Explanation

This risk was not identified in the FDD package. The data in Item 20 shows a net decline in the number of franchised outlets over the past three years, not rapid growth. Generally, rapid expansion can strain a franchisor's ability to provide adequate support to all franchisees, potentially diluting the quality of services.

Potential Mitigations

• In any franchise, it is wise to ask the franchisor about their growth plans and the corresponding expansion of their support staff and infrastructure.
• A business advisor can help you evaluate whether a franchisor's support systems are robust enough to handle their projected growth.
• Speaking with both new and established franchisees can provide insight into the consistency of franchisor support, which your attorney can help facilitate.

Explanation

This risk was not identified in the FDD package. Item 1 indicates that Century 21 and its predecessors have been franchising since 1972, demonstrating a long and established history in the real estate franchise industry. Therefore, the risks associated with an unproven system are not applicable here.

Potential Mitigations

• When evaluating any new or emerging franchise system, it's critical to scrutinize the business experience of its management team with a business advisor.
• An accountant should carefully review the financials of any new franchisor to assess if it is adequately capitalized for long-term support.
• Your attorney should be consulted to understand the unique risks associated with investing in a franchise that has a limited operating history.

Explanation

This risk was not identified in the FDD package. Residential and commercial real estate brokerage is a well-established, fundamental service industry with a long history of consumer demand. It is not considered a fad business that is dependent on a short-term trend.

Potential Mitigations

• For any business concept, a business advisor can help you conduct independent market research to assess the long-term sustainability of consumer demand.
• It is wise to question any franchisor on their strategies for innovation and adaptation to changing market conditions.
• Your financial advisor can assist in evaluating a business model's resilience to economic shifts and downturns.

Explanation

This risk was not identified in the FDD package. Item 2 of the FDD lists the executive officers, all of whom possess extensive and long-term experience in the real estate and franchise industries. The management team appears to be highly experienced.

Potential Mitigations

• For any franchise opportunity, a business advisor can help you thoroughly vet the backgrounds of the key management personnel.
• It is always recommended to speak with current franchisees to gauge their opinion on the competence and responsiveness of the leadership team.
• Your attorney can help you understand the implications if a franchisor's management team lacks specific experience in franchising.

Explanation

This risk was not identified in the FDD package. Item 1 discloses that the ultimate parent company, Anywhere Real Estate Inc., is a publicly traded corporation listed on the New York Stock Exchange under the symbol "HOUS." It is not owned by a private equity firm.

Potential Mitigations

• If a franchisor is owned by a private equity firm, engaging a business advisor to research the firm's history with other franchise brands is crucial.
• An attorney should review the franchise agreement for any terms that might change upon a future sale of the company.
• Interviewing franchisees of a PE-owned brand can reveal shifts in support or fees since the acquisition.

Explanation

This risk was not identified in the FDD package. Item 1 provides a clear and detailed description of the franchisor's complex corporate structure, including all parent companies up to the ultimate public parent, Anywhere Real Estate Inc. The required financial statements and guarantees for the parent companies are provided in Exhibit F.

Potential Mitigations

• If a franchisor is a subsidiary, your attorney should ensure that the FDD properly discloses all parent entities.
• When a parent company guarantees the franchisor's performance, an accountant must review the parent's financial statements for stability.
• It is important to understand the legal and financial relationship between a franchisor and its parent, which a business advisor can help clarify.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD explicitly states, "There are no predecessors that need to be disclosed in this Item 1." This indicates that the current franchisor entity has not recently acquired the system from a different entity.

Potential Mitigations

• When a franchisor has a predecessor, it's vital that your attorney review the litigation and bankruptcy history of that predecessor in Items 3 and 4.
• A business advisor can help you research the reputation and historical performance of any predecessor entity.
• In such cases, speaking with franchisees who operated under the predecessor can provide valuable historical context.