Explanation

The mobile restoration and repair business is an established industry, not a fad. However, success depends on sustained demand from sectors like automotive, marine, and real estate. The risk lies in local market saturation and the ability to adapt to new materials and repair techniques. The franchisor's ability to innovate and provide updated training, as outlined in Item 11, will be crucial for your long-term viability against competitors.

Potential Mitigations

• An independent assessment of the long-term demand for mobile repair services in your specific local market should be conducted with a business advisor.
• Evaluating the franchisor's disclosed plans for research, development, and system evolution in Item 11 is important.
• Consider the business model's resilience to local economic downturns, which could affect discretionary spending on repairs, with your financial advisor.

Explanation

Item 2 shows that the key executives, such as Larry Stevenson and David Stone, have extensive, multi-decade experience with the New Creations business concept and its predecessors in Canada and the U.S. This extensive and directly relevant industry experience is a positive factor and suggests the management team understands the operational aspects of the business well. Therefore, the specific risk of inexperienced management was not identified.

Potential Mitigations

• It is still prudent to interview current franchisees to confirm that management's experience translates into effective support and training.
• A business advisor can help you formulate questions for the management team regarding their strategic vision for the U.S. market.
• Verifying the U.S. franchise support team's experience, beyond the key executives, should be part of your due diligence process.

Explanation

The risk of private equity ownership, which can sometimes prioritize short-term investor returns over the long-term health of the franchise system, was not identified in this FDD package. Item 1 indicates ownership is held by individuals involved in the business, not a private equity firm. However, it is a risk to be aware of in general, as the franchisor has the right to sell the system in the future.

Potential Mitigations

• In any franchise review, it's wise to ask an attorney to examine the franchisor's right to assign the agreement and the potential implications if the system is sold.
• A business advisor can help research the ownership structure of any franchise system you consider.
• Understanding the franchisor's long-term goals is a key part of due diligence.

Explanation

This specific risk was not identified. Item 1 of the FDD appears to properly disclose the relevant parent and affiliate companies, such as New Creations Mobile Restorations Inc. and New Creations USA, LLC, and explains their relationship to the franchisor, Stevenstone. Financial statements for Stevenstone are provided, which is the direct contracting party. No non-disclosure of a required parent company was apparent.

Potential Mitigations

• A franchise attorney should always verify the corporate structure if there is any suspicion of an undisclosed controlling entity.
• When a parent company provides a guarantee, your accountant should ensure the parent's financials are provided and reviewed.
• Understanding the full corporate web is a crucial step in diligence for any franchise.

Explanation

This FDD does not indicate significant issues related to its predecessors. Item 1 discloses the history involving predecessor entities and the amalgamation that formed the Canadian affiliate. No negative history such as bankruptcy or significant litigation associated with these predecessors is disclosed in Items 3 and 4. The transition appears to be a corporate restructuring rather than an attempt to escape a troubled past. Therefore, this specific risk was not identified.

Potential Mitigations

• Asking long-term Canadian franchisees about their experience under any predecessor entities could provide additional context.
• Your attorney can help confirm that the predecessor history disclosed in Items 1, 3, and 4 appears complete.
• Independent online research on predecessor names can sometimes uncover historical issues not prominent in the FDD, a task your business advisor could assist with.

Explanation

Item 3 states, "There is no litigation information required to be disclosed in this Item." This indicates that in the last fiscal year, there were no material legal actions of the types required to be disclosed, such as those alleging franchise law violations, fraud, or similar claims, pending against the franchisor or its management. The absence of such litigation is a positive indicator, so this risk was not identified.

Potential Mitigations

• Your attorney can conduct independent searches for litigation as part of due diligence, as not all disputes meet the technical threshold for FDD disclosure.
• It is still wise to ask current franchisees about any past or present disputes they are aware of within the system.
• Always have a franchise attorney review Item 3 carefully in any FDD you consider.