Explanation

This risk was not identified in the FDD package. The Item 20 tables show a relatively low rate of franchisee terminations, non-renewals, and other departures over the past three years. Generally, a high franchisee turnover rate can be a critical warning sign of systemic problems within a franchise, such as poor profitability, franchisee dissatisfaction, or inadequate support from the franchisor. The low turnover here may suggest a relatively stable franchisee base.

Potential Mitigations

• Speaking with a diverse group of current and former franchisees from the list in Exhibit D is a crucial step your business advisor can help you prepare for.
• An accountant's review of the full Item 20 tables can help you verify turnover calculations and identify any subtle trends.
• Your attorney should review any footnotes in Item 20 that might explain the circumstances behind the outlets that did leave the system.

Explanation

The FDD does not indicate that the system is growing at a rate that would outpace its support capabilities. Item 20 shows steady, but not explosive, unit growth over the past three years. The franchisor's financial statements in Item 21, while showing historical weakness, also show growing net income, which may suggest an increasing capacity to support new and existing franchisees. Rapid growth without the infrastructure to support it can be a significant risk in some systems.

Potential Mitigations

• Inquire with the franchisor about their specific plans for scaling support staff and infrastructure to match continued unit growth.
• When speaking with franchisees, ask those who opened at different times about their perception of the quality and responsiveness of franchisor support.
• A business advisor can help you evaluate whether the current support structure described in Item 11 seems adequate for the system's size and complexity.

Explanation

This risk is not present. The franchisor, Assisting Hands Home Care, LLC (AHHC), has been in business and franchising since 2006, as disclosed in Item 1. This indicates a long operational history and an established business model, rather than a new or unproven system. A long track record can suggest more developed support systems, greater brand recognition, and a more stable franchisor, though it does not eliminate other potential risks.

Potential Mitigations

• A business advisor can help you research the company's history and reputation within the home care industry.
• It is still valuable to have an accountant review the multi-year financial statements in Item 21 to assess the company's long-term performance trends.
• Consulting with your attorney is important to understand the full scope of the established legal framework you will be operating within.

Explanation

The risk of this being a fad business appears low. The in-home care industry, particularly for senior citizens and disabled adults as described in Item 1, serves a fundamental and growing demographic need. This suggests long-term, sustained consumer demand rather than a temporary trend. A business based on a fad carries the risk of collapsing when consumer interests shift, but that does not seem to be the case here.

Potential Mitigations

• Engage a business advisor to research long-term demographic and market trends for in-home care services in your specific area.
• Your accountant can help you analyze the financial viability of this industry beyond any short-term market fluctuations.
• Discussing the industry's future with experienced operators can provide valuable insight; your business advisor can help you identify such contacts.

Explanation

This risk was not identified. Item 2 shows that the key executives and founders have extensive experience in the home care industry and in franchising, with some having been with the company since its inception in 2006. In many franchise systems, inexperienced management can pose a significant risk, leading to poor strategic decisions and inadequate franchisee support. The long tenure and relevant background of the management team here is a positive factor.

Potential Mitigations

• It is still a valuable exercise to research the professional backgrounds and reputations of the key executives listed in Item 2 with your business advisor.
• When speaking with franchisees, asking about their direct experiences and the quality of leadership from the management team can provide important context.
• Your attorney can help you understand the roles and responsibilities of the management team as outlined in the franchise documents.

Explanation

This risk was not identified. Item 1 of the FDD does not indicate that the franchisor is owned by a private equity firm. The risk with private equity ownership can sometimes be a focus on short-term profitability and a quick exit strategy, which may not align with the long-term health of franchisees. Since this is not the case here, that specific risk is not present.

Potential Mitigations

• A business advisor can help you verify the ownership structure of the franchisor through public records.
• Your attorney should still review the assignment clauses in the Franchise Agreement to understand who the franchisor could sell the system to in the future.
• Having an accountant analyze the franchisor's financial priorities as reflected in their financial statements remains a valuable step.

Explanation

This risk is not present. The FDD's Item 1 identifies one affiliate, Wada, Inc., and one subsidiary, Assisting Hands International, Inc. The nature of these entities is described, and the primary franchisor, AHHC, provides its own audited financial statements. The structure appears transparent, without any indication of a hidden parent company whose financials might be needed for a complete risk assessment. In some cases, a weak franchisor may be propped up by an undisclosed parent, creating hidden risks.

Potential Mitigations

• Your attorney can confirm the corporate structure and the roles of the affiliate and subsidiary as described in Item 1.
• An accountant should review any disclosed transactions between the franchisor and its affiliates for fairness and potential conflicts.
• A business advisor can help you assess the overall organizational health and how the different entities interact.

Explanation

This risk was not identified in the FDD. Item 1 indicates that Assisting Hands Home Care, LLC has operated under its own name since 2006 and does not mention any predecessors from which it acquired the system. Issues can arise when a franchisor acquires a system from a predecessor with a troubled history, as those problems can carry over. The absence of a predecessor simplifies the due diligence process in this regard.

Potential Mitigations

• A business advisor can help you conduct general industry research to confirm the company's history and origins.
• It is always prudent for your attorney to perform a public records search to ensure no undisclosed corporate history exists.
• Asking long-tenured franchisees about the company's history during your due diligence calls can provide additional confirmation.

Explanation

This risk was not identified. Item 3 of the FDD states, "No litigation is required to be disclosed in this Item." This indicates an absence of recent or pending lawsuits against the franchisor that are of the type requiring disclosure, such as those involving fraud or franchise law violations. A pattern of such litigation in other systems can be a major red flag, suggesting deeper issues with the franchisor's practices or franchisee relations. The lack of disclosed litigation is a positive indicator.

Potential Mitigations

• Your attorney can independently search court records to verify the franchisor's litigation history as an extra due diligence step.
• During discussions with current and former franchisees, it is wise to ask about any disputes they may be aware of, even if not formal litigation.
• A business advisor can help you assess the overall health of franchisee-franchisor relations within the system.