Explanation

This risk was not identified. The financial statements for FLEET FEET, INCORPORATED (Fleet Feet, Inc.) provided in Item 21 show a profitable company with a strong balance sheet. For fiscal year 2024, Fleet Feet, Inc. reported a net income of nearly $1 million and shareholder equity exceeding $18 million. These figures suggest financial stability and the capacity to support the franchise system. An accountant's review is still a prudent step for any investment.

Potential Mitigations

• Even with positive financials, having your accountant review the statements, including all footnotes and the auditor's report, is a crucial step.
• Discuss the franchisor's financial health and capital allocation plans for system support and growth with your financial advisor.
• It is wise to ask your attorney about any financial assurance mechanisms, like bonds or escrow, that might be required by your state, regardless of the franchisor's apparent stability.

Explanation

This risk was not identified. The data in Item 20's tables shows very low franchisee turnover. In each of the last three years (2022-2024), only one franchised outlet ceased operations for other reasons, and there were zero terminations or non-renewals. The tables also show a healthy number of transfers to new owners each year, which typically indicates a viable business with resale value. The system is growing steadily, not shrinking.

Potential Mitigations

• Despite low reported turnover, you should still contact a sample of current and former franchisees from the lists provided with Item 20 to discuss their experiences.
• A business advisor can help you analyze the Item 20 data for any subtle trends over the three-year period.
• During your validation calls with franchisees, ask about their profitability and satisfaction with the franchisor, which are key drivers of turnover.

Explanation

This risk was not identified. Fleet Feet, Inc. discloses in Item 1 that it has been offering franchises since 2002. With over two decades of experience and more than 275 total stores in operation, the system is well-established and not unproven. The risk associated with an emerging brand that lacks a track record does not appear to apply here.

Potential Mitigations

• When speaking with long-tenured franchisees, asking about the evolution of the system and the franchisor's support over the years can provide valuable insight.
• Engaging a business advisor to research the company's history and reputation within the specialty retail industry is always a prudent measure.
• Your attorney should still confirm the franchisor's compliance and registration history in your state.

Explanation

This risk was not identified. The franchise operates in the specialty running and fitness retail market. This is a well-established and mature industry, not a temporary fad. The business model is based on durable consumer interest in health and fitness, suggesting long-term viability rather than a concept tied to a fleeting trend.

Potential Mitigations

• Your business advisor can help you research the long-term trends and competitive landscape of the specialty athletic retail market in your specific area.
• Ask current franchisees about local market conditions and how the business model has adapted to changes over time.
• A discussion with your financial advisor about the resilience of this retail sector to economic cycles would be beneficial.

Explanation

This risk was not identified. The executive biographies in Item 2 of the FDD show a management team with extensive and long-term experience. Many key personnel have been with Fleet Feet, Inc. for several years and have significant prior experience in the retail and franchise industries. The leadership appears stable and deeply knowledgeable about the business.

Potential Mitigations

• During your due diligence calls, you can ask current franchisees for their direct opinions on the competence and accessibility of the management team.
• A business advisor can help you research the public-facing reputation of the key executives within the industry.
• It is always good practice to confirm with your attorney that all key management personnel have a clean history as disclosed in Item 3 and 4.

Explanation

This risk was not identified. The FDD's Item 1 appears to properly disclose the parent company, ONWARD OUTDOOR BRANDS, LLC, and its ultimate ownership structure involving Investor's Management Corporation. The franchisor's own audited financial statements are provided, and there is no indication that parent company financials are required and have been withheld.

Potential Mitigations

• Your attorney can help you understand the complex corporate structure outlined in Item 1 and the relationships between the various affiliated companies.
• Have your accountant confirm that the provided financial statements are sufficient for a proper risk assessment and that no other statements appear necessary.
• In your due diligence, asking franchisees about the role the parent company plays in day-to-day support can be insightful.

Explanation

This risk was not identified. Item 1 mentions a predecessor entity but clarifies it did not offer franchises. Furthermore, Items 3 and 4 disclose no history of litigation or bankruptcy related to any predecessor. The provided information does not suggest there are any inherited issues or a negative history being obscured.

Potential Mitigations

• Your attorney should review the predecessor information in the FDD to confirm there are no hidden liabilities or concerns.
• During franchisee validation calls, it can be useful to ask long-tenured franchisees about their experiences during any transitions of corporate ownership.
• A business advisor can help conduct public records searches on predecessor entities for additional peace of mind.

Explanation

This risk was not identified. Item 3 of the FDD states, "No litigation is required to be disclosed in this Item." This indicates there is no current, material litigation involving the franchisor, its predecessors, or management that would suggest a pattern of disputes with franchisees, suppliers, or regulators.

Potential Mitigations

• Although no litigation is disclosed, your attorney can perform independent public records searches to verify this information.
• Asking current franchisees about their experiences with disputes and how the franchisor resolves disagreements is a valuable part of due diligence.
• It is wise to have your attorney explain the dispute resolution process outlined in the Franchise Agreement, should a conflict arise in the future.