Explanation

This specific risk was not identified in the FDD package. While the system is growing, it is starting from a very small base and does not show the kind of explosive growth that would typically strain the support resources of a more established franchisor. The primary risk here is the newness of the system itself, rather than the speed of its expansion. A prospective franchisee should still monitor growth rates in future FDDs.

Potential Mitigations

• Your business advisor can help you create a plan to monitor the franchisor's growth versus the expansion of their support staff over time.
• Inquiring with your attorney about negotiating for guaranteed support levels in your franchise agreement can provide some protection.
• It is wise to discuss with existing franchisees whether they feel the franchisor's support systems are keeping pace with new unit openings.

Explanation

This risk was not identified in the FDD package. The franchise operates in the non-surgical pain relief and injury rehabilitation sector, which is a component of the broader, established healthcare industry. While specific treatments may evolve, the underlying consumer need for pain management is persistent and not typically considered a short-term fad. The business model appears based on long-term healthcare trends rather than a fleeting novelty.

Potential Mitigations

• Consult with a business advisor who specializes in the healthcare industry to assess the long-term market demand for the specific services offered.
• Your financial advisor can help you evaluate the business's resilience to economic shifts and changing consumer health trends.
• Investigating the scientific and medical community's acceptance of the core treatments offered can provide insight into their longevity.

Explanation

This risk was not identified in the FDD package. A review of Item 1, which details the franchisor, its parents, and affiliates, does not indicate that the franchisor is owned or controlled by a private equity firm. The ownership structure appears to be held by the operational founders and a parent company, EAD NexGenix LLC, without mention of external private equity investment funds.

Potential Mitigations

• It is always a good practice to have your attorney confirm the ownership structure described in Item 1 and ask about any pending sales of the company.
• A business advisor can help you research the background of the parent company and its principals to ensure there are no hidden affiliations.
• Understanding the franchisor's long-term vision, whether PE-owned or not, is a key part of due diligence.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD clearly discloses the existence of a parent entity, EAD NexGenix LLC, and several other affiliates. There is no indication that the franchisor is withholding information about its corporate structure. The audited financial statements provided in Exhibit B are for the franchisor entity itself, as required.

Potential Mitigations

• Your attorney should always verify that the financial statements provided in Item 21 belong to the correct corporate entity you are contracting with.
• An accountant should review whether a parent company financial guarantee is provided and assess its strength if the franchisor's financials are weak.
• If a parent company is also a key supplier, your business advisor should help you evaluate the potential for conflicts of interest.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD explicitly states, "We do not have a predecessor." This indicates that NGF did not acquire the franchise system from a prior entity and is the original developer and offeror of this specific franchise concept. Therefore, there is no predecessor history to analyze for potential issues like litigation, bankruptcy, or franchisee turnover.

Potential Mitigations

• Your attorney should confirm the statements in Item 1 regarding predecessors and the franchisor's formation date.
• Even without a predecessor, a business advisor should help you research the business history of the individual founders listed in Item 2.
• Speaking with the earliest franchisees in the system can provide valuable insight into the company's origins and early operations.

Explanation

This risk was not identified in the FDD package. Item 3 of the FDD states, "No litigation is required to be disclosed in this Item." This indicates that, within the reporting requirements of franchise law, there is no history of material litigation involving the franchisor, its predecessors, or its management that alleges fraud, franchise law violations, or other significant claims. The absence of such litigation is a positive sign but does not guarantee future disputes will not arise.

Potential Mitigations

• Your attorney can conduct an independent public records search to confirm the absence of litigation against the franchisor and its principals.
• Discussing any past or current disputes, even if not material enough for disclosure, with existing franchisees is a prudent due diligence step.
• It is wise to understand the dispute resolution clauses in the Franchise Agreement with your attorney, regardless of the litigation history.