Explanation

This specific risk was not identified in the FDD Package. The franchisor began offering franchises in 2016, so it is not a brand-new or startup system. However, understanding the maturity of a franchise system is important as it relates to brand recognition, established operating procedures, and the level of support you can expect to receive. Newer systems can carry higher risk but may also offer more flexibility or growth potential.

Potential Mitigations

• Engaging a business advisor to research the franchisor's history and its position within the broader educational services market is a prudent step.
• Discussions with the earliest-starting franchisees on the list in Exhibit E can provide insight into how the system has evolved.
• Your accountant can help analyze how the franchisor's financial performance has matured over the years presented in Item 21.

Explanation

This specific risk was not identified in the FDD Package. The STEAM education industry for children is an established market, not typically considered a short-term fad. However, any business in the education and technology sectors faces the risk of its specific curriculum or methods becoming outdated. Long-term success often depends on the franchisor's ability to innovate and adapt its offerings to keep pace with changing educational trends and technological advancements.

Potential Mitigations

• A business advisor can help you research the long-term sustainability of the specific educational programs offered by the franchise.
• It's wise to ask the franchisor about their budget and plans for research and development to keep the curriculum current.
• Speaking with your financial advisor about the resilience of this business model through various economic cycles is recommended.

Explanation

This specific risk was not identified in the FDD Package. Item 2 discloses a management team with multiple years of experience in business and, for several key executives, specific experience in franchising. In franchising, an experienced leadership team is important because they are more likely to have developed effective support systems, marketing strategies, and operational procedures, which can significantly impact your potential for success.

Potential Mitigations

• Even with experienced management, verifying their reputation by speaking with current and former franchisees is a crucial due diligence step.
• A business advisor can help you perform independent research on the professional backgrounds of the key executives listed in Item 2.
• Your attorney can help you formulate questions for the franchisor about the management team's specific contributions to the franchise system's development.

Explanation

This specific risk was not identified in the FDD Package. Item 1 does not indicate that the franchisor is owned or controlled by a private equity firm. This is an important factor to consider, as the strategic priorities of a private equity owner, which often include a shorter-term investment horizon, can sometimes differ from those of a founder-led or family-owned franchisor, potentially affecting long-term brand strategy and franchisee support.

Potential Mitigations

• It is always a good practice to ask your attorney to help you confirm the ownership structure of the franchisor entity.
• A business advisor can assist in researching whether any affiliated companies mentioned in the FDD have ties to private equity firms.
• Understanding the franchisor's long-term vision and capital structure can provide valuable context, a topic to discuss with your financial advisor.

Explanation

This specific risk was not identified in the FDD Package. Item 1 states that the franchisor has no predecessor company. A predecessor is a company from which the franchisor acquired the main assets of the business. Reviewing predecessor history is important because it can reveal inherited issues, such as a history of litigation or franchisee failures, that might not be immediately apparent from looking at the current franchisor alone.

Potential Mitigations

• It is good practice to have your attorney verify the corporate history of the franchisor to confirm the absence of any predecessors.
• Asking early franchisees about the history of the company can sometimes uncover information about prior business structures.
• A business advisor can help you research the brand's history online to ensure no prior iterations of the business are being overlooked.