Explanation

This risk was not identified in the FDD package. The system is showing steady growth rather than extremely rapid expansion that might strain resources. However, it is generally important to assess whether a franchisor's support infrastructure is keeping pace with its growth, as overly rapid expansion can sometimes lead to diluted support for individual franchisees. You should ensure the franchisor has the capacity to support all its new units effectively.

Potential Mitigations

• A review of the franchisor's support staff and infrastructure with your business advisor can help determine if they can manage current growth.
• Asking current franchisees about the quality and timeliness of support is a valuable step in your due diligence.
• Your accountant can review financial statements to assess if the franchisor is reinvesting in support systems.

Explanation

This risk was not identified. CarePatrol and its predecessor have been in business and franchising since 2009, indicating a long operational history. The system is well-established and not a startup. Generally, investing in a new or unproven system carries higher risks, as the business model may be untested and support systems underdeveloped. In this case, the franchisor has a significant track record, which provides a basis for evaluating its performance and stability.

Potential Mitigations

• It is still prudent to review the company's entire history, including any predecessors, with your attorney.
• Speaking with long-term franchisees about the evolution of the system can provide valuable insight; a business advisor can help facilitate this.
• An accountant can analyze the financial statements over the three years provided to assess the system's long-term stability.

Explanation

This risk was not identified. The senior placement and consulting business model is based on a strong, long-term demographic trend of an aging population. This suggests sustained consumer demand rather than a temporary fad. A business tied to a fleeting trend presents a risk that demand could evaporate, leaving you with a worthless business. CarePatrol's model appears to be based on a durable market need, which is a positive factor for long-term viability.

Potential Mitigations

• Your business advisor can help you conduct independent market research to confirm the long-term demand for senior placement services in your area.
• It is beneficial to ask the franchisor about their plans for adapting to future changes in the senior care industry.
• An attorney can help review how the franchise agreement allows for the evolution of services to meet changing market needs.

Explanation

The management team detailed in Item 2 appears to have significant experience in franchising and related business operations. For example, the CEO has extensive history managing other franchise systems. When a franchisor's management team lacks specific experience in franchising or their industry, it can lead to poor strategic decisions and inadequate support. The experience level presented in the FDD is a positive factor, suggesting the leadership understands the dynamics of a franchise relationship.

Potential Mitigations

• A thorough review of the backgrounds of all key executives listed in Item 2 is still a recommended step for your business advisor.
• Asking current franchisees about their direct experiences with the management team can provide insight into their competence and accessibility.
• Your attorney can help you research the past performance of other franchise systems managed by the current executive team.

Explanation

The FDD fully discloses the parent company structure, culminating in CFC Holding Company, LLC, which is owned by The Riverside Company. The parent company provides a performance guarantee, and its audited financial statements are included. This level of disclosure is appropriate and provides transparency. A risk would exist if a thinly capitalized franchisor were controlled by a parent whose identity or financial condition was not disclosed, as this would obscure the true financial backing of the system.

Potential Mitigations

• Have your accountant carefully review the financial statements of the parent company, CFC Holding Company, LLC, as they are the ultimate guarantor.
• Your attorney should analyze the terms of the parent company's Guarantee of Performance to understand the extent and limits of the protection it offers.
• It is wise to understand the entire ownership structure, as detailed in Item 1, with the help of your business advisor.

Explanation

This risk was not identified. Item 1 clearly discloses the predecessor company and its history. Obscuring or providing incomplete information about a predecessor's history, such as past litigation or franchisee failures, would be a significant risk. In this case, the franchisor provides a clear lineage of the brand, allowing for a more complete due diligence process. This transparency is a positive attribute.

Potential Mitigations

• It is still advisable for your attorney to review all information related to the predecessor entity.
• When speaking with long-tenured franchisees, asking about their experiences under the predecessor company can yield valuable insights.
• A business advisor can assist you in researching the predecessor's public records for any additional information.