Explanation

This risk was not identified. The disclosures in Items 1 and 2 indicate that both EXIT Realty Corp. International (EXIT) and Upper Midwest Realty, Inc (UMW) have been established for many years and possess a significant operational history in the real estate franchise industry. An unproven system can present higher risks due to untested business models, lack of brand recognition, and undeveloped support structures, which does not appear to be the case here.

Potential Mitigations

• Even with a mature system, consulting a business advisor to evaluate the brand's current market position and relevance is a valuable step.
• Your attorney should still review the complete history of the franchisor and any predecessors as detailed in Item 1.
• An accountant can help analyze financial trends over the last three years to confirm the system's stability despite its age.

Explanation

The business model is focused on traditional real estate brokerage services, which is a well-established industry. However, the industry is highly competitive and subject to market fluctuations, interest rate changes, and new technology. While not a fad, your success will depend on your ability to compete effectively against numerous other national, regional, and local real estate firms. The long-term viability is tied to the housing market's health and the brand's ability to adapt.

Potential Mitigations

• A business advisor can help you conduct a thorough local market analysis to assess the long-term demand and competitive landscape.
• Discuss the franchisor's strategies for innovation and adaptation to technological and market changes.
• It is wise to develop a business plan with your accountant that accounts for potential economic downturns and market shifts.

Explanation

This risk was not identified. The biographical information in Item 2 indicates that the key personnel of both the Franchisor, EXIT Realty Corp. International (EXIT), and the Subfranchisor, Upper Midwest Realty, Inc (UMW), have many years of experience in the real estate industry and within the EXIT franchise system specifically. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions and inadequate franchisee support.

Potential Mitigations

• It remains prudent to verify the operational support quality by speaking with existing franchisees.
• A business advisor can help you assess how the management team's extensive experience translates into effective support and strategy.
• Your attorney should confirm that the management team's structure and roles are clearly defined.

Explanation

This risk was not identified. Item 1 indicates that EXIT Realty Corp. International (EXIT) is a privately held corporation controlled by its founder, not a private equity firm. Private equity ownership can sometimes introduce risks related to prioritizing short-term returns over the long-term health of the franchise system, which does not appear to be a factor here based on the ownership structure disclosed.

Potential Mitigations

• Your attorney should always verify the ownership structure and identify all parent and affiliate companies in Item 1.
• Discussing the franchisor's long-term vision and philosophy with management can provide insight into their strategic priorities.
• A business advisor can help you understand the implications of different ownership structures on a franchise system.

Explanation

This risk was not identified. The FDD discloses that EXITUS Holdings Inc. is the corporate parent of the Franchisor, EXIT Realty Corp. International (EXIT). The FDD package also includes the audited consolidated financial statements for EXIT, which incorporate its subsidiaries. This appears to be compliant with disclosure rules, providing transparency into the financial health of the overall organization, including its parent and affiliates.

Potential Mitigations

• Your accountant should review the consolidated financial statements carefully, including the notes that explain the relationships between the parent and subsidiary entities.
• It is important for your attorney to review any guarantees or support agreements provided by the parent company to the franchisor.
• Always confirm with the franchisor that there are no other undisclosed parent entities or affiliates that materially impact the business.

Explanation

This risk was not identified. Item 1 describes the history of the Subfranchisor, Upper Midwest Realty, Inc (UMW), including its acquisition of franchise rights from predecessors for various states. The disclosure appears to be transparent about this history. Issues can arise when a franchisor's past, including performance under prior owners, is not clearly detailed, but that does not seem to be the case here.

Potential Mitigations

• Your attorney should carefully review the predecessor information in Items 1, 3, and 4 to understand the system's complete history.
• Asking long-term franchisees about their experience under any predecessors can provide valuable context.
• A business advisor can help you research the public record of any predecessor entities for additional information.