Explanation

This risk was not identified. The franchise system has demonstrated slow, stable growth over the past three years rather than rapid expansion. Rapid growth can be a risk because a franchisor's support systems may not keep pace, potentially leading to inadequate assistance for franchisees. This does not appear to be a concern here.

Potential Mitigations

• In any franchise opportunity, it is wise to ask your business advisor to evaluate the franchisor's growth plans and their capacity to support new units.
• An accountant's review of the franchisor's financial statements can help determine if they have the resources for planned expansion.
• When speaking with current franchisees, you can ask about the quality and timeliness of the support they receive from the franchisor.

Explanation

This risk was not identified in the FDD package. Bumper Man, Inc. (BMI) has been in business since 1993 and franchising for over two decades, with more than 130 outlets currently operating. An unproven system is a risk because its business model and support infrastructure may not be well-established. This does not appear to be a concern with BMI.

Potential Mitigations

• For any franchise, your attorney should review the franchisor's history in Item 1 to understand its experience.
• A business advisor can help you assess the maturity and track record of the franchise system.
• Speaking with long-term franchisees can provide valuable insight into the evolution and stability of the business model.

Explanation

This risk was not identified. The business provides mobile automotive bumper repair services, a well-established segment of the auto repair industry with sustained demand. A fad business carries the risk of declining consumer interest over time, which could jeopardize your long-term investment after the trend passes. This does not appear to be the case here.

Potential Mitigations

• When evaluating any franchise, your business advisor can help research the long-term market demand for its products or services.
• It is wise to consider the business's resilience to economic cycles and changing consumer tastes.
• Your attorney should review Item 1 for context on the franchisor's industry and history.

Explanation

This risk was not identified. Item 2 shows that the key executives have extensive, long-term experience with BMI, with most having been in their roles or with the company for over a decade. Inexperienced management can be a significant risk as it may lead to poor strategic decisions and inadequate franchisee support. This does not appear to be a concern.

Potential Mitigations

• For any franchise, it is prudent to have a business advisor help you review the executive backgrounds detailed in Item 2.
• Speaking with current franchisees can provide insights into their confidence in the management team's leadership and strategic direction.
• Your attorney can help you understand the roles and responsibilities of the key personnel as described in the FDD.

Explanation

This risk was not identified. Based on the information in Item 1, the franchisor appears to be a privately held company and not owned by a private equity firm. PE ownership can sometimes lead to a focus on short-term returns over the long-term health of the franchise system. This does not seem applicable here.

Potential Mitigations

• When evaluating a franchise, your attorney should review Item 1 to determine the ownership structure.
• If a private equity firm is involved, a business advisor can help research the firm's track record with other franchise brands.
• It's wise to ask current franchisees about any changes in support or company philosophy following an ownership change.

Explanation

This risk was not identified, as Item 1 does not indicate the existence of a parent company. The franchisor, BMI, appears to be a standalone entity. Failure to disclose a parent company can obscure the true financial backing and control structure of a franchise system, but that is not a concern here.

Potential Mitigations

• Your attorney should always review Item 1 to understand the franchisor's corporate structure and any parent or affiliate relationships.
• If a parent company exists and provides guarantees, an accountant should review its financial statements.
• A business advisor can help you assess the implications of the overall corporate structure on the franchise.

Explanation

This risk was not identified. Item 1 provides a clear history of the predecessor entities, which merged to form the current franchisor. Items 3 and 4 disclose no history of litigation or bankruptcy for these predecessors. Obscuring a predecessor's negative history is a risk, but it does not appear to be the case here.

Potential Mitigations

• It is wise to have your attorney carefully review the predecessor information in Items 1, 3, and 4 of any FDD.
• When speaking with long-tenured franchisees, you can ask about their experiences under any previous ownership or corporate structure.
• A business advisor can help you research the public record of any predecessor companies if concerns arise.

Explanation

This risk was not identified. Item 3 of the FDD explicitly states that there is no litigation that requires disclosure. A pattern of litigation, especially lawsuits brought by franchisees alleging fraud or misrepresentation, can be a major red flag indicating systemic problems. The absence of such disclosures is a positive sign.

Potential Mitigations

• In any FDD, your attorney should carefully review Item 3 for any disclosed litigation and its potential implications.
• A business advisor can help you perform independent searches for litigation that may not have met the criteria for disclosure.
• You should always ask current franchisees about the nature of their relationship with the franchisor and any disputes they are aware of.