Explanation

This risk was not identified. The audited financial statements provided for BOR Franchising, LLC (BOR Franchising) show a strong financial position, with significant net income and positive owner's equity for the past three fiscal years. Healthy financials suggest the franchisor has the resources to support its obligations. However, a prospective franchisee should always have their accountant review the financials in detail, as financial health can change over time.

Potential Mitigations

• A thorough review of the franchisor's audited financial statements, including all footnotes, with an experienced franchise accountant is essential.
• Your accountant should assess key financial trends over the past three years, such as revenue sources, profitability, and cash flow.
• Engaging a business advisor can help you understand the franchisor's capital structure and its ability to fund future growth and support.

Explanation

This risk was not identified. The restoration industry, which addresses needs arising from events like fires and floods, is generally considered to be based on sustained, non-discretionary consumer demand rather than a short-term trend or fad. This suggests a more stable market foundation for the business. However, market conditions and competition can always change over time, which requires ongoing business planning.

Potential Mitigations

• Engaging a business advisor to research the long-term outlook and competitive landscape for the restoration industry in your local market is recommended.
• Understanding the franchisor's strategy for innovation and adaptation to new technologies and market changes is important for long-term success.
• Your financial advisor can help model the business's resilience to various economic conditions.

Explanation

This risk was not identified. The executive team described in Item 2 appears to have direct and relevant experience in both the restoration industry and in franchising. For example, the President was a former franchisee of the system, and the Director of Franchise Operations has held leadership roles at another service franchise and also owned a BOR franchise. This experience can be beneficial for providing knowledgeable support and guidance.

Potential Mitigations

• It is still wise to verify the management's reputation by speaking with current and former franchisees about their experiences with the leadership team.
• A business advisor can help you research the past performance of other systems the executive team may have been involved with.
• During your own discussions with management, you can assess their strategic vision and understanding of franchisee needs.

Explanation

This risk was not identified in the FDD. Item 1 indicates the franchise is owned by its principals, not a private equity firm. This can sometimes mean that management's focus is more aligned with the long-term health of the brand and its franchisees rather than short-term investor returns. However, the ownership structure could change in the future, as the franchisor has the right to sell the system.

Potential Mitigations

• Your attorney should review the assignment clause in the franchise agreement to understand your rights if the system is sold.
• It is always prudent to ask the franchisor about any long-term plans regarding a potential sale or change in ownership structure.
• A business advisor can help you understand the potential implications of different ownership structures in franchising.

Explanation

This risk was not identified. The FDD discloses that the franchisor has no parent company. The franchisor's own audited financial statements are provided in Item 21. This provides direct transparency into the financial health of the entity you would be contracting with. An affiliate, BOR IP, LLC, is disclosed, but its role appears limited to holding intellectual property.

Potential Mitigations

• Your attorney should confirm the corporate structure and the roles of any disclosed affiliates.
• An accountant should still perform a thorough review of the provided franchisor financials to assess their stability and performance.
• Understanding the relationship between the franchisor and any affiliates, especially concerning key supplies or services, is a valuable discussion to have with your attorney.

Explanation

This risk was not identified. Item 1 of the FDD states that BOR Franchising has no predecessors. This means the entity you are contracting with is the same one that has been operating the franchise system since its inception. This avoids potential risks associated with inheriting historical issues, undisclosed liabilities, or a negative track record from a prior owner of the system.

Potential Mitigations

• Your attorney can help you verify the corporate history through public records if there are any concerns.
• It is still important to review the franchisor's own history in Items 3 and 4 for any litigation or bankruptcy events.
• Speaking with the longest-tenured franchisees can help confirm the operational history of the system under the current ownership.

Explanation

This risk was not identified. 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, or by the franchisor against franchisees, is a positive indicator. It suggests a potentially healthier franchisor-franchisee relationship compared to systems with significant legal disputes.

Potential Mitigations

• Your attorney can conduct independent searches for litigation involving the franchisor as part of comprehensive due diligence.
• It's valuable to ask current and former franchisees about any disputes, even those that did not result in formal litigation.
• A business advisor can help you assess the overall health of franchisee relations within the system.