Explanation

This specific risk was not identified in the FDD Package. The data in Item 20 for this region shows a net decrease in the number of outlets over the past two years, not rapid growth. Rapid growth can be a risk because a franchisor's support systems may not keep pace, potentially leading to inadequate assistance for new and existing franchisees. This does not appear to be a concern here.

Potential Mitigations

• A business advisor can help you evaluate whether the franchise system's growth rate is stable and sustainable.
• Reviewing the franchisor's financial statements in Item 21 with your accountant can help determine if they have the resources to support their current size and any future growth.
• Engaging with existing franchisees can provide insight into whether they feel the franchisor's support systems are currently adequate.

Explanation

This risk was not identified. The FDD indicates that the Jani-King system is well-established, having been founded in 1969 and franchising for several decades. The regional subfranchisor for your area has been operating since 1989. An unproven system would present higher risks related to brand recognition, operational support, and the viability of the business model, which is not the case here.

Potential Mitigations

• When evaluating any franchise, it is prudent to have your business advisor assess the franchisor's history and track record in the industry.
• Speaking with long-term franchisees can provide valuable perspective on the system's evolution and stability.
• Your accountant can review multi-year financial statements in Item 21 to analyze the company's historical performance.

Explanation

This risk was not identified in the FDD Package. Commercial cleaning is a mature and established industry with consistent demand, not a business based on a short-lived trend or fad. A fad-based business carries the risk that consumer interest could decline rapidly, potentially leaving you with a worthless investment and ongoing contractual obligations long after the trend has passed.

Potential Mitigations

• A business advisor can help you research the long-term market demand for the franchise's products or services.
• Investigating the industry's history and future projections can provide insight into its stability.
• Your financial advisor should help you assess whether the business model seems resilient to changing economic conditions and consumer tastes.

Explanation

This risk was not identified. Item 2 of the FDD indicates that the principals of the regional subfranchisor have extensive, long-term experience with the Jani-King system, some dating back to the 1980s. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions, weak operational support, and inadequate training for franchisees. This does not appear to be a concern in this case.

Potential Mitigations

• It is always wise to have a business advisor help you vet the backgrounds and relevant industry experience of a franchisor's key management team.
• Your attorney can review Item 2 of the FDD to ensure the disclosed experience is relevant to both the industry and to franchising.
• Discussions with current franchisees can offer real-world feedback on the management team's competence and responsiveness.

Explanation

This risk was not identified. The FDD discloses the relationship between the regional subfranchisor (DAZSER-BAL) and its parent companies, including Jani-King Franchising, Inc. and Jani-King International, Inc. (JKI). The FDD package also includes audited financial statements for both DAZSER-BAL and JKI. A failure to disclose a parent company can hide financial instability or other risks associated with the ultimate controlling entity.

Potential Mitigations

• An attorney can help you verify a franchisor's corporate structure and identify any undisclosed parent or affiliated companies.
• If a parent company guarantees the franchisor's obligations, it's critical that your accountant reviews the parent's financial statements.
• Understanding the full ownership structure is a key piece of due diligence that a business advisor can assist with.

Explanation

This risk was not identified in the FDD Package. Item 1 does not disclose any predecessors for DAZSER-BAL or Jani-King Franchising, Inc., indicating they have acquired the business from a prior entity. A predecessor's history, which could include bankruptcies or litigation, must be disclosed as it can reveal inherited problems or past issues with the franchise system's viability.

Potential Mitigations

• Your attorney should always review Item 1 carefully for any disclosure of predecessor entities.
• If a predecessor is identified, a business advisor can help you research its history for any red flags.
• Asking long-term franchisees about their experience under any previous ownership can provide valuable insight.