Explanation

This risk was not identified. Fas-Tes has been franchising since October 2010, according to Item 1. This indicates a history of more than a decade in franchising, so it is not considered a new or unproven system. However, it's always important for prospective franchisees to assess the long-term viability and brand recognition of any system they consider joining.

Potential Mitigations

• Engaging a business advisor to research the brand's reputation and market standing can provide valuable context.
• Your attorney can help you understand the franchisor's history by reviewing their disclosures in Items 1 and 2.
• An accountant's review of the multi-year financial statements in Item 21 can offer insight into the system's maturity and stability over time.

Explanation

The FDD describes the business as providing drug, alcohol, and DNA testing services for regulatory, employment, and personal purposes. This industry serves ongoing needs from businesses and government agencies. While technology and regulations change, the core demand for testing services is not typically considered a short-term fad. The risk of the business model being a passing trend appears low.

Potential Mitigations

• A business advisor can help you research the long-term outlook and trends for the drug and compliance testing industry.
• It is wise to assess how the business model might adapt to technological or legislative changes by discussing this with the franchisor.
• Talking to long-standing franchisees about their experiences with market shifts can provide practical insights.

Explanation

Item 2 indicates that the President and CEO, David M. Claflin, has been in that role since 2010 and with an affiliate in a similar business since 2008. The management team includes individuals with prior franchisee experience within the same system. This suggests the leadership has substantial experience in both the specific industry and in managing this franchise system. The risk of inexperienced management appears low.

Potential Mitigations

• Speaking with current franchisees can provide direct feedback on the management team's competence and supportiveness.
• Your business advisor can help you research the professional backgrounds of the key executives listed in Item 2.
• It's useful to ask the franchisor about their management philosophy and long-term vision for the system.

Explanation

This risk was not identified. Item 1 and the financial statements in Exhibit B clearly disclose the parent entities (FTFS Holdings LLC, FTFS Intermediate Inc., and Fastest Labs LLC) and the private equity firm involved. The parent company's financials appear to be consolidated with the franchisor's, as indicated by the pushdown accounting treatment described in the notes. There is no indication of a hidden or undisclosed parent entity.

Potential Mitigations

• An accountant should confirm that the provided financial statements give a complete picture of the entity you are contracting with, including its parent.
• It's good practice for your attorney to verify the corporate structure and any guarantees provided by a parent company.
• You can ask the franchisor to explain the complete ownership structure to ensure full transparency.

Explanation

This risk was not identified in the FDD. Item 1 states that the franchisor, Fas-Tes, "currently do not and have never had any predecessors." Therefore, there is no history of a prior entity from which the current franchisor acquired the system that would need to be scrutinized for past problems.

Potential Mitigations

• Your attorney can confirm the franchisor's corporate history through public record searches to ensure no predecessor history has been omitted.
• Speaking with the longest-tenured franchisees might reveal insights into the system's early history and evolution.
• A business advisor can help research the background of the franchisor's founders to understand the origins of the business concept.

Explanation

Item 3 of the FDD states, "No litigation is required to be disclosed in this Item." This indicates there are no pending or recent lawsuits against the franchisor that meet the materiality thresholds for disclosure, such as actions alleging fraud, franchise law violations, or other significant claims. The absence of such litigation is a positive indicator, though it does not guarantee a dispute-free relationship.

Potential Mitigations

• Your attorney can conduct independent public record searches for litigation involving the franchisor that may not have met the FDD's disclosure threshold.
• It is always valuable to ask current and former franchisees about their experiences with disputes and how the franchisor handles disagreements.
• Understanding the dispute resolution clauses in Item 17 of the Franchise Agreement is important, even in the absence of disclosed litigation.