Explanation

This risk was not identified in the FDD Package. The franchisor's growth has been inconsistent, with a net decrease in units in two of the last three years, rather than rapidly accelerating. Rapid growth can strain a franchisor's ability to provide adequate support to new and existing franchisees.

Potential Mitigations

• Your business advisor can help you evaluate whether the franchisor's current size and support infrastructure seem appropriate for its operational needs.
• It is useful to ask existing franchisees about the quality and timeliness of the support they receive from the corporate office.
• An accountant's review of the financial statements can help determine if the franchisor is investing sufficiently in franchisee support systems.

Explanation

This risk was not identified in the FDD Package. GoliathTech began offering franchises in 2013 and has grown to over 100 units. A new or unproven system can present higher risks due to untested operating procedures and support structures.

Potential Mitigations

• An attorney can help review the franchisor's corporate history in Item 1 to confirm its experience in this line of business.
• Engaging a business advisor to assess the maturity and stability of the franchise system is a valuable step.
• You should still ask current franchisees about the evolution of the system and the effectiveness of the support they have received over time.

Explanation

This risk was not identified in the FDD Package. The business of selling and installing helical piles is a component of the established construction industry and does not appear to be based on a short-term trend or fad. Investing in a fad business carries the risk of declining consumer demand after the trend fades.

Potential Mitigations

• A business advisor can help you research the long-term market demand and competitive landscape for helical piles in your area.
• It is wise to assess the company’s plans for innovation and adaptation to stay relevant in the construction industry.
• Your accountant can help you model the financial resilience of this business type during various economic cycles.

Explanation

This risk was not identified in the FDD Package. The executive team disclosed in Item 2 appears to have significant tenure with the company and relevant industry experience. Inexperienced management can be a risk factor as it may lead to poor strategic decisions and inadequate support for franchisees.

Potential Mitigations

• A thorough review of the management team's background in Item 2 with your business advisor is still a prudent step.
• Asking current franchisees about their direct experiences and the competence of the management team can provide valuable insight.
• Your attorney can help you understand the roles and responsibilities of the key personnel as described in the FDD.

Explanation

This risk was not identified in the FDD Package. There is no disclosure in Item 1 indicating that the franchisor is owned or controlled by a private equity firm. Private equity ownership can sometimes lead to a focus on short-term returns over the long-term health of the franchise system.

Potential Mitigations

• Your attorney can help you verify the corporate ownership structure detailed in Item 1 of the FDD.
• If ownership changes in the future, it would be important to research the new owner's track record with other franchise systems.
• A business advisor can help you understand the potential implications of different ownership structures on a franchise system.

Explanation

This risk was not identified in the FDD Package. Item 1 states, "We have no parent." Therefore, concerns about the financial stability or influence of an undisclosed parent company are not applicable here. In some franchise systems, a weak or undisclosed parent can pose a risk to the franchisee.

Potential Mitigations

• It is good practice to have an attorney confirm the corporate structure and identify any affiliated companies that may impact your business.
• Your accountant should always review the provided financial statements, regardless of parental structure, to assess financial health.
• A business advisor can help you understand the roles of any affiliates that are disclosed in Item 1.

Explanation

This risk was not identified in the FDD Package. GoliathTech's predecessor, Les pieux Goliath, is disclosed but was a manufacturer that did not offer franchises. Therefore, there is no history of franchisee issues inherited from a predecessor. A franchisor's negative history under a previous owner can sometimes be a red flag.

Potential Mitigations

• Your attorney can review the predecessor information in the FDD to ensure there are no hidden concerns.
• It is still beneficial to ask long-tenured franchisees about the company's history and evolution since its inception.
• A business advisor can help you research the public reputation of both the current franchisor and its predecessor.

Explanation

This risk was not identified in the FDD Package. Item 3 states, "No litigation is required to be disclosed in this Item." A pattern of litigation, especially lawsuits brought by franchisees alleging fraud or misrepresentation, can be a major warning sign about the health and integrity of a franchise system.

Potential Mitigations

• An attorney can help you understand the types of litigation that are legally required to be disclosed in Item 3.
• It is still prudent to conduct independent online searches for any news or legal filings related to the franchisor.
• Asking current and former franchisees about any disputes they are aware of can provide insight beyond the FDD disclosures.