Explanation

This risk was not identified in the FDD package. Item 20 data for the last three years shows no franchisee terminations, non-renewals, or other cessations of business. Generally, a high turnover rate can signal systemic problems, such as franchisee unprofitability or poor franchisor support. While the data here is positive, the system is very young, so its predictive value is limited.

Potential Mitigations

• With your business advisor, you should still contact a broad range of current franchisees from the list in Exhibit E to discuss their satisfaction and profitability.
• An accountant can help you analyze the Item 20 tables to calculate the annual turnover rate if it were present.
• Your attorney can help you formulate questions for franchisees about their relationship with the franchisor and their intentions for renewal.

Explanation

This specific risk was not identified in the FDD. Item 2 indicates that the key executives have prior experience in the fitness industry and with other franchise systems, such as Jabz Franchising, Body20, and Solidcore. This experience is a positive factor. Generally, a management team without relevant industry and franchising experience can be a significant red flag, leading to poor support and strategic errors.

Potential Mitigations

• It is still wise to research the track record of the executives and the performance of the other franchise systems they were involved with.
• A business advisor can help you assess if the management team's prior experience is directly applicable to this specific concept.
• When speaking with current franchisees, asking about their direct experiences with the management team's competence and support is valuable.

Explanation

This risk was not identified in the provided FDD package. Item 1 does not indicate that the franchisor is owned or controlled by a private equity firm. When PE firms own a franchise, there can be a risk that they prioritize short-term returns for investors over the long-term health of the system and its franchisees.

Potential Mitigations

• A review of the ownership structure in Item 1 with your attorney is always a good practice to confirm the identity of the controlling parties.
• You can still research the named owners and their associated entities with a business advisor to understand their background and investment philosophy.
• Your attorney can help you understand the franchisor's rights to sell or assign the franchise system to a new owner in the future.

Explanation

This risk was not identified in the FDD package. The franchisor entity, JETSET Franchising, LLC, appears to be the primary operating entity, and its financials are provided. The document discloses affiliates but does not indicate there is a parent company whose financials would be material to your decision but have been omitted. A failure to disclose a parent company can obscure the true financial backing of a franchisor.

Potential Mitigations

• Your attorney can review the corporate structure disclosed in Item 1 to confirm there are no signs of a hidden parent entity.
• It is a good practice to have your accountant verify that the provided financials are for the correct legal entity offering the franchise.
• Asking the franchisor to confirm its corporate structure in writing can provide additional assurance.

Explanation

This risk was not identified in the FDD package. Item 1 explicitly states that the franchisor has no predecessors. If a franchisor had a predecessor, it would be important to investigate that entity's history for issues like litigation, bankruptcy, or high franchisee failure rates, as these could indicate underlying problems with the system that may have been carried over to the new entity.

Potential Mitigations

• You can confirm the franchisor's formation date and history in Item 1 with your attorney.
• A business advisor can help you perform independent online searches to ensure no prior versions of the business operated under a different name.
• Asking early franchisees about the history of the company can provide additional context.

Explanation

This risk was not identified in the FDD package. Item 3 states that there is no litigation required to be disclosed. A pattern of lawsuits against a franchisor, especially claims of fraud or breach of contract brought by other franchisees, can be a major warning sign of systemic problems. The absence of such litigation is a positive indicator, though less meaningful for a very young system.

Potential Mitigations

• Even without disclosed litigation, it is wise to ask current and former franchisees about any disputes they may have had.
• Your attorney can conduct a public records search to look for any litigation that may not have met the technical disclosure threshold of Item 3.
• A business advisor can help you assess the overall health of franchisor-franchisee relationships through interviews.