Explanation

This specific risk was not identified in the FDD package. As a new franchisor that only began offering franchises in August 2023, there is insufficient system history to identify a pattern of high franchisee turnover. However, the lack of operating history is a significant risk in itself, which is addressed under the 'New/Unproven Franchise System' risk.

Potential Mitigations

• To understand future risks, it is important to have your attorney review the termination and renewal clauses in the franchise agreement.
• Speaking with the earliest franchisees about their initial experiences and outlook can provide valuable insight.
• Developing a conservative business plan with your accountant is wise, given the unproven nature of the system.

Explanation

This specific risk was not identified in the FDD package. The business model, commercial kitchen exhaust system cleaning, serves a consistent regulatory and maintenance need for restaurants and other commercial kitchens. This appears to be a needs-based service rather than a concept tied to a fleeting consumer trend, reducing the risk of it being a short-lived fad.

Potential Mitigations

• A business advisor can help you independently research the long-term demand and competitive landscape for this service in your local market.
• Assessing the system's plans for innovation and adaptation with the franchisor is a valuable exercise.
• Your accountant can assist in modeling the business's resilience to various economic conditions.

Explanation

This specific risk was not identified in the FDD package. While the Kitchen Guard franchise entity is new, its key executives, as listed in Item 2, have extensive experience with other established franchise systems under the same parent company, EverSmith Brands. This experience in managing franchise operations may mitigate some of the risks typically associated with a new franchisor's management team.

Potential Mitigations

• It's still prudent to have your business advisor help you research the specific track records of the executives and their other franchise brands.
• Speaking with franchisees from the parent company's other brands could provide insight into the management's style and support quality.
• Clarifying the roles and direct involvement of these experienced executives in the Kitchen Guard system is an important step.

Explanation

The franchisor, Kitchen Guard, is a newly formed subsidiary of EverSmith Brands Holding Company. The FDD properly discloses this parent company and provides its audited financial statements along with a Guaranty of Performance. Therefore, the risk of non-disclosure is not present, although the poor financial health of the parent guarantor remains a primary concern.

Potential Mitigations

• Your accountant should thoroughly review the provided parent company financial statements and the terms of the guarantee.
• It is important to have your attorney analyze the legal structure and the practical enforceability of the parent's guarantee.
• Understanding the relationship and fund flows between the parent and the franchisor entity can provide additional context.

Explanation

This specific risk was not identified in the FDD package. Item 1 indicates that Kitchen Guard is a new franchisor and does not list any predecessors from which it acquired the business. The risks associated with this FDD are related to its newness, not to an undisclosed or problematic history from a prior owner of the system.

Potential Mitigations

• Even without a predecessor, it is beneficial to have a business advisor help research the industry and operational history of the affiliate, Green Guard Services, LLC.
• Asking the franchisor about the origin of the business model and systems is a prudent step.
• Your attorney can confirm the corporate history of the franchisor and its affiliates.

Explanation

This specific risk was not identified in the FDD package. Item 3 states that there is no litigation that requires disclosure. For a new franchise system, the absence of litigation is expected. However, you should monitor future FDDs for any changes in litigation status as the system grows.

Potential Mitigations

• It is wise to have your attorney perform an independent search for litigation involving the franchisor or its principals as part of due diligence.
• Engaging with current franchisees can sometimes reveal disputes that have not yet resulted in formal litigation.
• Your attorney should advise you on the dispute resolution clauses in the franchise agreement in case a conflict arises in the future.