Explanation

This risk was not identified in the FDD package. Rapid, uncontrolled growth can strain a franchisor's ability to provide quality support. While Keyrenter has grown, the rate does not appear to be so explosive as to inherently outpace its support infrastructure, although its financial weakness noted elsewhere could impact its ability to support any level of growth.

Potential Mitigations

• Your business advisor can help you question the franchisor about their specific plans for scaling support services to match franchise growth.
• Engaging with a range of existing franchisees can provide insight into whether they feel the current level of support is adequate.
• An analysis of the franchisor's hiring and infrastructure investments should be conducted by your accountant to see if they are keeping pace.

Explanation

This risk was not identified in the FDD package. The franchisor, Keyrenter, began franchising in 2014 and has a multi-year operational history with over 50 outlets, as shown in Item 20. This suggests the system is established and not a new or unproven startup, though other risks concerning its financial health and operations exist.

Potential Mitigations

• A business advisor should help you evaluate the franchisor's history and the system's maturity relative to its competitors.
• It is wise to have your attorney review the business experience of the management team outlined in Item 2.
• Speaking with long-tenured franchisees can provide valuable perspective on the system's evolution and stability over time.

Explanation

This risk was not identified in the FDD package. A fad business is one tied to a fleeting trend. Property management, as described in Item 1, is a long-established service industry with sustained demand. The business model does not appear to be based on a short-term novelty, suggesting it is not a fad.

Potential Mitigations

• To gauge long-term viability, discuss the market trends for property management services with a local real estate professional.
• Assessing the franchisor's plans for adapting to new technologies and market shifts is a good topic to explore with your business advisor.
• An accountant can help you model the business's potential performance under various economic conditions to test its resilience.

Explanation

This risk was not identified in the FDD package. FDD Item 2 shows that the key executives, such as the CEO, have been with Keyrenter or its affiliates for many years, indicating significant experience within this specific system and industry. The management team does not appear to be new or inexperienced in property management or franchising.

Potential Mitigations

• A business advisor can help you perform due diligence on the professional backgrounds of the key executives listed in Item 2.
• Speaking with current franchisees can offer valuable insights into their direct experiences with the management team's competence and support.
• It is prudent to have your attorney review the information in Item 2 for any concerning history or lack of relevant experience.

Explanation

This risk was not identified in the FDD package. Private equity ownership can sometimes lead to decisions that prioritize short-term returns over the long-term health of the franchise system. FDD Item 1 does not indicate that Keyrenter is owned by a private equity firm. The ownership appears to be held by its members.

Potential Mitigations

• Your attorney should always confirm the ownership structure detailed in Item 1 and any related parent or affiliate entities.
• Understanding the franchisor's long-term vision and commitment to the brand is a key area to discuss with your business advisor.
• A review of the assignment clause in the Franchise Agreement with your attorney will clarify their ability to sell the system in the future.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD clearly discloses the existence of affiliated companies. However, there is no parent company disclosed, nor are there any parent company guarantees. The franchisor provides its own audited financial statements in Item 21, as required.

Potential Mitigations

• Your attorney should verify the corporate structure and ensure that any controlling entities are properly disclosed in Item 1.
• If a parent company were involved, your accountant would need to assess whether its financial statements are required and provided.
• It is important to understand the role of all affiliated companies mentioned in Item 1 by discussing them with your business advisor.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD states that Keyrenter does not have any predecessors. This means the company did not acquire a substantial portion of another business's assets or was not formed from a prior entity that offered similar franchises. Therefore, there is no hidden history from a predecessor to consider.

Potential Mitigations

• An attorney can help verify the franchisor's corporate history to ensure the non-existence of a predecessor is accurately stated.
• Independent research into the company's origins can be conducted with the help of your business advisor.
• Questioning early franchisees about the system's history can sometimes reveal information about its formation.