Explanation

The franchise system is in a phase of rapid growth, with a net increase of 16 franchised outlets in 2024. While growth can be positive, when combined with the parent company's significant financial losses, it raises the possibility that the franchisor's support infrastructure may struggle to keep pace. This could potentially affect the quality and availability of training, operational support, and other resources you will depend on.

Potential Mitigations

• In your discussions with current franchisees, specifically ask about the quality and responsiveness of the support they have received as the system has grown.
• It would be wise to ask the franchisor about their specific plans to scale support staff and infrastructure to match the rate of new unit openings.
• Engage a business advisor to evaluate if the franchisor’s support systems seem adequate for its current and projected size.

Explanation

The franchisor entity, ALL Franchising, LLC (ALL), was formed in August 2022 and acquired the system from a predecessor. While the system itself has been operating since 2006, this new ownership structure under a private equity firm is relatively recent. You will be relying on the execution of a new management team that is part of a larger portfolio of brands, which presents risks associated with any newly integrated business.

Potential Mitigations

• Conducting thorough due diligence on the parent company and its management team's experience in franchising is essential, and a business advisor can help.
• Speaking with franchisees who have been with the system both before and after the 2022 acquisition can provide valuable insight into changes in support and culture.
• Your accountant should review the financial statements to assess the stability of the enterprise under its new ownership structure.

Explanation

The current franchisor and its direct parent were formed in 2022 following an acquisition by a private equity firm. Many key executives, while having experience in other companies or with the parent firm, have held their current roles with this specific franchise for a relatively short time (2021-2024). This newness of the management team in their specific roles for this brand could present risks related to strategic direction and operational execution under the new ownership structure.

Potential Mitigations

• A thorough review of the management team's prior experience in both franchising and the senior care industry with your business advisor is important.
• When speaking with current franchisees, you should ask about their confidence in and the performance of the new management team.
• Question the franchisor directly about their long-term vision and strategy for the brand.

Explanation

The franchise system was acquired by The Riverside Company, a private equity firm, in 2022. This ownership structure may introduce a focus on maximizing short-term investor returns, which could potentially lead to decisions that are not aligned with the long-term health of franchisees. This might manifest as increased fees, reduced support to cut costs, or a future sale of the entire system, creating uncertainty for your long-term investment.

Potential Mitigations

• It would be prudent to research the private equity firm's reputation and its track record with other franchise brands in its portfolio.
• Engaging a business advisor can help you analyze the potential impacts of private equity ownership on a franchise system.
• Your attorney should carefully review any clauses in the Franchise Agreement that discuss the franchisor's right to sell or assign the system.

Explanation

The FDD discloses a multi-layered ownership structure with a direct parent (Evive Brands, LLC) and an indirect parent (EHC Holding Company, LLC) that provides a performance guarantee and whose financial statements are included. This structure is complex, involving numerous other affiliated franchise brands under the same umbrella. While the parent is disclosed, understanding the flow of resources and potential for conflicts of interest within this large portfolio can be challenging for a prospective franchisee.

Potential Mitigations

• Your accountant should carefully review the provided parent company financial statements and the terms of the performance guarantee.
• It is advisable to discuss the complex corporate structure with your attorney to understand how it might affect your franchise.
• Inquire with current franchisees about how the parent company's structure impacts their day-to-day business and support.