Explanation

This risk was not identified. The franchise system has experienced a net decrease in total outlets over the last three years, not rapid growth. Rapid expansion can strain a franchisor's ability to provide quality support. While not an issue here, you should always assess if a franchisor's support infrastructure is keeping pace with its growth by speaking with new and established franchisees.

Potential Mitigations

• Engaging a business advisor to research a franchisor's growth rate against its support infrastructure is a valuable due diligence step.
• Speaking with franchisees who opened at different times can provide insight into whether support levels have changed during periods of growth.
• An accountant's review of the franchisor's financials can help determine if they are investing adequately in support systems to sustain growth.

Explanation

This risk was not identified in the FDD package. The franchisor and its predecessor have been offering franchises for over a decade and the system has a substantial number of operational units. An unproven system can present higher risks due to a lack of brand recognition and underdeveloped support. A prospective franchisee should always investigate the franchisor's history and the maturity of its business model.

Potential Mitigations

• Investigating the franchisor's history and the operating experience of its management team is a critical task for your business advisor.
• Even with established systems, consulting an attorney to review the franchise agreement for protective clauses is wise.
• Speaking with long-tenured franchisees can offer perspective on the system's evolution and stability over time.

Explanation

This risk was not identified. The cell phone and electronics repair industry is an established market, not one based on a short-term trend. For any franchise, it is important to independently research the long-term consumer demand for its products or services. A business advisor can help assess whether a concept has staying power or is based on a temporary fad.

Potential Mitigations

• A business advisor can help you conduct market research to determine if a franchise concept is based on a sustainable consumer need.
• Reviewing the franchisor's commitment to research and development in Item 11 with a financial advisor can indicate its long-term focus.
• An attorney can review the franchise agreement term to ensure it aligns with the expected lifecycle of the business concept.

Explanation

This risk was not identified. The management team described in Item 2 appears to have relevant industry and corporate experience, largely through the parent company, Assurant. It is always wise for a prospective franchisee to review the backgrounds of the key executives. Discussing the management team's accessibility and effectiveness with current franchisees provides valuable insight.

Potential Mitigations

• A thorough review of the management team's franchising and industry-specific experience listed in Item 2 should be conducted with your business advisor.
• Posing questions to current franchisees about their interactions with and support from the management team is a key part of due diligence.
• Your attorney can help you understand the implications of management's authority as outlined in the franchise agreement.

Explanation

This risk was not identified, as the ultimate parent company is a publicly traded corporation, not a private equity firm. When considering a franchise owned by private equity, it is crucial to understand their investment timeline and track record. A business advisor can help you assess how such ownership might affect the franchisor's long-term strategy and support for franchisees.

Potential Mitigations

• Researching the ownership structure in Item 1 with your attorney and business advisor is crucial to identify potential private equity involvement.
• If private equity is involved, speaking with franchisees about any changes since the acquisition is an important diligence step.
• An accountant can analyze financials for signs of cost-cutting in franchisee support, which can be a private equity strategy.

Explanation

This risk was not identified. The FDD clearly discloses the parent companies in Item 1 and provides financial statements and a performance guarantee from the immediate parent in Items 21 and Exhibit I. Proper disclosure of parent companies is crucial for assessing the overall financial strength and corporate structure behind the franchise. An attorney can verify that these disclosures meet legal requirements.

Potential Mitigations

• An attorney should review Item 1 and Item 21 to ensure all parent and affiliate companies are properly disclosed and that financials are provided if required.
• If a parent guarantee is offered, it's vital for your attorney to analyze its terms and enforceability.
• Your accountant can assess the financial health of a parent company to understand the true stability behind the franchisor.

Explanation

This risk was not identified. The FDD discloses a predecessor in Item 1 but does not indicate any significant negative history such as litigation or bankruptcy associated with it. When a franchisor has a predecessor, it is important to understand the full history of the brand and system. An attorney can help scrutinize Items 1, 3, and 4 for any inherited risks.

Potential Mitigations

• Your attorney should carefully analyze Items 1, 3, and 4 for any mention of a predecessor and associated legal or financial issues.
• Discussing the system's history with long-term franchisees can reveal insights about any predecessor's performance.
• A business advisor can help you research the public record of any predecessor company for additional information.