Explanation

This risk was not identified. BHGRE LLC began franchising in 2008 and is part of a large, established parent company, Anywhere, with extensive experience in real estate franchising. Generally, investing in a new or unproven system carries higher risks because the business model, brand recognition, and support structures are not yet time-tested, which can lead to a higher rate of franchisee failure.

Potential Mitigations

• When evaluating any franchise, your business advisor should help you assess the franchisor's experience in both the specific industry and in managing a franchise network.
• An accountant can analyze the financial statements for signs of stability and reliance on franchise fees versus ongoing royalties.
• Consult with an attorney to understand the legal and contractual risks, which may be greater with a newer system.

Explanation

This risk is not considered significant. Real estate brokerage is a mature, well-established industry with long-term consumer demand. A fad business, by contrast, is one tied to a new or fleeting trend that may not have long-term viability. Investing in a fad carries the risk of business failure once consumer interest declines, even though your contractual obligations to the franchisor would continue for the full term.

Potential Mitigations

• A business advisor can help you conduct market research to assess the long-term demand for any franchise's products or services.
• Investigate the franchisor's plans for innovation and adaptation to changing market conditions with your business advisor.
• An accountant should help you evaluate the business model's resilience to economic shifts and changing consumer tastes.

Explanation

This risk was not identified. Item 2 shows that the management team of BHGRE LLC and its parent, Anywhere, consists of individuals with extensive and long-term experience in the real estate and franchising industries. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions, underdeveloped support systems, and a general lack of understanding of the franchisor-franchisee relationship, potentially jeopardizing your investment.

Potential Mitigations

• A business advisor can help you vet the backgrounds of any franchise's key executives for relevant industry and franchising experience.
• Speaking with current franchisees is an effective way to gauge the competence and responsiveness of the management team.
• Your attorney can review the FDD for any disclosures that might indicate instability or recent negative turnover in key management positions.

Explanation

This risk was not identified as the franchisor's parent, Anywhere, is a publicly-traded corporation, not a private equity firm. Private equity ownership can present risks, as PE firms often have a shorter investment horizon. This can lead to decisions that prioritize rapid returns, such as cutting franchisee support, increasing fees, or a quick sale of the franchise system, which may not align with the long-term health of the brand or your business.

Potential Mitigations

• If a franchisor is owned by a private equity firm, your business advisor should research the firm's history with other franchise brands.
• Consult your attorney to understand the franchisor's rights to sell the system and what protections you might have.
• Discuss any changes in support or operations since the PE acquisition with current franchisees.

Explanation

This risk was not identified. Item 1 fully discloses the complex parent company structure, and Item 21 provides the consolidated financial statements for the ultimate parent and guarantor, Anywhere Real Estate Inc. When a franchisor is a subsidiary, failing to disclose a parent company or provide its financial statements (if it guarantees performance or is otherwise fundamental to the offering) can obscure the true financial health and stability of the system you are investing in.

Potential Mitigations

• Your attorney and accountant should always confirm the full corporate structure disclosed in Item 1.
• If a parent company guarantee is offered, it's crucial for your attorney to review its terms and for your accountant to analyze the parent's financial statements.
• A business advisor can help research the parent company's reputation and its relationship with its subsidiary franchise brands.

Explanation

This risk was not identified. Item 1 states there are no predecessors that need to be disclosed for BHGRE LLC. When a franchisor acquires a business from a predecessor, it is important that the FDD provides a complete history. Failing to do so could hide inherited problems, such as a history of litigation, franchisee failures, or other systemic issues that could continue to affect the brand and your business under the new ownership.

Potential Mitigations

• An attorney should carefully review Item 1 for any mention of predecessors and cross-reference with litigation and bankruptcy history in Items 3 and 4.
• If a predecessor exists, your business advisor can help you research its historical performance and reputation.
• Speaking with long-term franchisees who operated under the predecessor can provide valuable insight into the system's history.