Explanation

This risk was not identified in the FDD package. The data in Item 20 shows the franchise system has been shrinking over the last three years, not growing rapidly. A risk of rapid growth can strain a franchisor's ability to provide adequate support to all franchisees. While not present here, you should always assess if a franchisor's support infrastructure is keeping pace with its growth.

Potential Mitigations

• When evaluating any franchise, your business advisor should help you analyze the pace of unit growth against the franchisor's reported support staff and resources.
• It is wise to ask current franchisees about the quality and timeliness of support they receive from the franchisor.
• Your accountant can review the franchisor's financial statements to see if they are reinvesting in support infrastructure.

Explanation

This risk was not identified in the FDD package. Fitness Together Franchise, LLC (FTF) states in Item 1 that it began offering franchises in 1996, indicating a long operational history. An unproven system can be risky due to the lack of a track record and potentially underdeveloped support systems. While this specific risk is not present, you should still carefully perform your due diligence on the brand's current market position and franchisee satisfaction.

Potential Mitigations

• For any franchise, consulting with a business advisor to research the brand's history and market longevity is a prudent step.
• Your attorney should verify the franchisor's business history as stated in Item 1 of the FDD.
• Speaking with long-term franchisees can provide valuable insight into the system's evolution and stability.

Explanation

This risk was not identified in the FDD package. The business model of providing personal fitness training services is a well-established segment of the broader health and wellness industry and does not appear to be a short-term fad. A business based on a fad carries a high risk of failure once public interest declines. You should always assess the long-term consumer demand for any franchise concept you consider.

Potential Mitigations

• A business advisor can help you conduct independent market research to evaluate the long-term consumer demand for the franchise's core services.
• When analyzing a business concept, consider its ability to adapt to changing market trends and consumer preferences.
• Your financial advisor can help assess the business model's resilience during different economic cycles.

Explanation

This risk was not identified in the FDD package. The executive profiles in Item 2 show that the management team has extensive experience with major national and international brands such as Papa John's, Taco Bell, and The Clorox Company. Franchisors with inexperienced management can pose a risk due to a potential lack of understanding of how to support a franchise network effectively. This does not appear to be a concern here.

Potential Mitigations

• As part of due diligence, having a business advisor help you research the backgrounds of the key management team is always a valuable exercise.
• In your calls with current franchisees, it is useful to ask about their direct experiences with and perceptions of the management team's competence and support.
• Your attorney can help you investigate the public record of key executives for any past business issues or litigation.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses the parent companies, and Item 21 provides audited financial statements for an affiliate, Elements Therapeutic Massage, LLC, which provides an unconditional guarantee for the franchisor's performance. The lack of disclosure of a parent company can obscure financial or operational risks, but this FDD appears to be transparent in this regard.

Potential Mitigations

• Your attorney should always verify that the relationship between a franchisor and its parent or guarantor is clearly documented.
• An accountant should review the financial statements of any guaranteeing entity to ensure it has the capacity to back the franchisor's obligations.
• Ensure that the guarantee document, typically an exhibit to the FDD, is legally sound and enforceable by having your attorney review it.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD explicitly states, “We do not have any predecessors.” Therefore, there are no inherited issues from prior entities to consider. When a franchisor has predecessors, it is important to investigate their history for any signs of trouble, such as litigation or high franchisee failure rates, as this could impact the current system.

Potential Mitigations

• For any franchise opportunity, it is important to have your attorney review Item 1 carefully to identify any predecessors.
• If predecessors exist, a business advisor can help you research their history and reputation.
• When predecessors are disclosed, asking long-term franchisees about their experiences under previous ownership is a key due diligence step.