Explanation

This risk was not identified in the FDD Package. An unproven system typically lacks a long history, has few operating units, and has inexperienced management. MilliCare and its predecessor have been in business for many years with a number of operating franchisees. However, you should still perform thorough due diligence, as any franchise investment carries inherent risk, especially when considering the recent change in ownership to a private equity firm and the financial condition of the parent company.

Potential Mitigations

• It is important to have your accountant carefully review the franchisor's financial statements for signs of stability and reliance on franchise fees versus royalties.
• A consultation with your business advisor to research the business's history and the experience of its management team is a prudent step.
• Speaking with the earliest-operating franchisees can provide valuable insight into the system's evolution and the franchisor's performance over time.

Explanation

This risk was not identified in the FDD Package. The floor and surface care industry for commercial properties is a well-established service sector, not a business based on a fleeting trend. However, competitive pressures and economic cycles can still affect long-term viability. A business model's resilience depends on its ability to adapt to changing market needs and technologies, a factor you should always consider when making a long-term investment.

Potential Mitigations

• A business advisor can help you independently research the long-term demand and competitive landscape for commercial floor care services in your specific market.
• It is wise to ask the franchisor about their strategy for innovation and research and development to maintain a competitive edge.
• Discuss the business model's resilience to economic downturns with your financial advisor.

Explanation

This risk was not identified in the FDD Package. The executives profiled in Item 2 appear to have extensive backgrounds in business and franchising, including experience with other large franchise systems. While some executives are relatively new to their specific roles at MilliCare or its parent, their collective experience seems substantial. However, you should always assess if the management team's specific expertise aligns with the support you will need.

Potential Mitigations

• Your business advisor can help you further investigate the backgrounds and track records of the key management personnel.
• It is prudent to speak with current franchisees to gauge their satisfaction with the management team's leadership and support.
• During discussions with the franchisor, inquire about the management team's long-term vision and commitment to the MilliCare brand.

Explanation

This risk was not identified in the FDD Package. The FDD clearly discloses the parent company, EverSmith Brands Holding Company, and provides its audited financial statements in Exhibit B-1 as required. Furthermore, the parent has provided a Guarantee of Performance, which is included as Exhibit B-2. This level of disclosure appears to meet regulatory requirements and provides transparency regarding the entity backing the franchisor's obligations.

Potential Mitigations

• Your attorney should confirm that all required parent and affiliate disclosures have been properly made under applicable law.
• It is important for your accountant to thoroughly review the provided parent company financial statements and the terms of the guarantee.
• Understanding the corporate structure and the relationships between the franchisor, its parent, and any affiliates is a key task for your attorney.

Explanation

This risk was not identified in the FDD Package. Item 1 discloses that MilliCare Franchising, LLC's predecessor was Milliken Services, LLC. The FDD does not indicate any negative history such as litigation (Item 3) or bankruptcy (Item 4) associated with this predecessor. A comprehensive analysis requires understanding the system's performance under prior ownership, but no specific red flags related to the predecessor's history are apparent within the document.

Potential Mitigations

• It is still advisable to ask long-tenured franchisees about their experiences under the predecessor's ownership.
• Your business advisor can assist in researching the predecessor entity's public records for any undisclosed issues.
• Your attorney should confirm that the asset transfer from the predecessor to the current franchisor was handled properly.

Explanation

This risk was not identified in the FDD Package. Item 3 states that no litigation information is required to be disclosed. This indicates an absence of recent or ongoing material legal actions involving the franchisor related to fraud, securities violations, or the franchise relationship. A clean litigation history is a positive sign, though it does not eliminate all potential for future disputes.

Potential Mitigations

• Your attorney can still conduct independent searches for litigation involving the franchisor or its principals as part of comprehensive due diligence.
• It is prudent to ask current and former franchisees about their experiences with dispute resolution, even if no formal litigation is disclosed.
• Understanding the dispute resolution clauses in the Franchise Agreement remains crucial, and your attorney should review them carefully.