Explanation

This risk was not identified in the FDD package. Rapid growth can strain a franchisor's ability to provide adequate support. If a system expands too quickly, new franchisees may find that resources for training, site selection, and operational guidance are spread too thin, potentially compromising the quality of support and the overall brand.

Potential Mitigations

• Your business advisor can help you assess whether a franchisor's support infrastructure is keeping pace with its unit growth.
• In discussions with current franchisees, it is wise to ask about the quality and timeliness of support they currently receive.
• An accountant should review the franchisor's financials to see if they are reinvesting in support systems to manage growth.

Explanation

This risk was not identified in the FDD package. The business model, which involves fundraising services for schools and sports leagues, appears to be based on a consistent, long-term market need rather than a fleeting trend. The risk of a 'fad business' is that consumer interest can disappear quickly, leaving franchisees with a worthless investment even though their contractual obligations to the franchisor remain.

Potential Mitigations

• A business advisor can help you research the long-term market demand and sustainability for any franchise concept.
• Investigate a company's history of innovation and adaptation to assess its resilience against changing market trends.
• Your financial advisor should help you evaluate the business's potential performance across different economic cycles.

Explanation

This risk was not identified in the FDD package. Item 2 indicates that the key executives have been involved in the fundraising industry and with affiliated companies since 2009. A lack of management experience in franchising or the specific industry can be a significant risk, as it may lead to underdeveloped support systems, poor strategic decisions, and an inability to effectively guide franchisees.

Potential Mitigations

• A thorough review of the executive team's background in Item 2 with your business advisor is a critical due diligence step.
• Speaking with current franchisees can provide insight into the management team's competence and the quality of support provided.
• Your attorney can help you understand the potential implications if key, experienced personnel were to leave the company.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that the franchisor is owned by a private equity firm. When a PE firm owns a franchisor, there can be a risk that decisions are driven by short-term financial targets, which may not align with the long-term health of the franchisees and the brand.

Potential Mitigations

• Your attorney can help you research the ownership structure of the franchisor to identify any private equity involvement.
• If a franchisor is PE-owned, a business advisor can help you investigate the firm's track record with other franchise brands.
• It is prudent to ask current franchisees about any changes in support or strategy since a PE acquisition.

Explanation

This risk was not identified in the FDD package. The FDD appears to correctly identify the franchising entity, Coaching Matters, and provides its financial statements. Failing to disclose a parent company or provide its financials when required can obscure the true financial stability and control structure of the franchise system, hiding significant risks from prospective franchisees.

Potential Mitigations

• Your attorney should verify the franchisor's corporate structure and ensure all required parent and affiliate disclosures are made in Item 1.
• If a parent company guarantees the franchisor's performance, an accountant should review the parent's financial statements.
• Confirm with your attorney that the entity signing the Franchise Agreement is the same one disclosed throughout the FDD.

Explanation

This risk was not identified in the FDD package. Item 1 states the franchisor has no predecessors. A predecessor is a company from which the franchisor acquired the main assets of the business. Concealing or providing incomplete information about a predecessor can hide a history of problems, such as litigation or high failure rates, that could be relevant to your investment decision.

Potential Mitigations

• Your attorney should carefully review Item 1 for any mention of predecessors or recent asset acquisitions.
• If a predecessor is identified, a business advisor can assist in researching its history and reputation.
• Asking long-term franchisees about their experience under any previous ownership is a wise due diligence step.