Explanation

This risk was not identified in the FDD package. An analysis of the franchisee turnover data presented in Item 20 for the last three years does not reveal an unusually high rate of terminations, non-renewals, or other cessations relative to the system's size. High turnover can be a red flag for systemic problems, so its absence here is a positive indicator, though the system is relatively new.

Potential Mitigations

• Your business advisor can help you calculate the percentage of turnover for each of the past three years to confirm the stability shown in the data.
• When speaking with former franchisees from the list in Exhibit G, it is a good practice to ask about their reasons for leaving the system.
• Engaging an attorney to review the termination and renewal clauses in Item 17 can provide context on why turnover might be low.

Explanation

This risk was not identified in the FDD package. The business model, which focuses on contents restoration services following property damage from events like fires and floods, serves a persistent, need-based market rather than a temporary trend. This suggests a degree of long-term market stability, as the demand for such services is not typically driven by fads or fleeting consumer interests.

Potential Mitigations

• Your business advisor can help you research the local market to confirm the consistent demand for restoration services in your area.
• Analyzing the competitive landscape with a business advisor will help you understand the long-term positioning of the franchise.
• It is prudent to discuss the business's resilience to economic cycles with your financial advisor.

Explanation

This risk was not identified in the FDD package. The executives of Packoutz LLC and its parent, BELFOR Franchise Group, have extensive backgrounds in the restoration industry and in managing other, similar franchise brands. This experience is a positive factor, suggesting the leadership team understands both the specific industry and the dynamics of a franchise relationship, which can reduce risks associated with operational and support failures.

Potential Mitigations

• You should still verify the experience claimed in Item 2 through independent research, which your business advisor can assist with.
• When speaking with current franchisees, asking about their perception of the management team's competence and support is a valuable step.
• Your attorney can help you formulate questions for the franchisor about how their past experience informs current strategy and franchisee support.

Explanation

This risk was not identified in the FDD package. The franchisor clearly discloses its complex corporate structure, including its parent, grandparent, and ultimate parent entities in Item 1. Furthermore, it provides audited financial statements for BFG Holdco, Inc., which guarantees the franchisor's performance. This level of transparency meets disclosure requirements and allows for a more complete assessment of the entities backing your franchise.

Potential Mitigations

• Your attorney should still confirm the corporate structure and the legal standing of the entity providing the guarantee.
• It is important for your accountant to analyze the provided parent financials, as they are the basis for the system's financial stability.
• Asking the franchisor to explain the roles and relationships between the various affiliated companies can provide additional clarity.

Explanation

This risk was not identified in the FDD package. Item 1 indicates Packoutz LLC was formed in 2019 and began franchising under its current name in 2021. The document does not disclose any predecessors from which it acquired its primary assets or business system, suggesting a relatively clean operational history. Therefore, there are no hidden risks associated with a prior operator's potential failures or negative history.

Potential Mitigations

• Your attorney can conduct public record searches to confirm the corporate history provided in Item 1.
• You should still ask the franchisor about the origin of their business system and operating procedures.
• A business advisor can help you understand the implications of starting with a company that does not have a long, multi-generational history.

Explanation

This risk was not identified in the FDD package. Item 3 of the FDD states that there is no litigation that requires disclosure. The absence of a pattern of lawsuits filed by franchisees alleging fraud, or by the franchisor against franchisees for contract breaches, is a positive indicator. It suggests a lower level of conflict within the franchise system compared to those with significant litigation histories.

Potential Mitigations

• Your attorney can perform independent public record and litigation searches to verify the franchisor's disclosure in Item 3.
• When speaking with current and former franchisees, it is still a good practice to inquire about any disputes they may have had with the franchisor.
• Understanding the dispute resolution process outlined in Item 17 with your attorney is important, even in the absence of disclosed litigation.