Explanation

Analysis of the data in Item 20's tables indicates a relatively low turnover rate for the most recent fiscal year. In 2023, four franchisees terminated their agreements out of a base of 193, representing a churn rate of approximately 2%. While any closure is a concern, this figure does not suggest a systemic problem or widespread franchisee failure at this time. Continuous monitoring of this data in future FDDs would still be prudent.

Potential Mitigations

• You should still contact several current and former franchisees from the lists in Exhibits E and F to discuss their experiences and reasons for leaving.
• Asking your franchise attorney to review the turnover data for the past three years can help confirm if the trend is stable.
• A business advisor can help you compare these turnover rates to available industry benchmarks for context.

Explanation

The franchise system is not undergoing rapid growth. Item 20 data indicates a stable to slow-growth pattern over the last three years, with a net increase of only one franchised outlet in 2023. This suggests the franchisor is not overstretching its support resources by selling franchises too quickly. The risks associated with rapid, unsupported expansion do not appear to be present in this system at this time.

Potential Mitigations

• A conversation with your business advisor can help you understand the pros and cons of investing in a mature, slow-growth system versus a rapidly expanding one.
• Ask existing franchisees about the current quality and consistency of franchisor support.
• Your attorney can confirm that the franchise agreement does not impose aggressive future development schedules on you.

Explanation

This franchise system is not new or unproven. Item 1 indicates that the franchisor's predecessors have been offering franchises since 2004. Item 20 data shows a large number of established outlets operating across the country. This long history suggests the business model is well-established and not a new venture with the associated higher risks of an unproven concept.

Potential Mitigations

• Speaking with long-tenured franchisees can provide valuable insight into the system's evolution and stability over time.
• Your accountant can review the multi-year financial statements provided in Item 21 to assess the historical financial performance of the system.
• A business advisor can help you evaluate the benefits and drawbacks of joining a mature system versus an emerging one.

Explanation

The business of wholesale automotive parts distribution is a mature and essential component of the automotive repair industry. This is not a business model based on a fleeting trend or novelty product. Therefore, the risk of the entire business concept being a short-term fad with limited long-term consumer demand appears to be low.

Potential Mitigations

• Engaging a business advisor to analyze the long-term trends in the automotive aftermarket industry can confirm the stability of this sector.
• Discuss the competitive landscape and the sustainability of the business model with current franchisees.
• Your financial advisor can help you assess the business's resilience to economic cycles and technological changes, such as the rise of electric vehicles.

Explanation

The management team detailed in Item 2 has significant and long-term experience within the parent company, Driven Brands, and its various automotive franchise systems. Many executives hold high-level positions and have been with the company for several years, indicating a stable and experienced leadership team. The risk of management lacking relevant industry or franchising experience appears to be low.

Potential Mitigations

• It is still valuable to research the public reputations and track records of the key executives listed.
• When speaking with franchisees, asking about their perception of the management team's competence and support is a useful step.
• A business advisor can help you interpret the professional backgrounds of the management team to assess their suitability for leading this specific brand.

Explanation

This specific risk is not present. The FDD is transparent about its complex corporate structure, identifying the franchisor, its direct parent (Driven Systems LLC), and the ultimate parent company (Driven Brands Holdings Inc.). Crucially, audited financial statements for both the guarantor parent and the ultimate parent company are included in Exhibit C, providing a basis for financial analysis.

Potential Mitigations

• It's still important for your accountant to carefully review the provided financials for both the parent and guarantor entities to understand their relationship.
• Your attorney can help you understand the legal implications of this multi-layered corporate structure and which entity holds specific obligations.
• Asking the franchisor to clarify the roles and responsibilities of each entity in the corporate structure can provide additional clarity.

Explanation

This risk does not appear to be present. Item 1 of the FDD identifies the franchisor's predecessors, and Item 3 discloses past litigation involving those predecessors. While the existence of past litigation is a risk in itself (covered under "Pattern of Litigation"), the franchisor appears to be making the required disclosures about its history rather than hiding or obscuring information about its predecessors.

Potential Mitigations

• A thorough review of Item 3 with your attorney is still crucial to understand the nature of any litigation involving predecessors.
• You can conduct independent online searches for news or articles related to the predecessor companies for additional background information.
• Asking long-term franchisees about their experience under the predecessor's management can provide valuable historical context.