Explanation

This specific risk was not identified in the FDD Package. The franchisor, Next Day Access, LLC, began franchising in 2012, indicating it has over a decade of operational history as a franchise system. An unproven system can pose a risk because the business model, brand recognition, and franchisee support structures may not be well-established, potentially leading to higher failure rates.

Potential Mitigations

• When evaluating any franchise, it is wise to have your business advisor assess the franchisor's operating history and the maturity of its systems.
• Reviewing the business experience of the management team in Item 2 with your attorney can reveal their expertise in franchising.
• An accountant should always review the franchisor's financial statements in Item 21 for signs of stability and sustainable performance.

Explanation

This specific risk was not identified in the FDD Package. The business, which provides accessibility products and services for individuals with physical challenges, addresses a consistent and growing need, suggesting it is not based on a temporary trend. A fad business model carries the risk of a sharp decline in consumer demand after an initial period of popularity, potentially leaving you with a worthless business but ongoing contractual obligations.

Potential Mitigations

• A business advisor can help you research the long-term demand and market trends for any industry you consider entering.
• Investigating the franchisor's commitment to research and development in Item 11 can provide insight into their plans for long-term relevance.
• When analyzing any opportunity, consider the business's resilience to economic shifts and changing consumer tastes with your financial advisor.

Explanation

The business experience of the executive team, as detailed in Item 2, appears to include significant franchising and relevant industry experience. For example, the CEO, J.J. Sorrenti, has extensive prior experience as president of another large franchise system. Inexperienced management can be a risk because it may lead to flawed strategies, inadequate franchisee support, and a higher potential for system-wide problems, even if the core business concept is sound.

Potential Mitigations

• It is always prudent to have your business advisor help you assess the background and track record of the key executives listed in Item 2.
• Speaking with current franchisees can provide valuable, real-world feedback on the management team's competence and responsiveness.
• Your attorney can help you understand the roles of the key personnel and their impact on the franchise relationship.

Explanation

This specific risk was not identified in the FDD Package. The franchisor properly discloses its parent companies, up to the ultimate ownership by funds associated with The Riverside Company. The parent company, CFC Holding Company, LLC, provides a guarantee of performance and its audited financial statements are included in Item 21. Failure to disclose parent companies or their financials when required can obscure the true financial backing and stability of the franchisor.

Potential Mitigations

• Your attorney should always verify that the ownership structure disclosed in Item 1 is clear and that financials for any guaranteeing parent are provided.
• An accountant's review of parent company financials is critical to understanding the overall health of the enterprise supporting your franchise.
• It is wise to ask your business advisor to assess the relationships between the franchisor and its parent and affiliated companies.

Explanation

This specific risk was not identified in the FDD Package. Item 1 states that the franchisor has no predecessors. Hidden or inadequately disclosed history from a predecessor entity could obscure past issues such as high franchisee failure rates, litigation, or bankruptcy, preventing you from having a complete picture of the system's historical challenges. It is crucial for a franchisor to be transparent about the entities from which it acquired the franchise system.

Potential Mitigations

• When evaluating a franchise, your attorney should confirm if there are any predecessors listed in Item 1 and analyze their history in Items 3 and 4.
• If a system was acquired from a predecessor, speaking with long-term franchisees about their experience under the previous ownership is advisable.
• A business advisor can help you conduct independent research on a predecessor's track record if one is disclosed.