Explanation

This risk was not identified in the FDD package. The franchise system has been established since 1999 and the number of outlets has remained relatively stable, and even slightly decreased, over the last three years. Rapid growth does not appear to be a current risk. Over-expansion can strain a franchisor's ability to provide adequate support.

Potential Mitigations

• Your accountant can review the franchisor's financial statements to assess if they have the capital to support their stated growth plans.
• Engaging a business advisor can help you evaluate whether the franchisor's support infrastructure seems adequate for its size and growth trajectory.
• Speaking with existing franchisees about the quality of support can provide insight into whether the franchisor is overextended.

Explanation

This risk was not identified in the FDD package. Integra has been offering franchises since July 1999 and has a long operational history. A new or unproven system presents higher risks, including the potential for an untested business model, undeveloped support systems, and minimal brand recognition, which does not appear to be the case here.

Potential Mitigations

• When evaluating any franchise, it's wise to have a business advisor help you research the franchisor's history and the track record of its management team.
• Your accountant should always review the franchisor's financial statements for signs of stability, regardless of the system's age.
• An attorney can help you understand the legal history and any disclosed risks associated with a newer franchise system.

Explanation

This risk was not identified in the FDD package. The business of commercial real estate appraisal and advisory services is a well-established professional field with sustained demand from financial institutions and other businesses. It does not appear to be based on a fleeting trend. Investing in a fad business carries the risk of declining consumer interest, which could jeopardize your long-term viability even if your contractual obligations remain.

Potential Mitigations

• A business advisor can help you conduct independent market research to assess the long-term demand for any franchise's products or services.
• It is prudent to evaluate a company's plans for innovation and adaptation to stay relevant in a changing market.
• With your financial advisor, consider the sustainability of any business model beyond current trends and its resilience to economic shifts.

Explanation

This risk was not identified in the FDD package. The management team described in Item 2 consists of individuals with extensive, long-term experience in the real estate appraisal industry and with Integra itself. Inexperienced management can be a significant risk, potentially leading to poor strategic decisions, inadequate franchisee support, and an unproven operating model.

Potential Mitigations

• When considering any franchise, it is beneficial to have a business advisor help you vet the backgrounds of the key management team.
• Discussions with current franchisees can provide valuable insight into the quality of management and the support they provide.
• Your attorney can review the FDD for any disclosures related to management's prior business or franchising experience.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that Integra is owned by a private equity firm. This type of ownership can sometimes lead to decisions that prioritize short-term investor returns over the long-term health of franchisees, potentially through increased fees, reduced support, or a quick sale of the franchise system.

Potential Mitigations

• It is always a good practice to have your attorney help you research the ownership structure of any franchisor.
• If a franchisor is owned by a private equity firm, a business advisor can help research the firm's track record with other franchise brands.
• Discussing any changes since an ownership change with existing franchisees can reveal potential impacts on the system.

Explanation

This risk was not identified in the FDD package. Integra discloses its holding company structure and provides consolidated financial statements that include its subsidiaries, as required. A failure to disclose a parent company or provide its financial statements when required could obscure the true financial health and backing of the franchise system, hiding significant risks from a potential franchisee.

Potential Mitigations

• Your accountant should always verify that the financial statements provided are for the correct entity and meet disclosure requirements.
• If a parent company guarantee is offered, an attorney should review its terms and ensure the parent's financial statements are provided and analyzed.
• Understanding the complete corporate structure is a key piece of due diligence that your business advisor can assist with.

Explanation

This risk was not identified in the FDD package. Integra discloses a former affiliate, IRR-Residential, LLC, but states it has no predecessors. Hidden or glossed-over predecessor history can obscure past issues like litigation, high failure rates, or bankruptcy that might be relevant to the health of the current system. A complete understanding of a brand's lineage is crucial for a full risk assessment.

Potential Mitigations

• An attorney's review of Item 1 is essential to understand the franchisor's stated history and any predecessor entities.
• For any franchise with a predecessor, independent research into the predecessor's reputation can be a valuable step in due diligence.
• Questioning long-term franchisees about their experience under any previous ownership can provide important context.