Explanation

This risk was not identified in the FDD package. The franchisor began offering franchises in 2007, and its affiliates have been operating similar businesses since 1995. A new or unproven system can pose a higher risk due to the lack of a track record, undeveloped support systems, and lower brand recognition. It is important to assess a franchisor's history to gauge the maturity and stability of its business model and support infrastructure.

Potential Mitigations

• When evaluating any franchise, it is wise to have your business advisor assess the franchisor's history and the business model's track record.
• Your accountant should review the financial statements of any franchisor to verify its operational history and financial stability.
• Consulting with an attorney will help you understand the protections available when investing in franchise systems of any age.

Explanation

This risk was not identified. The franchise operates in the commercial cleaning industry, which is an established and long-standing service sector. A business model tied to a short-term trend or fad presents a significant risk, as consumer demand may disappear before you can achieve a return on your investment. Your long-term contractual obligations would likely remain even if the business becomes obsolete, highlighting the importance of choosing a sustainable concept.

Potential Mitigations

• A business advisor can help you conduct market research to evaluate the long-term demand for any franchise's products or services.
• It is prudent to discuss the sustainability of a business model and its resilience to market changes with your financial advisor.
• Your attorney can review the franchise agreement to determine your obligations if the business model becomes unviable.

Explanation

This risk was not identified in the FDD. The executives profiled in Item 2 have extensive, long-term experience with CCG and its affiliated companies, some dating back to 2003. Management teams that lack experience in their specific industry or in franchising can pose a risk, as they may not have the expertise to provide effective support, training, and strategic direction, which could jeopardize the success of their franchisees.

Potential Mitigations

• Before investing, you should always have a business advisor help you research the background and track record of the franchisor's key management team.
• Your attorney can help you frame questions for existing franchisees about the quality of management and the support they provide.
• An accountant can analyze whether the franchisor's financial performance reflects experienced and effective management.

Explanation

This risk was not identified. The FDD does not indicate that the franchisor is owned or controlled by a private equity firm. When a franchisor is owned by a private equity firm, there can be a risk that business decisions prioritize short-term investor returns over the long-term health of the franchise system and the profitability of individual franchisees. This can sometimes lead to increased fees, cuts in support, or a rapid sale of the brand.

Potential Mitigations

• If a franchisor is owned by a private equity firm, your business advisor should research the firm's history with other franchise brands.
• Speaking with franchisees who have operated under private equity ownership can provide valuable insight into any changes in the system.
• Your attorney can help you understand the implications of assignment clauses in the franchise agreement if the brand is sold.

Explanation

This risk was not identified. Item 1 of the FDD properly discloses affiliated companies but no parent company. If a franchisor is a subsidiary of a parent company, the financial health and stability of that parent can be material information. Failing to disclose a parent company or provide its financial statements when required can obscure a complete picture of the financial backing and overall viability of the franchise system you are considering.

Potential Mitigations

• Your attorney should review Item 1 and Item 21 to confirm the franchisor’s corporate structure and ensure all required financial disclosures are present.
• An accountant's review can determine if the franchisor entity appears sufficiently capitalized on its own or if reliance on a parent is implied.
• Always ask your business advisor to help you understand the relationships between all affiliated entities disclosed in the FDD.

Explanation

This risk was not identified. The FDD does not mention any predecessors from which CCG acquired its assets or brand. When a franchise system has a history involving predecessor companies, it's important to review their track record. A history of litigation, bankruptcy, or high franchisee turnover under a predecessor could indicate inherited problems or challenges for the current system that may not be immediately apparent from reviewing the current franchisor's information alone.

Potential Mitigations

• Your attorney can help you analyze any disclosed predecessor information in Items 1, 3, and 4 of the FDD.
• It is wise to ask your business advisor to research the history of the brand, especially if it has been transferred from a predecessor.
• Speaking with long-term franchisees can reveal important history about their experience under any previous ownership.

Explanation

This risk was not identified, as Item 3 of the FDD discloses no material litigation. A pattern of lawsuits, especially those initiated by franchisees alleging fraud or misrepresentation, can be a significant red flag about a franchisor's business practices. Similarly, a high volume of lawsuits initiated by the franchisor against its franchisees might suggest an overly aggressive or litigious relationship, which could be a concern for a prospective franchisee.

Potential Mitigations

• A franchise attorney should always be engaged to carefully review any litigation disclosed in Item 3 and explain its potential implications.
• For any disclosed litigation, an attorney can help you understand the nature of the claims and the case outcomes.
• Speaking with current franchisees can provide context on the franchisor's relationship with its franchise network.