Explanation

This risk was not identified in the FDD Package. Rapid growth can strain a franchisor's resources, potentially leading to a decline in the quality of support, training, and site selection assistance for new franchisees. It is a sign that a franchisor may be prioritizing expansion and franchise fee collection over ensuring the long-term success of its existing operators, which could impact your business's performance and stability.

Potential Mitigations

• It is wise to have your accountant review the franchisor's financial statements to assess if their cash flow and staffing can support their growth rate.
• A business advisor can help you analyze the ratio of support staff to franchisees to gauge their capacity for providing assistance.
• Speaking with franchisees who joined at different times can provide insight into whether support levels have changed during growth phases.

Explanation

This risk was not identified in the FDD Package. The franchisor, Image One Facility Solutions, Inc. (Image One), was formed in 2010 and has been franchising since 2011, providing over a decade of operational history. Key management personnel, as detailed in Item 2, also have extensive experience with the company and within the commercial cleaning industry. The system appears to be established rather than new or unproven.

Potential Mitigations

• Engaging a business advisor to review the franchisor's history and the experience of its management team is a prudent step.
• A discussion with your accountant about the system's financial maturity as shown in the Item 21 statements can provide valuable context.
• Your attorney can help you confirm the length of operation and franchising history as stated in the disclosure documents.

Explanation

This risk was not identified in the FDD Package. The business operates in the commercial janitorial and facility services industry. This is a mature and established sector with consistent demand from commercial and government clients, rather than a business based on a recent or fleeting trend. The long-term viability of cleaning services is generally considered stable.

Potential Mitigations

• To confirm the stability of the local market, consider commissioning a market analysis with the help of a business advisor.
• It is useful to discuss the long-term demand for commercial cleaning services with other local business owners.
• An accountant can help you model financial performance based on the established nature of the industry.

Explanation

This risk was not identified in the FDD Package. The management team detailed in Item 2 appears to have significant and long-term experience with the company and in the commercial cleaning industry. For example, the President has been with the company since its inception in 2010. This level of experience generally suggests a stable leadership team that is familiar with the business model and the franchising industry.

Potential Mitigations

• It's a good practice to research the backgrounds of the key executives listed in Item 2 with the help of a business advisor.
• Asking current franchisees about their interactions with and the effectiveness of the management team can provide valuable firsthand insight.
• Your attorney can help you formulate questions for the franchisor about their management's direct experience in supporting franchisees.

Explanation

This risk was not identified in the FDD Package. Item 1 indicates the franchisor is not owned by a private equity firm. Private equity ownership can sometimes lead to a focus on short-term profits, which may not align with the long-term health of the franchisees or the brand. Since this is not the case here, this specific risk is not present.

Potential Mitigations

• During due diligence, it is always wise to ask your attorney to verify the ownership structure of the franchisor.
• Understanding the franchisor's long-term strategic goals can provide insight into their operational philosophy; a business advisor can assist with this.
• You should confirm with the franchisor if there are any plans for a sale or acquisition of the company in the near future.

Explanation

This risk was not identified in the FDD Package. Item 1 of the FDD states that Image One does not have a parent company. Therefore, the risk of non-disclosure of a parent company or its financial statements is not applicable. The franchisor entity, Image One Facility Solutions, Inc., provides its own audited financial statements in Item 21.

Potential Mitigations

• Your attorney should always confirm the corporate structure disclosed in Item 1 to ensure there are no undisclosed controlling entities.
• In any franchise review, having an accountant verify that the provided financial statements belong to the correct corporate entity is crucial.
• A business advisor can help you understand the implications of a franchisor's corporate structure on its support capabilities.

Explanation

This risk was not identified in the FDD Package. Item 1 states that the franchisor does not have a predecessor. A predecessor is a company from which the franchisor acquired the major portion of its assets. Since there is no predecessor, there is no risk of inheriting historical problems or having negative history obscured from a prior entity.

Potential Mitigations

• It's good practice to have your attorney verify the franchisor's corporate history as disclosed in Item 1.
• Independently researching the company's history online can sometimes reveal information about its origins; a business advisor could assist.
• Asking long-tenured franchisees about the company's history can provide additional context and confirmation.

Explanation

Item 3 discloses one concluded lawsuit initiated by the franchisor against a former franchisee for breach of contract, which was settled. While any litigation is worth noting, this single case does not represent a significant pattern of franchisee-initiated lawsuits alleging fraud or other systemic problems. The absence of a pattern of such litigation is a positive indicator, but the specific case details should still be considered.

Potential Mitigations

• A franchise attorney should review the details of the disclosed litigation and its outcome to assess any potential implications.
• It is prudent to ask the franchisor for their perspective on the dispute and how they handle disagreements with franchisees.
• You could ask your attorney to conduct independent research on court records for any other litigation not required to be disclosed in Item 3.