Explanation

This risk was not identified. The franchisor's system has not experienced rapid growth; in fact, Item 20 data shows a net decrease in the total number of outlets over the past three years. Rapid growth can strain a franchisor's ability to provide support, so its absence can be a positive sign, but slow growth or shrinkage presents its own challenges regarding brand momentum.

Potential Mitigations

• In discussions with your business advisor, evaluate the potential impacts of the system's recent contraction on brand recognition and market presence.
• Your accountant should still review the franchisor's financial statements to ensure they have sufficient resources to support the existing system.
• When speaking with current franchisees, inquire about their perception of the brand's growth trajectory and momentum in the market.

Explanation

This risk was not identified. The franchisor, Daekyo America, Inc. (Daekyo America), and its parent company have been franchising and operating learning centers for several decades, as detailed in Item 1. This extensive history indicates a well-established brand and operational model, not a new or unproven system, which can provide a more stable foundation for a new franchisee.

Potential Mitigations

• A business advisor can help you investigate the franchisor's long-term history and reputation within the supplemental education industry.
• Discussions with long-standing franchisees can provide valuable insights into the evolution of the system and the franchisor's management.
• An attorney can help you understand how the brand's long history may influence the terms and enforceability of the franchise agreement.

Explanation

This risk was not identified. The business model, focused on supplemental mathematics and English education for school-aged children, operates in a long-established and enduring market sector. This is not a business based on a short-term trend or fad, suggesting a more stable potential for long-term consumer demand.

Potential Mitigations

• Conducting local market research with a business advisor can help confirm the sustained demand for supplemental education services in your area.
• In discussions with current franchisees, inquire about enrollment trends and the long-term viability of the educational services offered.
• It is wise to have a financial advisor help you assess the business model's resilience to economic shifts and changes in educational trends.

Explanation

This risk was not identified. Item 2 details a management team with extensive and long-term experience within the Daekyo corporate family, both in the U.S. and internationally. Many executives have served in various leadership roles for several years. This depth of experience suggests a stable leadership team with a deep understanding of the franchise system and the supplemental education industry.

Potential Mitigations

• A business advisor can help you research the professional backgrounds and reputations of the key executives listed in Item 2.
• When speaking with franchisees, ask about their interactions with and perception of the current management team's competence and support.
• During any discovery day or meeting with the franchisor, prepare questions to gauge the management team's vision and strategy for the future.

Explanation

This risk was not identified. Item 1 and the financial statements indicate the franchisor is a subsidiary of a long-standing international parent company, Daekyo Co., Ltd., with no mention of ownership by a private equity firm. This type of corporate ownership structure can often imply a focus on longer-term brand health rather than the short-term return objectives sometimes associated with private equity ownership.

Potential Mitigations

• It may be beneficial to have a business advisor help you understand the implications of being part of a large, international corporate structure.
• When speaking with current franchisees, you could inquire about the influence and involvement of the Korean parent company in U.S. operations.
• An attorney can help review the ownership structure and any agreements with the parent company that might affect your franchise.

Explanation

This risk was not identified. The FDD clearly discloses in Item 1 that the franchisor is a subsidiary of Daekyo Co., Ltd., a South Korean company. Item 13 further details the license agreement with this parent. While the parent's financials are not included, there is no mention of a parent guarantee that would typically require them. The franchisor's own audited financials are provided as required.

Potential Mitigations

• Your attorney can confirm if the disclosure regarding the parent company is sufficient under franchise law.
• A discussion with your accountant about the financial relationship between the franchisor and its parent can provide additional context.
• It's wise to ask the franchisor about the stability of its relationship and licensing agreement with the parent company.

Explanation

This risk was not identified. The franchisor clearly discloses its predecessors in Item 1, explaining they were merged into the current corporate entity. There is no indication in Items 3 or 4 of any negative litigation or bankruptcy history associated with these predecessors that would suggest inherited systemic problems.

Potential Mitigations

• An attorney can review the predecessor disclosures to ensure they are complete and comply with franchise regulations.
• In discussions with long-term franchisees, you might inquire about their experience during the corporate mergers mentioned in Item 1.
• A business advisor can help assess if the historical corporate restructuring has had any lasting impact on the franchise system.