Explanation

This specific risk was not identified in the FDD package. Rapid system growth can be a concern if a franchisor's support infrastructure does not keep pace, potentially leading to diluted franchisee support. While AlphaGraphics does have a new franchisee pipeline, Item 20 data shows a net decrease in outlets over the last three years, not rapid growth.

Potential Mitigations

• A business advisor can help you assess if the franchisor's support systems seem appropriately scaled for its current size and projected openings.
• When interviewing current franchisees, it is useful to ask about the quality and responsiveness of the support they receive.
• Your accountant can review the franchisor's financial statements to gauge their investment in franchisee support infrastructure.

Explanation

This risk is not present. AlphaGraphics, Inc. and its predecessors have been operating and franchising for several decades, since the 1970s. Item 1 and Item 2 demonstrate a long history in the print and marketing industry and extensive experience in franchising. The system is well-established and not an unproven or new concept.

Potential Mitigations

• Even with an established system, consulting with a business advisor to review the franchisor's history and management experience is a valuable step.
• An attorney can help you understand how the franchisor's long history may have shaped the terms in the current franchise agreement.
• It is beneficial to speak with long-term franchisees to understand how the system has evolved over time.

Explanation

This risk does not appear to be present. The print, marketing, and signage industry is a well-established and mature business sector with sustained demand from a wide range of business customers. While the industry evolves with technology, the core services offered are not typically considered a fad or tied to a fleeting trend.

Potential Mitigations

• Engaging a business advisor to research the long-term outlook for the commercial printing and marketing services industry is a prudent step.
• You should independently investigate the local market demand for these specific services.
• Discussing the industry's future and the franchisor's plans for innovation with existing franchisees can provide valuable insight.

Explanation

This risk was not identified in the FDD. Item 2 details the business experience of the management team, showing that key executives have extensive, multi-year, and often multi-decade experience within the franchising and print/marketing industries, both with AlphaGraphics and other relevant companies. The leadership appears to have significant and relevant experience.

Potential Mitigations

• It is always good practice to have a business advisor help you review the backgrounds of the key management team members.
• When speaking with current franchisees, inquire about their direct experiences with the management team's leadership and support.
• Independently researching the key executives online can provide additional context and is a sound due diligence step.

Explanation

This risk was not identified in the provided documents. While AlphaGraphics is owned by a corporate parent structure (U.S. Business Holdings Inc., ultimately MBE Worldwide S.p.A.), this structure has been in place since 2017. It does not appear to be a recent private equity acquisition with a short-term exit strategy, which is the primary focus of this risk. However, the nature of corporate ownership always carries the potential for future sales of the brand.

Potential Mitigations

• Investigating the history and reputation of the parent company, MBE Worldwide S.p.A., with your business advisor can provide useful context.
• Asking existing franchisees about any changes in system direction or support since the 2017 acquisition is recommended.
• Your attorney should review the assignment clause in the Franchise Agreement to understand your rights if the system is sold again.

Explanation

This risk is not present. Item 1 clearly discloses the parent companies, U.S. Business Holdings, Inc. and MBE Worldwide S.p.A. Furthermore, the FDD includes the audited consolidated financial statements for AlphaGraphics, Inc. and its subsidiary in Item 21 and Exhibit D. There is no indication that required parent financial information has been withheld.

Potential Mitigations

• Your accountant should review the provided financial statements and the corporate structure described in Item 1.
• It's wise to have your attorney confirm that all necessary disclosures regarding parent companies and their financials appear to be included.
• Understanding the relationships between the franchisor and its parent companies can be explored in discussions with a business advisor.

Explanation

This risk is not present. Item 1 discloses the franchisor's predecessor, AlphaGraphics, Inc. of Tucson (“AGIT”), and describes the merger that occurred in 1986. The FDD provides a clear lineage of the company and does not appear to hide or obscure any relevant predecessor history. The information provided seems straightforward and complete.

Potential Mitigations

• Having your attorney review the predecessor information in the FDD is a standard part of due diligence.
• You can ask long-tenured franchisees about their experience with the company's history and evolution.
• A business advisor can help you understand if the corporate history presents any ongoing business implications.