Explanation

This risk was not identified as the FDD indicates this is a new franchise system with no operating franchisees as of the end of 2024. Therefore, franchisee turnover data is not available. High turnover in an established system can signal problems like low profitability or poor franchisor support, so this will be a key metric to watch in future FDDs.

Potential Mitigations

• It is crucial to ask the franchisor about their strategies for franchisee retention and success, which your business advisor can help evaluate.
• Once franchisees exist, speaking with them will be a vital due diligence step; an attorney can help you formulate key questions.
• An accountant can help you model different scenarios for profitability to understand the business's financial resilience.

Explanation

This risk was not identified as the franchise system is new and has not yet experienced any growth, rapid or otherwise. In franchising, rapid expansion can sometimes strain a franchisor's ability to provide adequate support and training to all its new franchisees. It is a key indicator to monitor as the system matures.

Potential Mitigations

• In your discussions with the franchisor, inquire about their future growth plans and how they intend to scale their support infrastructure.
• A business advisor can help you assess whether the franchisor's support systems appear robust enough to handle future expansion.
• Speaking with the very first franchisees as they come online will provide early insight into the quality of support during growth.

Explanation

This risk was not identified in the FDD package. The business model, which involves providing outsourced human resources and consulting services, operates in an established and recognized sector of the business-to-business service industry. This is not a business model that appears to be based on a short-term trend or fad.

Potential Mitigations

• Engage a business advisor to research the long-term outlook and competitive landscape for the outsourced HR services industry in your local market.
• You should still assess the franchisor’s plans for innovation and adaptation to ensure long-term relevance.
• An accountant can help you evaluate the model's resilience to economic cycles and shifts in business practices.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor, HRBoost US Franchising LLC, is a limited liability company and does not disclose any ownership by a private equity firm. The management appears to be the original founders. Therefore, risks associated with short-term, investor-driven decision-making are not apparent here.

Potential Mitigations

• It remains good practice to ask about the franchisor's long-term vision and any potential plans for future sale of the company.
• An attorney can help you understand the 'assignment' clause in the franchise agreement, which governs what happens if the franchisor is sold.
• A business advisor can help you understand different franchise ownership structures and their potential impacts.

Explanation

This risk was not identified as FDD Item 1 explicitly states that the franchisor has no predecessors. A predecessor is a company from which the franchisor acquired the major portion of its assets. Therefore, there is no prior corporate history under a different name or entity to investigate for issues like past litigation, bankruptcy, or franchisee failures.

Potential Mitigations

• A review of the business history of the key individuals listed in Item 2 with your business advisor can sometimes reveal relevant past business activities.
• Your attorney can confirm that corporate records show no predecessor entities.
• Always verify any claims about the company's history through your own due diligence with an accountant or business advisor.

Explanation

This risk was not identified, as FDD Item 3 states that no litigation is required to be disclosed. This indicates the franchisor has not been involved in legal disputes meeting the criteria for disclosure, such as franchisee lawsuits alleging fraud or significant actions initiated by the franchisor against franchisees. This is a positive sign, but not unusual for a brand-new franchise system.

Potential Mitigations

• Your attorney can conduct public record searches to verify the absence of litigation history.
• It is wise to ask existing franchisees, once there are some, about their experiences and any disputes they may be aware of.
• Understanding the dispute resolution clauses in the franchise agreement with your attorney is crucial for managing future conflicts.