Explanation

This specific risk was not identified in the FDD package. The franchise system's unit count, as shown in Item 20, has remained relatively stable over the past two years, not indicating excessively rapid expansion. However, it's generally important to consider if a franchisor's support capabilities are keeping pace with its unit growth, as over-expansion can strain resources and dilute franchisee support.

Potential Mitigations

• Engaging a business advisor to evaluate the franchisor's support infrastructure in relation to its future growth plans is a prudent step.
• During due diligence calls, asking current franchisees about the quality and timeliness of franchisor support is a valuable exercise.
• Your accountant can review the franchisor's financial statements to assess if they are reinvesting sufficiently in support systems.

Explanation

This risk was not identified. Garage Experts International LLC (GEI) and its predecessors have been franchising since 2008, as stated in Item 1, and the system has over 100 units. This indicates an established system rather than a new or unproven one. For any new franchise, however, it is always important to scrutinize the franchisor's track record and the viability of the business model.

Potential Mitigations

• Even with an established system, a business advisor can help you conduct thorough due diligence on the management team's specific experience.
• Speaking to a mix of new and long-term franchisees from the list in Item 20 can provide insight into the system's evolution and support quality.
• Your accountant should still review the financials in Item 21 to ensure continued stability and profitability.

Explanation

This risk was not identified. The business of providing garage flooring, cabinets, and storage solutions targets a consistent homeowner need for home improvement and organization, rather than appearing to be a short-term or fleeting trend. Assessing the long-term market demand and competitive landscape is still a crucial step for any prospective franchisee to ensure the business has lasting viability.

Potential Mitigations

• A business advisor can help you research the long-term market trends for home improvement and garage organization in your local area.
• Evaluating the franchisor's plans for innovation and adaptation to changing consumer tastes is a wise step.
• Your financial advisor can help assess the business model's resilience to various economic conditions.

Explanation

This risk was not identified in the FDD. Item 2 shows that the key executives have several years of experience in the industry and within the GarageExperts system or other franchise brands. A lack of relevant management experience can be a significant risk, as it may affect the quality of training, support, and strategic direction provided to franchisees.

Potential Mitigations

• It is still advisable to discuss the management team's accessibility and effectiveness with current franchisees.
• A business advisor can help you research the professional backgrounds of the key executives listed in Item 2.
• Your attorney can help clarify the roles and responsibilities of the management team as they relate to franchisee support.

Explanation

The FDD does not indicate that the franchisor is owned by a private equity firm. This type of ownership can sometimes create risk, as investment firms may prioritize short-term returns over the long-term health of the franchise system. It is always important to understand the ownership structure of the franchisor, as this can influence strategic decisions, fee structures, and the level of franchisee support.

Potential Mitigations

• Your attorney should always confirm the ownership structure of the franchisor entity disclosed in Item 1.
• Understanding the franchisor's long-term vision for the brand can provide insight into its strategic priorities, a topic to discuss with your business advisor.
• Asking current franchisees about any recent changes in ownership or management philosophy can be very revealing.

Explanation

This risk appears to be well-managed in the disclosure. Item 1 clearly identifies the franchisor, Garage Experts International LLC (GEI), and its affiliates, including VHPC and Envision IP. The FDD includes GEI's audited financial statements as required. While there is no parent company whose financials would be required, the extensive dealings with affiliates present their own set of risks, which are analyzed separately.

Potential Mitigations

• Your attorney should confirm the corporate structure and ensure all relevant affiliate relationships are clearly disclosed.
• It's important to have an accountant review the provided financial statements to assess the franchisor's financial health.
• In discussions with current franchisees, you can inquire about the role and impact of the various affiliated companies on their business.

Explanation

This risk was not identified. Item 1 indicates the franchisor was formed in 2008 and does not list any predecessors from which it acquired the business. Understanding a system's full history, including any previous owners, is important because it can reveal inherited issues, historical challenges, or a track record of high franchisee turnover that may not be apparent from the current franchisor's data alone.

Potential Mitigations

• Your attorney should always review Item 1 to identify any disclosed predecessors and investigate their history.
• If a predecessor is identified, a business advisor can help you research its track record through public records and news archives.
• Speaking with long-term franchisees who may have operated under a predecessor can provide invaluable historical context.

Explanation

This risk is not identified as a significant pattern. Item 3 discloses one pending lawsuit initiated by a former member of a franchisee entity, in which the franchisor has not yet been served. While any litigation warrants attention, this single disclosed case does not represent a pattern of franchisee-initiated lawsuits alleging fraud or other systemic issues. A pattern of such litigation can be a major red flag about a franchisor's practices.

Potential Mitigations

• Your attorney should review the details of any disclosed litigation and assess its potential impact on the franchise system.
• It's wise to ask your attorney to conduct an independent search for other litigation involving the franchisor that may not require disclosure in Item 3.
• You can discuss the disclosed litigation with the franchisor to understand their perspective on the matter.