Explanation

The FDD does not indicate a high rate of franchisee turnover. Item 20 shows a very new system with only one franchisee open as of year-end 2024 and no reported terminations or closures. While this is positive, the data reflects a very limited operating history. High turnover in more mature systems can signal issues with profitability, support, or the business model, so this is a key area to monitor as the brand grows.

Potential Mitigations

• When speaking with the franchisees listed in Item 20, a business advisor can help you formulate questions about their satisfaction and future intentions.
• Your attorney should explain the termination and renewal provisions in Item 17 to help you understand your rights if you choose to leave the system.
• An accountant can help you analyze the Item 19 FPR to project potential profitability, which is a key driver of franchisee satisfaction.

Explanation

This risk was not identified in the FDD package. MaxStrength Fitness operates in the personal fitness training industry, which is an established sector. However, for any franchise, it is important to assess whether its specific niche or service model has long-term consumer demand or if it is tied to a fleeting trend. A business based on a fad could face declining sales once public interest wanes, even if your contractual obligations to the franchisor continue.

Potential Mitigations

• Engage a business advisor to conduct independent market research on the long-term demand for high-intensity, appointment-based personal training.
• Discuss the franchisor’s plans for innovation and adaptation to evolving fitness trends and competition.
• Your financial advisor can help model the business's potential resilience to economic downturns or shifts in consumer preferences.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the key executives have extensive, long-term experience operating the same type of business through their affiliated companies, some since 2007. This direct operational experience is a positive factor. However, their experience in managing a national franchise system, as opposed to operating local studios, is more recent, beginning in 2021. Inexperienced management can sometimes lead to challenges in providing franchisee support.

Potential Mitigations

• A business advisor can help you assess whether the management team's skills in local operations are translating effectively to national franchise support.
• It is valuable to ask current franchisees about the quality and responsiveness of the support they receive from the management team.
• Reviewing the professional backgrounds of the entire support staff, not just the top executives, can provide a fuller picture of the team's capabilities.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that MaxStrength Fitness is owned by a private equity firm. When a franchisor is owned by such a firm, there can be a risk that decisions are focused on short-term investor returns rather than the long-term health of the franchisees. This can sometimes lead to increased fees, cuts in support, or a quick sale of the franchise system.

Potential Mitigations

• For any franchise, it is prudent for your attorney to review the franchisor's rights to sell or assign the franchise system.
• A business advisor can help you research the ownership structure and history of any franchise system you consider.
• Consulting with your accountant can help assess if financial decisions appear to be focused on long-term brand health.

Explanation

This risk was not identified in the FDD package. Item 1 properly discloses the franchisor's affiliates, which are other fitness studios under common ownership. Item 21 provides the franchisor's financial statements as required. Since the franchisor is a startup with a limited financial history and negative net worth, and is not a subsidiary of a larger parent, its own financials are the most relevant for review. No parent company financials are required or omitted.

Potential Mitigations

• Your attorney should always confirm the corporate structure and identify any parent companies or guarantors involved in a franchise offering.
• An experienced franchise accountant should review the provided financial statements to assess the franchisor's stability and resources.
• Asking the franchisor directly about its corporate structure can provide additional clarity on its backing and resources.

Explanation

This risk was not identified in the FDD package. Item 1 clearly states that MaxStrength Fitness has no predecessors. This means the current entity did not acquire its assets from a prior company in the same business. When predecessors exist, it is important to review their history for any signs of past trouble, such as litigation, bankruptcy, or high franchisee failure rates, as these could indicate underlying issues with the system that may have been carried over.

Potential Mitigations

• For any franchise investment, it is a good practice for your attorney to review Item 1 carefully for any mention of predecessors.
• A business advisor can help you conduct independent research on a predecessor's history if one is disclosed.
• Speaking with long-term franchisees who may have operated under a predecessor provides invaluable insight.

Explanation

This risk was not identified in the FDD package. Item 3 states that there is no litigation that requires disclosure. A clean litigation history is a positive indicator. However, a pattern of lawsuits in other franchises, particularly those initiated by franchisees alleging fraud or misrepresentation, can be a significant red flag about the franchisor's practices and the health of the system. A high number of lawsuits initiated by the franchisor against franchisees can also signal an overly aggressive relationship.

Potential Mitigations

• Your attorney should always review Item 3 carefully for any disclosed litigation and assess its potential impact on the franchise system.
• It is wise to ask current and former franchisees about their experiences with disputes, whether or not they resulted in formal litigation.
• A business advisor can help you research public records for litigation that may not have been required to be disclosed in the FDD.