Explanation

This is a new franchise system that began operations in 2024. As a result, the franchisee turnover data in Item 20 does not yet reflect a long-term operational history. While no closures or terminations are reported, the lack of data means there is no track record to evaluate franchisee success or satisfaction over time. High turnover in future years could indicate systemic problems, making this an area to monitor closely in subsequent FDDs.

Potential Mitigations

• It is crucial to contact the initial franchisees listed in Item 20 to discuss their early experiences, challenges, and satisfaction with the system.
• A business advisor can help you assess the risks inherent in a new system with no long-term franchisee performance data.
• Your attorney should advise on the implications of investing in a system before a stable operational track record is established.

Explanation

This risk was not identified in the FDD package. While the system is new and growing, the rate of growth in the first year (12 total outlets) does not appear to be so extreme as to suggest support infrastructure is currently overstretched. However, rapid growth is a risk in any new system, potentially straining the franchisor's ability to provide adequate support, training, and quality control. Future growth should be monitored.

Potential Mitigations

• Engaging a business advisor to question the franchisor about their plans to scale support infrastructure in line with projected growth is a prudent step.
• You should ask the franchisees who joined in the first year about the quality and responsiveness of the support they are currently receiving.
• An accountant can review the franchisor's financial plans to see if adequate capital is allocated for supporting future growth.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor is a wholly-owned subsidiary of Daisyco Inc., but there is no disclosure of outside private equity ownership. Therefore, the specific risks associated with a PE firm's typical investment horizon and focus on short-term returns do not appear to be present based on the provided documents. However, the system could be sold to a PE firm in the future.

Potential Mitigations

• Your attorney should review the assignment clauses in the Franchise Agreement to understand your rights if the system is sold to any third party, including a PE firm.
• A business advisor can help you research the ownership structure and any potential future sale plans the franchisor may have.
• It is wise to ask existing franchisees if they have any knowledge of the franchisor's long-term ownership plans.

Explanation

This risk was not identified in the FDD package. The franchisor discloses its predecessor, Daisyco Inc., and provides its financial statements. There is no indication of hidden or downplayed negative history, as no litigation or bankruptcy is reported for the predecessor in Items 3 and 4. The system is new, so the predecessor history is very short and appears to be fully disclosed within the document.

Potential Mitigations

• A careful review of all information related to the predecessor in Items 1, 3, 4, and 21 should still be conducted with your attorney and accountant.
• You can perform independent online searches for any news or franchisee commentary related to the predecessor, Daisyco Inc.
• When speaking with the earliest franchisees, you should ask them about their experience dealing with the predecessor entity.

Explanation

This specific risk was not identified in the FDD package. Item 3 states, 'No litigation is required to be disclosed in this Item.' This indicates that, as of the FDD issuance date, there was no reportable litigation involving the franchisor, its predecessor, or key personnel that would suggest a pattern of fraud, misrepresentation, or other systemic issues. However, the absence of litigation in a new system is expected and not indicative of a long-term record.

Potential Mitigations

• Your attorney can conduct independent searches for any litigation that may have arisen after the FDD was issued.
• It is important to ask current franchisees about any disputes or disagreements they may be aware of within the system.
• A business advisor can help you establish a process for monitoring any future litigation trends as the system matures.