Explanation

This risk was not identified in the FDD package. The data in Item 20 clearly shows the franchise system has been shrinking significantly over the past three years, not growing rapidly. Rapid growth can strain a franchisor's ability to provide adequate support to its franchisees. While this specific risk is not present, the opposite problem of rapid decline is a major concern.

Potential Mitigations

• When evaluating any franchise, asking your business advisor to assess the sustainability of its growth or decline is a crucial step.
• It is wise to have your accountant review the franchisor's financial capacity to support its current number of franchisees, whether growing or shrinking.
• Your attorney can review the franchisor's contractual support obligations to ensure they are clearly defined, regardless of system size.

Explanation

This risk was not identified in the FDD package. NHance, Inc. (NHI) began franchising in 2013, and its affiliate and predecessor, Chem-Dry, Inc., has been franchising since the 1970s. The system has a long operational history and cannot be considered new or unproven. However, its recent performance indicates significant challenges despite its maturity.

Potential Mitigations

• For any franchise opportunity, particularly new ones, it's essential to have a business advisor help you vet the business model's track record.
• An accountant's review of the financials is critical to determine if a new system has adequate capitalization.
• Your attorney should scrutinize the experience of the management team listed in Item 2 for any new franchise system.

Explanation

This risk was not identified in the FDD package. The franchise operates in the wood refinishing and renewal industry, which is a segment of the broader, established home services market. This type of business relies on ongoing homeowner needs for maintenance and renovation and does not appear to be based on a short-term trend or fad.

Potential Mitigations

• A business advisor can help you conduct independent market research to assess the long-term consumer demand for any franchise's products or services.
• Reviewing a franchisor's plans for research and development in Item 11 with your business advisor can reveal their strategy for staying relevant.
• An accountant can help you analyze the financial stability of the business model beyond temporary trends.

Explanation

This risk was not identified in the FDD package. The executive team detailed in Item 2 appears to have significant experience in both franchising and the home services industry. For instance, the President is a former franchisee of the same system, and other key leaders have long tenures with the parent company, BELFOR, and its affiliated brands. Inexperience in management does not appear to be a risk here.

Potential Mitigations

• A thorough review of the executive biographies in Item 2 with a business advisor is a key step in evaluating any franchise.
• Speaking with current franchisees about their perception of the management team's competence and support is valuable due diligence.
• Your attorney can help assess whether the management team's experience is relevant to the specific challenges of the franchise system.

Explanation

This risk was not identified in the FDD package. Item 1 clearly outlines the corporate structure, identifying NHance, Inc.'s parent companies, including BELFOR (USA) Group, Inc. and BFG Holdco, Inc. Furthermore, Item 21 provides audited financial statements for the guarantor, BFG Holdco, Inc., ensuring financial transparency for the entity backing the franchisor's performance.

Potential Mitigations

• It is important to have your attorney verify the corporate structure and identify all parent companies and affiliates listed in Item 1.
• An accountant should confirm that the financial statements provided in Item 21 are for the correct entity, especially if a parent company guarantee is involved.
• If a parent company is not disclosed but suspected, your attorney can advise on how to seek more information.

Explanation

This risk was not identified in the FDD package. Item 1 discloses the franchise's history, including its development by and transfer from a predecessor, Chem-Dry, Inc. (CDI). While the history is complex, the FDD does not appear to be hiding or downplaying any specific negative historical events, like bankruptcy or litigation, associated with the predecessor.

Potential Mitigations

• Your attorney should always carefully review Item 1 for any mention of predecessors and cross-reference with Items 3 and 4 for related litigation or bankruptcy.
• A business advisor can help you research a predecessor's history and reputation independently.
• When possible, speaking with long-term franchisees who operated under a predecessor can provide valuable historical context.