Explanation

This specific risk was not identified in the FDD package. The business model, which involves purchasing, remodeling, and selling residential properties, is a well-established real estate investment strategy. While its success is highly dependent on real estate market cycles, it is not considered a short-term fad. A franchisee's success will likely be tied to local market conditions and economic cycles rather than fleeting consumer trends, which is a different type of business risk.

Potential Mitigations

• Engaging a business advisor to research the long-term sustainability and cyclical nature of the house-flipping market in your specific region is recommended.
• Your financial advisor can help you develop financial models that account for potential downturns in the real estate market.
• It is prudent to assess the business model's resilience to economic shifts and interest rate fluctuations.

Explanation

This risk was not identified in the FDD package. There is no disclosure in Item 1 or elsewhere that indicates the franchisor is owned or controlled by a private equity firm. The ownership appears to rest with the company's founders and key individuals. A disclosed 2025 change in ownership appears to be an internal corporate restructuring rather than a sale to an outside financial buyer, which mitigates the typical risks associated with private equity ownership.

Potential Mitigations

• Your attorney can help you confirm the ownership structure of the franchisor and any parent companies.
• Inquiring with your business advisor about the franchisor's long-term goals can provide insight into their operational philosophy.
• It is still valuable to ask existing franchisees about any significant changes in company strategy or support over the past few years.

Explanation

This specific risk was not identified. The FDD's Item 1 and the notes to the financial statements appear to disclose the relevant parent and affiliate companies, including a future parent company resulting from a corporate reorganization. There is no indication that a controlling parent company's identity or required financial statements have been withheld. The disclosures regarding corporate structure seem transparent, allowing for a proper assessment of the entities involved in the franchise system.

Potential Mitigations

• Having your attorney verify the corporate structure and the relationships between all affiliated entities is a good practice.
• Your accountant should confirm that all necessary financial statements for the franchisor and any guaranteeing parent companies have been included and audited.
• Understanding the specific roles and obligations of each affiliated entity mentioned in the FDD is crucial.

Explanation

This risk was not identified in the FDD. Item 1 describes the franchisor's predecessors, and there are no negative disclosures related to them in Item 3 (Litigation) or Item 4 (Bankruptcy). The history of the business as it evolved into the current franchising entity appears to be presented in a straightforward manner without indicating any inherited issues from prior corporate structures. The transition from Lavinder Development to New Again Franchising seems transparently disclosed.

Potential Mitigations

• A review of the predecessor information in the FDD with your attorney is always a sound step in due diligence.
• It can be beneficial to ask long-term franchisees about their experiences under any prior company structures.
• Your business advisor can assist in researching the public record of any predecessor companies for additional context.

Explanation

This risk was not identified in the FDD. Item 3 explicitly states, "No litigation is required to be disclosed in this Item." The absence of disclosed lawsuits against the franchisor, especially those initiated by franchisees alleging fraud or misrepresentation, is a positive indicator. It suggests a lower likelihood of systemic issues in the franchisor's sales process or franchisee relationships that commonly lead to legal disputes. This finding reduces concerns about a history of franchisee dissatisfaction.

Potential Mitigations

• Your attorney can perform an independent public records search to confirm the absence of litigation not required to be disclosed in the FDD.
• Asking current and former franchisees about their relationship with the franchisor can provide insight into potential non-litigated disputes.
• A review of the dispute resolution clauses with your attorney will help you understand the process if a conflict were to arise.