Explanation

The risk of a franchisor expanding too quickly and outpacing its ability to provide adequate franchisee support was not identified. The system's growth, as shown in Item 20, appears to be steady rather than excessively rapid. However, in any franchise system, rapid growth can strain resources, potentially affecting the quality of training, marketing, and operational support available to you.

Potential Mitigations

• It is still prudent to ask current franchisees about the quality and timeliness of the support they receive from the franchisor.
• A business advisor can help you evaluate whether the franchisor’s support staff, as described in Item 2, seems adequate for the current system size.
• Your accountant should review the franchisor's financials in Item 21 to confirm it has the resources to sustain its current growth rate.

Explanation

This risk was not identified. The Benjamin Franklin Plumbing system has a long operational history, with its predecessor having offered franchises since September 2001, as noted in Item 1. This indicates a mature system, not a new or unproven one. A new franchise system would present higher risks due to a lack of a proven track record, brand recognition, and developed support systems.

Potential Mitigations

• Even in a mature system, asking long-tenured franchisees about the system's evolution and support consistency over the years is a valuable exercise.
• Your business advisor can help research the brand's reputation and history in the specific industry.
• It is wise to have your accountant review the system's financial performance over the past several years to ensure continued stability.

Explanation

This risk was not identified. Residential and commercial plumbing, as described in Item 1, is a well-established and essential service industry with consistent long-term demand. It is not dependent on a fleeting trend or fad. Investing in a fad business carries the risk that consumer interest could decline, potentially harming your business long before the franchise term expires, regardless of your contractual obligations.

Potential Mitigations

• A business advisor can help you research the long-term outlook for the plumbing services industry in your local market.
• Engaging with existing franchisees provides an opportunity to discuss the stability of customer demand and the business model's resilience.
• An accountant can assist in modeling financial performance based on the stable, needs-based nature of the services offered.

Explanation

The risk of an inexperienced management team was not identified. Item 2 of the FDD details the business experience of the franchisor's key personnel, showing that many executives have extensive backgrounds in the franchise industry and with related brands. An inexperienced management team can pose a significant risk, as it may lead to poor strategic decisions, weak support systems, and a lack of understanding of franchisee needs.

Potential Mitigations

• When speaking with current franchisees, it remains valuable to ask about their direct experiences with the management team's responsiveness and competence.
• Your business advisor can help you research the professional reputations of the key executives listed in Item 2.
• It is a good practice to confirm with your attorney that management's roles and responsibilities align with the support obligations promised in the Franchise Agreement.

Explanation

This risk was not identified. Item 1 and Item 21 of the FDD appear to properly disclose the complex parent company structure and provide the required financial statements for the guarantor, AB Assetco LLC, as well as for the management company, Authority Brands, Inc. Failure to disclose a parent company or provide its required financials can hide significant risks related to the overall financial stability and backing of the franchise system.

Potential Mitigations

• A franchise attorney can confirm that the disclosures regarding parent companies and guarantors meet all federal and state legal requirements.
• Having an accountant review all provided financial statements, including those of the parent entities, is a critical step in due diligence.
• It is beneficial to ask the franchisor to clarify the roles and relationships between the various parent and affiliate entities.

Explanation

This risk was not identified. The FDD discloses that the franchisor's predecessor, Benjamin Franklin Franchising, LLC, operated from 2001 to 2021. The document does not indicate any significant negative history, such as major litigation or bankruptcy, associated with this predecessor. A history of problems with a predecessor could indicate inherited systemic issues that might continue to affect the franchise system under its new ownership.

Potential Mitigations

• It is a good practice for your attorney to review all disclosures related to a franchisor's predecessor in Items 1, 3, and 4.
• Engaging with long-term franchisees who operated under the predecessor can provide firsthand accounts of the system's history.
• A business advisor can help you conduct independent research on a predecessor company's historical reputation and performance.