Explanation

This risk was not identified, as STD Franchising is a new system that only began franchising in 2024 with two initial units. Item 20 shows no terminations, non-renewals, or other cessations. For any franchise, high turnover can signal systemic problems like low profitability or poor support. You should monitor this data in future FDDs.

Potential Mitigations

• Your business advisor should help you monitor future Item 20 tables annually to watch for any developing signs of high turnover.
• It is wise to ask your attorney to help you create a list of questions to ask current franchisees about their satisfaction and future plans.
• An accountant can help you analyze financial performance representations to better understand the potential profitability that impacts franchisee retention.

Explanation

This risk was not identified. Item 20 data shows the system is in its infancy with only two franchised outlets opened in the most recent year. Rapid growth can strain a franchisor's ability to provide adequate support. While not a current risk, you should monitor the pace of growth against the franchisor’s support infrastructure in future years.

Potential Mitigations

• A business advisor can help you assess the franchisor's plans for scaling its support staff and systems if they begin to grow quickly.
• You should periodically discuss the quality and timeliness of support with other franchisees as the system expands.
• Engaging your attorney to review any changes in support levels promised in future Franchise Agreements is a sound practice.

Explanation

This risk was not identified. The business model of providing non-medical, social-supportive day services to an aging population, as described in Item 1, addresses a well-established and growing demographic need rather than a fleeting trend. A fad business carries the risk of declining consumer interest, which could jeopardize your long-term investment.

Potential Mitigations

• It is prudent to have a business advisor help you research long-term demographic trends in your specific territory to confirm sustained demand.
• Understanding the competitive landscape with your marketing advisor can help gauge the concept's staying power against other senior care options.
• Engaging a financial advisor to model the business's resilience to economic shifts is a valuable exercise for any long-term investment.

Explanation

This risk was not identified. Item 2 indicates that the key principals, Kara and Ken Harvey, have significant prior experience in the senior care industry, including operating a similar business since 2014 and managing home care, hospice, and adult day programs. While the franchise entity itself is new, the management appears to have relevant industry experience.

Potential Mitigations

• Your business advisor can help you formulate questions for the management team about how their past industry experience translates to supporting franchisees.
• It is beneficial to speak with current franchisees to gauge their perception of the management team's competence and responsiveness.
• An attorney can help review the franchisor's specific support obligations in the agreement to ensure they are clearly defined.

Explanation

This risk was not identified in the FDD. Item 1 indicates the franchisor is a corporation founded by individuals, and there is no mention of private equity ownership. Such ownership can sometimes lead to decisions that prioritize short-term investor returns over the long-term health of the franchise system, a risk that does not appear present here.

Potential Mitigations

• A business advisor can help you research the ownership structure of any franchise system you consider.
• It's good practice to ask your attorney to review any clauses in the Franchise Agreement that give the franchisor the right to sell the system.
• Discussing long-term vision with the founders of a system can provide insight into their commitment, a task your business advisor can guide.

Explanation

This risk was not identified. Item 1 explicitly states, "We have no parent or predecessor entities." The franchisor entity, Spend The Day Franchising, Inc., appears to be the primary operating and contracting entity. Therefore, the risk of hidden liabilities or instability from an undisclosed parent company does not seem applicable.

Potential Mitigations

• Your attorney should always verify the corporate structure and any disclosed parent or affiliate relationships in Item 1.
• When a parent company exists and provides guarantees, an accountant should review its financial statements for stability.
• Consulting a business advisor can help you understand the implications of complex corporate structures in franchising.

Explanation

This risk was not identified. Item 1 of the FDD states there are no predecessor entities. While the owners operated a similar business under a different name, the franchisor entity itself did not acquire assets from a prior franchisor. This avoids the risk of inheriting unresolved issues from a predecessor's history, such as litigation or high franchisee failure rates.

Potential Mitigations

• In any FDD, your attorney should carefully examine Item 1 for any mention of predecessors and their history.
• If predecessors exist, it's wise to have a business advisor research their track record and reputation.
• Asking long-term franchisees about their experience under any previous ownership is a key due diligence step.

Explanation

This risk was not identified. Item 3 states, "There is no litigation that is required to be disclosed in this Item." The absence of litigation, especially claims of fraud or misrepresentation from other franchisees, is a positive sign, although this is also a function of the system's young age. A pattern of litigation can be a major red flag in more mature systems.

Potential Mitigations

• An attorney should always review Item 3 of any FDD to assess the nature, volume, and outcomes of any disclosed litigation.
• It is a good practice to conduct independent online searches for any litigation involving the franchisor that may not have been required for disclosure.
• A business advisor can help you understand the context of litigation by discussing it with current and former franchisees.