Explanation

This risk was not identified in the FDD Package, as the franchise system is new and has no operating franchisees as of the FDD's issuance date. High franchisee turnover is generally a major red flag, as it can indicate systemic problems such as a lack of profitability, poor franchisor support, or an unsustainable business model. The absence of data here means there is no track record, positive or negative, to evaluate.

Potential Mitigations

• A business advisor can help you monitor system growth and turnover rates if you join the system early.
• It is important for your attorney to review termination and non-renewal clauses, as these directly affect future turnover statistics.
• An accountant can assist in modeling the financial performance necessary to ensure you can operate profitably and avoid becoming a negative statistic.

Explanation

This risk was not identified, as the system has no history of rapid growth. However, Item 20 projects 18 new franchises in the next fiscal year. While not a current risk, rapid future expansion can strain a franchisor's ability to provide adequate training and support. A system that outgrows its support infrastructure can lead to widespread franchisee issues.

Potential Mitigations

• Should you proceed, engaging a business advisor to monitor the quality of franchisor support as the system grows would be a prudent step.
• Your attorney should review the franchisor's support obligations outlined in Item 11 to ensure they are specific and enforceable.
• Discuss with an accountant how to budget for potential shortfalls in franchisor support if the system expands too quickly.

Explanation

This risk was not identified in the FDD package. The handyman services industry is a well-established and long-standing sector, not a business model based on a new or fleeting trend. Therefore, the risk of the business being a short-lived fad with limited long-term consumer demand appears low.

Potential Mitigations

• A business advisor can help you research the long-term stability and competitive landscape of the local handyman market.
• It is prudent to have an attorney review the franchise term and renewal options to ensure they align with a long-term business plan.
• Your accountant can assist in modeling the business's resilience to various economic cycles.

Explanation

This risk was not identified in the FDD package. The management team, as detailed in Item 2, appears to have prior experience in the home services industry and in building other franchise systems under their parent company, ResiBrands. While Monty's is a new brand, the executive team does not appear to be inexperienced in franchising itself.

Potential Mitigations

• A business advisor can help you further investigate the specific track record of the management team with their other franchise brands.
• Speaking with franchisees from the franchisor's other affiliated brands could provide insight into the management's capabilities.
• An attorney can help confirm the corporate structure and the roles of the key executives.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses the parent company, ResiBrands LLC, and other affiliated entities. The corporate structure appears to be transparently presented, even though the lack of parent company financial statements remains a risk captured under 'Franchisor's Financial Instability'.

Potential Mitigations

• An attorney can help you understand the relationships between the franchisor and its parent and affiliate companies.
• A business advisor can help you research the parent company's reputation and its other business ventures.
• It's valuable to have an accountant review the franchisor's financials in the context of it being a subsidiary.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD clearly states that the franchisor has no predecessor company, meaning it did not acquire the assets or business system from a prior entity. Therefore, there is no risk of undisclosed negative history from a predecessor.

Potential Mitigations

• An attorney can confirm the corporate history as stated in the FDD through public record searches.
• A business advisor can help you understand the implications of investing in a company without a predecessor, which relates to the 'New/Unproven Franchise System' risk.
• An accountant can analyze the franchisor's opening balance sheet for any signs of transferred assets or liabilities.

Explanation

This risk was not identified in the FDD package. Item 3 states that there is no litigation that requires disclosure. The absence of lawsuits involving the franchisor, particularly claims of fraud or breach of contract from franchisees, is a positive indicator, though it is expected for a brand-new system with no franchisees yet.

Potential Mitigations

• An attorney can conduct independent searches for any litigation that may not have been disclosed.
• It is wise to have a business advisor help you establish a process for monitoring any future litigation involving the system.
• Your attorney should still review the dispute resolution clauses in the Franchise Agreement to understand how future conflicts would be handled.