Explanation

An analysis of franchise outlet data in Item 20 does not indicate a high rate of franchisee turnover. High turnover can be a red flag for systemic issues, such as a lack of profitability or inadequate support. Although this specific risk was not identified, prospective franchisees should still assess the reasons for any departures from the system.

Potential Mitigations

• It is always a good practice to contact former franchisees listed in the FDD to understand their reasons for leaving the system.
• Discussing the stability of the franchisee base with your business advisor can provide valuable context for your investment decision.
• Your attorney can help you formulate appropriate questions to ask both the franchisor and former franchisees about system turnover.

Explanation

The franchise system data disclosed in Item 20 does not show signs of excessively rapid growth. Uncontrolled expansion can strain a franchisor's ability to provide adequate support. While this specific risk is not present, it is always important to ensure a franchisor has the infrastructure to support its current and future franchisees.

Potential Mitigations

• Even without rapid growth, it's wise to ask current franchisees about the quality and timeliness of the support they receive from the franchisor.
• A discussion with your business advisor can help evaluate whether the franchisor's support systems are robust for the existing network.
• Your accountant can review the franchisor's financial statements to assess their investment in franchisee support services.

Explanation

This risk is not identified, as the Maid Brigade system is well-established, having offered franchises since 1984. Investing in a new or unproven system carries higher risks related to the business model's viability and the franchisor's ability to provide support. This FDD describes a mature franchise system with a long operational history.

Potential Mitigations

• When evaluating any franchise, a review of the franchisor's history and years in business with your attorney is a key due diligence step.
• Speaking with long-term franchisees can provide insight into the evolution and stability of the business model over time.
• A business advisor can help you assess the brand's market position and staying power.

Explanation

The business model, focused on residential and light commercial cleaning services, is part of a well-established and enduring industry, not a temporary fad. Fad-based businesses can pose a risk as consumer interest may decline over time, jeopardizing the long-term viability of your investment even though your contractual obligations continue.

Potential Mitigations

• Engaging a business advisor to research the long-term demand and competitive landscape for residential cleaning services in your specific market is recommended.
• When considering any business, it is wise to assess its resilience to economic cycles with your financial advisor.
• Your attorney can review the franchise agreement to ensure you understand the long-term commitments, regardless of market trends.

Explanation

The executive team detailed in Item 2 possesses extensive and long-term experience within the Maid Brigade franchise system, with key personnel having been with the company for decades. Inexperienced management can be a significant risk, potentially leading to poor strategic decisions and inadequate support. This does not appear to be a concern here.

Potential Mitigations

• It is always a good practice to research the backgrounds of the key executives of any franchise system you are considering.
• Discussing the management team's reputation and effectiveness with current and former franchisees can provide valuable insights.
• A business advisor can help you assess the strength and stability of the leadership team.

Explanation

This risk was not identified, as Item 1 and the accompanying financial statements do not indicate that the franchisor is owned by a private equity firm. Private equity ownership can sometimes lead to a focus on short-term returns over the long-term health of the franchise system, so its absence can be a positive indicator.

Potential Mitigations

• Your attorney should always confirm the ownership structure of the franchisor by reviewing Item 1 and any related corporate documents.
• Understanding who the ultimate decision-makers are is a key part of due diligence a business advisor can help with.
• Discussing any ownership changes with current franchisees can reveal shifts in company culture or priorities.

Explanation

This risk was not identified. The FDD discloses its corporate structure and does not appear to have an undisclosed parent company whose financial information would be material to your decision. In cases where a franchisor is a subsidiary, a lack of financial data from a parent company that guarantees obligations can obscure significant risks.

Potential Mitigations

• Your attorney should always verify the franchisor's corporate structure as disclosed in Item 1.
• If a parent company exists and guarantees performance, an accountant should review its financial statements.
• A business advisor can help investigate the relationships between affiliated companies in a franchise system.

Explanation

The FDD identifies a predecessor company and appears to properly integrate its history into the disclosures, with no litigation or bankruptcy reported in Items 3 and 4. Inadequate disclosure of a predecessor's history can hide past problems. This does not appear to be the case here.

Potential Mitigations

• It is a good practice for your attorney to review the predecessor information in Items 1, 3, and 4.
• When a merger or acquisition has occurred, asking long-tenured franchisees about the transition is a useful step.
• Independent online research on the predecessor company can sometimes uncover history not required in the FDD; a business advisor may assist.

Explanation

This risk is not identified, as Item 3 of the FDD reports no disclosable litigation involving the franchisor, its predecessor, or its management. A pattern of litigation, particularly claims of fraud or breach of contract brought by other franchisees, can be a major red flag about the health and integrity of a franchise system.

Potential Mitigations

• Even with a clean Item 3, it is prudent to conduct your own online searches for litigation or complaints against the franchisor.
• Your attorney can help you understand the types of litigation that are material and must be disclosed.
• Asking current and former franchisees about their experiences with disputes, whether they resulted in litigation or not, provides valuable insight.