Explanation

This risk was not identified in the FDD Package. Item 20 data does not show a high rate of franchisee terminations, non-renewals, or other cessations. High turnover can be a major red flag, often indicating systemic problems such as low franchisee profitability, inadequate support, or an unviable business model. A stable and growing franchise system is generally a positive indicator for prospective franchisees.

Potential Mitigations

• Even with low reported turnover, it is wise to have your business advisor help you contact a broad sample of current and former franchisees from the lists in Item 20.
• Discuss the typical reasons for franchisee exits in this industry with your franchise attorney to have a benchmark for comparison.
• An accountant can help you analyze the multi-year trends in the Item 20 tables to confirm system stability.

Explanation

This risk was not identified in the FDD Package. The growth of the franchise system, as shown in Item 20, does not appear to be unusually rapid. While growth is positive, excessively fast expansion can strain a franchisor's resources, potentially leading to a decline in the quality of training, support, and site selection assistance for new franchisees.

Potential Mitigations

• Your business advisor can help you analyze the growth trajectory in Item 20 relative to the franchisor's apparent support infrastructure.
• During discussions with existing franchisees, inquire about the quality and responsiveness of the franchisor's support systems.
• Consult with your accountant to review the franchisor's financial statements for evidence of investment in support infrastructure.

Explanation

This risk was not identified in the FDD Package. Item 1 indicates the franchisor was organized in 2007, and its parent company has been in the resurfacing business since 1999. A new or unproven system can present higher risks, including an untested business model, undeveloped support systems, and minimal brand recognition, which could impact your potential for success.

Potential Mitigations

• Engage a business advisor to assess the franchisor's track record and the maturity of its operating systems.
• Your attorney should verify the business history and experience of the franchisor and its key personnel as disclosed in Items 1 and 2.
• Discuss the system's history and evolution with long-standing franchisees to gauge its stability and track record.

Explanation

This risk was not identified in the FDD Package. The business model, which involves resurfacing and refinishing kitchen and bathroom surfaces, serves a consistent home and commercial maintenance need. Investing in a fad business carries the risk that consumer interest could decline rapidly, potentially leaving you with a worthless business while still being bound by a long-term franchise agreement.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm the long-term demand for these services in your area.
• Review the franchisor's plans for innovation and service development in Item 11 with your business consultant.
• Your financial advisor should help you assess the business model's resilience to economic shifts and changing consumer tastes.

Explanation

This risk was not identified in the FDD Package. The key executives listed in Item 2 appear to have been with the company and its parent since 1999 or 2001, indicating extensive experience. Inexperienced management can be a significant liability, potentially leading to poor strategic decisions, inadequate franchisee support, and a higher risk of system-wide problems, even if the business concept itself is sound.

Potential Mitigations

• A thorough review of the backgrounds of key personnel in Item 2 with your business advisor is always a prudent step.
• When speaking with existing franchisees, specifically ask about their confidence in and the competence of the leadership team.
• Your attorney can help verify the franchising and industry-specific experience claimed by the management team.

Explanation

This risk was not identified in the FDD Package. Item 1 indicates the franchisor is owned by GET A GRIP, Inc., which appears to be a family-operated entity, not a private equity firm. Private equity ownership can sometimes introduce risks related to prioritizing short-term investor returns over the long-term health of the franchise system and its franchisees.

Potential Mitigations

• Your attorney should always confirm the ownership structure disclosed in Item 1.
• Engaging a business advisor to research the ownership entity's history can provide additional context on their business practices.
• Discuss any ownership changes with existing franchisees to understand the impact on the system's culture and support.

Explanation

This risk was not identified in the FDD Package. Item 1 clearly discloses the parent company, GET A GRIP, Inc. Failing to disclose a parent company or its financials (when required) is a significant issue, as it can hide the true financial stability and control structure of the franchise system. Proper disclosure allows you to assess the full picture of the entity you are contracting with.

Potential Mitigations

• Your accountant should review the provided financials and note the absence of parent company financials, which may be relevant given the inter-company transactions.
• Your attorney can help you understand the legal relationship between the franchisor LLC and its parent company.
• A business advisor can assist in researching the parent company's history and reputation.

Explanation

This risk was not identified in the FDD Package. The franchisor's parent and predecessor is GET A GRIP, Inc., and there is no indication of a problematic history being concealed. A franchisor's predecessor history is important as it can reveal inherited issues, past litigation, or high franchisee failure rates that could affect the current system's health and your potential for success.

Potential Mitigations

• It is always wise for your attorney to carefully review the predecessor information disclosed in Items 1, 3, and 4.
• A business advisor can help you conduct independent online searches for any news or franchisee commentary related to the predecessor.
• When speaking with long-term franchisees, inquire about their experiences under any previous ownership or company structure.

Explanation

This risk was not identified in the FDD Package. Item 3 states there is no litigation required to be disclosed. A pattern of litigation, particularly franchisee-initiated lawsuits alleging fraud, misrepresentation, or breach of contract, can be a major red flag indicating systemic problems with the franchisor's business practices or the viability of the franchise model itself.

Potential Mitigations

• Your attorney can perform independent public records searches to verify the litigation disclosures in Item 3.
• A business advisor can help you research online forums and franchisee groups for discussions of any legal disputes.
• Always ask current and former franchisees about their experiences and whether they are aware of any disputes with the franchisor.