Explanation

This risk was not identified in the FDD package. Multivista Systems LLC (MVS) appears financially stable based on the audited financial statements in Exhibit G. These statements show consistent profitability, positive net income ($5.1M in 2024), substantial member's equity ($16.7M), and strong working capital. A financially healthy franchisor is better positioned to provide support and grow the brand, which is crucial for your long-term success.

Potential Mitigations

• A franchise accountant should still review the franchisor's financial statements, including all footnotes and the auditor’s report, to provide an independent assessment of financial health.
• Discussing the franchisor's financial strategy and plans for reinvesting in the system with your business advisor can offer additional insight.
• It is wise to ask your attorney to verify if any financial assurance, like a bond or escrow, is required by your state, even for healthy franchisors.

Explanation

This risk was not identified. Item 20 data does not show a high rate of franchisee turnover. While there were six exits (reacquisitions and other cessations) in 2022, this number decreased to three in 2023 and only one in 2024, indicating an improving trend in system stability. Low turnover is generally a positive sign, suggesting that franchisees are, on the whole, remaining with the system.

Potential Mitigations

• Speaking with a significant number of current and especially former franchisees from the lists in Item 20 is the best way to understand the real reasons for any departures.
• A business advisor can help you analyze the turnover data over the three-year period to identify any concerning patterns, despite the overall low numbers.
• It's valuable to have your attorney help you formulate questions for former franchisees to understand their exit experiences.

Explanation

This risk is not present in the FDD. The data in Item 20 shows very stable and measured growth, not rapid expansion. The number of franchised outlets increased by only one unit in 2023 and one unit in 2024. This controlled pace suggests the franchisor is not overextending its resources, which can be a positive indicator for maintaining quality franchisee support.

Potential Mitigations

• Even with slow growth, asking the franchisor about their future expansion plans is a prudent step for a business advisor to help you with.
• A discussion with your financial advisor can help assess if the slow growth rate aligns with your personal investment goals for brand expansion.
• Engaging with existing franchisees can provide insight into whether they perceive the current growth rate as healthy and sustainable.

Explanation

This risk was not identified. Item 1 of the FDD indicates Multivista Systems LLC has been offering franchises since 2007. This represents a long operational history and an established franchise system, not a new or unproven one. A mature system typically has well-developed operating procedures and support structures, which can reduce risks for new franchisees.

Potential Mitigations

• Even with a mature system, a business advisor should help you investigate its recent performance and adaptability to new market trends.
• Your attorney can review how the franchise agreement has evolved over time by speaking with long-term franchisees.
• An accountant should still review the financials to ensure the mature system maintains its profitability and is not becoming stagnant.

Explanation

This risk does not appear to be present. The franchise offers business-to-business documentation services for the construction and facilities management industries, as described in Item 1. This is a specialized service tied to a major economic sector, not a consumer-facing trend or fad. Such a business model's viability typically depends on the health of the construction market rather than fleeting consumer tastes.

Potential Mitigations

• An assessment of the long-term health and trends of the construction industry in your specific territory should be conducted with a business advisor.
• Your financial advisor can help you analyze the potential impact of economic cycles on this type of B2B service business.
• Discuss the franchisor's strategies for innovation and staying competitive within the construction technology sector.

Explanation

This risk was not identified in the FDD. Item 2 shows that the key executives, including the President/CEO and VP/CTO, have been with the company since its founding in 2007. This indicates a stable and highly experienced management team with deep knowledge of this specific franchise business. Experienced leadership is crucial for providing effective guidance and support to franchisees.

Potential Mitigations

• It is still beneficial to research the recent achievements and reputation of the key executives with the help of a business advisor.
• When speaking with current franchisees, you should inquire about their direct experiences with the management team's accessibility and support.
• Your attorney can help you understand the employment history of the leadership team as detailed in Item 2.

Explanation

This specific risk was not identified. While Item 1 shows MVS is owned by a large corporate parent, Hexagon AB, it is a publicly-traded strategic company in the technology sector, not a traditional private equity firm with a short-term exit strategy. Ownership by a large strategic corporation can provide stability and resources, though it is still important to understand the parent's long-term vision for the franchise system.

Potential Mitigations

• A business advisor can help you research the parent company's history and its typical approach to managing its subsidiary brands.
• When speaking with other franchisees, ask about any changes in operations or support since the acquisition by the parent company.
• Your attorney should review any provisions in the franchise agreement related to changes in ownership or control.

Explanation

This risk is not present. Item 1 provides a detailed and clear description of the franchisor's parent companies, up to the ultimate parent, Hexagon AB. Full disclosure of the corporate structure is essential for you to understand the entities that influence the franchise system. This transparency allows you and your advisors to assess the stability of the entire organization.

Potential Mitigations

• Your attorney should confirm that the disclosures in Item 1 meet all state and federal requirements regarding parent companies.
• A review of the parent company's public financial records can be conducted with your accountant for a more complete picture of the overall organization's health.
• Engaging with a business advisor can help you understand the potential implications of the parent company's other business lines on your franchise.

Explanation

This risk is not present. Item 1 of the FDD clearly discloses the franchisor's predecessors and provides details of their operating history. The document does not appear to obscure any negative information related to these prior entities. Proper disclosure of predecessor history is important for understanding the full background and evolution of the franchise system you are considering joining.

Potential Mitigations

• Your attorney should carefully review the information provided about predecessors in Items 1, 3, and 4.
• Speaking with long-tenured franchisees about their experience under any predecessor entities can provide valuable historical context.
• A business advisor can help you research the public record of any predecessor companies for additional information.

Explanation

This risk was not identified. Item 3 discloses one litigation case, which was initiated by MVS and its franchisee to protect trade secrets against a competitor, and MVS prevailed. The FDD does not show a pattern of litigation against the franchisor by franchisees alleging fraud, misrepresentation, or other systemic issues. A clean litigation history is a positive indicator for a prospective franchisee.

Potential Mitigations

• Your attorney should still review the details of the disclosed litigation to understand its nature and outcome.
• It is wise to conduct an independent public records search for litigation involving the franchisor, as recent cases may not yet be disclosed.
• Asking current and former franchisees about their experiences with disputes, whether they resulted in litigation or not, is a key part of due diligence.