Explanation

This risk was not identified in the FDD Package. Rapid growth can strain a franchisor's ability to provide adequate support. It is important to evaluate whether a franchisor's support infrastructure is keeping pace with its franchise sales to ensure new and existing franchisees receive the assistance they need to succeed.

Potential Mitigations

• Your business advisor can help you analyze the growth rate shown in Item 20 against the franchisor's resources detailed in Item 21.
• Ask current franchisees about their perception of the franchisor's support quality as the system has expanded.
• Inquiring with your attorney about any contractual guarantees related to support levels can provide a clearer picture of your rights.

Explanation

This risk was not identified in the FDD Package. The franchisor, Branches Company, LLC (Branches Company), began offering franchises in November 2013 and has an established system with over 80 operating units. An unproven system presents higher risks, as its business model, brand recognition, and support structures are not yet time-tested.

Potential Mitigations

• It is still prudent to have your business advisor help you conduct thorough due diligence on the system's history and performance.
• Discussing the franchisor's long-term vision and track record with your financial advisor can provide valuable context.
• Consulting with an attorney to understand the stability of the system as described in the documents is a key step.

Explanation

This risk was not identified in the FDD Package. The business model, focused on flooring installation and bathroom remodeling, serves a consistent and fundamental need in the residential and commercial property markets. These services are generally not considered to be based on a short-term trend or fad, suggesting a more stable market demand.

Potential Mitigations

• Your business advisor can help you research the long-term demand and competitive landscape for home services in your local market.
• Review the franchisor's history and plans for service evolution with your financial advisor to gauge its adaptability.
• It is always wise to consult an attorney to review the contract terms, ensuring you are not locked into a business that could become obsolete.

Explanation

This risk was not identified in the FDD Package. Item 2 indicates that the key personnel of Branches Company have extensive experience within the company and the flooring industry, with many serving in various roles for several years. This suggests a stable management team with deep operational knowledge. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions and inadequate support for franchisees.

Potential Mitigations

• A business advisor can help you verify the backgrounds of the management team and assess their reputation in the industry.
• When speaking with current franchisees, you should still inquire about their direct experiences with the management team's competence and responsiveness.
• Your attorney can review the franchise agreement for any clauses that might be concerning if management were to change in the future.

Explanation

This risk was not identified in the FDD Package. Item 1 and the accompanying financial statements do not indicate that the franchisor is owned by a private equity firm. This type of ownership can sometimes introduce risks related to focus on short-term returns over the long-term health of the franchise system. The franchisor appears to be a privately held limited liability company.

Potential Mitigations

• Your attorney should still confirm the ownership structure and investigate any parent or affiliate companies for signs of PE involvement.
• A discussion with your business advisor about the franchisor's long-term strategy can help gauge their commitment to franchisee success.
• Asking current franchisees about their perception of the ownership's goals and philosophy is a valuable due diligence step.

Explanation

This risk was not identified in the FDD Package. The FDD discloses a parent company, Pilgrim, LLC, and an affiliate, Gopher Wood, LLC, which operates a company-owned unit. The FDD appears to provide the necessary financial statements for the franchisor itself. Non-disclosure of a parent company's financials, when required, can obscure the true financial health and backing of the franchise system.

Potential Mitigations

• Your accountant should review the provided financial statements and the corporate structure to ensure all necessary disclosures appear to have been made.
• A franchise attorney can advise on whether parent company financials might be required under state or federal rules based on the structure.
• Investigating the relationship between the franchisor and its parent company can be a useful step for your business advisor.

Explanation

This risk was not identified in the FDD Package. Item 1 states that Branches Company does not have any predecessors. A predecessor is a company from which the franchisor acquired the business, and its history can be important. The absence of a predecessor means the franchisor's own history, as disclosed in Items 3, 4, and 20, is the complete history of the system's management.

Potential Mitigations

• Your attorney should verify the franchisor's statement about having no predecessors.
• A thorough review of the franchisor's own history of litigation and bankruptcy is still a crucial step for your attorney to undertake.
• Your business advisor can help research the company's background to confirm its corporate history.