Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support to all franchisees. If a franchisor's support infrastructure, like training staff and field consultants, does not keep pace with new unit openings, the quality of assistance available to each franchisee, including you, could decline, potentially hindering your operational performance and growth.

Potential Mitigations

• Engaging a business advisor to review the franchisor's growth plans in relation to its support staff can provide valuable perspective.
• Speaking with franchisees who joined at different times can help you understand if support levels have changed as the system expanded.
• An accountant's review of the franchisor's financials can help determine if they are reinvesting sufficiently to support a growing system.

Explanation

FRSTeam has been franchising since 2006 and its management team has significant industry experience. Therefore, the specific risks associated with an unproven system or inexperienced management do not appear to be present. In a newer system, you would face higher risks related to unproven business models, weak brand recognition, and a lack of established operational support, which can affect franchisee success.

Potential Mitigations

• When evaluating any franchise, a business advisor can help you assess the depth and relevance of the management team's experience in both the industry and in franchising.
• It is always prudent to review the system's history and growth trajectory in Item 20 with your accountant to gauge stability.
• Your attorney can help verify the operating history of the business as described in Item 1.

Explanation

The business of restoring fabrics, electronics, and contents after disasters like fire and water damage serves a persistent market need driven by insurance claims, not temporary trends. This suggests the business model has long-term viability. A fad business, in contrast, risks a rapid decline in consumer interest, which could leave you with a worthless investment while still being bound by the long-term franchise agreement.

Potential Mitigations

• Your business advisor can help you research the stability and long-term outlook of the restoration and insurance repair industry.
• Analyzing the franchisor's plans for service innovation and adaptation in Item 11 with a business consultant can reveal their focus on long-term relevance.
• To gauge resilience, discuss with current franchisees how the business weathers economic cycles and shifts in the insurance market.

Explanation

The executive teams for both FRSTeam and its parent, Empower Brands, appear to have extensive experience in franchising and related industries, as detailed in Item 2. This suggests a lower risk of unforced errors from inexperienced management. In a franchise with inexperienced leadership, you might face risks of poor strategic decisions, weak operational systems, and inadequate franchisee support, which could negatively impact your business.

Potential Mitigations

• A thorough review of the executive biographies in Item 2 with your business advisor is a good practice to confirm relevant experience.
• It is beneficial to ask current franchisees about their direct experiences with the management team's competence and support.
• Your attorney can help you understand the roles and responsibilities of the key personnel listed.

Explanation

This risk was not identified. The FDD discloses a complex parent and affiliate structure, culminating in ownership by MidOcean Partners. Crucially, the parent company, Empower Brands, has provided its audited financial statements and a Guarantee of Performance. An issue would arise if a parent company that provides essential support or guarantees were not disclosed, or if its required financial statements were omitted, hiding potential financial weaknesses and creating an incomplete risk profile for you.

Potential Mitigations

• An experienced franchise attorney should always verify that all parent companies and their roles are properly disclosed in Item 1.
• If a parent provides a guarantee, your accountant must review their financial statements, which should be included in Item 21.
• Confirm with your attorney that any required financial assurance mechanisms, like guarantees or bonds, are properly documented in the exhibits.

Explanation

FRSTeam was converted from a corporation (FRSTeam, Inc.) but is not described as having a predecessor in the sense of acquiring the system from a different, prior entity. Predecessor history is important because past issues, such as litigation or high franchisee failure rates under previous ownership, could carry over and affect the current system's health and your potential for success. A lack of such history here is positive.

Potential Mitigations

• Your attorney can help you understand the corporate history detailed in Item 1 to identify any predecessors.
• If a predecessor exists, researching their public records and speaking to long-term franchisees about their experience is a critical step.
• A business advisor can help assess if any of a predecessor's historical challenges might still impact the current franchise system.

Explanation

The FDD states that there is no litigation required to be disclosed in Item 3. This is a positive finding, as a pattern of lawsuits filed by franchisees against a franchisor alleging fraud, misrepresentation, or breach of contract can be a significant red flag. Such litigation often points to systemic problems within the franchise relationship, its sales process, or its operational execution.

Potential Mitigations

• It is always a good practice to have your attorney verify the litigation disclosures in Item 3 and conduct a public records search for any other legal actions.
• Asking current and former franchisees about their disputes with the franchisor can provide insights beyond the formal disclosures.
• Your business advisor can help you assess the nature of any disclosed litigation and its potential impact on the franchise system.