Explanation

Analysis of the last three years in Item 20 shows a declining franchisee turnover rate, with a net loss of only one unit in 2024. While the system's overall size is modest and recently saw a slight contraction, the data does not indicate an unusually high rate of franchisee exits through termination, non-renewal, or other cessations. However, the lack of reporting from many units for the Item 19 FPR is a separate, more significant concern.

Potential Mitigations

• It would be beneficial to ask your business advisor to help you analyze the three-year trend in franchisee departures to confirm the stable outlook.
• Contacting franchisees who have recently left the system, if listed in Exhibit G, can provide valuable insight into their reasons for departure.
• Your attorney should review the definitions used for franchisee exits in Item 20 to ensure they are not misleading.

Explanation

This risk was not identified in the FDD package. The data in Item 20 does not show extremely rapid growth that might outpace the franchisor's ability to provide adequate support. In fact, the system experienced a net decrease of one unit in the most recent year. Rapid growth can strain a franchisor's resources, potentially leading to a decline in the quality of training, site selection assistance, and ongoing operational support for all franchisees.

Potential Mitigations

• You should still ask the franchisor about their future growth plans and how they intend to scale support systems with help from a business advisor.
• An accountant's review of the franchisor's financials can help assess if they have the capital to support any future growth spurts.
• Your attorney can help you understand the support levels promised in the Franchise Agreement, regardless of system size.

Explanation

This risk was not identified in the FDD package. The franchise offers commercial floor and surface care services, which is an established business-to-business industry with consistent demand. This is not a concept tied to a fleeting consumer trend or novelty. Investing in a fad business carries the risk that demand could evaporate, leaving you with a worthless business and ongoing contractual obligations to the franchisor long after public interest has moved on.

Potential Mitigations

• Your business advisor can help you assess the long-term demand for the franchisor's services in your specific local market.
• In discussions with the franchisor, you might inquire about their plans for research and development to keep services competitive.
• An accountant can help you model the financial performance of the business under various economic scenarios.

Explanation

This risk was not identified in the FDD package. The executive biographies in Item 2 show that the key leaders of MilliCare and its parent company, EverSmith Brands, have extensive prior experience in managing and growing other large, established franchise systems such as U.S. Lawns, Gold's Gym, and Smash My Trash. This suggests the management team has relevant experience in the franchising industry, which is a positive factor for a prospective franchisee.

Potential Mitigations

• It remains a good practice to ask your business advisor to help you research the specific track records of the key executives mentioned in Item 2.
• When speaking with current franchisees, you should ask about their direct experiences and the quality of support they receive from the current management team.
• Your attorney can help you understand the roles and responsibilities of the management team as outlined in the franchise documents.

Explanation

This risk was not identified in the FDD package. Item 1 provides a detailed disclosure of the franchisor's corporate structure, including its immediate parent, MilliCare, Inc., and the ultimate parent, EverSmith Brands Holding Company. Furthermore, the audited financial statements and a formal Guarantee of Performance from the parent company are included as exhibits. This level of transparency is a positive indicator and appears to meet disclosure requirements.

Potential Mitigations

• It is still wise for your attorney to review the corporate structure and the Guarantee of Performance to ensure they are clear and enforceable.
• Your accountant should confirm that the provided parent financial statements are complete and audited as required.
• A business advisor can help you understand the relationships between the various entities in the corporate family.

Explanation

This risk was not identified in the FDD package. Item 1 discloses that the franchisor's predecessor was Milliken Services, LLC. However, Items 3 and 4 of the FDD state there is no litigation or bankruptcy history to report for the franchisor or its predecessors. This lack of disclosed negative history is a positive sign, suggesting a stable operational past for the brand before its acquisition and restructuring under the current franchisor entity.

Potential Mitigations

• A business advisor could still help you conduct public records searches on the predecessor entity to confirm the absence of negative history.
• When speaking with long-tenured franchisees, you could ask about their experience under the predecessor's management.
• Your attorney should confirm that the asset purchase from the predecessor did not include the assumption of undisclosed liabilities.

Explanation

This risk was not identified in the FDD package. Item 3 explicitly states that "No litigation is required to be disclosed in this Item." This indicates an absence of the type of material legal actions involving the franchisor, its predecessors, or management that would require disclosure under franchise law. This lack of litigation is a positive factor, suggesting a lower risk of systemic legal problems or disputes with other franchisees.

Potential Mitigations

• While the FDD is clean, it is still a prudent step to have a business advisor help you conduct independent online searches for any informal complaints or disputes.
• You should always ask current franchisees about their relationship with the franchisor and whether they are aware of any widespread disputes.
• Your attorney can explain the specific types of litigation that are material and must be disclosed, providing context for this finding.