Explanation

This risk was not identified in the FDD. The data in Item 20 indicates the franchise system has been shrinking over the last three years, not growing at a rate that would strain support resources. A rapidly expanding system can sometimes outpace its ability to provide adequate training and support to new franchisees, which does not appear to be the case here. However, a shrinking system presents its own set of challenges.

Potential Mitigations

• A business advisor can help you evaluate the franchisor's growth plans and assess if they have a sustainable strategy for the future.
• During due diligence calls, ask current franchisees if they feel the level of franchisor support is adequate for the current system size.
• Your accountant should review the franchisor's financials to confirm it has the resources to support any future growth initiatives.

Explanation

This risk was not identified in the FDD. BFK began offering franchises in July 2009, as stated in Item 1. Therefore, it is an established system with over a decade of operational history and not considered new or unproven. The risks associated with this franchise appear to stem from other factors, such as its financial condition and high turnover, rather than a lack of operational history.

Potential Mitigations

• When speaking with franchisees, it is a good practice to ask about the evolution of the business model and support systems over time.
• A business advisor can help you research the brand's history and reputation within its industry.
• Your attorney should still verify the franchisor's operating history as stated in Item 1.

Explanation

This risk was not identified in the FDD. The business model, focused on STEAM education for children using LEGO® brand products, is part of the broader, established educational services industry. With an operating history since 2009, the concept appears to have sustained consumer demand and is not tied to a short-term trend, suggesting it is not a fad business.

Potential Mitigations

• A business advisor can help you research the long-term trends and competitive landscape in the supplemental and youth education market.
• Assess the franchisor's commitment to curriculum development and innovation to ensure the offerings remain relevant.
• During your due diligence, discuss the stability of customer demand with current franchisees.

Explanation

This risk was not identified in the FDD. Item 2 indicates that the management team possesses significant experience with the Bricks 4 Kidz brand and in franchising. Key personnel have history with the predecessor company, Creative Learning Corporation, and some have been franchise owners themselves. This suggests the leadership team understands the business from both a franchisor and franchisee perspective.

Potential Mitigations

• A business advisor can help you research the backgrounds of the key executives listed in Item 2.
• When speaking with current franchisees, inquire about their direct experiences with the management team's competence and support.
• During validation calls, you can ask about the management's strategic vision for the company.

Explanation

This risk was not identified in the FDD. Item 1 discloses that the franchisor's parent company is StroomX LLC. There is no indication that StroomX LLC is a private equity firm. The structure does not appear to involve the types of short-term investment horizons or financial pressures typically associated with private equity ownership, though you should still review the financials carefully.

Potential Mitigations

• It is always prudent to ask your attorney to review the ownership structure detailed in Item 1.
• A business advisor can assist in researching the parent company to understand its business and objectives.
• Inquire about any potential plans to sell the company during your discussions with the franchisor.

Explanation

This risk was not identified in the FDD. Item 1 clearly discloses the parent company, StroomX LLC, and its relationship to the franchisor. The FDD does not indicate that the parent company's financial statements are required for disclosure or that they guarantee the franchisor's obligations. Therefore, there does not appear to be an issue with non-disclosure of a parent entity.

Potential Mitigations

• Your attorney can confirm that the disclosures regarding parent and affiliate companies in Item 1 comply with franchise regulations.
• An accountant should review the franchisor's financials to assess its standalone viability without reliance on a parent.
• Always ask the franchisor to clarify the roles and relationships between all affiliated companies mentioned in the FDD.