Explanation

This risk was not identified in the FDD package. Rapid, uncontrolled growth can strain a franchisor's support systems. A prospective franchisee should evaluate if the franchisor has the financial and human resources to adequately support a quickly expanding network. Your accountant and business advisor can help assess the franchisor's capacity for sustainable growth by reviewing the information in Items 20 and 21.

Potential Mitigations

• A business advisor can help you analyze the rate of growth shown in Item 20 against the support infrastructure detailed in Item 11.
• Questioning current franchisees about the quality and timeliness of support is an important step in your due diligence.
• An accountant's review of the franchisor’s financials can help determine if they have the resources to sustain their growth.

Explanation

The Good Neighbor Pharmacy program has existed since 1982, and the franchisor, AmerisourceBergen Drug Corporation (ABDC), has been offering the GNP Premier franchise since 2009. The franchisor and its parent company, Cencora, have extensive experience in the pharmaceutical distribution industry. Therefore, the risks associated with an unproven system or inexperienced management do not appear to be present in this offering.

Potential Mitigations

• With your business advisor, you should still evaluate how the franchisor's extensive history might influence its culture and adaptability.
• An attorney can help review the long history of the company as disclosed in Items 1, 3, and 4 for any recurring issues.
• Confirming the experience of the current management team listed in Item 2 is a prudent due diligence step.

Explanation

The business model is for a retail pharmacy, a well-established industry with consistent consumer demand. The franchise is a program overlay for existing pharmacies rather than a new, trendy consumer concept. The risk of the business being a short-term fad appears to be low. However, you should still consider the long-term competitive landscape of independent pharmacies versus large chains.

Potential Mitigations

• A business advisor can help you assess the long-term viability and competitive pressures within the independent pharmacy industry.
• It is important to evaluate the franchisor's plans for innovation and adaptation to market changes with your financial advisor.
• Engaging in discussions with current franchisees can provide insight into the sustainability of the business model.

Explanation

This risk was not identified in the FDD. Item 2 shows that the key executives of AmerisourceBergen Drug Corporation (ABDC) and its parent, Cencora, have extensive, long-term experience within the company and the pharmaceutical industry. For example, the President and CEO has been with the company for over 25 years. This level of experience generally mitigates risks associated with unknowledgeable management.

Potential Mitigations

• A business advisor can help you research the professional backgrounds of the key executives listed in Item 2.
• It's still valuable to ask current franchisees about their direct experiences with the franchisor's management team and support quality.
• An attorney can help you understand the corporate structure and the roles of the individuals described in Items 1 and 2.

Explanation

This risk was not identified in the FDD package. The franchisor is a subsidiary of Cencora, Inc., a publicly traded corporation, not a private equity firm. Risks associated with private equity ownership, such as a focus on short-term returns over system health, do not appear to apply here. The ownership structure is detailed in Item 1.

Potential Mitigations

• An attorney can help you verify the corporate structure and ownership details provided in Item 1.
• Understanding the goals and strategies of a publicly traded parent company is a task for which a business advisor can provide valuable context.
• It is still wise to ask long-term franchisees about any changes in franchisor philosophy or support over the years.

Explanation

The franchisor, AmerisourceBergen Drug Corporation (ABDC), is a subsidiary of Cencora, Inc. The FDD fully discloses this relationship and includes a performance guarantee from Cencora. Furthermore, Exhibit E provides the comprehensive audited financial statements for the parent company, Cencora. Therefore, the risk of non-disclosure of a parent company or its financials is not present.

Potential Mitigations

• Your accountant should carefully review the provided parent company financials in Exhibit E to assess the overall health of the enterprise.
• Having an attorney analyze the language of the parent company guarantee is crucial to understand its scope and enforceability.
• A business advisor can help you understand the relationship between the franchisor subsidiary and its parent company.

Explanation

This risk was not identified in the FDD package. Item 1 provides a detailed history of the franchisor's predecessors, including mergers that formed the current company. It also clearly distinguishes between the current GNP Premier Program and the legacy Voluntary Program. The disclosures appear to provide a reasonable basis for understanding the system's lineage. Always review these historical details carefully, as they provide important context.

Potential Mitigations

• An attorney can help you review the predecessor information in Items 1, 3, and 4 for any potential red flags.
• Conducting independent research on the predecessor companies with the help of a business advisor can sometimes reveal additional context.
• You should ask long-term franchisees about their experiences under any of the predecessor companies.