Explanation

This specific risk was not identified in the FDD Package. The franchisor's audited financial statements for 2022 and 2023 show profitability and a positive net worth. A franchisor's financial health is critical as it indicates their ability to support you, invest in the brand, and meet their obligations. Weak financials can signal an unstable system and pose a direct risk to your investment. The interim 2024 financials show a loss, which may be due to seasonality.

Potential Mitigations

• A franchise accountant should review the franchisor's audited financial statements for the last three years, including all footnotes, to assess financial stability and trends.
• It is wise to ask your accountant to analyze the franchisor's sources of income to determine if they rely more on ongoing royalties versus one-time franchise fees.
• Engaging a business advisor to discuss the franchisor's financial health in the context of their support obligations is a prudent step.

Explanation

This specific risk was not identified in the FDD Package. Item 20 data does not show excessively rapid growth; in fact, the system has slightly contracted in the most recent year. When a franchise system grows too quickly, a franchisor's support systems for training, site selection, and ongoing assistance can become strained. This may lead to a decline in service quality for all franchisees and dilute the brand's value.

Potential Mitigations

• A business advisor can help you evaluate whether a franchisor's support infrastructure appears adequate for its current size and growth rate.
• In discussions with current franchisees, it's beneficial to ask about their perception of the quality and timeliness of franchisor support.
• Your accountant can review the franchisor's financial statements to see if they are reinvesting in infrastructure to support their franchisees.

Explanation

This specific risk was not identified in the FDD Package. oh DEER Development Corporation (ohDEER LLC) began franchising in 2012 and has over a decade of experience. An unproven system presents higher risks because its business model, brand recognition, and support structures are not yet well-established. Investing in a new franchise can sometimes offer ground-floor opportunities but carries greater uncertainty about long-term viability and profitability.

Potential Mitigations

• When evaluating any franchise, it is prudent to have your business advisor assess the franchisor's track record and the system's maturity.
• Consulting with an attorney to scrutinize the experience and background of the management team as disclosed in Item 2 is a key due diligence step.
• Your accountant can help you model a wider range of financial outcomes to account for the higher uncertainty of a newer system.

Explanation

This specific risk was not identified in the FDD Package. The business model, which provides deer, tick, and mosquito control, addresses a persistent consumer need driven by health and nuisance concerns in many regions. A fad business is one based on a short-lived trend, which can lead to a rapid decline in consumer demand, leaving franchisees with a worthless investment while still being bound by a long-term contract.

Potential Mitigations

• A business advisor can assist you in conducting independent market research to assess the long-term consumer demand for a franchise's products or services.
• Inquiring with the franchisor about their research and development plans can provide insight into their strategy for long-term relevance.
• Your financial advisor can help you evaluate the business model's resilience to economic shifts and changing consumer tastes.

Explanation

This specific risk was not identified in the FDD Package. Item 2 discloses that the key principals have been operating the affiliated business since 2007 and franchising since 2012, indicating significant experience in both the industry and in franchising. Inexperienced management can be a major risk, as it may lead to poor strategic decisions, weak operational systems, and inadequate franchisee support, undermining the value of the brand.

Potential Mitigations

• It's always wise to have your attorney and business advisor review the executive team's background in Item 2.
• Asking current franchisees about their direct experiences with the management team's competence and support provides valuable, real-world insight.
• A thorough review of the FDD for signs of inexperienced management, such as a poorly constructed FDD, is a task for your franchise attorney.

Explanation

This specific risk was not identified in the FDD Package. The disclosures in Item 1 do not indicate that ohDEER LLC is owned or controlled by a private equity firm. When a franchisor is owned by a private equity firm, there can be a risk that decisions are focused on short-term financial returns for investors rather than the long-term health of the brand and the profitability of individual franchisees.

Potential Mitigations

• Your attorney should always verify the ownership structure detailed in Item 1 of the FDD.
• If private equity ownership is present, a business advisor can help you research the firm's reputation and track record with other franchise systems.
• Speaking with franchisees who have operated under private equity ownership can provide crucial insights into any changes in support or operational focus.

Explanation

This specific risk was not identified in the FDD Package. Item 1 discloses the franchisor and its affiliates, but does not mention a parent company. Failure to disclose a parent company, or to provide its financial statements when it guarantees the franchisor's performance, can obscure the true financial stability and control structure of the franchise system. This could hide risks if the franchisor is a poorly capitalized subsidiary of a larger, potentially troubled, entity.

Potential Mitigations

• Your attorney can help you research the corporate structure to confirm the information disclosed in Item 1.
• If a parent entity exists and provides guarantees, it is critical that your accountant reviews their financial statements for a complete picture of the system's health.
• A business advisor can help you understand the potential implications of complex ownership structures on your franchise.

Explanation

This specific risk was not identified in the FDD Package. Item 1 states the franchisor has no predecessors. A predecessor is a company from which the franchisor acquired the main assets of the business. Full disclosure of a predecessor's history, including any past bankruptcies, litigation, or high franchisee turnover, is required and is crucial for you to understand the full history and potential inherited issues of the franchise system you are joining.

Potential Mitigations

• Your attorney should always confirm the predecessor disclosures in Item 1 of the FDD.
• If a predecessor is identified, conducting independent research on that entity's history can provide valuable context.
• Speaking with long-term franchisees who may have operated under a predecessor can offer unique historical perspective.

Explanation

This specific risk was not identified in the FDD Package. Item 3 discloses no litigation. A pattern of lawsuits filed against the franchisor by franchisees, especially those alleging fraud, misrepresentation, or breach of contract, is a significant red flag. It can indicate systemic problems within the franchise relationship, issues with the business model, or a failure by the franchisor to meet its obligations. It suggests a higher likelihood of future disputes.

Potential Mitigations

• Your attorney should always carefully review the nature, status, and outcomes of any litigation disclosed in Item 3.
• It is wise to ask current and former franchisees about any litigation or disputes they are aware of, even if not disclosed.
• For any disclosed litigation, your attorney can conduct further research into the case filings to understand the specific allegations in greater detail.