Explanation

This specific risk was not identified in the FDD Package. Item 20 tables show no franchisee terminations, non-renewals, or other cessations of business. However, as a very young franchise system that only began selling franchises in 2022, this data has limited predictive value. A high turnover rate is generally a significant red flag indicating potential systemic problems, so this should be monitored in future FDDs.

Potential Mitigations

• It is crucial to discuss the experiences of the few existing franchisees listed in Item 20 with your business advisor to gauge their satisfaction and viability.
• An accountant can help you analyze the Item 20 data in future FDDs to spot any emerging negative trends in franchisee turnover.
• Your attorney can help you frame questions for the franchisor about their franchisee support systems designed to promote long-term success.

Explanation

This risk was not identified in the FDD package. The business of providing commercial truck driver training is a long-standing service tied to the logistics and transportation industries. It is not based on a short-term trend or novelty, suggesting it has sustained market demand. The industry is established, though the FDD notes it is highly competitive.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm sustained local demand for commercial driving training.
• It is wise to assess the long-term economic outlook for the transportation industry with your financial advisor.
• Your attorney can help you understand any long-term contractual obligations that would persist even if market demand were to change.

Explanation

This risk was not identified in the FDD. Item 2 indicates that the key executives have prior experience in the truck driving school industry. The President has been serving as president for an affiliated driving school since 2016, and the Director of Training has been in a similar role since 2018. While their experience in franchising is recent (since 2021), their direct industry experience appears relevant and substantial.

Potential Mitigations

• You should discuss the management team's specific franchising experience and support capabilities with your business advisor.
• It is prudent to ask current franchisees about the quality of guidance they receive from the management team.
• Your attorney can review the franchisor's contractual support obligations outlined in Item 11 to ensure they are clearly defined.

Explanation

This risk was not identified in the FDD Package. Item 1 and the accompanying financial statements do not indicate that the franchisor is owned or controlled by a private equity firm. Ownership appears to be held by a holding company established by the founder, which is a different business structure.

Potential Mitigations

• It is still beneficial to have your attorney clarify the complete ownership structure and identify all controlling parties.
• A business advisor can help you research the background of the parent company, Driving Academy Acquisition Inc., and its principals.
• Asking the franchisor about their long-term plans for the brand can provide insight into their strategic vision.

Explanation

This risk does not appear to be present. Item 1 and the audited financial statements in Exhibit J disclose the existence and names of a parent and a subsidiary company involved in a recent stock transfer. The relationship between the entities is described, so there does not appear to be a non-disclosure issue.

Potential Mitigations

• Your attorney should review the roles and responsibilities of each affiliated entity mentioned in Item 1 to understand their potential impact on your franchise.
• It is wise to have your accountant review any financial guarantees or obligations that may exist between these affiliated companies.
• You should ask the franchisor to clarify the operational relationship between the parent company and the franchisor entity.

Explanation

This risk was not identified in the FDD package. Item 1 explicitly states that the franchisor has no predecessors. This means the franchisor did not acquire the business from a prior company, and you are dealing with the original entity that created this franchise system.

Potential Mitigations

• Your attorney can confirm the franchisor's corporate history through public record searches to verify the 'no predecessors' statement.
• A business advisor can help you focus due diligence on the franchisor's own limited history, as it is a new company.
• Questioning the founders about the origin of the business concept is a prudent step.

Explanation

This risk was not identified in the FDD Package. Item 3 states that no litigation is required to be disclosed. This indicates there are no recent or pending material lawsuits involving the franchisor related to fraud, franchise law violations, or other specified claims. For a new system, this is expected but should be monitored in future FDDs.

Potential Mitigations

• Your attorney can perform independent public record searches to verify the absence of litigation history.
• It is good practice to ask current franchisees if they are aware of any disputes within the system, even if not formal litigation.
• A business advisor can help you assess the franchisor's dispute resolution processes mentioned in Item 17.