Explanation

This risk was not identified. The audited financial statements in Item 21 and Exhibit N show Ameriprise Financial Services, LLC (Ameriprise) is profitable with a substantial positive net worth. Strong financials suggest the franchisor can support its obligations and invest in the system. A financially weak franchisor could jeopardize your investment by failing to provide support or remain in business.

Potential Mitigations

• An accountant should review the franchisor's full audited financial statements, including footnotes, to confirm financial stability.
• Your business advisor can help you assess how the franchisor's financial health might impact long-term support and brand growth.
• Engaging an attorney to review any parent company guarantees mentioned in the FDD is a prudent step.

Explanation

This risk was not identified. Item 20 data shows a large, mature franchise system with a low percentage of franchisee turnover in the last three years. Ameriprise notes many "terminations" are due to advisors transitioning to a different role within the system, not leaving entirely. High, unexplained turnover can be a significant red flag indicating systemic problems with profitability or support.

Potential Mitigations

• It is wise to contact former franchisees listed in the FDD to understand their reasons for leaving the system.
• An accountant can help you analyze the turnover data in Item 20 to calculate the net churn rate over several years.
• Discussing the franchisor's franchisee retention strategies with a business advisor can provide additional insight.

Explanation

This risk was not identified. The franchise system is mature and its number of franchised outlets has been stable or slightly declining, as shown in Item 20. Rapid growth can strain a franchisor's ability to provide adequate support, training, and quality control. This system does not appear to be facing the risks associated with excessively fast expansion.

Potential Mitigations

• A business advisor can help you evaluate whether a franchisor's growth rate is sustainable and supported by adequate infrastructure.
• Franchisees listed in Item 20 can provide valuable insight into whether they feel the franchisor's support levels have kept pace with system size.
• An accountant's review of the financial statements can help determine if the franchisor has the capital to support its stated growth plans.

Explanation

This risk was not identified. Ameriprise Financial Services, LLC (Ameriprise) is a large, well-established company that began franchising in 1999, as stated in Item 1. Investing in a new or unproven system carries higher risks, including the potential for an untested business model, underdeveloped support systems, and lack of brand recognition. This franchise system is mature and has a long operating history.

Potential Mitigations

• When evaluating any franchise, it is wise to have your business advisor research the franchisor’s history and the business's long-term viability.
• For new systems, an attorney should be consulted to negotiate more favorable terms to offset the higher risk.
• An accountant should closely scrutinize the financial statements of any new franchisor to ensure it is adequately capitalized.

Explanation

This risk was not identified. The business of providing financial advice and brokerage services is a long-established professional service industry, not a temporary trend. Investing in a fad business carries the risk that customer demand will disappear, potentially leading to business failure even if you are locked into a long-term franchise agreement. This business model is based on a durable market.

Potential Mitigations

• A business advisor can help you research the long-term market trends and sustainability of any industry you consider entering.
• For any franchise, it is prudent to review the franchisor's plans for innovation and adaptation to changing market conditions with your attorney.
• Consulting with your accountant can help you assess the business model's resilience to economic cycles.

Explanation

This risk was not identified. Item 2 of the FDD lists a large management team with extensive, long-term experience at Ameriprise or within the financial services industry. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions, inadequate franchisee support, and an unproven operational playbook. The leadership of this franchisor appears to be highly experienced.

Potential Mitigations

• When considering any franchise, a business advisor can help you thoroughly vet the backgrounds of the key management team members listed in Item 2.
• It is always a good practice to ask existing franchisees about their direct experiences with the franchisor’s management team.
• An attorney can help you understand the professional history and any disclosed litigation involving the management team.

Explanation

This risk was not identified. Item 1 discloses that the franchisor's parent is Ameriprise Financial, Inc., a publicly traded company, not a private equity firm. Private equity ownership can sometimes introduce risks related to short-term profit motives, which may not always align with the long-term health of the franchise system or its individual franchisees.

Potential Mitigations

• A business advisor can help you research the ownership structure of any franchisor to understand its potential impact on strategic direction.
• It is prudent to ask your attorney to review any clauses in the Franchise Agreement that discuss the franchisor's right to sell or assign the system.
• If a franchisor is PE-owned, speaking with franchisees who have been with the system before and after the acquisition can provide valuable insight.

Explanation

This risk was not identified. Item 1 clearly discloses the parent company, Ameriprise Financial, Inc., and the franchisor entity, Ameriprise Financial Services, LLC, provides its own comprehensive, audited financial statements in Item 21. A failure to disclose a parent company, or provide its financials when it guarantees the franchisor's performance, can obscure a full picture of the system's financial stability.

Potential Mitigations

• Your attorney should always verify that the entities disclosed in Item 1 match the parties signing the Franchise Agreement.
• An accountant should confirm if parent company financials are required for disclosure, especially if the franchisor itself is newly formed or thinly capitalized.
• If a parent guarantee is offered, it's crucial for your attorney to review its terms and ensure the parent's financial statements are provided.

Explanation

This risk was not identified. Item 1 discloses a predecessor relationship with American Express Company that ended with a spin-off in 2005, which is distant history. The FDD does not indicate any recent predecessor changes or any transfer of assets from a troubled entity. A lack of transparency about predecessor history can hide past failures or systemic issues that may still affect the franchise system.

Potential Mitigations

• It is always good practice for your attorney to review Item 1 carefully for any mention of predecessors.
• A business advisor can help you research the history of the brand and any predecessor companies for a more complete picture of the system's background.
• If there is a recent predecessor, you should ask existing franchisees about their experience before and after the transition.