Explanation

This risk was not identified in the FDD Package, as Item 20 shows there were no franchised outlets in operation during the last three years. High franchisee turnover is a critical red flag in established systems, as it can indicate widespread franchisee dissatisfaction, a lack of profitability, or an unviable business model. The absence of this data is due to the franchisor being a new market entrant.

Potential Mitigations

• Although no history exists, a business advisor can help you assess the model's potential viability and the factors that could lead to future turnover.
• Your attorney should advise on negotiating stronger protections in the event the system proves to be unsuccessful for early franchisees.
• Discussing the franchisor's strategies for ensuring franchisee success and profitability with your financial advisor is a prudent step.

Explanation

This risk was not identified in the FDD Package. The franchisor is a new entity with no franchisees yet, so there is no history of rapid system growth. In other franchises, rapid expansion can strain a franchisor's ability to provide adequate training, site selection assistance, and ongoing operational support, potentially harming the quality and success of individual units. This risk may become relevant for this system in the future.

Potential Mitigations

• Engaging a business advisor to question the franchisor about their future growth plans and how they intend to scale their support infrastructure is beneficial.
• Your attorney can help you understand the support commitments detailed in the franchise agreement.
• An accountant can help you assess if the franchisor's financial model supports sustainable growth.

Explanation

The franchised business offers home organizing, move management, and related services. This appears to be a service industry with consistent consumer demand rather than one based on a short-term trend or fad. Therefore, the risk of the underlying business concept becoming obsolete due to shifting consumer interests seems low. The long-term viability will depend more on execution and competition than on the business being a fad.

Potential Mitigations

• A business advisor can help you research the local market to confirm sustained demand for professional organizing services.
• Discussing the franchisor's plans for service innovation and adaptation to market changes with them is a worthwhile exercise.
• Your financial advisor can help assess the business model's resilience to economic downturns.

Explanation

This risk was not identified in the FDD Package. Item 1 does not indicate that the franchisor is owned or controlled by a private equity firm. Such ownership can sometimes lead to a focus on short-term profitability and a quick exit strategy over the long-term health of the franchise system and its franchisees. This does not appear to be a concern with this franchisor at this time.

Potential Mitigations

• Your attorney can help you understand the franchisor's current ownership structure as disclosed in Item 1.
• A business advisor can help you research the background of the principal owners to understand their business philosophy.
• Understanding the transfer rights in the Franchise Agreement with your attorney is important, as the system could be sold to a PE firm in the future.

Explanation

This risk was not identified in the FDD Package. Item 1 discloses the franchisor's affiliates but does not mention a parent company. The franchisor appears to be a standalone entity created for franchising. Therefore, the risk of masked financial instability or control issues from an undisclosed parent company is not present based on the information provided.

Potential Mitigations

• Your attorney can confirm the corporate structure based on the disclosures in Item 1.
• An accountant should review the provided financial statements for the franchisor entity itself.
• A business advisor can help research the disclosed affiliates to understand their relationship with the franchisor.

Explanation

This risk was not identified in the FDD Package. Item 1 does not list any predecessors for DDH Franchising, LLC. A predecessor is a company from which the franchisor acquired a major portion of its assets. The affiliate, Done and Done NYC LLC, is a separate operating entity, not a predecessor in the legal sense. Therefore, there are no concerns about a negative history from a prior version of the franchisor.

Potential Mitigations

• Your attorney can verify the franchisor's history as disclosed in Item 1 of the FDD.
• A business advisor can help you research the history of the affiliate company to better understand the origins of the business model.
• Speaking with the founders about the history of the operating affiliate can provide valuable context.

Explanation

This risk was not identified in the FDD Package. Item 3 discloses that there has been no material litigation involving the franchisor, its predecessors, or its management. For a new franchisor, this is expected. A pattern of litigation in other franchises, particularly lawsuits initiated by franchisees alleging fraud or misrepresentation, would be a significant warning sign about the franchisor's practices and the system's health.

Potential Mitigations

• An attorney can perform a public records search to confirm the absence of litigation.
• It is prudent to periodically check for litigation updates if you are considering the franchise over a long period.
• A business advisor can help you assess other risk factors in the absence of a litigation history.