Explanation

The parent company, Stanley Black & Decker, Inc. (SBDI), provides a performance guarantee. Its audited financial statements show a large, stable corporation with substantial equity. While it experienced a net loss from continuing operations in fiscal year 2023, it was profitable in 2022 and 2024 with positive operating cash flow in all three years. This suggests a low risk of franchisor financial instability impacting the system.

Potential Mitigations

• Your accountant should review the consolidated financial statements of the parent company, SBDI, paying close attention to the footnotes and overall trends.
• Discuss the nature and strength of the parent company's performance guarantee with your franchise attorney.
• It is wise to ask the franchisor about the reasons for the 2023 loss and the steps taken to ensure future profitability with your business advisor.

Explanation

This risk was not identified. Item 20 data does not indicate unusually rapid growth that might outpace the franchisor's ability to provide support. The franchise system appears mature and has shown moderate and stable growth in the number of outlets over the past three fiscal years, suggesting that support infrastructure is likely adequate for the current system size.

Potential Mitigations

• A business advisor can help you assess whether the franchisor's support staff and infrastructure, as described in Item 11, seem appropriate for the system's size.
• Asking current franchisees about the quality and timeliness of the support they receive is a valuable due diligence step.
• Your attorney should review the support obligations outlined in the Franchise Agreement to ensure they are clearly defined.

Explanation

This risk was not identified. The FDD indicates that the Mac Tools brand and its predecessors have been operating for over 86 years and that the company began franchising more than a decade ago. This is a mature system with a long operational history and a well-established brand in the professional tool market, not a new or unproven concept.

Potential Mitigations

• With your business advisor, you should still evaluate the brand's current market position against competitors.
• Speaking with long-tenured franchisees can provide insight into the system's evolution and stability.
• Your accountant can review the financials in Item 21 to confirm the stability that a mature system should exhibit.

Explanation

This risk was not identified. The franchise is centered on the sale of professional automotive tools to mechanics and other commercial users. This is a long-established, essential industry, not a business model based on a recent trend or fad. The nature of the products and the customer base suggests a model built for long-term, stable demand rather than short-lived popularity.

Potential Mitigations

• Your business advisor can help you research the long-term outlook for the automotive repair industry to confirm market stability.
• When speaking with current franchisees, you can inquire about the seasonality and consistency of customer demand.
• Assessing the franchisor's commitment to product innovation in Item 11 with an industry expert can provide insight into its long-term strategy.

Explanation

This risk was not identified. Item 2 of the FDD lists a management team with significant and long-term experience within the tool industry and with the franchisor or its parent company, Stanley Black & Decker, Inc. The executive profiles indicate stable leadership with relevant backgrounds in sales, finance, and franchise development, suggesting a capable and experienced management team is in place.

Potential Mitigations

• Your business advisor can help you research the public profiles of the key executives listed in Item 2 to verify their experience.
• Asking current franchisees about their perception of management's competence and support for the system is a valuable due diligence step.
• It is still prudent to ask the franchisor about the long-term strategic vision of the current leadership team.

Explanation

This risk was not identified. Item 1 of the FDD clearly states that the franchisor's ultimate parent company is Stanley Black & Decker, Inc., a publicly traded corporation. The franchise is not owned by a private equity firm, so the specific risks associated with models that prioritize short-term returns for a fund's exit strategy do not appear to be present here.

Potential Mitigations

• Your accountant can confirm the franchisor's ownership structure by reviewing public filings for Stanley Black & Decker, Inc. (NYSE: SWK).
• It is still beneficial to discuss the franchisor's long-term goals and commitment to the franchise system with your business advisor.
• An attorney can review the assignment clauses in the Franchise Agreement to understand how a future sale of the company could affect you.

Explanation

This risk was not identified. The FDD clearly discloses the franchisor's parent company, Stanley Black & Decker, Inc., in Item 1. Furthermore, the parent company's audited financial statements and a Guarantee of Performance are provided in Exhibit A. This level of disclosure provides significant transparency regarding the financial strength and backing of the franchisor, mitigating risks associated with undisclosed parent entities.

Potential Mitigations

• Your accountant should carefully review the parent company's financial statements provided in Exhibit A.
• An attorney should analyze the terms of the Guarantee of Performance to ensure it is unconditional and covers all of the franchisor's primary duties.
• You should confirm with the franchisor that there are no other undisclosed affiliates that are critical to the system's operation.

Explanation

This risk was not identified. Item 1 of the FDD describes the franchisor's history, including its predecessors and the system's evolution from a distributorship model. The disclosure appears transparent and does not indicate any hidden or problematic history, such as undisclosed bankruptcies or significant litigation related to predecessors, that would suggest an inherited risk.

Potential Mitigations

• Asking long-tenured franchisees about their experiences under any previous ownership or system structure can provide valuable historical context.
• Your attorney can review Items 1, 3, and 4 for any inconsistencies or red flags related to predecessor history.
• A business advisor can help you research the public history of the brand for any additional context.