Explanation

The Item 20 tables show steady and consistent growth in the number of franchised outlets over the past three years, rather than an explosive or potentially unsustainable pace. This suggests that the franchisor's support infrastructure is less likely to be overwhelmed by a sudden influx of new franchisees. This specific risk of unmanageable rapid growth was not identified.

Potential Mitigations

• Confirm with your business advisor that the franchisor's support staff and systems have grown in proportion to its unit count.
• Ask current franchisees, both new and established, about the quality and timeliness of the support they receive.
• Your accountant can review the franchisor's financials in Item 21 to assess if resources are being allocated to support growth.

Explanation

This risk was not identified. Item 1 indicates the franchisor's predecessor began offering franchises in 1993. The Mr. Rooter system is well-established and has a long operating history. Therefore, the risks associated with an unproven concept or an emerging franchisor without a track record do not appear to be present in this offering.

Potential Mitigations

• A business advisor can still help you evaluate the brand's current market position and competitive advantages despite its long history.
• When speaking with franchisees, ask about the system's ability to adapt and innovate over time.
• Your attorney can review the history of the brand's intellectual property to confirm its strength and longevity.

Explanation

This risk was not identified in the FDD package. Plumbing is a fundamental and essential home service with consistent, long-term consumer demand. It is not dependent on temporary trends or fads, which suggests a lower risk of the business model becoming obsolete due to shifting consumer interests. The core offering appears to be a stable and sustainable service.

Potential Mitigations

• Consult with a business advisor to research the long-term outlook for the plumbing services industry in your local market.
• Discuss the franchisor's strategies for innovation and staying competitive with current franchisees.
• Review Item 11 with your attorney to understand the franchisor's commitment to research and development of new services.

Explanation

This risk was not identified. Item 2 of the FDD details the business experience of the key executives. The management team, including the President, possesses many years of experience in the franchising industry and within the franchisor's parent organization, Neighborly. The leadership appears to have substantial experience in both the industry and in managing a large franchise system.

Potential Mitigations

• During discussions with the franchisor, inquire about management's philosophy and long-term vision for the brand with help from your business advisor.
• Ask current franchisees about their direct experiences and the quality of support they receive from the management team.
• Have your attorney review the backgrounds of the executives listed in Item 2 for any potential concerns.

Explanation

This risk was not identified. The FDD is transparent about its complex corporate structure, clearly identifying its direct parent, Neighborly Assetco LLC, and the ultimate controlling entity, KKR. Audited financial statements for the parent company are provided in Exhibit C as required, along with a parental guarantee of performance. There does not appear to be an attempt to obscure the ownership structure.

Potential Mitigations

• Have your franchise attorney review the corporate structure detailed in Item 1 to ensure all relevant entities are disclosed.
• An accountant should confirm that the provided parent financial statements comply with disclosure requirements.
• Verify the terms and enforceability of the parent guarantee with your attorney.

Explanation

This risk was not identified in the FDD package. Item 1 discloses the predecessor entity, Mr. Rooter LLC, and Item 3 discloses litigation involving that predecessor. The FDD appears to provide the required historical information without evidence of obscuring significant negative history related to its predecessor.

Potential Mitigations

• Your attorney can help you review the disclosures in Items 1, 3, and 4 for any red flags related to the predecessor's history.
• Consider asking long-term franchisees about their experiences under the previous ownership structure.
• A business advisor can assist in researching public records or news archives for additional information on the predecessor company.