Explanation

This risk was not identified, as there is no history of franchisee turnover. Item 20 shows that the franchise system is new, with the first five franchisees beginning operations in 2024. While there is no negative data, the lack of an operating history for franchisees means there is no track record to evaluate system satisfaction or profitability. The risk of being an early franchisee in an unproven system is addressed under the 'New/Unproven Franchise System' risk.

Potential Mitigations

• A business advisor can help you assess the risks of joining a new system with no performance history for its franchisees.
• Your attorney should help you formulate questions for the franchisor about their long-term plans to support franchisees and ensure stability.
• Engage with the very first franchisees listed in Item 20 to monitor their initial experiences and satisfaction levels over time.

Explanation

This specific risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support, training, and quality control to all franchisees. While this system is not yet experiencing rapid growth, it is a key metric to monitor in young franchise systems. You should assess if the franchisor's support infrastructure is prepared to handle its projected growth, as rapid expansion without sufficient resources can negatively impact your business.

Potential Mitigations

• Your business advisor can help you question the franchisor about their specific plans to scale support infrastructure as the system grows.
• An accountant should review the franchisor's financial capacity to invest in the necessary support staff and resources for expansion.
• Speaking with the earliest franchisees can provide insight into the current quality and responsiveness of franchisor support.

Explanation

This risk was not identified. The franchise offers water well pump installation, maintenance, and repair services. This is an established and essential service based on infrastructure needs rather than a fleeting consumer trend. Therefore, the business model does not appear to be a fad, which reduces the risk of a sudden decline in market demand due to changing tastes.

Potential Mitigations

• A business advisor can help you analyze the long-term stability and demand within your local market for these essential services.
• Investigating local competition and market dynamics is a prudent step to confirm the viability of this business in your area.
• You should still have your financial advisor help you consider the business model's resilience to local economic conditions or housing market shifts.

Explanation

This risk was not identified in the FDD package. There is no disclosure in Item 1 or elsewhere that suggests the franchisor is owned or controlled by a private equity firm. This type of ownership can sometimes introduce a focus on short-term returns over the long-term health of the franchise system. Since this structure is not present, this particular risk is not a factor.

Potential Mitigations

• It is still prudent to ask your attorney to verify the full ownership structure of the franchisor to ensure there are no undisclosed controlling entities.
• Understanding the franchisor's long-term vision and commitment to the brand is a worthwhile discussion to have with a business advisor.
• Your attorney can review the 'Assignment' clause in the Franchise Agreement to understand who the franchisor could sell the system to in the future.

Explanation

This risk was not identified in the FDD package. Item 1 appears to properly disclose the franchisor and its key affiliate which owns the trademarks. There is no indication of a separate, undisclosed parent company whose financial information might be necessary to fully assess the franchisor's stability or backing. Therefore, the risk of a hidden, unstable parent entity is not apparent from the documents.

Potential Mitigations

• Your attorney can conduct a corporate search to confirm the ownership structure of 180 Water Franchising, LLC and its disclosed affiliate.
• An accountant should still scrutinize the provided financials to ensure the franchisor appears to be a standalone entity capable of meeting its obligations.
• Clarifying the relationship and any financial interdependencies between the franchisor and its affiliate with a business advisor is recommended.

Explanation

This risk was not identified. FDD Item 1 states that the franchisor has no predecessor company. The business model is based on an affiliated operating business, but that affiliate is not a legal predecessor from which the franchisor acquired assets. Therefore, there is no risk of undisclosed negative history from a prior corporate entity that operated the franchise system.

Potential Mitigations

• A business advisor can still help you research the history and reputation of the affiliated operating company, as its experience is the basis for the franchise.
• Speaking with long-term employees or customers of the affiliate, if possible, could provide valuable historical context.
• Your attorney can confirm that no predecessor entity exists that should have been disclosed under franchise law.

Explanation

This risk was not identified. FDD Item 3 states that no litigation is required to be disclosed. This indicates that the franchisor, its predecessors, and its management have not been involved in the types of legal disputes that the FTC rule deems material for disclosure. This includes franchisee lawsuits alleging fraud, as well as significant litigation initiated by the franchisor against its franchisees.

Potential Mitigations

• Your attorney can perform an independent search of public court records to verify the absence of litigation history.
• A discussion with a business advisor can help you assess other indicators of system health in the absence of legal disputes.
• Continue to monitor for any future litigation that may be disclosed in subsequent FDD updates.