Explanation

This risk was not identified in the FDD Package. F45 Training Incorporated (F45) began offering franchises in 2015 and has a significant number of operating units, indicating it is not a new or unproven system. However, the stability of any system, regardless of age, depends on its financial health and franchisee success, which should be independently evaluated.

Potential Mitigations

• Always conduct thorough due diligence, even with established systems, by speaking with a wide range of current and former franchisees.
• A franchise attorney can help you evaluate the entire FDD package for any signs of systemic weakness or instability.
• Engaging an accountant to review the franchisor's financial statements is crucial for assessing its current health.

Explanation

This risk was not identified in the FDD Package. The F45 business is centered on functional fitness training, a segment of the broader health and wellness industry that has shown sustained consumer interest. While fitness trends can change, the core business model does not appear to be based on a short-term fad. Your success will still depend on local market factors and operational execution.

Potential Mitigations

• A business advisor can help you independently research the long-term market demand for this type of fitness studio in your specific area.
• Evaluate the franchisor's plans for innovation and adaptation to stay relevant in the competitive fitness market.
• Assess the business model’s resilience to economic shifts and changing consumer tastes with your financial advisor.

Explanation

This risk was not identified in the FDD Package. The executive team members listed in Item 2 generally appear to have backgrounds in relevant fields such as business management, finance, and marketing, including prior experience within the F45 system or other large companies. However, the effectiveness of management is best judged by the health of the system and franchisee satisfaction.

Potential Mitigations

• It is still prudent to discuss the management team's reputation and effectiveness with current and former franchisees.
• A business advisor can help you assess whether the executive team's collective experience aligns with the support needs of a franchisee.
• Review the litigation history in Item 3 and turnover rates in Item 20 with your attorney for insights into management's historical performance.

Explanation

This risk was not identified in the FDD Package. F45 Training Holdings Inc., the ultimate parent, is a publicly traded company. While this involves accountability to shareholders, it does not fit the typical private equity model of a short-term holding period and exit strategy. Risks associated with public companies include pressure to meet quarterly earnings, which can still affect decisions impacting franchisees.

Potential Mitigations

• Your business advisor can help you research the parent company's performance and analyst reports to understand its strategic direction.
• Speaking with franchisees about any changes in support or system focus since the company went public is a valuable due diligence step.
• Your attorney should review the Franchise Agreement for clauses related to assignment or sale of the system.

Explanation

This risk was not identified in the FDD Package. F45 clearly discloses its ultimate parent, F45 Training Holdings Inc., in Item 1. As the franchisor itself is the entity with audited financials, and there is no parent guarantee mentioned that would necessitate the parent's financials being included, the disclosure appears compliant in this regard. The franchisor's own financials are provided for review.

Potential Mitigations

• Your attorney should always verify the corporate structure and identify all parent and affiliate companies involved in the franchise system.
• If a parent company provides essential services or guarantees, your accountant should confirm that its financial statements are included and properly reviewed.
• Clarifying the specific roles and obligations of any parent or affiliate company is a critical step in due diligence.

Explanation

This risk was not identified in the FDD Package. Item 1 does not mention any predecessors from which F45 acquired the business. The franchisor, F45 Training Incorporated, appears to be the original entity that developed and began franchising the system. Therefore, there is no hidden negative history from a predecessor to consider.

Potential Mitigations

• Your attorney should always confirm the history of the business as disclosed in Item 1.
• Asking long-term franchisees about the history of the company can sometimes reveal information not present in the FDD.
• A business advisor can help you research the company's origins to ensure there are no undisclosed predecessor entities.