Explanation

The audited financial statements for America's Music School LLC (AMS) for the years ending December 31, 2024, and 2023, do not indicate financial instability. The company reported net income in both years and maintained a positive member's equity. No 'going concern' notes or other significant warnings were identified in the auditor's report. However, ongoing profitability is not guaranteed.

Potential Mitigations

• An accountant should review the complete, multi-year financial statements and footnotes to assess the franchisor's financial health and stability.
• Discuss with your financial advisor the franchisor's reliance on franchise fees versus ongoing royalties for its revenue.
• It is wise to have your attorney confirm the franchisor is in compliance with any state financial assurance requirements, such as bonds or escrow.

Explanation

The franchisee turnover rates disclosed in Item 20 tables for 2022-2024 appear to be relatively low. Over the three-year period, there was one termination and one non-renewal out of a base of over 40 franchised outlets. While any closure is a concern, these numbers do not suggest a systemic problem at this time. A footnote notes one franchisee terminated before opening, which is not reflected as a terminated 'outlet' in the main table.

Potential Mitigations

• Your business advisor should help you calculate the annual turnover rates and compare them to any available industry benchmarks.
• It is highly recommended to contact a significant number of former franchisees listed in Exhibit H to understand their reasons for leaving the system.
• Posing specific questions to the franchisor about the circumstances of each termination, non-renewal, and reacquisition can provide valuable context.

Explanation

The franchise system shows steady but not excessively rapid growth in the number of franchised outlets from 2022 to 2024. This controlled pace of expansion suggests the franchisor, America's Music School LLC (AMS), may be less likely to outstrip its capacity to provide necessary support and training to new franchisees. However, you should still verify the quality of current support.

Potential Mitigations

• Engaging with a broad sample of franchisees from the list in Exhibit G can help verify if the franchisor’s support systems are keeping pace with growth.
• Your business advisor should review the franchisor's infrastructure and staffing levels in relation to its expansion plans.
• Asking the franchisor directly about their strategy for scaling support as the system grows is a prudent step.

Explanation

The franchisor began offering franchises in June 2011 and has a multi-layered corporate structure under its parent, Cambridge Information Group. With over a decade of franchising experience and 49 franchised locations open as of early 2025, the system appears to be established and not an unproven startup. The management team also appears to have significant tenure with the company and in relevant industries.

Potential Mitigations

• In discussions with your business advisor, evaluate the franchisor's long-term track record and the performance of its earliest franchisees.
• Your attorney should review the complex corporate structure involving AMS, MMH, and CIG to understand control and liability.
• It remains important to speak with franchisees who have been in the system for varying lengths of time to gauge the evolution of support and strategy.

Explanation

This risk was not identified. The business model, focused on music education for children and adults, appears to be based on a service with historically consistent demand. While teaching methods and program specifics may evolve, the core offering does not seem to be tied to a short-lived fad. Long-term success will still depend on operational excellence and adapting to local market competition.

Potential Mitigations

• Your business advisor can help you research the stability and long-term trends of the supplemental education market in your local area.
• Discuss the franchisor's approach to curriculum development and innovation to ensure the offerings remain relevant over time.
• Assessing the business's resilience to economic shifts and changes in consumer spending habits with a financial advisor is recommended.

Explanation

This risk was not identified in the FDD. Item 2 details the business experience of the key management personnel of America's Music School LLC (AMS) and its parent companies. The executives listed generally appear to have long tenures with the company and its affiliates, with backgrounds in franchising, finance, operations, and marketing within this or related industries. This suggests a stable and experienced leadership team.

Potential Mitigations

• A business advisor can help you conduct independent research on the professional backgrounds and reputations of the key executives listed.
• When speaking with current franchisees, inquire about their direct experiences and the quality of strategic guidance from the management team.
• Verifying the franchising experience of the management team, not just their industry experience, is a key due diligence step.

Explanation

This risk was not identified. Item 1 clearly discloses the parent companies, Music Makers Holdings LLC (MMH) and Cambridge Information Group II LLC (CIG). The franchisor, America's Music School LLC (AMS), provides its own audited financial statements in Exhibit E. As AMS appears financially stable and is not a new entity, the parent's financials are not required to be disclosed under the FTC Rule, and their absence does not appear to hide a material risk.

Potential Mitigations

• Your attorney should confirm that no parent company guarantees are required for the franchisor to meet its obligations.
• Understanding the full corporate structure and the relationships between the parent and subsidiary entities is a wise step to take with your legal counsel.
• Your accountant can assess if the financial statements of AMS on their own are sufficient to support the franchise system's obligations.

Explanation

This risk was not identified in the FDD. Item 1 discloses that East Coast Music Production Camp, LLC was the 'Predecessor' to the Bach to Rock school system, having been acquired in 2007. The FDD appears to provide the necessary historical context regarding this entity. No other predecessors are mentioned, and there are no apparent gaps or negative history being obscured in Items 3 or 4 related to this predecessor.

Potential Mitigations

• Careful review of Items 1, 3, and 4 with your attorney is important to ensure all predecessor history is fully understood.
• If possible, a business advisor could assist in researching the public record of any predecessor entity for additional context.
• When speaking with long-tenured franchisees, you could inquire about their experiences under the predecessor's ownership.

Explanation

This risk was not identified as a significant pattern. Item 3 of the FDD states, 'No litigation is required to be disclosed in this Item.' While Item 13 discloses a successful trademark proceeding initiated by the franchisor's parent, this is not franchisee-initiated litigation alleging fraud. The absence of a disclosed pattern of franchisee lawsuits concerning misrepresentation or other systemic issues is a positive indicator, though it does not eliminate all legal risk.

Potential Mitigations

• An attorney should still conduct independent searches for litigation involving the franchisor or its affiliates that may not have met the threshold for FDD disclosure.
• During due diligence calls with current and former franchisees, it is prudent to inquire about their satisfaction and any disputes they may have had.
• Understanding the dispute resolution process outlined in Item 17 is crucial in case future conflicts arise.