. F: Washington Addendum, referencing RCW 49.62.020, 49.62.030, and 49.62.060
Franchisee Reliance on Non-FDD Information
Medium
Explanation:
- The Franchise Compliance Certificate aims to ensure franchisees understand the risks and rely solely on the FDD. However, there's a risk that franchisees may still rely on external information or verbal promises not included in the FDD.
- This reliance can lead to misunderstandings, disputes, and potential litigation between the franchisor and franchisee.
Potential Mitigations:
- Reinforce the importance of the FDD during the sales process and provide comprehensive training on its contents.
- Implement a clear communication policy that discourages reliance on information outside the FDD.
- Include a strong disclaimer in all marketing materials and communications emphasizing that the FDD is the sole source of information for prospective franchisees.
FDD Citations:
- Exhibit I: Franchise Compliance Certificate
Performance & ROI Risks
6 risks identified
2
3
1
No Earnings Claims
High
Explanation:
- The FDD explicitly states that no claims, representations, or warranties of earnings, sales, profits, or business success are made except as set forth in Item 19. If Item 19 lacks detailed financial performance representations, this creates significant uncertainty about the potential profitability of the franchise.
- This lack of information makes it difficult to project potential ROI and assess the financial viability of the franchise investment.
Potential Mitigations:
- Carefully review Item 19 for any available financial performance information, even if limited. Analyze the data provided and consider its relevance to your specific market and circumstances.
- Conduct thorough independent market research to estimate potential revenue and expenses in your target area. Consult with industry experts and existing franchisees (if possible) to gain insights into realistic financial expectations.
- Develop conservative financial projections based on your research and seek advice from a financial advisor to assess the feasibility and potential ROI of the investment.
FDD Citations:
- Item 21.7: "You agree that no claims, representations or warrantees of earnings, sales, profits, or success of your Cornhole Golf Business have been made to you other than as set forth in Item 19 of the FDD."
New and Untested Franchise
High
Explanation:
- Cornhole Golf was founded in 2024, making it a very new franchise concept. The lack of an established track record increases the risk of unforeseen challenges and potential business model failures.
- There is limited historical data to assess the long-term viability and profitability of the franchise.
Potential Mitigations:
- Thoroughly research the franchisor's management team and their experience in the industry. Assess their qualifications and ability to execute the business plan.
- Scrutinize the FDD for any information about pilot locations or initial franchisees. If available, contact these franchisees to discuss their experiences and assess the realities of operating the business.
- Recognize the inherent risks associated with a new franchise and be prepared for potential challenges and adjustments to the business model as it evolves.
FDD Citations:
- General FDD Information: The FDD indicates the founding year as 2024.
Franchisor's Discretionary Approval
Medium
Explanation:
- The franchisor retains broad discretionary approval rights for various aspects of the franchise agreement. This can limit the franchisee's autonomy and create potential conflicts.
- The franchisor can withhold approval "for any reason, or for no reason," which introduces uncertainty and potential for unfair treatment.
Potential Mitigations:
- Carefully review Item 21.8 and all other relevant sections of the FDD to fully understand the scope of the franchisor's approval rights.
- Seek legal counsel to review the agreement and negotiate for clearer language and limitations on the franchisor's discretion.
- Communicate openly with the franchisor to establish a positive working relationship and understand their expectations and decision-making processes.
FDD Citations:
- Item 21.8: "Wherever our consent or approval is required in this Agreement, unless the provision specifically indicates otherwise, we have the right to withhold our approval in our discretion, for any reason, or for no reason."
Strict One-Year Notice Requirement for Claims
Medium
Explanation:
- The FDD imposes a strict one-year deadline for notifying the franchisor of any claimed breach, misrepresentation, or violation. This short timeframe can make it difficult to identify and document issues, potentially forfeiting valid claims.
Potential Mitigations:
- Maintain meticulous records of all interactions and transactions with the franchisor.
- Consult with legal counsel promptly if any potential issues arise to ensure timely notification within the one-year period.
- Develop a system for regularly reviewing the franchise agreement and monitoring compliance to identify potential breaches or violations early on.
FDD Citations:
- Item 21.10: "If you fail to give written notice to us of any claimed misrepresentation, violation of law, or breach of this Agreement within one (1) year…then the misrepresentation, violation of law, or breach will be considered to have been condoned…and you will be barred from beginning any legal…action."
Personal Guaranty Requirement
Medium
Explanation:
- All owners are required to sign a personal guaranty agreement, exposing them to personal liability for the franchise's debts and obligations. This significantly increases the financial risk for individual owners.
Potential Mitigations:
- Carefully review the Guaranty Agreement with legal counsel to fully understand the extent of personal liability.
- Negotiate with the franchisor to limit the scope or duration of the guaranty, if possible.
- Ensure adequate capitalization of the franchise to minimize the risk of default and potential personal liability.
FDD Citations:
- Item 21.16: "All of your owners…will sign the personal guaranty agreement…Any person or entity that at any time…becomes an owner…will…sign the Guaranty Agreement."
Limited Force Majeure Protection
Low
Explanation:
- While the FDD includes a Force Majeure clause, it specifically excludes the franchisee's inability to obtain financing. This limits the protection afforded to the franchisee in situations where financing becomes unavailable due to external factors.
Potential Mitigations:
- Secure financing commitments early in the process and explore multiple financing options to mitigate the risk of financing falling through.
- Include contingency plans in your business plan to address potential financing challenges.
- Consult with legal counsel to understand the implications of the limited Force Majeure protection and explore potential negotiation strategies.
FDD Citations:
- Item 23: "Your inability to obtain financing for any reason shall not constitute an event of Force Majeure."
FDD Documents by Year
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FDD Year: 2025
Uploaded: 8/8/2025
FDD Documents
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