Explanation

This risk was not identified. The franchisor, 1HCS, has been offering franchises since 2014, and its affiliate has operated a similar business since 2008. A new or unproven system carries higher risks because its business model, brand recognition, and support structures are not yet well-established, which can affect a franchisee's ability to succeed. This franchisor appears to have a significant operational history.

Potential Mitigations

• When evaluating any franchise, it's wise to ask a business advisor to help you assess the franchisor's operational history and the maturity of its systems.
• An accountant can analyze the financial track record to determine if the business has demonstrated long-term viability.
• Consulting an attorney to review the FDD for any signs of an unproven concept is a key part of due diligence.

Explanation

This risk was not identified in the FDD Package. The non-medical home care industry is supported by long-term demographic trends of an aging population, rather than being a short-term or fad-based business. Investing in a fad business is risky because consumer interest can decline rapidly, leaving you with a potentially obsolete business and ongoing contractual obligations to the franchisor long after the trend has passed.

Potential Mitigations

• A business advisor can help you conduct market research to assess the long-term consumer demand for any franchise concept.
• Evaluating a franchisor's plans for innovation and adaptation beyond current trends is a prudent step.
• Discussing the sustainability of the business model with a financial advisor can help guard against investing in a potential fad.

Explanation

This risk appears low in this FDD. The executive team, as described in Item 2, demonstrates substantial and long-term experience in the home care industry and with the 1HCS brand itself, with key personnel having been involved since 2008 and 2014. This experience can be a significant benefit, suggesting a deeper understanding of the market, operations, and franchisee needs. However, you should still verify the quality of support with current franchisees.

Potential Mitigations

• A thorough review of the backgrounds of all key management personnel with your business advisor is still recommended.
• Inquiring with current franchisees about the quality and effectiveness of management's guidance and support is crucial.
• Your attorney can help formulate questions for the franchisor regarding the specific experience of the team that will be supporting you.

Explanation

This risk was not identified in the FDD Package, as there is no disclosure of private equity ownership in Item 1. When a private equity firm owns a franchisor, there can be a focus on short-term profitability and a quick exit strategy. This might lead to decisions, such as cutting franchisee support or increasing fees, that benefit investors but could harm the long-term health of the franchise system and your investment.

Potential Mitigations

• It is always prudent to ask your attorney to help you investigate the complete ownership structure of the franchisor.
• If private equity is involved, a business advisor can help you research the firm's history with other franchise brands.
• Discussing any changes in the system since a potential private equity acquisition with existing franchisees can provide valuable insight.

Explanation

This risk was not identified. Item 1 of the FDD does not indicate that 1HCS has a parent company. Failure to disclose a parent company, especially if it guarantees the franchisor's obligations or is a key supplier, can be a risk. Without the parent's financial statements, it can be difficult to assess the true financial strength and stability backing the franchise system, potentially hiding financial weaknesses that could affect you.

Potential Mitigations

• Your attorney can help you verify the franchisor's corporate structure to ensure there are no undisclosed parent or controlling entities.
• If a parent company exists and provides a guarantee, having an accountant review its financial statements is crucial.
• A business advisor can help assess the operational relationship between a franchisor and its parent company.

Explanation

This risk was not identified. The FDD does not disclose any predecessors for the franchisor entity, 1HCS. A predecessor is a company from which the franchisor acquired a major part of its assets. Not fully disclosing a predecessor's history could obscure important information, such as past litigation, bankruptcies, or high franchisee failure rates, preventing you from seeing a complete picture of the system's historical performance and potential inherited problems.

Potential Mitigations

• Asking your attorney to carefully review Item 1 for any mention of predecessors or business acquisitions is a vital due diligence step.
• A business advisor can assist in researching the history of the brand, which may uncover information about previous owners or entities.
• Inquiring with long-term franchisees about their experiences under any previous ownership can reveal important historical context.