Explanation

This risk was not identified. The provided audited financial statements for the parent company, Cornerstone Franchise Brands, LLC, show strong performance with increasing revenue, net income, and positive member's equity. Additionally, as stated in Item 21 and Exhibit N, the parent company unconditionally guarantees the franchisor's obligations, which provides an extra layer of financial backing. This suggests a stable franchisor capable of supporting its system and franchisees.

Potential Mitigations

• An experienced franchise accountant should review the franchisor's financial statements, including footnotes and the auditor’s report, to confirm financial health.
• It is wise to have your attorney review the parental guarantee to understand its scope and enforceability.
• A business advisor can help you assess if the franchisor's financial strength aligns with its growth plans and support commitments.

Explanation

This risk was not identified. The franchisee turnover rates disclosed in Item 20 are low. For the most recent year, 2024, only four franchises ceased operations for other reasons, and there were zero terminations or non-renewals out of a starting base of 203 outlets. This low churn rate, combined with significant new franchise growth, suggests a stable and healthy franchise system with a low level of franchisee distress or dissatisfaction.

Potential Mitigations

• It's beneficial to contact a diverse sample of current and former franchisees from the lists in Exhibit G to discuss their experiences.
• Your accountant can help you calculate and benchmark the turnover rates presented in Item 20 against industry averages for a broader perspective.
• Asking your attorney about state relationship laws can provide context on how terminations and non-renewals are regulated.

Explanation

This risk was not identified. FirstLight HomeCare Franchising, LLC (FirstLight LLC) began franchising in March 2010 and has a long operational history with 238 franchised outlets at the end of 2024. The business model, in-home senior care, is well-established. This indicates a mature system with a proven track record, rather than a new or experimental venture.

Potential Mitigations

• Engaging a business advisor to review the franchisor's history and system maturity can confirm its stability.
• It is still valuable to speak with long-term franchisees about how the system has evolved and improved over time.
• Your attorney can review the FDD to ensure all historical information about the franchisor and its system is consistently presented.

Explanation

This risk was not identified. The business operates in the in-home senior care industry, a sector with strong, long-term demand driven by demographic trends. This is a sustained market need rather than a short-lived fad, suggesting a stable business concept for the foreseeable future.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm the long-term demand for senior care services in your specific territory.
• Reviewing the franchisor's plans for service innovation with your attorney can provide insight into their long-term vision.
• An accountant can help you model the business's resilience to various economic conditions.

Explanation

This risk was not identified. Item 2 shows that the key executives at FirstLight LLC have extensive and long-term experience in both franchising (with large systems like ServiceMaster) and the specific operations of the business. For example, the CEO, COO, and other VPs have multi-decade careers in relevant fields, indicating a seasoned leadership team capable of managing the franchise system effectively.

Potential Mitigations

• A business advisor can help you further vet the backgrounds of the management team to confirm their expertise matches system needs.
• When speaking with current franchisees, it is useful to ask about their direct interactions with and confidence in the leadership team.
• Your attorney can review Item 2 to ensure the disclosed experience is relevant and comprehensive.

Explanation

The franchisor is part of a larger structure owned by a private investment firm, Navigator Partners, LLC. While the system currently appears stable and well-managed, ownership by an investment-focused entity can introduce risks. Decisions might prioritize investor returns over the long-term health of franchisees, and the firm may plan to sell the system within a specific timeframe. The Franchise Agreement permits the franchisor to assign the contract, adding to this uncertainty.

Potential Mitigations

• Investigating the investment firm's history with other franchise brands they have owned can be insightful; a business advisor can assist.
• It's important to ask current franchisees about any changes in system focus or support since the current ownership structure was established.
• Your attorney should review the assignment clause in the Franchise Agreement to clarify your rights if the system is sold.

Explanation

This risk was not identified. The FDD clearly discloses the parent company, Cornerstone Franchise Brands, LLC, and provides its audited financial statements in Item 21. Furthermore, Exhibit N contains an explicit and unconditional guarantee of the franchisor's obligations by this parent company, providing transparency and additional financial security for franchisees.

Potential Mitigations

• It is beneficial to have your accountant review the parent company's financials in conjunction with the franchisor's.
• Your attorney should analyze the terms of the parental guarantee to ensure it is robust and enforceable.
• A business advisor can help assess the overall corporate structure and how it impacts franchisee support and stability.

Explanation

This risk was not identified. Item 1 states the franchisor has no predecessor other than a corporate reorganization where it converted from an Ohio LLC to a Delaware LLC, emerging as a continuation of the same entity. There is no history of acquiring the system from a previous, potentially troubled franchisor.

Potential Mitigations

• Your attorney can review the corporate history disclosed in Item 1 to confirm the absence of substantive predecessors.
• A business advisor can help you perform independent research to verify that no undisclosed predecessor history exists.
• Asking long-term franchisees about the company's history can provide additional confirmation.

Explanation

This risk was not identified. Item 3 of the FDD states that there is no litigation that requires disclosure. This suggests a clean legal history without significant disputes with franchisees, regulators, or other parties. Furthermore, Item 4 confirms that neither the franchisor nor its management has any history of bankruptcy.

Potential Mitigations

• It is still prudent to have your attorney conduct an independent search for any litigation not required to be disclosed in the FDD.
• A business advisor can help you assess whether the lack of litigation aligns with the franchisee satisfaction levels you discover during due diligence calls.
• Asking current franchisees about how the franchisor handles disputes can provide valuable insight, even without formal litigation.