Explanation

This risk was not identified. The franchisor's audited financial statements for the fiscal year ending September 30, 2024, show positive and growing net income, positive stockholder's equity, and current assets greater than current liabilities. Financial instability does not appear to be a current risk, which is important as a financially healthy franchisor is better equipped to support its franchisees and invest in the brand's long-term growth.

Potential Mitigations

• It is advisable for your accountant to review the franchisor's financial statements annually to monitor for any changes in financial health.
• Discuss the franchisor's financial strategy and plans for future investment in the system with your business advisor.
• Your attorney can help you understand any financial performance covenants that might be required of the franchisor.

Explanation

This risk was not identified in the disclosure document. The data in Item 20 shows a stable to slightly declining number of total outlets over the past three years (48 to 47 to 47). This indicates the franchisor is not currently undergoing a period of rapid expansion. A stable growth rate can be positive, suggesting the franchisor may have adequate resources to support its existing franchisees effectively.

Potential Mitigations

• Ask the franchisor about their future growth plans to understand how the system size may change over the term of your agreement.
• Your business advisor can help you assess whether the franchisor's support infrastructure is appropriately scaled for its current size and any projected growth.
• Engaging with current franchisees can provide insight into the current quality and responsiveness of franchisor support.

Explanation

This risk was not identified. LearningRx Franchise Corporation (LearningRx) has been offering franchises since February 2003, as stated in Item 1. This indicates a long operational history. A mature franchise system generally has more established operating procedures, brand recognition, and a longer performance track record for you to evaluate during your due diligence.

Potential Mitigations

• In discussions with your business advisor, evaluate how the brand has evolved over its 20+ year history to remain competitive.
• Consult with long-term franchisees to understand the system's history and the franchisor's consistency in providing support.
• Your attorney can review the FDD for any recent changes in ownership or strategy that might affect the established system.

Explanation

This risk was not identified. The executive biographies in Item 2 indicate that the key management team, including the CEO and President/COO, have extensive and long-term experience with LearningRx, with tenures starting in 2004. Experienced management is generally a positive factor, as it suggests a deeper understanding of the business operations, franchisee relationships, and industry challenges.

Potential Mitigations

• It is still prudent to interview current franchisees about their direct experiences with the management team's leadership and support.
• A business advisor can help you assess how the management team's experience translates into effective franchise system support.
• Your attorney can help verify if there have been any recent, unlisted changes in key management.

Explanation

This risk was not identified in the FDD. Item 1 discloses the parent company is Oikonomos Enterprises, LLC, and there is no indication that this is a private equity firm. Franchise systems not owned by private equity may sometimes prioritize long-term brand health and franchisee profitability over short-term investor returns, which can be a potential benefit for franchisees.

Potential Mitigations

• A business advisor can help you research the ownership structure of Oikonomos Enterprises, LLC to confirm its nature.
• Your attorney should carefully review the assignment clauses in the Franchise Agreement to understand your rights if the company is sold in the future.
• Ask the franchisor about their long-term vision and any plans for future changes in ownership.

Explanation

This risk was not identified. Item 1 of the FDD states, "We do not have any predecessors." This means the current franchisor entity has not acquired the business from a prior company. While this simplifies due diligence, it also means the track record presented is solely that of the current management and ownership structure.

Potential Mitigations

• A business advisor can help you thoroughly evaluate the operational history of the current franchisor entity.
• It is wise to focus due diligence on the FDD's three-year disclosure period to assess recent performance and stability.
• Your attorney should confirm the corporate history to ensure no predecessor entities have been omitted.