Explanation

This risk was not identified. The data in Item 20 does not show unusually rapid system growth that might strain the franchisor's support capabilities. In franchising, excessively fast growth can sometimes lead to diluted support, so a stable growth rate may be a positive sign for new franchisees seeking adequate attention and resources from the franchisor.

Potential Mitigations

• Your business advisor can help you evaluate the franchisor's growth plans in relation to its current support infrastructure.
• When speaking with current franchisees, it is wise to ask about the quality and timeliness of the support they receive.
• An accountant's review of the franchisor's financials can help determine if they are adequately capitalized to support their current size and planned growth.

Explanation

This risk was not identified. Crestcom and its predecessor have been in the training and franchising business since the early 1990s, as disclosed in Item 1. The system is well-established and does not appear to be new or unproven. A long history can indicate a more mature operating system and greater brand recognition, though it does not guarantee future success.

Potential Mitigations

• A business advisor should still help you assess the relevance of this long-standing business model in today's competitive market.
• Speaking with long-term franchisees can provide valuable insight into how the system has evolved and adapted over the years.
• Your attorney can review the history of the franchisor and any predecessors as detailed in Item 1 to ensure a full understanding.

Explanation

This risk was not identified. The business of providing management and leadership development training, as described in Item 1, is a well-established professional service with a long history of demand. It does not appear to be based on a short-term trend or fad. The long-term viability of any business, however, still depends on evolving market conditions and successful execution.

Potential Mitigations

• A business advisor can help you research the current and future demand for corporate training services in your local market.
• Evaluating the franchisor's history of product innovation, as disclosed in Item 11, can provide insight into their ability to adapt to changing business needs.
• Discussing the relevance and effectiveness of the training materials with current or past clients of the franchise system can be valuable.

Explanation

This risk was not identified. The executive team described in Item 2 demonstrates significant and long-term experience with Crestcom, with most key leaders having been in their roles for many years. An experienced management team can be beneficial for providing stable leadership and knowledgeable support, which is a positive factor for prospective franchisees to consider.

Potential Mitigations

• It is still valuable to research the backgrounds of the key executives listed in Item 2 to understand their prior industry and franchising experience.
• When speaking with current franchisees, inquiring about their perception of the management team's competence and vision for the system is advised.
• A business advisor can help you evaluate how the management team's experience aligns with the company's stated strategic direction.

Explanation

This risk was not identified in the FDD. Item 1 indicates ownership by a holding company, but there is no disclosure that this entity is a private equity firm. Franchisees should be aware that when PE firms own franchisors, it can sometimes lead to a focus on short-term profits over the long-term health of the brand and its franchisees.

Potential Mitigations

• Your attorney can help you investigate the ownership structure of the parent company listed in Item 1 for more clarity.
• Consulting a business advisor to understand the potential implications of different ownership structures is a sound business practice.
• Always ask current franchisees about any recent changes in franchisor policies or focus that might indicate a shift in ownership philosophy.

Explanation

This risk was not identified as the parent company, Crestcom International Holdings, LLC, is disclosed in Item 1. The FDD includes audited consolidated financial statements for the franchisor and its subsidiary. Understanding the relationship between a franchisor and its parent is important for assessing the overall stability and resources available to the system, which your professional advisors can help with.

Potential Mitigations

• Your attorney can help clarify the relationship and any obligations between the franchisor and its parent company.
• An accountant should review the provided financial statements and any notes regarding related-party transactions, such as those in Note 11.
• Asking the franchisor about the specific role and influence of the parent holding company can provide additional clarity.

Explanation

This risk was not identified. The FDD discloses a predecessor in Item 1 but does not indicate any negative history such as significant litigation or bankruptcy associated with it in Items 3 or 4. Understanding the full history of a franchise system, including any predecessors, is a key part of due diligence to ensure there are no inherited systemic problems that could affect you.

Potential Mitigations

• Engaging a business advisor to research the history and reputation of any predecessor company can be a prudent step.
• When speaking with long-tenured franchisees, you can ask about their experience under any previous ownership structure.
• Your attorney should confirm that all required information about predecessors has been properly disclosed per franchise regulations.

Explanation

This risk was not identified, as Item 3 of the FDD states that there is no litigation that requires disclosure. A clean litigation history is a positive sign, as a pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, can be a major red flag about a franchisor's practices and the health of the franchise system.

Potential Mitigations

• Your attorney can conduct an independent search of public records to verify the absence of significant litigation involving the franchisor.
• Asking current and former franchisees about their experiences and any disputes they may have had, formal or informal, is a crucial part of due diligence.
• A business advisor can help you assess whether the franchisor's policies seem fair and are unlikely to lead to future disputes.