Explanation

Jiffy Lube International, Inc. (JLI) does not provide its own audited financials. Instead, it relies on a performance guarantee from its parent, Shell USA, Inc., which provides its audited financials in Exhibit A. These statements show a very strong financial position, with billions in assets and significant net income. This structure suggests robust financial backing, minimizing risks of franchisor insolvency or an inability to provide support to the system. This specific risk was not identified.

Potential Mitigations

• Your accountant should review the provided Shell USA, Inc. financials and the accompanying Guarantee of Performance to understand the financial strength backing your franchise.
• It is wise to have your attorney confirm the enforceability and scope of the parent company guarantee.
• A business advisor can help you assess how the financial health of a large parent company translates to support for the franchise brand.

Explanation

The franchise system is mature and not experiencing the kind of rapid expansion that would strain a newer franchisor's support systems. Item 20 data shows a large net contraction in 2022, followed by modest, stable growth in 2023 and 2024. This pattern does not suggest that the franchisor's resources are being outpaced by new unit openings. This specific risk was not identified.

Potential Mitigations

• A business advisor can help you interpret the outlet data in Item 20 to understand the system's growth trajectory.
• Engage with your accountant to analyze the franchisor's financials in Item 21 to confirm they have sufficient resources to support the current system size and modest growth.
• During your due diligence calls, ask current franchisees about the quality and timeliness of franchisor support.

Explanation

Jiffy Lube is a highly mature and well-established franchise system, having offered franchises since 1979. It is one of the most recognized brands in the automotive service industry and has over 1,700 franchised locations operating. The risk associated with an unproven business model or a new franchisor is not applicable here.

Potential Mitigations

• A review of the franchisor's long history in Item 1 with your attorney can confirm its extensive experience in the industry.
• Your business advisor can help you analyze the benefits and potential drawbacks of joining a very large, mature franchise system.
• Discuss the brand's long-term market position and evolution with current, long-standing franchisees.

Explanation

The franchised business, which offers automotive oil changes and light repair services, operates in a mature and established market. Consumer demand for these essential services is historically stable and not dependent on fleeting trends or fads. Therefore, the risk of the business model becoming obsolete due to changing tastes is low.

Potential Mitigations

• Your business advisor can provide an analysis of the automotive aftermarket industry to confirm its stability and long-term outlook.
• Discuss with the franchisor their strategies for adapting to future industry shifts, such as the rise of electric vehicles.
• Review Item 11 with your attorney to understand the franchisor's stated obligations regarding research and development of new products and services.

Explanation

Item 2 of the FDD presents a management team with extensive and long-term experience within Jiffy Lube, its parent company Shell, and the broader automotive and energy industries. The executives listed have a significant history in relevant roles such as operations, finance, and marketing. This indicates a deep familiarity with both the specific business and franchising in general. The risk of inexperienced management is not present.

Potential Mitigations

• Confirm the extensive experience of the management team outlined in Item 2 with your business advisor.
• When speaking with existing franchisees, you can inquire about their direct experiences with the leadership team's competence and support.
• Your attorney can help you investigate the public record and reputation of the key executives listed.

Explanation

The franchisor, Jiffy Lube International, Inc., is part of Shell plc, a publicly-traded global energy company, not a private equity firm. This ownership structure is clearly disclosed in Item 1. The risks typically associated with private equity ownership, such as a focus on short-term returns or a quick sale of the brand, are not indicated here.

Potential Mitigations

• Your attorney can confirm the corporate structure and public ownership status as detailed in Item 1.
• With a financial advisor, review the publicly available reports for Shell plc to understand its overall financial health and strategic direction.
• A business advisor can help you understand the potential implications of being part of a large, publicly-traded corporate structure.

Explanation

The FDD clearly discloses the franchisor's parentage up to the ultimate parent, Shell plc. Furthermore, the parent company, Shell USA, Inc., provides both a full Guarantee of Performance and its audited financial statements, which are included as Exhibit A. This level of disclosure provides significant transparency into the financial backing of the franchise system. This risk is not present.

Potential Mitigations

• Your accountant should review the financial statements of the parent company, Shell USA, Inc., in Exhibit A.
• Have your attorney review the Guarantee of Performance to understand its scope and your rights as a beneficiary.
• When speaking with the franchisor, you can ask for clarity on the relationship and support structure between the franchisor and its parent companies.

Explanation

This risk is not applicable, as Item 1 of the FDD explicitly states, "We have no predecessors." The franchisor, Jiffy Lube International, Inc., has operated the system since its inception. Therefore, there is no risk of undisclosed negative history from a prior owner of the franchise system.

Potential Mitigations

• It is still prudent to have your attorney verify the corporate history outlined in Item 1.
• You can discuss the brand's entire history with long-term franchisees to gain a deeper understanding of its evolution.
• A business advisor can help you research the brand's public history to confirm the information provided.