Explanation

HPB Lawn Care LLC (HPB Lawn Care) has a history of significant financial instability. Audited financial statements in Item 21 show multi-year net losses exceeding $1 million annually and a persistent negative net worth. The FDD explicitly highlights "Financial Condition" as a special risk. This financial weakness may impact the franchisor's ability to provide support or remain a viable company, despite a disclosed member commitment to provide funding through May 2026, creating a substantial risk for you.

Potential Mitigations

• Your accountant must thoroughly analyze the franchisor's financial statements, including the notes on related party transactions and the member funding commitment.
• A business advisor can help you assess the franchisor's plan for achieving profitability and the specific terms of the funding guarantee.
• A franchise attorney should review any state-mandated financial assurances, like bonds or fee deferrals, required due to this financial weakness.

Explanation

Item 20 data reveals an exceptionally high rate of franchisee departures. In 2024, the system experienced 29 terminations out of a starting base of 65 franchised outlets, a termination rate of nearly 45% in one year. Such a high number of franchisees leaving the system is a critical red flag. It may indicate significant, widespread problems with the business model's profitability, the level of franchisor support, or overall franchisee satisfaction, posing a severe risk to your potential for success.

Potential Mitigations

• It is imperative that you contact a significant number of the former franchisees listed in the FDD to understand why they left the system.
• Your franchise attorney should help you formulate specific, probing questions about profitability, support, and the reasons for termination.
• A business advisor should help you assess whether the issues causing this high turnover are systemic and likely to affect your new franchise.

Explanation

Item 20 data indicates very rapid franchise growth, with the number of outlets growing from 6 to 63 in two years. This rapid expansion, when combined with the franchisor's disclosed financial losses and high franchisee turnover, suggests the support infrastructure may be strained. You could experience challenges with the quality and availability of training, operational guidance, and marketing assistance as the franchisor struggles to keep pace with the growth of the system.

Potential Mitigations

• Inquire directly about the franchisor's specific plans for scaling its support staff and systems to match unit growth.
• A business advisor can help you evaluate whether the franchisor's current infrastructure appears adequate for the system's size.
• Discussing the quality and responsiveness of current support with a wide range of existing franchisees is crucial.

Explanation

HPB Lawn Care is a new franchise system, having started franchising in March 2022. The FDD explicitly discloses "Short Operating History" as a special risk. Investing in a young system carries higher risk as the business model is not yet proven over the long term and support systems may be underdeveloped. This is compounded by the high franchisee turnover and financial instability disclosed in other FDD items, indicating the system is facing significant early-stage challenges.

Potential Mitigations

• A business advisor should help you conduct extensive due diligence on the long-term viability of the business model and the brand's market position.
• Speaking with the earliest franchisees is crucial to understand how the system and support have evolved since launch.
• Your attorney might be able to negotiate more favorable terms, such as enhanced support or protections, to compensate for the higher risk of a new system.

Explanation

Item 3 discloses pending litigation brought by former franchisees against HPB Lawn Care alleging fraudulent misrepresentation and other claims. It also discloses a similar lawsuit against an affiliate under the same parent brand. A pattern of litigation, especially alleging fraud or misrepresentation, is a significant red flag. It may indicate systemic issues in the franchise sales process, dissatisfaction among franchisees, or problems with the franchisor's performance, which poses a high risk to your investment.

Potential Mitigations

• Your franchise attorney must carefully review the allegations and current status of all disclosed litigation.
• A pattern of lawsuits alleging fraud should be considered a serious warning sign, and you should discuss the implications with your attorney.
• Consider asking the franchisor for their perspective on the litigation, but rely on your own professional advisors for objective analysis.