Explanation

This risk was not identified, as New Life LLC is new and has no history of franchisee turnover. In established systems, high turnover disclosed in Item 20 can signal problems like unprofitability or franchisee dissatisfaction. You will be one of the first franchisees, which carries its own set of risks related to the unproven nature of the franchise system. This means you cannot learn from the experiences of past franchisees.

Potential Mitigations

• A business advisor can help you understand the unique risks and potential rewards of being an early franchisee in a new system.
• Discussing the franchisor's long-term vision and franchisee support plans is crucial for any prospective franchisee.
• Your accountant can help you model different financial scenarios, given the lack of historical franchisee performance data.

Explanation

This risk was not identified, as the franchise system has not yet started to grow. For established systems, rapid growth can strain a franchisor's ability to provide adequate support. As a pioneering franchisee, your concern is less about strained resources from growth and more about whether New Life LLC has sufficient resources to support you and attract future franchisees to build the brand.

Potential Mitigations

• Question the franchisor about their controlled growth strategy and the resources allocated to support the initial group of franchisees; a business advisor can help evaluate their plans.
• Your accountant should review the franchisor's financials to assess if they have the capital to support future growth.
• Engaging an attorney to understand the franchisor's contractual support obligations is a wise step.

Explanation

This risk was not identified. The assisted living and senior care industry is supported by long-term demographic trends and is not considered a fad. For franchises in newer or trend-driven sectors, there is a risk that consumer interest could decline, leaving you with a long-term contract for a business with waning demand. This does not appear to be a concern for this business model.

Potential Mitigations

• A business advisor can help you research long-term industry trends and demand in your local market.
• Understanding a business model's resilience to economic cycles is a key piece of due diligence an accountant can assist with.
• Your attorney can review the franchise agreement to ensure there are no unusual long-term obligations that would be problematic if market demand were to shift unexpectedly.

Explanation

This risk was not identified in the FDD. The franchisor appears to be founder-operated and not owned by a private equity firm. In cases of PE ownership, there can be a risk that decisions are driven by short-term financial targets for investors, potentially at the expense of long-term franchisee success and support. This is not a disclosed concern for this franchise.

Potential Mitigations

• It is always wise to have your attorney research the ownership structure of any franchisor to understand who is making decisions.
• A business advisor can help you understand the potential pros and cons of different franchisor ownership models.
• Reviewing a franchisor's long-term strategic plans with existing franchisees can provide insight into their priorities.

Explanation

This risk was not identified, as New Life LLC clearly states in Item 1 that it has no parent company, though a related affiliate is disclosed. In situations where a franchisor is a subsidiary of another company, the financial stability and influence of the parent company become critical. A failure to disclose a parent or its financials when required can hide significant risks from a prospective franchisee.

Potential Mitigations

• Your attorney can verify the corporate structure disclosed in Item 1 to confirm the absence of an undisclosed parent company.
• It is good practice to have an accountant review the financial statements to ensure they are for the correct legal entity offering the franchise.
• In any franchise review, understanding the role and financial stability of all related affiliates is a task a business advisor can assist with.

Explanation

This risk is not present, as New Life LLC discloses in Item 1 that it has no predecessors. When a franchisor acquires a business from a predecessor, it is important to scrutinize the predecessor's history for issues like litigation, bankruptcy, or high franchisee failure rates, as these can indicate underlying problems with the system that may have been inherited by the current franchisor.

Potential Mitigations

• Your attorney should always verify the franchisor's statements about predecessors in Item 1.
• If a predecessor did exist, researching their history through public records and franchisee interviews would be a critical due diligence step for your business advisor.
• An accountant can analyze historical financial data, if available from a predecessor, to identify any negative trends.

Explanation

This risk was not identified, as Item 3 of the FDD discloses no litigation history. For other franchises, a pattern of lawsuits filed by franchisees alleging fraud or by the franchisor against franchisees can be a major red flag. It may indicate systemic problems with the franchise relationship or business model. The absence of litigation is a positive sign, though expected for a new system.

Potential Mitigations

• It is always a good practice to have your attorney conduct an independent public records search for litigation involving the franchisor or its principals.
• Discussing any past or pending legal issues with current franchisees is a vital part of due diligence.
• A business advisor can help you assess the nature of any disclosed litigation and its potential impact on the franchise system.