Explanation

The FDD does not show franchisee turnover for Junkco+ because it is a new system with no operating franchisees as of the reporting date. However, this lack of data is itself a risk. Furthermore, the guarantor's financial statements note that its goodwill impairments are partially due to reducing the size of its other franchise networks. This implies potential high turnover or systemic issues across the parent's broader portfolio of brands, a significant environmental risk for you.

Potential Mitigations

• You should discuss the risks of joining a new system with no performance history with your business advisor.
• It is important to have your attorney review the parent company's disclosures for any signs of instability in its other franchise systems.
• Speaking with franchisees from the franchisor's other, more established brands (listed in Item 1) could provide insight into the parent company's operational culture.

Explanation

This specific risk was not identified in the FDD Package, as the system is new with no history of franchisee growth. Franchisors that grow too quickly can sometimes outpace their ability to provide adequate support, training, and resources to all franchisees. This can strain the system and negatively impact franchisee success, even in a system that appears to be popular.

Potential Mitigations

• Discussing the franchisor's projected growth and their capacity to scale support services is a valuable conversation to have with your business advisor.
• It is wise to ask your accountant to review the franchisor's financials to assess if they are reinvesting in support infrastructure.
• Your attorney can review the franchisor's contractual support obligations to ensure they are specific and enforceable.

Explanation

This risk was not identified, as the junk removal industry is a well-established service sector, not a business model based on a fleeting trend. A fad business relies on short-lived popularity, which can be risky for a franchisee locked into a long-term agreement. When public interest wanes, the business may no longer be viable, but your contractual obligations to pay fees often remain.

Potential Mitigations

• Engaging a business advisor to research the long-term market trends and consumer demand for any business offering is a wise step.
• Your accountant can help you assess the financial resilience of a business model against changing economic cycles.
• It's prudent to review the franchisor's plans for innovation and adaptation with your attorney to gauge their long-term vision.

Explanation

This risk does not appear to be present. Item 2 shows that the management team of Junkco+ International, LLC (Junkco+) includes executives from its parent, BELFOR Franchise Group. These individuals have extensive, long-term experience managing numerous other large, established franchise systems in related industries, such as HOODZ and 1-800 WATER DAMAGE. The brand's president also has prior experience founding and running the predecessor junk removal company.

Potential Mitigations

• Even with an experienced team, it's beneficial to have a business advisor help you research the specific track record of the key executives.
• Your attorney can help you frame questions for the franchisor about how the management team's experience will be applied to this new brand.
• Interviewing franchisees from the parent company's other brands can provide insight into the management's style and effectiveness.

Explanation

This risk was not identified in the FDD. Item 1 provides a detailed disclosure of the franchisor's parent and affiliate companies, and Item 21 provides audited financial statements for the affiliate that guarantees the franchisor's performance. The ownership structure appears to be transparently disclosed. A lack of such disclosure could otherwise hide the true financial backing or controlling interests of a franchise system.

Potential Mitigations

• It is always a good practice for your attorney to verify the corporate structure disclosed in Item 1 through public records.
• Your accountant should confirm that if a parent company guarantees the franchisor's obligations, its financial statements are included as required.
• A business advisor can help you understand the relationships between the different entities disclosed in the FDD.

Explanation

This specific risk was not identified for the Junkco+ brand itself, as Item 3 discloses no reportable litigation. However, a prospective franchisee could find it concerning that the guarantor's financial statements allude to systemic issues in other brands, mentioning efforts to resolve 'a host of franchisee-related matters of noncompliance.' While not litigation against Junkco+, it may suggest a litigious or difficult environment within the broader family of brands you are joining.

Potential Mitigations

• Your attorney should thoroughly review the language in the financial statement notes regarding franchisee non-compliance matters.
• A business advisor can help you research online for complaints or legal actions involving the parent company's other franchise brands.
• You should discuss the franchisor's approach to dispute resolution with current franchisees from their various systems.