Explanation

The data presented in Item 20 does not indicate a high rate of franchisee turnover. The number of terminations, non-renewals, and other cessations appears low relative to the size of the franchise system. Monitoring this data in future FDDs remains important as high turnover can signal systemic problems, such as franchisee unprofitability or poor franchisor support.

Potential Mitigations

• When reviewing any FDD, it is crucial to have an accountant analyze the tables in Item 20 to calculate the true turnover rate.
• Consulting with a business advisor to compare the system's turnover rate with industry averages provides valuable context.
• Your attorney can help you formulate questions for current and former franchisees about their satisfaction with the system and reasons for leaving.

Explanation

This risk was not identified in the FDD package. While Item 20 shows system growth, it does not appear to be at a pace that would inherently strain the franchisor's resources, especially given the system's large, established size. However, rapid growth in any system can sometimes stretch support services thin, potentially impacting training, site selection, and ongoing assistance for all franchisees.

Potential Mitigations

• It is wise to have your accountant review the franchisor's financial statements in Item 21 to assess if they have the capital and staff to support continued growth.
• Speaking with a range of franchisees, both new and established, can provide your business advisor with insight into the current quality of franchisor support.
• Your attorney should review the franchisor's contractual obligations for support in Item 11 to ensure they are specific and adequate.

Explanation

This risk was not identified. The FDD indicates that Midas and its predecessors have been franchising since 1956, demonstrating a long operational history and a well-established brand. For any new franchise system, however, risks can include an unproven business model, minimal brand recognition, or inexperienced management, which could lead to a higher potential for business failure or inadequate franchisee support.

Potential Mitigations

• For any franchise, a business advisor can help you conduct extensive due diligence on the founders' and management's experience in both the industry and franchising.
• Your accountant should always be engaged to scrutinize the franchisor's capitalization and financial stability, especially with a newer system.
• It's advisable to have your attorney negotiate for more favorable terms to compensate for the higher risk associated with an unproven system.

Explanation

This risk was not identified. The automotive repair and maintenance industry is a long-established sector with consistent consumer demand, not typically considered a fad. A fad business is often tied to a fleeting trend, which can create a risk of business failure once consumer interest declines. Your long-term franchise obligations would likely outlast the popularity of such a trend.

Potential Mitigations

• A business advisor can help you independently assess the long-term market demand for any franchise's products or services.
• Working with a financial advisor to consider a business model's resilience to economic downturns and changing consumer trends is a prudent step.
• Your attorney can review the franchise term to ensure it aligns with a realistic assessment of the business's long-term viability.

Explanation

This risk was not identified in the FDD. The management team described in Item 2 appears to have extensive experience in the automotive service industry and with the Midas system or its parent companies. In general, inexperienced management can pose a risk if the leadership team lacks a track record in franchising or the specific industry, which could lead to poor strategic decisions and inadequate franchisee support.

Potential Mitigations

• You should always ask a business advisor to help you vet the management team's background and specific experience in managing a franchise system.
• Speaking with existing franchisees about their direct experiences with the management team provides invaluable, real-world insight.
• Your accountant can help assess if the management's financial stewardship, as reflected in Item 21, appears sound and stable.

Explanation

This risk does not appear to be present. The FDD in Item 1 and Item 21 clearly discloses the parent and affiliate structure, including the role of Express Oil Change Franchise, LLC as the guarantor. In some cases, a franchisor might be a thinly capitalized subsidiary of a larger, undisclosed parent. Failure to disclose such a parent or provide its financials when required can obscure the true financial stability and backing of the system.

Potential Mitigations

• It is prudent to have your attorney and accountant verify the corporate structure if there is any ambiguity about a controlling parent entity.
• If a parent company provides a performance guarantee, your attorney should confirm that the parent's financial statements are included in the FDD as required.
• Your accountant should review any parent company financials to ensure they meet standard accounting and auditing principles.

Explanation

This risk was not identified. Midas discloses its corporate history and predecessors in Item 1. When a franchisor acquires a system, it is important to understand the predecessor's history. A failure to disclose or downplaying a predecessor's negative history, such as significant litigation or high franchisee failure rates, could obscure inherited problems and prevent you from making a fully informed decision about the system's stability and track record.

Potential Mitigations

• Your attorney should always carefully review the predecessor information disclosed in Items 1, 3, and 4 of any FDD.
• A business advisor can assist in researching the predecessor's public track record, including news archives or online franchisee discussion forums.
• If possible, speaking with long-term franchisees who operated under the predecessor can provide valuable historical context.