Explanation

This risk was not identified in the FDD package. Item 20, which tracks franchisee turnover, shows no franchisee data because DapperTails LLC has just begun offering franchises. High turnover can be a major red flag in established systems, often signaling issues with profitability, support, or the business model itself. You should monitor this data in future FDDs if you become a franchisee.

Potential Mitigations

• For any franchise, it is critical to have your accountant analyze the franchisee turnover tables in Item 20 for signs of distress.
• A discussion with your attorney about the definitions used for transfers and cessations can reveal if data is being presented in a misleading way.
• Your business advisor would recommend contacting former franchisees to understand why they left the system.

Explanation

This risk was not identified in the FDD. The mobile pet grooming industry has a history of sustained consumer demand and is not typically considered a fad. The business model is based on an established service rather than a fleeting trend. However, you should always assess the long-term demand in your specific local market.

Potential Mitigations

• Before investing in any franchise, it is wise to have a business advisor help you research long-term market trends for the industry.
• An accountant can assist you in evaluating the business model's resilience to economic shifts and changing consumer tastes.
• You should discuss with the franchisor their plans for evolving the brand and services to stay relevant over time.

Explanation

This risk was not identified in the FDD. Item 1 indicates the franchisor is a private company controlled by its founders, not a private equity firm. This means decisions may be more focused on the long-term health of the brand rather than short-term financial returns for outside investors, which can be a risk with PE-owned systems.

Potential Mitigations

• For any franchise, a discussion with your attorney to understand the ownership structure disclosed in Item 1 is a key due diligence step.
• It is good practice to ask a business advisor to research the track record of any parent or investment firm.
• You should ask current franchisees if there have been any major strategy shifts following a change in ownership.

Explanation

This risk was not identified in the FDD. Item 1 clearly discloses the relationship between the franchisor and its affiliates, including the entity that operates the company stores and the one that owns the trademark. There is no indication of an undisclosed parent company whose financial health might be hidden from view.

Potential Mitigations

• It is a good practice for your attorney to verify the corporate structure of a franchisor and its disclosed affiliates.
• If a parent company's financial guarantee is mentioned, your accountant should confirm that the parent's financial statements are included and properly audited.
• Always question why a franchisor might be structured as a new, thinly capitalized entity separate from a more established parent.

Explanation

This risk was not identified in the FDD. DapperTails LLC is a new franchisor and does not have any predecessors. Item 1 discloses its affiliate, which has an operating history, but not as a legal predecessor from which assets were acquired. Therefore, there is no hidden history of past failures, litigation, or high turnover under a prior company name.

Potential Mitigations

• When evaluating a franchise, your attorney should always review Item 1 for any mention of predecessors.
• If a predecessor is listed, it is crucial to have your business advisor research its history and reputation independently.
• Asking long-term franchisees about their experience under a predecessor company can provide valuable insights.

Explanation

This risk was not identified in the FDD. Item 3 states that there is no litigation that requires disclosure. This indicates the new franchisor and its management are not currently involved in lawsuits with franchisees, suppliers, or regulators concerning issues like fraud, misrepresentation, or breach of contract, which is a positive sign.

Potential Mitigations

• For any franchise, a careful review of all litigation disclosed in Item 3 with your attorney is a critical step.
• A business advisor can help you assess whether a pattern of litigation exists, which may signal systemic problems.
• Your attorney can also conduct public records searches to see if any non-disclosed or recent litigation exists.