Explanation

This risk was not identified. The audited financial statements provided in Exhibit E for Fish Window Cleaning Services, Inc. (FWC) show a financially stable company. FWC reported consistent profitability and revenue growth for the fiscal years 2023 and 2024, with substantial retained earnings and no long-term debt. This financial health suggests FWC has the resources to support its franchisees and continue investing in the system.

Potential Mitigations

• Even with positive financials, having your accountant review the full, audited statements, including all footnotes, is a crucial step for due diligence.
• A discussion with your financial advisor can help you understand the franchisor's key financial metrics and their trends over the past several years.
• Your attorney should confirm that the financial statements are audited and comply with all disclosure requirements.

Explanation

This risk was not identified. The data in Item 20 shows a relatively stable system size over the last three years, indicating a mature and controlled growth strategy rather than rapid expansion. This suggests the franchisor is not likely to be overstretching its support infrastructure, which is a positive indicator for new franchisees seeking adequate training and assistance.

Potential Mitigations

• Asking existing franchisees about the quality and timeliness of franchisor support can validate that the system's resources are not strained.
• A business advisor can help you evaluate the franchisor's support staff-to-franchisee ratio based on information you gather.
• Your accountant should review the franchisor's investments in support infrastructure as reflected in the financial statements.

Explanation

This risk was not identified. FWC has been franchising since 1998, as stated in Item 1, and has a large, established system of over 260 franchised outlets. This long history and significant size indicate a well-proven business model and experienced management, which reduces the risks typically associated with new or emerging franchise systems.

Potential Mitigations

• Speaking with long-term franchisees can provide insight into the system's evolution and the franchisor's consistency over time.
• A business advisor can help you assess the value of joining a mature system versus a newer one.
• It is still prudent for your attorney to review the entire FDD for any signs of recent negative changes despite the system's maturity.

Explanation

This risk was not identified. The business of providing window and specialty cleaning services is a long-standing, established industry. It is not dependent on a short-term trend or fad, which suggests a greater likelihood of sustained consumer demand and long-term viability for your business.

Potential Mitigations

• Engaging a business advisor to research the local market demand and competitive landscape for cleaning services can confirm the concept's local viability.
• Discussing the industry's stability and potential for growth with your financial advisor is a valuable planning step.
• Your attorney can help you understand any long-term obligations in the Franchise Agreement that would persist even if market demand were to change.

Explanation

This risk was not identified. The business experience of the management team, detailed in Item 2, is extensive. Key executives have been involved with the company since its inception in 1998 and have decades of experience in the window cleaning industry. This depth of experience in both the specific industry and in franchising is a positive factor for system stability and support.

Potential Mitigations

• In discussions with the franchisor, you can inquire about management's long-term vision for the brand's continued growth and adaptation.
• A review of the management team's public profiles and industry reputation with a business advisor can provide additional context.
• Asking current franchisees about their direct experiences and the quality of guidance from the leadership team can be insightful.

Explanation

This risk was not identified. According to Item 1, FWC is owned by its executives, S. Michael Merrick and Linda Merrick. The FDD gives no indication of ownership by a private equity firm. This typically suggests a focus on the long-term health of the brand rather than prioritizing short-term investor returns, which can be a risk with PE-owned systems.

Potential Mitigations

• Your attorney should confirm the ownership structure and verify there are no undisclosed controlling entities.
• It's beneficial to ask the franchisor about their long-term succession and ownership plans for the company.
• A business advisor can help you understand the different implications of founder-led versus PE-owned franchise systems.

Explanation

This risk was not identified. Item 1 discloses the franchisor and its affiliate, and the financial statements in Item 21 are consolidated. There is no evidence of a separate, controlling parent company whose financial information would be material to your decision but has been omitted. The disclosure appears to be straightforward regarding the corporate structure.

Potential Mitigations

• Your attorney can conduct a corporate search to confirm the ownership structure and identify any other related entities.
• Asking the franchisor to provide an organizational chart can provide additional clarity on the corporate structure.
• Your accountant should verify that the provided financial statements properly consolidate all relevant affiliated entities.

Explanation

This risk was not identified. Item 1 does not disclose any predecessors, as FWC appears to have developed the system itself since 1998. This eliminates the risk of inheriting historical problems from a prior owner of the franchise system, such as a poor reputation or a history of franchisee failures.

Potential Mitigations

• A discussion with your attorney can confirm that the FDD's statements regarding predecessors are complete.
• Speaking with the longest-tenured franchisees can help verify the history of the system as presented.
• A business advisor can help you research the company's history through public records for additional confirmation.

Explanation

This risk was not identified. Item 3 discloses a single, resolved wage-and-hour lawsuit in which FWC was ultimately dismissed as a defendant. This does not represent a pattern of litigation initiated by franchisees alleging fraud, misrepresentation, or other systemic issues. The lack of such a pattern is a positive indicator of the franchisor-franchisee relationship.

Potential Mitigations

• Your attorney should still review the details of any disclosed litigation to understand its potential implications.
• It is wise to ask current franchisees about their perception of the franchisor's fairness and communication in resolving disputes.
• A business advisor can help you perform public searches for any other litigation involving the franchisor that may not have been required for disclosure.