Explanation

This risk was not identified in the FDD package, as Item 20 data indicates the system has been shrinking in recent years, not growing rapidly. Rapid growth can strain a franchisor's ability to provide adequate support. While not a current risk here, you should always assess if a franchisor's support infrastructure is keeping pace with its system size.

Potential Mitigations

• Engaging a business advisor to evaluate the franchisor's support staff relative to the number of existing franchisees is a good practice.
• When speaking with franchisees, it's wise to ask about the quality and timeliness of the support they currently receive.
• Your accountant can review financial statements to determine if the franchisor is reinvesting in support systems.

Explanation

This risk appears low. The business of providing professional head lice removal services addresses a persistent, though niche, consumer need rather than a fleeting trend. LSI has been operating since 2006, demonstrating a degree of market longevity. While subject to competition from over-the-counter products, the core service itself is not typically considered a fad.

Potential Mitigations

• A business advisor can help you research the local market to confirm sustained demand for professional lice treatment services versus at-home solutions.
• When speaking with current franchisees, inquire about the seasonality and long-term consistency of customer demand in their territories.
• Review the franchisor's plans for marketing and brand development with your business advisor to assess their strategy for long-term relevance.

Explanation

This risk was not identified in the FDD package. The executive team, as described in Item 2, has significant and long-term experience with the company and in business. For example, the CEO has been in her role since 2013, and one director has founded another franchise system. While the system has faced challenges, it does not appear to be due to a lack of management experience.

Potential Mitigations

• It is always prudent to research the business background of key executives listed in Item 2 with the help of your business advisor.
• When speaking with franchisees, inquire about their perception of the management team's competence and strategic direction.
• Your attorney can help you understand the roles and responsibilities of the key personnel as outlined in the FDD.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that a private equity firm owns or controls the franchisor. Ownership appears to be private, with one of the key investors being an LLC associated with the Chairman of the Board. This structure does not present the typical risks associated with a private equity-driven, short-term investment horizon.

Potential Mitigations

• Your attorney can help you verify the corporate structure and ownership of the franchisor to confirm the absence of private equity control.
• In any franchise, it's wise to ask about the long-term vision for the company during discussions with the franchisor.
• A business advisor can help you understand the potential implications of different ownership structures on a franchise system.

Explanation

This risk was not identified in the FDD package. Item 1 clearly states that LSI has no parent companies that are required to be disclosed. The financial statements provided are for the franchisor entity itself. Therefore, there is no risk of a hidden or undisclosed parent company whose financial health might be obscured.

Potential Mitigations

• Your accountant should confirm that the financial statements provided are for the actual franchisor entity you are contracting with.
• Your attorney can verify the corporate registration of the franchisor to ensure it is a standalone entity as disclosed.
• Always ensure the legal name on the Franchise Agreement matches the entity disclosed in Item 1 and on the financial statements.

Explanation

This risk was not identified in the FDD package. Item 1 does not disclose any predecessors for Larada Sciences, Inc. The company has operated under its own name and evolved its business model from licensing to franchising, but it did not acquire the system from a prior entity. Therefore, there are no risks associated with a hidden or negative history from a predecessor.

Potential Mitigations

• Your attorney should confirm the corporate history as stated in Item 1 to ensure there are no undisclosed predecessor entities.
• It is good practice to ask long-tenured franchisees about the history of the company and any significant past changes.
• A business advisor can help you research the company's background to verify the information presented in the FDD.