Explanation

This risk was not identified in the FDD Package. Rapid growth can strain a franchisor's ability to provide adequate support, training, and resources to all franchisees. While exciting, it can dilute the quality of the system if not managed properly, leading to franchisee dissatisfaction and operational challenges.

Potential Mitigations

• An analysis of the franchisor's balance sheet and cash flow statements with your accountant can help assess if they have the capital to support growth.
• Speaking with franchisees who joined at different times can provide insight into how support levels have evolved, a task for your business advisor.
• Your attorney can review the franchisor's stated obligations in Item 11 to ensure they are specific and enforceable.

Explanation

This risk was not identified in the FDD Package. Molly Maid has a long operational history dating back to 1979 and began franchising in the US in 1984. A new system lacks a proven track record, established brand recognition, and refined operational procedures. This increases the risk for early franchisees, who are effectively testing the business model.

Potential Mitigations

• For any franchise, a business advisor should help you investigate the business experience of the management team as detailed in Item 2.
• It is important to have an accountant thoroughly review the financial statements in Item 21 for signs of stability and adequate capitalization.
• Consulting with an attorney to understand the terms is crucial, especially when considering a newer, less-proven franchise system.

Explanation

This risk was not identified in the FDD Package. Home cleaning is an established industry with consistent demand. A fad business is one tied to a short-lived trend, which can lead to a rapid decline in customer interest and revenue after an initial boom. Investing in a fad carries the risk that your business may not be viable long-term, even though your contractual obligations to the franchisor continue.

Potential Mitigations

• A business advisor can help you conduct independent market research to assess the long-term consumer demand for any franchise's products or services.
• It is wise to evaluate the franchisor's plans for innovation and adaptation to changing market tastes, typically found in Item 11.
• An accountant can assist in modeling the financial viability of the business under various market-demand scenarios.

Explanation

This risk was not identified in the FDD Package. The executive team disclosed in Item 2 appears to have significant experience in franchising and related industries, often within the parent company, Neighborly. Inexperienced management can be a major risk, as they may lack the knowledge to provide effective support, manage system growth, or make sound strategic decisions, which can negatively impact franchisee success.

Potential Mitigations

• A business advisor can help you research the backgrounds of the key executives listed in Item 2 of any FDD.
• Contacting existing franchisees is a valuable way to gauge their opinion of the management team's competence and responsiveness.
• Your attorney can help you understand the contractual obligations the franchisor has for providing support, regardless of management's experience.

Explanation

This risk was not identified in the FDD Package. The franchisor's parent company, Neighborly Assetco LLC, is clearly disclosed, provides audited financial statements in Exhibit C, and offers a performance guarantee in Exhibit D. A failure to disclose a parent company or its financials when required can hide financial instability or other risks at a higher level of the corporate structure, preventing a full assessment of the entity guaranteeing the franchise.

Potential Mitigations

• Your attorney can help you verify the corporate structure disclosed in Item 1 to ensure all relevant parent and affiliate entities are identified.
• When a parent company guarantees performance, it is crucial for an accountant to review its financial statements for stability.
• A business advisor can help assess the level of operational control a parent company exerts over the franchisor.

Explanation

This risk was not identified in the FDD Package. The franchisor's predecessor, Molly Maid, LLC (formerly Molly Maid, Inc.), is disclosed in Item 1, along with its history. Predecessor history can sometimes reveal past issues like litigation, bankruptcy, or high franchisee turnover that might not be immediately apparent from the current franchisor's data. A clear understanding of the system's entire history is important for due diligence.

Potential Mitigations

• An attorney should always review Items 1, 3, and 4 for any disclosures related to predecessors.
• If a system has a predecessor, it's wise to ask long-term franchisees about their experiences under the prior ownership.
• A business advisor can help you research public records or news archives for information about a predecessor's business history.

Explanation

This risk was not identified in the FDD Package. Item 3 discloses a 2010 case against the franchisor's predecessor and a 2017 administrative order involving an affiliate (Window Genie). These isolated incidents do not appear to constitute a recent pattern of franchisee-initiated litigation against Molly Maid alleging fraud, misrepresentation, or similar claims. A pattern of such litigation can be a significant red flag about a franchisor's business practices.

Potential Mitigations

• It is always prudent to have your attorney carefully review all litigation disclosed in Item 3 of any FDD.
• A business advisor can help you research online to see if there are other franchisee complaints or legal actions not required to be disclosed.
• Discussing the franchisor's relationship with its franchisees with a number of current owners is a key due diligence step.