Explanation

This risk was not identified. The audited financial statements in Exhibit A show that Bark Busters North America, LLC (Bark Busters NA) is profitable, has strong positive net worth, and healthy cash flow. A significant portion of its revenue comes from ongoing royalties rather than initial fees, which indicates a financially sustainable business model. The company appears financially stable and capable of supporting its franchise system.

Potential Mitigations

• An accountant's review of the franchisor's financial statements, including footnotes and the auditor's report, is essential to confirm financial health.
• Discussing the franchisor’s financial stability and investment in the brand with your financial advisor provides important context for your decision.
• It is prudent to have your attorney verify that the franchisor has met any state-mandated financial assurance requirements, if applicable.

Explanation

This risk was not identified in the disclosure document. The data presented in Item 20 tables shows low rates of franchise terminations, non-renewals, and other cessations relative to the system's size over the last three years. The system appears to be stable and experiencing modest growth, which suggests that widespread franchisee failure or dissatisfaction is not a significant issue at this time.

Potential Mitigations

• Contacting a broad sample of current and former franchisees listed in the FDD is a crucial step your business advisor can help you with to verify the reasons for any turnover.
• An analysis of the Item 20 tables with your accountant can help you calculate the precise turnover rates over the past three years.
• Your attorney should be consulted to ask the franchisor for clarification on any statistics in the turnover tables that seem unclear.

Explanation

This risk was not identified. Item 20 data shows a pattern of slow and steady growth over the past three years, not a rapid expansion that might strain support systems. This indicates a more controlled and potentially sustainable growth strategy. The franchisor does not appear to be prioritizing rapid franchise sales over the health and support of the existing system.

Potential Mitigations

• Engaging a business advisor to question the franchisor about their future growth plans and how they intend to scale support systems is beneficial.
• It is important to discuss with current franchisees whether the quality and responsiveness of franchisor support has remained consistent.
• Your accountant can review the financials in Item 21 to assess if the franchisor's infrastructure spending is keeping pace with its growth.

Explanation

This risk was not identified. The FDD indicates that the franchisor has been in business since 2013 and has a substantial number of operating units. The management team described in Item 2 possesses relevant industry experience. Furthermore, the franchisor provides audited financial statements and has a multi-year history of operations, suggesting it is an established and proven system rather than a new or untested one.

Potential Mitigations

• A thorough review of the management team's experience in both the specific industry and in franchising with a business advisor is a wise step.
• Speaking with some of the earliest franchisees in the system can provide valuable insight into the franchisor's evolution and consistency.
• An accountant's analysis of multi-year financial data from Item 21 is critical to confirm the system's long-term viability.

Explanation

This risk was not identified. The business model, focused on in-home dog training, addresses a consistent and long-standing market demand for pet services. This type of business is not typically dependent on short-term trends or novelties. The franchisor's history since 2013 further suggests a sustainable business model rather than a temporary fad.

Potential Mitigations

• Engaging a business advisor to research the long-term market trends for pet services can help validate the business model's sustainability.
• You should ask the franchisor about their plans for future service development and innovation to ensure they are not becoming complacent.
• It is wise to assess the business's resilience to economic downturns by discussing the model with a financial advisor.

Explanation

This risk was not identified. Item 2 of the FDD details the business experience of the key executives, Carl and Heather Peterson, indicating their involvement since 2018 and prior relevant industry experience. The franchisor entity has been operating since 2013. This suggests that the management team is familiar with both the industry and the franchise system's operations.

Potential Mitigations

• A business advisor can help you thoroughly vet the backgrounds of the key executives listed in Item 2 to assess their specific experience.
• Speaking with current franchisees about their direct experiences with the management team's competence and support is crucial for due diligence.
• It is important to ask the franchisor directly about the experience level of the support and training staff you will be working with.

Explanation

This risk does not appear to be present, as Item 1 does not disclose that the franchisor is owned by a private equity firm. The company appears to be privately held by its principal operators. Therefore, risks associated with short-term investor return horizons, which can sometimes conflict with the long-term health of franchisees, may not be a primary concern here.

Potential Mitigations

• Your attorney can help you verify the ownership structure of the franchisor through public records to confirm the information in Item 1.
• It is always a good practice to ask the franchisor about any potential plans for selling the company in the future.
• Understanding the franchisor's long-term vision for the brand during discussions can provide insight into their operational philosophy.

Explanation

This risk was not identified. Item 1 of the FDD does not indicate the existence of a parent company. The franchisor, Bark Busters NA, appears to be the primary operating and franchising entity, and it provides its own audited financial statements in Item 21. There is no mention of a parent guaranteeing obligations or being a required part of the financial picture.

Potential Mitigations

• Your attorney should confirm the corporate structure and verify that there are no undisclosed parent or controlling entities.
• If a parent company were involved, it would be critical for your accountant to review their financial statements for a complete risk assessment.
• Always ask your attorney to scrutinize any guarantees mentioned in the FDD to see if they are from a parent entity or the individuals themselves.

Explanation

The FDD in Item 1 mentions a predecessor related to trademark ownership and Item 3 discloses a 2005 regulatory action against a prior, unrelated U.S. licensee of the Australian brand. While the current franchisor has operated since 2013, this history, though indirect, is part of the brand's past in the U.S. You should consider this historical context when evaluating the brand.

Potential Mitigations

• Your attorney should carefully review all disclosures related to predecessors and prior licensees to understand the brand's full history.
• Asking the franchisor to clarify the relationship between the current company and any past entities is a key due diligence step.
• In discussions with long-term franchisees, you could inquire about their experiences during any transition periods from prior brand licensees.

Explanation

This risk was not identified. Item 3 discloses a single administrative proceeding from 2005 involving a prior licensee, not the current franchisor. There is no disclosure of a pattern of litigation against the current franchisor, Bark Busters NA, alleging fraud, misrepresentation, or similar claims. The absence of such a pattern suggests a healthier relationship between the current franchisor and its franchisees.

Potential Mitigations

• Your attorney should review the specifics of any disclosed litigation, even if it involves a predecessor, to understand its potential relevance.
• It is wise to ask the franchisor if they have been involved in any disputes that did not rise to the level of disclosable litigation.
• Asking current and former franchisees about their relationship with the franchisor and any disputes can provide valuable, real-world context.