Explanation

This risk was not identified in the FDD package. The franchise system is not experiencing rapid growth; according to Item 20 data, the system size has been relatively stagnant or shrinking over the last three years. Uncontrolled growth can strain a franchisor's ability to provide adequate support, but that does not appear to be a current risk here. Instead, the lack of growth combined with high turnover may present different challenges regarding brand momentum and franchisee validation.

Potential Mitigations

• Discuss the system's growth trajectory and its implications for brand value with a business advisor.
• It is wise for your accountant to analyze how stagnant growth could affect your own financial projections.
• Your attorney can help you understand any contractual obligations that are difficult to meet in a no-growth environment.

Explanation

This risk was not identified. According to Item 1, 360BRANDS, Inc. (360clean) began offering franchises in 2007. With over 15 years of franchising history, the system is established and cannot be considered new or unproven. A long track record provides historical data for evaluation, but it does not eliminate other risks, such as the financial instability and high turnover disclosed elsewhere in the FDD.

Potential Mitigations

• A business advisor can help you analyze the long-term performance trends of the established system.
• Reviewing the company's long history with your attorney can provide context for its current challenges.
• An accountant should examine the financial performance over the years provided to understand the company's historical stability.

Explanation

This risk was not identified. The franchise offers commercial janitorial and cleaning services, which is a mature and established industry with consistent demand. It is not based on a fleeting trend or novelty product. While the industry is competitive, the business model itself is not considered a fad, which reduces the risk of a sudden collapse in consumer interest that can affect trend-based franchises.

Potential Mitigations

• A business advisor can help you research the stability and competitive landscape of the local commercial cleaning market.
• Discussing the long-term viability of the janitorial service industry with a financial advisor is recommended.
• Your attorney can review the agreement to ensure it allows for adaptation to future changes in the cleaning industry.

Explanation

This risk was not identified. Item 2 shows that the key executives, including the Founder/CEO and COO, have been with the company for many years, indicating an experienced and stable management team. They possess significant history with the 360clean brand and franchise system. Inexperience at the leadership level, which can lead to poor strategic decisions and inadequate support, does not appear to be a risk in this case.

Potential Mitigations

• It is still prudent to research the reputation and track record of the management team with a business advisor.
• Posing questions to current franchisees about their perception of management's competence and support is a valuable step.
• Your attorney can help you assess whether management's experience translates into a well-run and supportive franchise system.

Explanation

This risk was not identified in the FDD. Item 1 explicitly states that the franchisor does not have any parent companies. Therefore, risks associated with private equity ownership, such as a focus on short-term profits over long-term system health or a potential sale of the brand, are not applicable based on the ownership structure disclosed.

Potential Mitigations

• Your attorney should always verify the ownership structure disclosed in Item 1 during due diligence.
• A business advisor can help you understand the pros and cons of different franchisor ownership structures.
• An accountant can confirm that the financial statements align with the stated ownership structure.

Explanation

This risk is not applicable as the FDD states in Item 1 that 360clean has no parent company. The franchisor entity, 360BRANDS, Inc., appears to be the top-level entity in the corporate structure. Therefore, there is no risk of undisclosed information or financial instability from a hidden parent company.

Potential Mitigations

• Your attorney should confirm the corporate structure and ensure no controlling entities are omitted from the disclosure.
• An accountant should review the financial statements to ensure they represent the standalone health of the franchising entity.
• A business advisor can help you assess the risks and benefits of a franchise system without a larger parent company for support.

Explanation

This risk was not identified. Item 1 of the FDD explicitly states that the franchisor has no predecessors. This means the company did not acquire the franchise system's assets from a prior entity. As a result, there is no risk of inheriting historical problems, such as litigation, bankruptcy, or high turnover from a predecessor's tenure.

Potential Mitigations

• Your attorney can help verify the franchisor's corporate history to confirm the 'no predecessor' status.
• When evaluating any franchise, a business advisor can help you investigate the full history of the brand, even without formal predecessors.
• An accountant should review the earliest available financial statements to understand the company's financial origins.

Explanation

This risk was not identified in the FDD package. Item 3, which requires the disclosure of material litigation against the franchisor, states that no litigation is required to be disclosed. The absence of a pattern of lawsuits, particularly those from franchisees alleging fraud or misrepresentation, is a positive indicator, though it does not eliminate other business risks.

Potential Mitigations

• It is still a good practice for your attorney to conduct an independent public records search for litigation involving the franchisor.
• Asking current and former franchisees about any past or pending disputes can provide valuable insight.
• A business advisor can help you assess the overall health of franchisor-franchisee relations.