Explanation

Item 20 data shows significant recent growth, with the number of franchised outlets increasing from 76 to 105 in 2024. While growth can be positive, such a rapid expansion rate could potentially strain the franchisor's resources. This may impact its ability to provide the necessary level of training, field support, and operational assistance to all franchisees, both new and existing. The quality of support could be diluted if infrastructure does not keep pace.

Potential Mitigations

• Engaging a business advisor to question the franchisor about their plans for scaling support infrastructure to match this rapid growth is beneficial.
• A discussion with a diverse group of new and established franchisees can provide insight into the current quality and responsiveness of franchisor support.
• Your accountant can help analyze the franchisor's financial statements in Item 21 to assess if they are investing sufficiently in support staff and systems.

Explanation

Item 2 shows that some key executives from the parent company, HFC, have extensive experience in franchising with other brands, but not necessarily in the pet services industry. Conversely, the direct brand leadership has operational experience but may be newer to their specific executive roles. This mix of experience could impact the quality of both industry-specific guidance and franchise system management. You should evaluate if the management team has a balanced and relevant skill set.

Potential Mitigations

• A business advisor can help you thoroughly vet the backgrounds of the key management personnel listed in Item 2.
• In discussions with current franchisees, it's beneficial to ask about their perception of the management team's competence and support.
• Your attorney could help you formulate questions for the franchisor regarding the specific experience of the team that will directly support you.

Explanation

APM is owned by Home Franchise Concepts, LLC, which is part of the large corporate entity JM Family Enterprises, Inc. This structure means decisions could be driven by the parent company's financial goals rather than the long-term health of franchisees. This could manifest as pressure for rapid growth, increased fees, or cost-cutting in support services to maximize returns for the ultimate owner, creating a potential conflict with your interests as a franchisee.

Potential Mitigations

• A business advisor can help research the parent company's reputation and track record with its other franchise brands.
• It is important to ask current franchisees if they have observed any significant changes in fees, support, or strategy since the acquisition.
• Your attorney should review the assignment clause in the Franchise Agreement to understand how the system could be sold again.

Explanation

Items 3 and 4 disclose significant negative history under previous ownership, including a 2006 consent order for franchise law violations and a 2012 Chapter 11 bankruptcy. While the franchisor is under new ownership since 2021, this history is part of the system's legacy. A prospective franchisee should consider how these past issues may have shaped the current system, its reputation, and the franchise agreements, which might still contain legacy provisions.

Potential Mitigations

• It is prudent to discuss the details of the past litigation and bankruptcy with your attorney to understand their potential relevance today.
• You should ask long-term franchisees about their experience during the periods of historical trouble and under the new ownership.
• Your business advisor can help research the reputation of the current parent company, HFC, to assess changes since the acquisition.

Explanation

Item 3 discloses a 2006 Consent Order with the state of Maryland where APM, under previous ownership, was required to cease and desist from violating franchise law. While this event is dated and occurred under prior management, it is a material legal action. The FDD does not disclose a recent pattern of franchisee-initiated litigation for fraud or misrepresentation. However, this historical regulatory action warrants careful consideration.

Potential Mitigations

• Your attorney should carefully review the details of the past regulatory action disclosed in Item 3 and explain its potential significance.
• It is wise to ask the franchisor what procedural changes were implemented to ensure compliance with franchise laws following this order.
• Consulting a business advisor to research the brand's current reputation and any more recent, undisclosed disputes is a valuable step.