Explanation

This risk was not identified. The franchisee turnover rates, as calculated from the data in Item 20, appear to be low for the past three fiscal years. Generally, high turnover can signal systemic problems, such as franchisee unprofitability or dissatisfaction with support. A low rate is a positive indicator for the stability of the franchise system.

Potential Mitigations

• During your due diligence calls, it is still prudent to ask current franchisees about their satisfaction with the system and its support.
• A business advisor can help you frame questions for franchisees regarding the overall health and morale of the system.
• Even with low turnover, an attorney can help you understand the termination and non-renewal clauses that would apply to your franchise.

Explanation

This risk was not identified. The data in Item 20 does not indicate rapid system growth over the past three fiscal years; the number of franchised outlets has remained relatively stable. Rapid growth can sometimes strain a franchisor's ability to provide adequate support, so stability can be a positive sign.

Potential Mitigations

• Even in a stable system, asking the franchisor about their future growth plans is a good practice for your business advisor.
• When speaking with franchisees, you can inquire about the current quality and responsiveness of the franchisor's support team.
• Your attorney should review the franchisor's contractual obligations for support in the Franchise Agreement.

Explanation

While Midas is a long-established brand, this does not eliminate all risks associated with a new or unproven system. Prospective franchisees should still scrutinize the current management team's experience, recent system changes, and the performance of newer franchisees to ensure the system is not resting on past laurels and is well-managed for current market conditions.

Potential Mitigations

• A thorough review of the management team's recent tenure and franchising experience with your business advisor is recommended.
• Inquire with newer franchisees about the quality of training and initial support to gauge the effectiveness of current systems.
• Having an accountant assess recent financial performance can provide insight into the current health of this mature system.

Explanation

This risk was not identified. The Midas brand is a mature concept in the automotive repair industry, which is a sector with long-term consumer demand rather than being based on a fleeting trend. The business model has demonstrated sustainability over many decades. A key risk for any business, however, is adapting to market changes, such as the rise of electric vehicles.

Potential Mitigations

• A business advisor can help you research the long-term outlook for the general automotive repair industry.
• It is wise to ask the franchisor and current franchisees about their strategies for adapting to electric vehicles and other new technologies.
• Understanding the system's plans for continued relevance is a key part of your due diligence.

Explanation

This risk was not identified. Item 2 discloses that the executive team has extensive experience within the automotive and franchise industries, including long tenures with Midas, its parent company TBC, or other major relevant corporations. A management team with deep, relevant experience in both the specific industry and franchising is a positive factor that can reduce operational and strategic risks for franchisees.

Potential Mitigations

• When speaking to current franchisees, it's still good practice to ask about their direct experiences with the management team's accessibility and support.
• Your business advisor can help you perform independent research on the professional reputations of the key executives listed.
• An attorney can help confirm that the experience listed translates into clear and fair contractual obligations for support.

Explanation

This risk was not identified in the FDD package. The franchisor's parent company is a joint venture between two major corporations, Michelin and Sumitomo, rather than a typical private equity firm with a short-term exit strategy. This ownership structure may suggest a focus on long-term strategic goals over short-term financial returns, which can be a positive for system stability.

Potential Mitigations

• A business advisor can help you research the history and strategic goals of the parent companies, Michelin and Sumitomo.
• It is still wise to ask your attorney to review the assignment clauses in the Franchise Agreement to understand your rights if the system is ever sold.
• Discuss with franchisees if they have noticed any changes in system philosophy or support related to the corporate ownership structure.

Explanation

This risk was not identified. The FDD clearly discloses that Midas International, LLC is owned by TBC Retail Holdings, LLC, which is a subsidiary of TBC Corporation and ultimately TBC Holdings, LLC. The audited financial statements for the guarantor parent, TBC Holdings, LLC, are provided in Exhibit B as required, ensuring financial transparency for the entity guaranteeing the franchisor's performance.

Potential Mitigations

• Your franchise attorney should confirm that the provided parent company guarantee is legally sufficient and enforceable.
• An accountant's review of the parent company's financial statements is critical to understanding the true financial health backing the franchise.
• It is useful to ask a business advisor to help you understand the full corporate structure and how it might impact operations.

Explanation

This risk was not identified. Item 1 of the FDD discloses the franchisor's corporate history, including predecessors and a 1998 spin-off. Items 3 and 4 disclose the litigation and bankruptcy history for the current franchisor and its predecessors as required. No significant negative history related to predecessors that would appear to carry over to the current operation was identified.

Potential Mitigations

• A franchise attorney can help you interpret the disclosed history of the franchisor and its predecessors.
• When speaking with long-term franchisees, asking about their experience under any prior ownership can provide valuable context.
• Your business advisor can assist with independent research on the historical performance and reputation of any predecessor companies.