Explanation

This risk was not identified, as Mobius Franchising, LLC (Mobius LLC) is a new franchisor with no operating franchisees to date, according to Item 20. Therefore, there is no history of franchisee turnover. However, high franchisee turnover (terminations, non-renewals, or closures) in an established system is a critical red flag, often indicating systemic problems with profitability, support, or the business model itself. Diligent review of this data is crucial when evaluating a mature franchise.

Potential Mitigations

• As the system grows, your business advisor should help you monitor future FDDs for any signs of increasing franchisee turnover.
• Maintaining open communication with other franchisees as they join the system can provide early warnings of any widespread dissatisfaction or problems.
• Your attorney can explain how franchisors may classify departures in Item 20 to potentially obscure negative trends.

Explanation

This risk was not identified. Item 20 data shows no franchise growth to date, as the system is new. While growth is a goal, the FDD does not currently reflect a rate of expansion that would suggest the franchisor's support resources are strained. Rapid growth without a corresponding investment in support infrastructure can be a significant risk in other franchise systems, potentially leading to inadequate training, site selection assistance, and ongoing operational help for franchisees.

Potential Mitigations

• A business advisor can help you evaluate the franchisor's plans for scaling its support staff and systems in line with its future growth projections.
• Before investing, it is wise to confirm with the franchisor their specific hiring plans for support personnel.
• Your accountant should review future financial statements to ensure the franchisor is investing adequately in support infrastructure as the system expands.

Explanation

This risk was not identified. The business concept, providing after-school and summer STEAM and play-based programs for children, is part of the broader, well-established childcare and supplemental education industry. While specific market demand can vary, the core service does not appear to be based on a short-term or fleeting trend. Therefore, the risk of the entire business model becoming obsolete due to being a fad seems low.

Potential Mitigations

• A business advisor can help you conduct local market research to confirm sustained demand for these specific types of children's programs in your area.
• It is prudent to ask the franchisor about their long-term plans for curriculum development and program innovation.
• Your own analysis should consider the local competitive landscape, including other established childcare and after-school providers.

Explanation

This risk was not identified in the FDD. Item 1 indicates that the franchisor, Mobius LLC, is a subsidiary of Mobius Learning Academy, Inc., which appears to be a privately held company controlled by the individual executives listed in Item 2. There is no mention of ownership or control by a private equity firm. Therefore, the specific risks associated with a PE firm's potentially short-term investment horizon do not seem to apply here.

Potential Mitigations

• Your attorney can help you verify the ownership structure through public records to confirm the absence of private equity involvement.
• It is still wise to ask the franchisor directly about their long-term vision for the company and any plans for future sale of the system.
• A business advisor can help you research the background of the individual owners to understand their business history and philosophy.

Explanation

This risk was not identified. Item 1 of the FDD explicitly states, 'We do not have any predecessors.' This indicates that Mobius LLC did not acquire its assets from a prior company that operated the same business and is starting this franchise system from scratch. Therefore, there are no concerns about a hidden negative history, such as litigation or franchisee failures, from a predecessor entity.

Potential Mitigations

• Your attorney can help confirm the franchisor's corporate history through public records searches to verify the 'no predecessors' statement.
• A business advisor can help you investigate the history of the affiliate-owned location to understand its operational track record.
• You should focus your due diligence on the current management team's experience and the new franchising entity's financial stability.

Explanation

This risk was not identified. Item 3 of the FDD states, 'No litigation is required to be disclosed in this Item.' This means that neither the franchisor nor its management has been involved in the types of material litigation that require disclosure, such as actions involving fraud, franchise law violations, or other significant legal disputes. The absence of a litigation history is a positive factor, though not unusual for a brand-new franchise system.

Potential Mitigations

• Your attorney can conduct independent public record searches to verify the accuracy of the 'no litigation' disclosure.
• It is good practice to ask management directly if they are aware of any pending disputes that have not yet resulted in formal litigation.
• A business advisor should help you monitor future FDDs for any litigation that may arise as the system grows.