Explanation

This risk was not identified. The audited financial statements provided by Equity One Franchisors, LLC (Equity One) in Exhibit F for the years ending 2022, 2023, and 2024 show consistent profitability, positive cash flow, and growing members' equity. An unqualified audit opinion and the absence of a 'going concern' note suggest the franchisor is financially stable and capable of supporting the franchise system, which is a positive factor for prospective franchisees.

Potential Mitigations

• Even with positive financials, having your accountant review the statements, including footnotes and cash flow trends, is a prudent step.
• A business advisor can help you understand how the franchisor's financial health relates to its ability to provide long-term support.
• Your attorney should confirm that the financial statements provided meet all federal and state disclosure requirements.

Explanation

This risk was not identified. The data in Item 20 shows the franchise system has been shrinking in unit count over the last three years, not growing rapidly. While a shrinking system presents its own potential issues, the specific risks associated with rapid expansion overwhelming franchisor support resources do not appear to be present.

Potential Mitigations

• It is still wise to discuss the franchisor's future growth plans and their capacity to support new and existing franchisees with your business advisor.
• An accountant can analyze the financial statements to confirm the franchisor has adequate resources for its current operational needs.
• Asking current franchisees about the quality of support they receive can provide valuable insight into the franchisor's capabilities.

Explanation

This risk was not identified. Item 1 indicates Equity One began offering franchises in 2007. With over 15 years of operational history and more than 150 units currently in the system, it is an established franchise. The risks associated with an unproven concept, untested systems, or a lack of brand history do not appear to apply here.

Potential Mitigations

• You should still have your attorney and accountant perform thorough due diligence on all aspects of the franchise offering.
• Speaking with long-tenured franchisees can provide valuable perspective on how the system has evolved over time.
• A business advisor can help you evaluate the brand's current market position and relevance despite its long history.

Explanation

This risk was not identified. The franchised business is the sale of various insurance products, which is a long-standing and essential industry. It is not dependent on a fleeting trend or novelty. Therefore, the risk of the business model becoming obsolete due to changing fads appears to be low.

Potential Mitigations

• A business advisor can help you assess the long-term market demand for insurance products in your specific geographic area.
• Understanding the impact of technology and online competition on the traditional insurance agency model is crucial for your business plan.
• Discussing the franchisor's strategies for adapting to industry changes with existing franchisees is recommended.

Explanation

This risk was not identified. Item 2 of the FDD details the business experience of the key executives. The management team appears to have extensive, long-term experience in both the insurance industry and in franchising, with several key personnel having been with the company since its early years. This suggests a stable and experienced leadership team.

Potential Mitigations

• It is still beneficial to research the professional backgrounds of the key executives listed in Item 2.
• When speaking with current franchisees, asking about their perception of the management team's competence and support is a valuable step.
• A business advisor can help you evaluate how the management team's experience aligns with the company's strategic direction.

Explanation

This risk was not identified. The FDD does not indicate that Equity One is owned or controlled by a private equity firm. The leadership appears to consist of the named individuals in Item 2. Therefore, the specific risks associated with a PE firm's typical investment timeline and focus on short-term returns do not appear to be present.

Potential Mitigations

• Your attorney can help you verify the ownership structure of the franchisor entity.
• Understanding the franchisor's long-term vision for the brand is still a key due diligence point to discuss with a business advisor.
• Reviewing the franchisor's right to sell the system in the Franchise Agreement with your attorney is always a prudent measure.

Explanation

This risk was not identified. Item 1 of the FDD identifies the franchisor, Equity One Franchisors, LLC, and its affiliate, Equity One Insurance Agency, L.L.C. There is no mention of a parent company, and the franchisor itself is not a thinly capitalized subsidiary. The disclosure appears to be straightforward regarding the corporate structure.

Potential Mitigations

• An attorney can help confirm the corporate structure and identify any undisclosed controlling entities if there are concerns.
• It is always a good practice to have an accountant review the provided financial statements to assess the capitalization of the franchising entity.
• Ensure all related-party transactions disclosed in the financials are understood with the help of your accountant.

Explanation

This risk was not identified. Item 1 of the FDD states that Equity One does not have any predecessors. Therefore, there is no risk of inheriting historical problems, undisclosed liabilities, or a negative track record from a prior entity that operated the franchise system.

Potential Mitigations

• Your attorney should always verify the statements made in Item 1 regarding the franchisor's history.
• When performing due diligence, it is still wise to ask long-tenured franchisees about the history of the system.
• A business advisor can assist in researching the company's background to confirm the absence of any predecessor entities.