Explanation

This risk was not identified in the FDD package. FDD Item 20 tables show the franchisor is a new system with only two franchised outlets opened in the most recent year and no terminations, non-renewals, or other cessations. While currently low, high turnover in the future would be a critical indicator of systemic problems, such as franchisee dissatisfaction or lack of profitability. It is a key metric to monitor as the system grows.

Potential Mitigations

• As the system matures, it is critical to have your accountant analyze Item 20 data to calculate the franchisee turnover rate.
• A business advisor can help you compare turnover rates to industry benchmarks to assess system health over time.
• If turnover appears high in future FDDs, your attorney can help you frame questions to ask former franchisees about their reasons for leaving.

Explanation

This risk was not identified in the FDD package. As a new franchisor that began franchising in 2024 with only two outlets added, the system is not currently experiencing rapid growth. Should the franchisor begin to sell franchises at a very high rate, it could risk outstripping its ability to provide adequate training and support to its Regional Developers and their unit franchisees, potentially harming the entire system.

Potential Mitigations

• Your business advisor can help you monitor the pace of franchise sales shown in future FDDs against the franchisor's support staff size.
• If growth becomes rapid, speaking with other franchisees about the quality of support is a key due diligence step.
• An accountant can help assess if the franchisor is reinvesting in support infrastructure to match its growth.

Explanation

This risk was not identified in the FDD package. The business of selling and installing fencing is a traditional home service and is not based on a current trend or fad. This suggests a more stable underlying market demand for the services that your unit franchisees will provide. The long-term viability depends on factors like competition and operational execution rather than fleeting consumer interest.

Potential Mitigations

• Your business advisor can help you research the long-term stability and competitive landscape of the local home services market.
• An accountant can assist in developing financial models based on stable, non-fad industries.
• To understand local demand, consider consulting with a local real estate professional or contractor association.

Explanation

This risk was not identified in the FDD package. FDD Item 1 does not indicate that the franchisor is owned by a private equity firm. The ownership structure appears to be with individuals involved in the franchising industry. Therefore, the specific risks associated with PE ownership, such as a focus on short-term returns over franchisee health or a planned quick exit from the investment, do not seem to apply here.

Potential Mitigations

• Your attorney can verify the franchisor's ownership structure through state business entity records.
• A business advisor can help you understand the motivations and long-term strategy of the current ownership group.
• It is prudent to ask the franchisor directly about their long-term vision for the brand.

Explanation

This risk was not identified in the FDD package. The franchisor, 76 Franchise Group LLC, does not appear to be a subsidiary of a larger, undisclosed parent company. Item 1 lists affiliates but no parent entities. The financial statements in Item 21 are for the franchisor itself, providing direct insight into its financial condition without the complication of a parent company's financials being required or withheld.

Potential Mitigations

• Your attorney can confirm the company's standalone status by reviewing corporate filings.
• An accountant should always focus on the financials of the actual entity you are contracting with.
• A business advisor can help you investigate the relationships between the disclosed affiliates to understand the full organizational picture.

Explanation

This risk was not identified in the FDD package. Item 1 discloses a predecessor, CMS ILLINOIS, LLC, but states that this entity never offered franchises. It was an operating fencing business whose assets were acquired. Therefore, there is no negative predecessor franchising history, such as litigation or high franchisee turnover, that could be concealed. The risks associated with this franchisor stem from its newness, not from a problematic past.

Potential Mitigations

• Your attorney should confirm the nature of the asset acquisition from the predecessor to understand what was transferred.
• A business advisor can help you assess how the predecessor's operational experience might (or might not) benefit the new franchise system.
• You should inquire about the performance of the business when it was operated by the predecessor.

Explanation

This risk was not identified in the FDD package. Item 3 states that no litigation is required to be disclosed. For a new franchisor that only began operations in 2024, the absence of litigation is expected but still a positive sign. There is no indication of a pattern of disputes with franchisees regarding fraud, misrepresentation, or other claims, which is a risk often seen in more mature or troubled systems.

Potential Mitigations

• Your attorney can perform an independent search for any litigation that may not have met the technical disclosure requirements of Item 3.
• A business advisor can guide you on how to ask current franchisees about any disputes or disagreements they may have had with the franchisor.
• It is prudent to monitor Item 3 in future FDDs to see if any patterns of litigation develop as the system grows.