Explanation

The risk of the franchisor expanding too quickly and outpacing its ability to provide adequate support was not specifically identified. However, rapid growth in any franchise system can strain resources. A new franchisee could find that training, site selection assistance, and operational support may be diluted if a franchisor is more focused on selling new franchises than supporting existing ones.

Potential Mitigations

• Asking current franchisees about the quality and timeliness of franchisor support is a crucial due diligence step a business advisor can guide you on.
• Your accountant should review the franchisor's financials to see if they are investing in support infrastructure commensurate with growth.
• An attorney can help you understand the specific support obligations committed to in the Franchise Agreement.

Explanation

This specific risk was not identified in the FDD package, as the franchisor and its predecessors have been operating for many years. For new systems, a lack of a long-term track record can make it difficult to verify the business model's viability and the franchisor's ability to provide consistent support. This uncertainty increases the investment risk for early franchisees, who are essentially testing the concept with the franchisor.

Potential Mitigations

• In any franchise investment, it is wise to have your business advisor research the history and reputation of the brand and its management.
• An accountant's review of financial statements can help determine if a franchisor is financially stable or overly reliant on initial fee sales.
• Your attorney can help you understand the contractual commitments, which are especially important with a less-proven system.

Explanation

This risk was not identified, as the auto body repair industry is well-established. For some franchises, however, the underlying business can be a fad based on a temporary trend. This poses a risk that customer demand could decline significantly, leaving you with a long-term contractual obligation for a business with a short-term appeal. Assessing the long-term consumer need for a product or service is a critical piece of due diligence.

Potential Mitigations

• A business advisor can help you conduct independent market research to assess the long-term sustainability of the industry and business model.
• Reviewing the franchisor's plans for innovation and adaptation in Item 11 with a business consultant can reveal their strategy for staying relevant.
• Discuss the business's resilience to economic shifts and changing consumer tastes with your financial advisor.

Explanation

While many executives listed in Item 2 have extensive experience with the parent company, Driven Brands, and its various affiliates, their direct, long-term operational experience specifically with the Abra brand itself may be less extensive for some roles. You should be comfortable that the management team responsible for your support has deep, specific expertise in the collision repair business and not just general automotive or franchising experience.

Potential Mitigations

• A thorough review of the management team's specific experience in the collision repair industry with a business advisor is prudent.
• Asking current franchisees about the expertise and effectiveness of the direct support personnel they interact with can provide valuable insight.
• Your attorney can help you frame questions to the franchisor about the specific team that will be supporting your Abra-branded unit.

Explanation

The FDD discloses the parent company, Driven Systems LLC, and provides its audited financial statements as required. Driven Systems LLC also provides a full performance guarantee for Abra. While this is compliant, it creates a complex structure where you must analyze the financial health of parent entities, not just the franchisor. Your reliance is on a separate entity's guarantee, which adds a layer of legal and financial complexity.

Potential Mitigations

• Having your accountant review the financials of both the franchisor (if provided) and any guaranteeing parent is essential.
• Your attorney should analyze the terms of the parent guarantee to confirm it is unconditional and covers all of the franchisor's obligations to you.
• A business advisor can help you understand the practical implications of relying on a parent company for financial stability and support.

Explanation

Item 1 details a history of predecessors and acquisitions that formed the current company structure. Item 3 discloses litigation involving a predecessor related to a merger with Caliber Collision. While the disclosure appears adequate, the complex history means that the current management may not have been involved in the original system's development. Understanding this history is important for context on how the system has evolved.

Potential Mitigations

• Your attorney should carefully review the history of predecessors detailed in Items 1, 3, and 4.
• Inquiring with long-term franchisees about their experience through different ownership phases can offer valuable perspective.
• A business advisor can help you research public information about the predecessor companies to gain a fuller picture of the system's history.