Explanation

The financial statements for the franchisor, Meineke Franchisor SPV LLC (Meineke), its parent Driven Systems LLC, and its ultimate parent Driven Brands, Inc., are provided and have been audited by a major accounting firm. The guarantor, Driven Systems LLC, reported a net income of $195 million for 2023 and substantial member equity. There are no disclosed indicators of financial instability, such as a going concern note, suggesting the franchisor has the resources to support the system.

Potential Mitigations

• An experienced franchise accountant should review the complete, audited financial statements for the franchisor and any guaranteeing parent entities.
• It is prudent to assess the franchisor's financial trends over the past several years with your accountant to check for stability.
• Your business advisor can help you evaluate whether the franchisor's financial resources are adequate to support its existing system and future growth plans.

Explanation

This risk was not identified in the FDD package. The franchisor appears to have substantial resources, as detailed in Item 21, to support its current size and planned growth. However, in any system, rapid expansion can strain a franchisor's ability to provide adequate support, training, and site selection assistance to all franchisees. You should assess if the franchisor's infrastructure can keep pace with its growth.

Potential Mitigations

• During discussions with existing franchisees, you should inquire about the quality and timeliness of the support they currently receive.
• A thorough review of the franchisor's support staff and infrastructure with your business advisor is important.
• Your accountant can review the franchisor's financial statements to assess if capital is being reinvested into support systems.

Explanation

This risk was not identified. Meineke was founded in 1972 and has been franchising for decades, operating over 700 units as of year-end 2023. The system is well-established and does not appear to be an unproven concept. Management personnel listed in Item 2 have extensive experience in the automotive and franchising industries. The business model is mature and not dependent on a passing trend.

Potential Mitigations

• It is still wise to have your business advisor evaluate the management team's experience and the brand's long-term market position.
• Speaking with long-term franchisees can provide insight into the system's evolution and stability over time.
• Your accountant should review the financial statements to confirm the company relies on ongoing royalties rather than just initial fees for revenue.

Explanation

This risk was not identified. The automotive repair and maintenance industry is a long-standing, essential service sector with sustained consumer demand. The Meineke brand has operated since 1972, indicating a business model with long-term viability that is not dependent on a short-term fad. The core services offered, such as brake and exhaust repair, represent consistent consumer needs.

Potential Mitigations

• Your business advisor can help you research the long-term outlook for the independent automotive aftermarket to confirm its stability.
• Reviewing the franchisor's history of adding or modifying services in Item 1 and Item 11 can provide insight into its adaptability.
• Discuss the brand's market position and competitive landscape with current franchisees to gauge its continued relevance.

Explanation

This risk was not identified. The executive team detailed in Item 2 appears to have significant and relevant experience. For instance, the CEO, Jonathan Fitzpatrick, has been in his role since 2012, and other key personnel have extensive backgrounds in the automotive service industry and with other large franchise systems. This level of experience suggests the leadership team is well-equipped to manage the franchise system.

Potential Mitigations

• It is still beneficial to discuss the management team's reputation and effectiveness with current and former franchisees.
• A business advisor can help you independently research the professional backgrounds of the key executives listed in Item 2.
• You should ask the franchisor about management stability and the company's long-term strategic vision.

Explanation

This risk was not identified. The FDD clearly discloses the parent and affiliate structure in Item 1, including the ultimate parent, Driven Brands, Inc., and the guarantor, Driven Systems LLC. Audited financial statements for both of these entities are provided as exhibits, along with a copy of the Guarantee of Performance. This level of transparency appears to meet disclosure requirements.

Potential Mitigations

• Have your franchise accountant review the financial statements for both the franchisor and its parent guarantor to assess the system's overall financial health.
• Your attorney should review the Guarantee of Performance (Exhibit V) to confirm its terms and enforceability.
• You should ask the franchisor to clarify the relationships and dependencies between the various corporate entities.

Explanation

This risk was not identified. Item 1 discloses the predecessor entity, Meineke Car Care Centers, LLC, and its history. The litigation and bankruptcy history for this predecessor and its affiliates appear to be disclosed in Items 3 and 4, respectively. There is no indication of incomplete or obscured information regarding the system's history prior to the current franchisor entity taking over.

Potential Mitigations

• It is still worthwhile to have your attorney review the predecessor information in Items 1, 3, and 4 to ensure complete understanding.
• You might ask long-tenured franchisees about their experiences under the previous ownership structure.
• A business advisor can help you conduct independent online searches for news or reports related to the predecessor entity for additional context.