Explanation

This risk was not identified in the FDD package. Rapid system growth can be a concern if a franchisor's support infrastructure does not keep pace, potentially leading to diluted franchisee support. While this system has grown, the primary concern identified in the FDD is high franchisee turnover rather than an unsupportable pace of new openings. You should still monitor the quality of support provided to existing franchisees.

Potential Mitigations

• Your business advisor can help you question the franchisor about their capacity and plans for scaling support infrastructure.
• It's wise to interview a broad range of existing franchisees about the current quality and responsiveness of franchisor support.
• An accountant should review the franchisor's financials to assess if they have the resources to support their existing system adequately.

Explanation

This risk was not identified in the FDD package. An unproven system can present higher risks due to a lack of a long track record. However, 1-800-Packouts Holdco, LLC (1-800-Packouts) indicates its predecessor began franchising in 2015 and the system had 48 franchised outlets at the end of 2024. This suggests the system has moved beyond the initial startup phase, though other risks regarding its stability and performance exist.

Potential Mitigations

• A business advisor can help you conduct extensive due diligence on the management team's experience in both the industry and in franchising.
• Speaking to the earliest available franchisees listed in Item 20 can provide insight into the system's evolution and challenges.
• Your accountant should still assess the franchisor's capitalization and financial stability, as even established systems can face difficulties.

Explanation

This risk was not identified in the FDD package. The business model, focused on contents restoration after events like water or fire damage, serves a persistent market need rather than being based on a fleeting trend. While demand can fluctuate with weather patterns, the underlying service is an established part of the insurance and property restoration industries. This suggests the business concept is not a fad with limited long-term viability.

Potential Mitigations

• A business advisor can help you assess the long-term market demand for the product or service in your specific territory.
• It is still wise to evaluate the franchisor's plans for innovation and adaptation to stay competitive.
• Consider the business model's resilience to economic downturns with your financial advisor.

Explanation

This risk was not identified in the FDD package. FDD Item 2 shows that the key executives have prior experience in relevant industries or in leadership roles. For instance, the President and CEO has held executive roles since 2016, and the SVP of Franchise Development has prior experience with other large franchise systems. While you should always vet management, extensive inexperience does not appear to be a primary risk based on the disclosures.

Potential Mitigations

• Your business advisor can help you to thoroughly vet the management team's background and specific experience in franchising.
• Interviewing existing franchisees about the quality of management's support and strategic direction is a crucial step.
• In discussions with the franchisor, you might ask about the management team's vision for the company's future.

Explanation

This risk was not identified in the FDD package. FDD Item 1 discloses the parent company, FS PEP Holdco, LLC, and the audited financial statements of the parent are provided in Exhibit C as required. This provides a degree of transparency into the financial health of the overall organization that controls the franchisor, allowing for a more complete risk assessment.

Potential Mitigations

• Your accountant should still carefully review the provided parent company financial statements, including all footnotes.
• It is important for your attorney to confirm that all required parent and affiliate disclosures have been made properly.
• In your due diligence, asking the franchisor about the relationship and financial interplay between the parent and the franchisor entity is advisable.

Explanation

This risk was not identified in the FDD package. Item 1 discloses a predecessor entity, 1800Packouts Franchise, LLC. The document appears to properly incorporate information from this predecessor, such as the litigation history disclosed in Item 3, which involved the predecessor. There is no indication of hidden or downplayed negative history associated with the predecessor entity. This transparency allows for a more complete picture of the system's historical challenges.

Potential Mitigations

• Your attorney should still carefully review all information related to the predecessor in Items 1, 3, and 4.
• When speaking with long-term franchisees, asking about their experience under any predecessors can provide valuable context.
• A business advisor can help you research the predecessor's public track record for any additional insights.

Explanation

This risk was not identified in the FDD package. Item 3 discloses one past litigation involving a dispute between the franchisor's predecessor and a franchisee, which was settled. This appears to be an isolated incident rather than a pattern of franchisee-initiated lawsuits alleging fraud or misrepresentation. A lack of recurring, serious litigation with franchisees is a positive sign, suggesting a less contentious system history.

Potential Mitigations

• Your attorney should still review the details of any disclosed litigation to understand the nature of the dispute.
• Speaking with current and former franchisees can provide context on the franchisor's general approach to disputes.
• A business advisor can help you search for any undisclosed litigation involving the franchisor or its principals.