Explanation

This risk was not identified. The data in Item 20 tables shows a low rate of franchisee turnover. In 2024, a total of 20 franchised outlets ceased operations for reasons other than transfer, with zero terminations or non-renewals. This represents an annual churn rate of approximately 2% of the outlets operating at the start of the year. Low turnover can be an indicator of franchisee satisfaction and system stability.

Potential Mitigations

• To understand the reasons behind any turnover, you should contact former franchisees listed in the FDD with guidance from your attorney.
• Discuss overall system satisfaction and the franchisor's relationship with its franchisees with your business advisor.
• An accountant can help you analyze the multi-year turnover trends presented in Item 20 for a more complete picture.

Explanation

This risk was not identified. The FDD shows a pattern of steady, managed growth rather than explosive, potentially unsustainable expansion. The total number of U.S. outlets grew by 27 in 2024 and 18 in 2023. This controlled pace may suggest the franchisor is able to scale its support systems to meet the needs of new franchisees. However, you should still verify the quality of current support.

Potential Mitigations

• Asking current franchisees about the quality and responsiveness of franchisor support is a crucial step your business advisor can help with.
• Inquire with the franchisor about their plans for scaling support infrastructure to match future growth.
• Your accountant can review the franchisor's financial statements in Item 21 to assess if they have the resources to properly support their network.

Explanation

This risk was not identified. The Mathnasium system is well-established, having been in operation since 2003 with a large number of franchised outlets. This history provides a track record of performance. A new or unproven franchise system would present higher risks due to the lack of an established brand, operational history, and franchisee support structure, making it difficult to assess long-term viability.

Potential Mitigations

• When evaluating any franchise, it is crucial to have your business advisor assess the franchisor’s experience in both the industry and in franchising.
• Speaking with the earliest franchisees in a system can provide valuable insight into the franchisor's evolution and support capabilities.
• Your attorney can help you scrutinize the business experience of the management team as detailed in Item 2.

Explanation

This risk was not identified. Supplemental education is a well-established industry with consistent consumer demand, not typically considered a fad. A business based on a fad carries the risk that consumer interest could decline rapidly, potentially leaving you with a failing business while still being bound by your franchise agreement. Assessing long-term market demand is key.

Potential Mitigations

• A business advisor can help you independently research the long-term market demand and competitive landscape for any franchise concept.
• Reviewing the franchisor's plans for innovation and adaptation in Item 11 can offer insight into its long-term strategy.
• An accountant can help you model the financial resilience of a business concept to shifts in trends or economic downturns.

Explanation

This risk was not identified. The executive team detailed in Item 2 appears to have significant experience both within the Mathnasium system and with other major franchise brands like Papa John's and Jackson Hewitt. Management experience is a key factor in a franchisor's ability to provide effective support, training, and strategic direction. Inexperienced leadership can pose a significant risk to the entire franchise system.

Potential Mitigations

• It is always prudent to have a business advisor help you thoroughly vet the management team's background and specific experience.
• Speaking with existing franchisees about their direct experiences with the management team can provide valuable, real-world insight.
• Your attorney can help you understand the roles and responsibilities of the key executives listed in Item 2.

Explanation

This risk was not identified. Item 1 clearly discloses the parent companies and the corporate structure, including the recent securitization transaction. Furthermore, Item 21 includes audited financial statements for both the new franchisor entity and its predecessor/manager, Mathnasium Center Licensing, LLC, which appears to provide a comprehensive financial picture of the entities involved. Proper disclosure allows for a more complete risk assessment.

Potential Mitigations

• Your attorney should always verify that the FDD properly discloses all parent companies and affiliates, especially if the franchisor is a new or thinly-capitalized entity.
• If a parent company provides a guarantee, your accountant must review its financial statements to assess its ability to back that guarantee.
• It is wise to have your attorney confirm that all required financial disclosures are present and compliant with franchise regulations.

Explanation

This risk was not identified. Item 1 clearly discloses that Mathnasium Center Licensing, LLC (MCL) is the predecessor to the current franchisor. It details MCL's history of offering franchises from 2003 to 2024 and explains the transition of franchising rights to the new entity as part of the Securitization Transaction. Hiding or obscuring a predecessor's history can conceal important information about past performance, litigation, or franchisee turnover.

Potential Mitigations

• An attorney can help you carefully review the FDD for any mention of predecessors and related entities in Items 1, 3, and 4.
• If a system was acquired from a predecessor, it's beneficial to have your business advisor help research the predecessor's public track record.
• Asking long-term franchisees about their experiences under any previous ownership can provide valuable historical context.

Explanation

This risk was not identified for Mathnasium itself. Item 3 discloses no material litigation involving the franchisor or its direct parent. It does disclose litigation involving affiliated programs under the same ultimate private equity ownership (Arby's and Dunkin') related to 'no-poaching' clauses and a data breach. While these do not directly concern the Mathnasium brand, they provide context about the broader corporate family.

Potential Mitigations

• It is crucial to have your attorney carefully review all litigation details in Item 3 for any franchisor you consider.
• A pattern of lawsuits against a franchisor alleging fraud or breach of contract should be considered a significant red flag.
• Your attorney can help you understand the nature and potential impact of any disclosed litigation, even if it involves affiliates.