Explanation

This risk was not identified. The audited financial statements for City Wide Franchise Company, Inc. (City Wide) show a strong and stable financial position, with consistent profitability, growing revenue, and a healthy balance sheet for the past three fiscal years. There are no indicators of financial instability, such as a going concern note from the auditors, that would suggest an inability to support franchisees.

Potential Mitigations

• An experienced franchise accountant should still review the complete financial statements, including footnotes and the auditor's report, to provide an independent assessment.
• It is wise to ask your business advisor to assess the franchisor's revenue sources to confirm their long-term stability is based on royalties, not just initial fees.
• Your attorney can help verify if the franchisor is required by any state to post a bond or escrow funds, which can offer protection.

Explanation

This risk was not identified. The franchisee turnover rates, as detailed in the tables in Item 20, appear to be low for the past three years. The number of terminations, non-renewals, and cessations of operation for other reasons is zero, with only a few franchisor reacquisitions noted. This data suggests a relatively stable and satisfied franchisee base rather than a system experiencing significant distress.

Potential Mitigations

• It is still valuable to have your accountant calculate the precise turnover rates and compare them against available industry benchmarks.
• Engaging with a broad selection of current and former franchisees from the lists in Item 20 is a crucial step to verify the reasons for any departures.
• Your attorney can help you formulate insightful questions to ask former franchisees about their experience and reasons for leaving the system.

Explanation

This risk was not identified. While the system has grown, Item 20 data shows a controlled and slowing rate of new franchise openings over the last three years, not the kind of explosive growth that might strain support systems. Furthermore, the franchisor's financial statements in Item 21 indicate strong profitability and resources, suggesting it has the capacity to support its current and new franchisees effectively.

Potential Mitigations

• Posing questions to the franchisor about their specific plans for scaling support infrastructure to match system growth can provide valuable insight.
• A discussion with your business advisor can help evaluate if the franchisor's support staff-to-franchisee ratio is adequate.
• Contacting a mix of new and established franchisees from the Item 20 list is recommended to gauge the current quality and responsiveness of franchisor support.

Explanation

This risk was not identified. City Wide has been franchising since 2001, indicating it is a mature and established franchise system, not a new or unproven one. The FDD provides a long history of operational data and demonstrates significant experience in managing the franchise network.

Potential Mitigations

• Your business advisor can still help you research the company’s history and reputation within the commercial cleaning industry.
• A conversation with long-tenured franchisees from the list in Item 20 can offer perspective on the system's evolution and stability over time.
• Have your attorney review the business experience of the key executives listed in Item 2 to confirm their long-term involvement and expertise.

Explanation

This risk was not identified. The franchise offers commercial facility maintenance and janitorial services. This is a well-established, essential B2B service industry with consistent demand, rather than a business concept based on a fleeting trend or fad. The long-term viability appears to be based on fundamental business needs.

Potential Mitigations

• Engaging a business advisor to research the long-term outlook and competitive landscape for commercial cleaning services in your specific market is still a prudent step.
• You should evaluate the system's plans for innovation and adaptation to new technologies or cleaning standards with the franchisor.
• A financial advisor can help assess the business model's resilience to various economic cycles and market shifts.

Explanation

This risk was not identified. The key executives listed in Item 2 appear to have substantial experience. The founder and CEO has been with the company since its inception in 2001. While several executives have been hired more recently, their professional backgrounds seem well-suited to their roles within the facility solutions industry and franchise management, suggesting a capable leadership team.

Potential Mitigations

• It remains valuable to have your business advisor help you research the professional backgrounds and track records of the key management personnel.
• During discussions with existing franchisees, it would be beneficial to inquire about their direct experiences with the management team's competence and support.
• You should ask the franchisor about its management philosophy and the integration of any newer executives into the company culture.

Explanation

This risk was not identified. Item 1 of the FDD clearly discloses the parent company, City Wide Franchise Holding Company, Inc., and provides its address. The document does not suggest that the parent company's financials are required for disclosure or that there is any attempt to obscure the ownership structure.

Potential Mitigations

• Your attorney can still verify the corporate structure and the relationship between the franchisor and its parent company.
• It is worthwhile to have your accountant confirm that no financial guarantees from the parent are necessary for the franchisor's stability.
• A business advisor can help you understand the roles and influence of the parent company and any other affiliated entities.

Explanation

This risk was not identified. Item 1 of the FDD states that there are no predecessors to the business. The franchisor, City Wide Franchise Company, Inc., appears to be the original entity that developed and has operated the franchise system since its inception.

Potential Mitigations

• Your attorney can conduct a public records search to independently verify the corporate history and confirm the absence of predecessors.
• Asking long-tenured franchisees about the history of the company can provide additional confirmation and context.
• A business advisor can help you research the brand's origins to ensure there are no un-disclosed prior owners or related systems.

Explanation

This risk was not identified. Item 3 discloses only one recent legal action, which involved a dispute with a franchisee over renewal terms and was subsequently settled and dismissed. A single, settled lawsuit does not constitute a pattern of litigation that would suggest systemic problems with the franchisor's practices or franchisee relationships. The franchisor does not appear to be unusually litigious.

Potential Mitigations

• Your attorney should still review the details of the disclosed case to understand the nature of the dispute and the settlement terms.
• Independent online research for news or other public records of litigation involving the franchisor is a prudent step your business advisor could assist with.
• When speaking with former franchisees, it is useful to inquire if litigation or threats of litigation were a factor in their departure.