Explanation

This specific risk was not identified in the FDD Package. The franchisee turnover rates, calculated from the data provided in Item 20, do not appear to be excessively high for a system of this size. High turnover can be a red flag for systemic problems, such as lack of profitability, poor franchisor support, or an unsustainable business model, but the disclosed numbers here do not suggest a significant issue with franchisee churn.

Potential Mitigations

• Speaking with a range of current and former franchisees listed in Item 20 is a crucial step your business advisor can help you prepare for.
• Your accountant can help you calculate the precise turnover rates from Item 20 data for your own analysis.
• It is wise to ask your attorney about any confidentiality agreements mentioned in Item 20 that could limit what former franchisees can discuss.

Explanation

This risk was not identified in the FDD Package. The business model, focused on parking lot striping and pavement maintenance, represents a standard, ongoing business-to-business service need. It is not based on a new trend or novelty product that might see a rapid decline in consumer interest. Therefore, the risk of the business being a short-lived fad appears to be low.

Potential Mitigations

• A business advisor can help you analyze the long-term demand and competitive landscape for pavement maintenance services in your local market.
• Researching local and national industry trends for these types of services can provide additional confidence in the model's sustainability.
• Your financial advisor can assist in assessing the business model's resilience to various economic cycles.

Explanation

This risk was not identified in the FDD Package. The executive biographies in Item 2 indicate that key personnel, particularly the President, have extensive prior experience in the same or very similar industries, including prior franchise management. The Director of Training is also noted as being the system's first franchisee. This suggests the management team possesses relevant industry and operational experience.

Potential Mitigations

• It is still prudent to ask current franchisees about their direct experiences with the management team's competence and support.
• Your business advisor can help you research the professional backgrounds of the key executives listed in Item 2.
• During any discovery day or meeting, you should prepare questions to gauge the management team's strategic vision and operational expertise.

Explanation

This risk was not identified in the FDD Package. Item 1 describes the franchisor as a New Hampshire limited liability company and does not disclose any ownership by a private equity firm. The dynamics often associated with PE ownership, such as a focus on short-term returns or rapid resale of the company, do not appear to be present based on the information provided.

Potential Mitigations

• A basic corporate records search, which your attorney can perform, can confirm the ownership structure of the franchisor entity.
• It is always a good practice to ask the franchisor about their long-term goals and any plans for future sale of the company.
• Your business advisor can help you understand the different implications of various ownership structures in franchising.

Explanation

This risk was not identified in the FDD Package. Item 1 clearly states, "we do not have any parent companies." The document discloses several affiliates but does not indicate the existence of a parent company that would control the franchisor or whose financials would be material to understanding the franchisor's stability. The franchisor appears to be a standalone entity.

Potential Mitigations

• Your attorney can review the corporate structure described in Item 1 and confirm that there are no red flags indicating an undisclosed parent.
• It is helpful to have your accountant review the affiliate relationships described in Item 1 to understand their potential financial impact.
• Always ask about the roles and relationships of any affiliated companies mentioned in the FDD.

Explanation

This risk was not identified in the FDD Package. Item 1 of the FDD explicitly states, "we do not have any predecessors." While management's prior business experience is disclosed, those entities are not presented as legal predecessors from which the current franchisor acquired its assets or brand. Therefore, there is no predecessor history to analyze for potential inherited issues.

Potential Mitigations

• Your attorney can confirm that the language in Item 1 properly discloses the absence of any legal predecessors.
• Even without predecessors, it's wise to discuss management's prior business ventures with your business advisor to understand their track record.
• Speaking with long-term franchisees can still provide insight into the history and evolution of the business concept.

Explanation

This risk was not identified in the FDD Package. Item 3 of the FDD states, "No litigation is required to be disclosed in this Item." This indicates there is no recent or pending material litigation involving the franchisor, its predecessors, or key individuals that alleges fraud, franchise law violations, or similar claims.

Potential Mitigations

• An attorney can perform an independent search of court records to verify the absence of significant litigation.
• It is still advisable to ask current and former franchisees if they are aware of any past or current disputes within the system.
• Your legal counsel should review the dispute resolution clauses in Item 17 to understand your rights if a conflict were to arise.