Explanation

This risk was not identified. The provided audited financial statements for the parent company of Buildingstars Management, Inc. (Buildingstars), Buildingstars International, Inc., show consistent revenue growth and profitability over the past three years. The balance sheet appears stable with positive working capital and stockholder equity. There is no 'going concern' note from the auditor, which suggests the company is financially stable and capable of meeting its obligations.

Potential Mitigations

• A franchise-experienced accountant should conduct a detailed review of the franchisor's financial statements, including all footnotes.
• It is wise to have your accountant assess financial trends over the full three years provided, focusing on cash flow and the source of revenues.
• Discuss the franchisor's financial health and its ability to support the system with your business advisor.

Explanation

This risk was not identified. Buildingstars Management, Inc. and its parent companies have been in operation since the 1990s and began franchising around the year 2000. The system is well-established and has a long operational history with a significant number of franchisees. Key executives also have long tenures within the company, indicating an experienced management team. This is not an unproven or startup franchise system.

Potential Mitigations

• It's still valuable to have a business advisor help you research the company's reputation and history within the commercial cleaning industry.
• Asking long-tenured franchisees about the evolution of the system and its management can provide useful insights.
• Your attorney should review the corporate history disclosed in Item 1 for any details of concern.

Explanation

This risk was not identified. The franchise operates in the commercial cleaning services industry, which is a long-established market with consistent demand. This type of business is not based on a fleeting trend or novelty product, suggesting it has long-term market viability. The business model provides essential services to other businesses, which is generally not considered a fad.

Potential Mitigations

• A business advisor can help you assess the local market competition and long-term demand for commercial cleaning services in your area.
• You should research general trends in the commercial cleaning industry to understand its future outlook.
• Discussing the stability of the customer base with existing franchisees is a prudent step.

Explanation

This risk was not identified. The executive profiles in Item 2 show that the key management personnel, including the President and Vice Presidents, have extensive experience within the Buildingstars system itself, with most having tenures of over a decade. This indicates a stable and experienced leadership team that is familiar with both the industry and the franchise system's operations.

Potential Mitigations

• It remains a good practice to ask current franchisees about their direct experiences with the management team's competence and support.
• You could research the professional backgrounds of the key executives listed in Item 2 for additional context.
• A business advisor can help you evaluate the overall strength of the leadership team as disclosed.

Explanation

This risk was not identified. While Buildingstars has a parent company, Facility Brands, Inc., there is no information in the FDD to suggest it is owned by a private equity firm. However, the Franchise Agreement gives Buildingstars an unrestricted right to sell or assign the agreement. A sale could result in a new owner, such as a PE firm, with different priorities that may not align with your long-term success.

Potential Mitigations

• You should ask your attorney to explain the implications of the broad assignment clause in the Franchise Agreement.
• Discussing any past changes in ownership and their impact on the system with long-term franchisees would be insightful.
• A business advisor can help you research the ownership structure of the parent company, Facility Brands, Inc.

Explanation

This risk was not identified. Buildingstars clearly discloses its parent, Buildingstars International, Inc., and its ultimate parent, Facility Brands, Inc. Furthermore, the FDD includes audited consolidated financial statements for Buildingstars International, Inc., which guarantees the performance of Buildingstars Management, Inc. This level of disclosure appears to be appropriate and provides necessary financial transparency.

Potential Mitigations

• Your accountant should review the provided parent company financials and the accompanying Guaranty of Performance.
• It is wise to have your attorney confirm that the disclosed corporate structure is clear and the guaranty is legally sound.
• Asking the franchisor to clarify the roles and relationships between the various corporate entities is a reasonable step.

Explanation

This risk was not identified. Buildingstars discloses that it was formerly named Advantage Building Services, Inc. and that it acquired franchisees from this predecessor. However, the FDD does not indicate any negative history, such as litigation, bankruptcy, or significant franchisee failures, associated with the predecessor. The transition appears to have been part of the company's own evolution.

Potential Mitigations

• It is always prudent to ask long-term franchisees who may have operated under a predecessor about their experience during the transition.
• Your attorney can help you perform public records searches on any listed predecessor entities for additional background.
• A business advisor can help you assess if the change from the predecessor represents any ongoing risk.

Explanation

This risk was not identified in the FDD. Item 3 states, "No litigation is required to be disclosed in this Item." This indicates there is no current, pending, or past material litigation involving claims of fraud, misrepresentation, or violations of franchise law between the franchisor and its franchisees that would legally require disclosure. This is a positive indicator, but does not guarantee the absence of all disputes.

Potential Mitigations

• You can conduct independent online searches for news articles or other public information regarding disputes involving the franchisor.
• Asking current and former franchisees about their experiences with disputes, whether they resulted in litigation or not, is a critical due diligence step.
• Your attorney can explain what types of litigation are considered "material" and must be disclosed.