Explanation

This risk was not identified in the FDD Package. Item 20 tables show that no franchisees have yet joined or left the system. High franchisee turnover is a critical indicator of potential systemic problems, such as a lack of profitability or inadequate support. It is crucial to monitor this data in future FDDs if the system grows.

Potential Mitigations

• If franchisees join the system, your business advisor should help you analyze future Item 20 data to calculate the franchisee turnover rate.
• Speaking with current and former franchisees is a key due diligence step, and your attorney can help you formulate insightful questions about their experiences.
• An accountant can help you compare turnover rates to any available industry benchmarks to assess system health.

Explanation

This risk was not identified in the FDD Package, as Item 20 shows the system has zero outlets and is just beginning to offer franchises. Rapid growth can strain a franchisor's ability to provide adequate support. While not currently a risk, it is a factor to monitor if the system begins to expand quickly, given the franchisor's limited operating history and resources.

Potential Mitigations

• As the system grows, your business advisor can help you monitor the ratio of support staff to franchisees.
• Before investing, it is important to discuss the franchisor's plans for scaling its support infrastructure with your business advisor.
• Future discussions with franchisees, guided by your attorney, should focus on the quality and timeliness of franchisor support as the system expands.

Explanation

This risk was not identified in the FDD Package. The business concept of providing boat checks and marine maintenance services is an established industry. It does not appear to be based on a short-lived trend or fad. However, the business is disclosed as potentially seasonal depending on your location, which could affect year-round revenue streams.

Potential Mitigations

• Your business advisor should help you research the long-term demand for these services in your specific geographic market.
• Develop a business plan with your accountant that accounts for potential seasonality and its impact on cash flow.
• Investigate the local competitive landscape to understand the stability of demand for marine services.

Explanation

This risk was not identified in the FDD Package. Item 1 does not indicate that Boatsitters.com Incorporated is owned or controlled by a private equity firm. The principal owners appear to be the founders listed in Item 2. Therefore, risks specifically associated with private equity ownership, such as a focus on short-term returns over long-term system health, do not appear to be present.

Potential Mitigations

• It is good practice to have your attorney verify the corporate ownership structure during due diligence.
• Understanding the ownership of the franchisor is a key step a business advisor can help with to assess long-term strategic alignment.
• An accountant can analyze financial statements for signs of financial engineering common in private equity-backed firms.

Explanation

This risk was not identified in the FDD Package. Item 1 does not disclose a parent company. The franchisor, Boatsitters.com Incorporated, is a newly formed entity with weak financials, but it does not appear to be a subsidiary of a larger, undisclosed parent. An affiliate, Boat Sitters IP, Inc., owns the trademarks, but the FDD does not indicate it is a parent company.

Potential Mitigations

• Your attorney can verify the corporate structure and any affiliate relationships to ensure there are no undisclosed controlling entities.
• An accountant should review the financial statements to confirm the franchisor's standalone status and assess its capitalization.
• A business advisor can help you investigate the history and relationship between the franchisor and its affiliate, Boat Sitters IP, Inc.

Explanation

This risk was not identified in the FDD Package. Item 1 explicitly states that the franchisor has no predecessors. This means the current entity did not acquire the business from a prior company. Therefore, there is no risk of inheriting historical problems, such as past litigation or franchisee failures, from a predecessor entity.

Potential Mitigations

• It is always prudent to have your attorney confirm the franchisor's corporate history as disclosed in Item 1.
• A business advisor can help you research the background of the founders, even in the absence of a formal predecessor company.
• An accountant's review of the financial statements can help confirm the lack of prior business operations.

Explanation

This risk was not identified in the FDD Package. Item 3 states that no litigation is required to be disclosed. The absence of a pattern of lawsuits filed by franchisees alleging fraud, misrepresentation, or breach of contract is a positive indicator. It is important to monitor Item 3 in future FDDs for any changes.

Potential Mitigations

• Your attorney should still perform a public records search to confirm the absence of litigation against the franchisor or its principals.
• A business advisor can help you research the online reputation of the company and its management for any signs of disputes.
• You should discuss the dispute resolution process with existing franchisees once the system is established.