Explanation

This risk was not identified. The FDD includes audited financial statements for Aire-Master of America, Inc. (Aire-Master) for the fiscal years ending March 31, 2023, and 2022. The statements show consistent profitability, positive and growing stockholder equity, and substantial revenue. No indicators of financial instability, such as a going concern note from the auditor, were present. A financially healthy franchisor is better positioned to support its franchisees and invest in the brand's growth.

Potential Mitigations

• An experienced franchise accountant should review the franchisor's financials, including footnotes and the auditor's report, to confirm financial health.
• Discussing the franchisor's financial stability and plans for future investment with your business advisor can provide additional context.
• Your accountant can help you analyze revenue trends, specifically the balance between royalty income and initial franchise fees, to assess system sustainability.

Explanation

This risk was not identified. FDD Item 20 data shows the system size has been relatively stable over the past three fiscal years, with a net change of -1 franchised unit in 2023 and +7 in 2022. This does not indicate the kind of rapid expansion that can strain a franchisor's ability to provide adequate franchisee support. A stable growth rate can suggest a more manageable and mature system.

Potential Mitigations

• Engage a business advisor to assess whether the franchisor's current support infrastructure, as detailed in Item 11, is adequate for its current size.
• During discussions with existing franchisees, it is prudent to inquire about their satisfaction with the level and quality of ongoing support.
• Your accountant can review the franchisor's financial statements in Item 21 to confirm it has sufficient resources allocated to support functions.

Explanation

This risk was not identified. Aire-Master is a highly mature franchise system. Item 1 indicates the company was incorporated in 1976 and first began offering franchises in 1977. This extensive history suggests a well-established business model and operational track record, which typically reduces risks associated with unproven or startup franchise concepts.

Potential Mitigations

• A business advisor can help you review the company's long history to understand how it has adapted to market changes over the decades.
• When speaking with long-term franchisees, ask about the evolution of the business model and the franchisor's support systems.
• Consulting with your attorney about the implications of joining a mature system versus an emerging one can provide valuable perspective.

Explanation

This risk was not identified. The business model, focused on commercial odor control, scent branding, and hygiene services, is a long-standing business-to-business service category. Given that Aire-Master has operated in this industry since 1977, the business is clearly not based on a short-term trend or fad, suggesting a stable market demand.

Potential Mitigations

• A business advisor can help you research the commercial hygiene industry to confirm its long-term stability and growth prospects.
• It is wise to assess the local demand for these types of services in your specific market.
• Discuss the franchisor's plans for future innovation and service development to ensure long-term relevance with your business advisor.

Explanation

This risk was not identified. FDD Item 2 details a senior management team with extensive and long-term experience with Aire-Master. Key executives have been with the company for decades, with tenures starting in 1990, 1992, and 1993. This deep experience in both the industry and the specific franchise system is a significant positive factor, reducing risks associated with unseasoned leadership.

Potential Mitigations

• As part of due diligence, it can be useful to research the public reputation and industry standing of the key executives listed in Item 2.
• When speaking with franchisees, asking about their direct interactions with and confidence in the leadership team provides valuable insight.
• A business advisor can help you assess how the management team's experience aligns with the company's strategic direction and your own business goals.

Explanation

This risk was not identified. FDD Item 1 indicates Aire-Master has no parent companies and its ownership structure does not suggest involvement from a private equity firm. The long tenure of the management team is more characteristic of a family or privately-held business. This can mean a greater focus on the long-term health of the brand rather than short-term investor returns.

Potential Mitigations

• To confirm the ownership structure, you can ask your attorney to review state business registration records.
• In discussions with the franchisor, inquiring about their long-term vision for the company can help confirm their operational philosophy.
• A business advisor can help you understand the pros and cons of joining a franchise system that is not owned by a private equity firm.

Explanation

This risk was not identified. Item 1 of the FDD clearly states that Aire-Master has no parents or subsidiaries. The franchisor entity appears to be the primary operating company with a long history, and its financial statements are provided in Item 21. There is no indication of a separate, thinly capitalized subsidiary being used as the franchisor entity.

Potential Mitigations

• An attorney can verify the corporate structure through public records to confirm the information disclosed in Item 1.
• Your accountant's review of the Item 21 financials will confirm that the franchisor entity itself has substantial assets and operations.
• Asking the franchisor directly about its corporate structure can provide additional assurance.

Explanation

This risk was not identified. Item 1 discloses that the franchisor's predecessor was a sole proprietorship operated by Jerry P. McCauley from 1966. The document states this predecessor did not offer franchises. The transition to the current corporate entity in 1976 appears to have been part of the company's own evolution rather than an acquisition of a troubled system. No negative history associated with the predecessor is disclosed in Items 3 or 4.

Potential Mitigations

• An attorney can review the predecessor disclosures in Items 1, 3, and 4 to ensure they are complete and compliant.
• In discussions with long-tenured franchisees, you could inquire about the system's early history and the transition from the predecessor.
• A business advisor can help you understand the significance of a franchisor's lineage and history.

Explanation

This risk was not identified. Item 3 explicitly states, 'No litigation is required to be disclosed in this Item.' For a franchise system that has been operating for over 45 years with more than 100 franchisees, the absence of disclosable litigation against the franchisor is a significant positive indicator. It suggests a history of stable relationships with franchisees and a lack of systemic issues leading to legal disputes.

Potential Mitigations

• While no litigation is disclosed, your attorney can conduct an independent public records search to confirm the absence of significant legal disputes.
• When speaking with current and former franchisees, it is still prudent to ask about their experience with dispute resolution.
• A business advisor can discuss the importance of a clean litigation history as an indicator of a healthy franchise system.