Explanation

The franchisor, MAACO Franchisor SPV LLC (Maaco), is part of a complex holding structure. The FDD includes audited financials for the guarantor, Driven Systems LLC, which show significant profitability and a strong equity position. Net income was $195 million in 2023. While the franchisor entity itself has limited operations, the financial backing from the guarantor appears solid. Therefore, a risk of financial instability was not identified.

Potential Mitigations

• An experienced franchise accountant should review the complete financial statements for the franchisor and any parent guarantors, including all footnotes.
• Understanding the complex corporate and debt structure outlined in the notes to the financial statements is a task for your attorney.
• Ask your financial advisor to assess the franchisor's financial health and its ability to support the system long-term.

Explanation

This specific risk was not identified in the FDD Package. The data in Item 20 shows the franchise system has been shrinking over the past three years, not growing rapidly. A franchisor expanding too quickly can strain its ability to provide adequate support to new and existing franchisees. The absence of this risk here suggests resources are not being stretched by excessively fast growth, though the reasons for shrinkage present their own separate challenges.

Potential Mitigations

• It is still wise to have a business advisor evaluate the franchisor's infrastructure and capacity to support its existing franchisees.
• Discuss the franchisor's current support levels and responsiveness with a range of existing franchisees.
• Your accountant can help assess whether the franchisor's financial resources are allocated effectively to support services versus expansion.

Explanation

This specific risk was not identified in the FDD Package. Maaco is a very mature brand, having commenced franchise operations in 1972, as disclosed in Item 1. An unproven system carries higher risks related to the viability of the business model, brand recognition, and the adequacy of operational support. The long operational history here suggests these particular risks are low, although the system's current performance should still be carefully evaluated.

Potential Mitigations

• Even with a mature system, consulting a business advisor to review the current market position and competitive landscape is recommended.
• Inquire with existing franchisees about how the system has evolved and adapted over time.
• Your accountant should still review recent financial performance to ensure the mature system remains healthy and profitable.

Explanation

This specific risk was not identified in the FDD Package. The automotive collision repair and painting industry is an established and essential service sector, not a business based on a short-term trend or fad. The long-term consumer need for vehicle repair provides a stable market foundation. The risk of the business concept becoming obsolete due to shifting consumer interests is considered low for this industry.

Potential Mitigations

• A business advisor can help you analyze the long-term trends and technological shifts within the automotive repair industry.
• Discuss the brand's strategies for staying competitive and relevant with the franchisor and existing franchisees.
• Your financial advisor can help assess the business's resilience to economic cycles and other market pressures.

Explanation

This specific risk was not identified in the FDD Package. Item 2 shows that the key executives at Maaco and its parent company, Driven Brands, have extensive experience in the automotive services and franchising industries. Inexperienced management can be a significant risk, often leading to inadequate support and poor strategic decisions. The long tenure and relevant background of the management team here suggest this risk is low.

Potential Mitigations

• It is still good practice to research the backgrounds of key executives with your business advisor.
• When speaking with existing franchisees, you should still inquire about their perception of the management team's competence and support.
• Your attorney can help you understand the roles and responsibilities of the key personnel listed in Item 2.

Explanation

This specific risk was not identified in the FDD Package. Item 1 and the accompanying financial statements in Exhibit A provide extensive detail on the franchisor's parent companies, up to the ultimate public parent, Driven Brands Holdings Inc. The FDD also includes audited financials for the guarantor entity. A failure to disclose parent companies can hide financial weakness or conflicts of interest, but this FDD appears to be transparent in its corporate structure disclosures.

Potential Mitigations

• It's always wise for your attorney to review the corporate structure outlined in Item 1 to ensure all relevant entities are disclosed.
• Have your accountant confirm that the provided financial statements correspond to the correct entities, including any guarantors.
• Understanding the relationships between the franchisor and its various parent entities is crucial, a task for your legal and financial advisors.

Explanation

This specific risk was not identified in the FDD Package. Item 1 discloses the franchisor's history and predecessors, including Maaco Enterprises, Inc. and MAACO Franchising, LLC. The litigation history in Item 3 includes cases against these predecessors, providing some insight into past issues. The disclosure of this lineage appears to be compliant. Hidden or incomplete predecessor history can obscure past problems, but that does not appear to be the case here.

Potential Mitigations

• Have your attorney review the predecessor information in Items 1, 3, and 4 to ensure the history is clear.
• When speaking with long-term franchisees, ask about their experiences under any previous ownership structures.
• A business advisor can help you research public records for information on the predecessor companies for additional context.