Explanation

The franchisor, Critter Control, Inc. (Critter Control), is a subsidiary of Rollins, Inc., a large, publicly-traded company. Rollins provides a full financial guarantee for Critter Control's obligations, and its audited financials appear strong. While this reliance on a parent is a structural risk, the parent's financial strength and explicit guarantee significantly lower the immediate risk of franchisor instability. An accountant's review of Rollins' financials is still important to confirm ongoing health.

Potential Mitigations

• An accountant should review the parent company's (Rollins, Inc.) audited financial statements to verify its health and ability to support the guarantee.
• Discuss the implications of the parent-subsidiary structure and the strength of the guarantee with your franchise attorney.
• It is wise to ask the franchisor about the operational relationship between Critter Control and its parent company with your business advisor.

Explanation

This risk was not identified in the FDD Package. The franchise system has not experienced recent rapid growth; in fact, the number of franchised outlets has seen a slight net decrease in the most recent year reported. Rapid expansion can strain a franchisor's ability to provide adequate support, so the current stable size is a positive indicator in this specific regard.

Potential Mitigations

• A business advisor can help you assess whether the franchisor's current size and growth rate align with your personal business goals.
• Your accountant should still review the franchisor's financial statements to ensure it has sufficient resources for supporting the existing system.
• During discussions with existing franchisees, it is useful to ask about the quality and consistency of franchisor support.

Explanation

This risk was not identified in the FDD Package. Critter Control began its franchise operations in 1987, indicating it is a mature and well-established system, not a new or unproven one. A long operational history can suggest a more stable business model and more experienced support systems, which is generally a positive factor for prospective franchisees.

Potential Mitigations

• A business advisor can help you evaluate how a mature system's brand recognition and established processes might benefit your new franchise.
• Discuss with your attorney how the terms in a mature franchisor's agreement might be less negotiable than those of a newer system.
• It is still prudent to ask long-term franchisees about how the system has evolved over time.

Explanation

This risk was not identified in the FDD Package. The business provides wildlife and pest control services, which is a well-established industry with consistent, long-term consumer and commercial demand. This type of business is not dependent on short-lived trends or fads, suggesting a more stable market for your services.

Potential Mitigations

• Engage a business advisor to research the local market demand and competition for pest and wildlife control services in your specific area.
• Your accountant can help you project revenue based on the stable, recurring nature of these services.
• Discuss the long-term industry outlook with existing franchisees to gauge their perspective on market stability.

Explanation

This risk was not identified in the FDD Package. The executive team described in Item 2 has extensive and long-term experience within the pest control industry and with the parent company, Rollins, Inc. This depth of experience in both the specific industry and in managing large-scale service operations is a positive indicator for stable and knowledgeable leadership.

Potential Mitigations

• When speaking with current franchisees, inquire about their direct experiences with the management team's support and strategic direction.
• A business advisor can help you assess how the management team's background aligns with the company's future goals.
• Your attorney can review the FDD for any recent, significant changes in key management personnel.

Explanation

This risk was not identified in the FDD Package. The ultimate parent company is Rollins, Inc., which is a publicly-traded corporation (NYSE: ROL), not a private equity firm. While public companies are beholden to shareholders, this structure avoids the specific risks associated with typical private equity ownership, such as aggressive short-term cost-cutting and a fixed exit timeline that might not align with franchisees' long-term interests.

Potential Mitigations

• An accountant should review the public filings of Rollins, Inc. to understand its financial health and strategic priorities.
• A business advisor can help you research the history and reputation of Rollins, Inc. as a franchisor and corporate parent.
• Consult your attorney regarding the implications of the assignment clause in the Franchise Agreement, as the system could still be sold.

Explanation

This risk was not identified in the FDD Package. The franchisor clearly discloses its parent companies, including the ultimate parent, Rollins, Inc. Furthermore, the FDD includes the audited financial statements of Rollins, Inc., as well as a specific Guarantee of Performance. This level of transparency is a positive factor, providing a clearer picture of the financial backing of the franchise system.

Potential Mitigations

• Your accountant should review the provided parent company financials and the terms of the guarantee to assess their strength.
• It is important to have your attorney confirm that the guarantee is properly executed and provides meaningful protection.
• A business advisor can help you understand the complete corporate structure and the relationships between the affiliated entities.

Explanation

This risk was not identified in the FDD Package. The franchisor discloses a predecessor affiliate from an acquisition in 2015. There is no indication in the FDD of negative history, such as litigation or bankruptcy, associated with this predecessor. Proper disclosure of predecessor history is important for understanding the full background of the franchise system you are joining.

Potential Mitigations

• It remains a good practice to ask long-tenured franchisees about their experiences before and after the 2015 acquisition.
• Your attorney should confirm that the disclosures regarding the predecessor in Items 1, 3, and 4 are complete.
• A business advisor can help you research public records for any additional information on the predecessor entity if concerns arise.