Explanation

This risk was not identified in the FDD package. While the system is growing, the rate of adding two to three franchisees per year is not considered excessively rapid. Uncontrolled growth can strain a franchisor's ability to provide adequate support, so its absence here is positive. However, the system's overall newness and financial state present other challenges.

Potential Mitigations

• Engaging a business advisor to evaluate the franchisor’s capacity for future growth against its available resources is a prudent measure.
• Your accountant can review financial statements for signs that expansion costs are negatively impacting franchisee support budgets.
• Legal counsel should review the franchisor's contractual support obligations to ensure they are specific and enforceable.

Explanation

This risk was not identified in the FDD. The business of senior living placement caters to a significant and growing demographic of aging adults and their families. This service addresses a long-term societal need rather than a fleeting trend, suggesting market sustainability. Therefore, the risk of the business being a short-lived fad appears low.

Potential Mitigations

• A business advisor can help you research long-term demographic trends to confirm the sustained demand for senior placement services.
• Analyzing the competitive landscape and the business's differentiators with a marketing consultant can help validate its market position.
• Your financial advisor should assist in creating long-range forecasts that account for market stability.

Explanation

This risk was not identified in the FDD. Item 2 indicates that the key executives have operated a similar business through an affiliate since 2013, demonstrating direct industry experience. Additionally, one co-founder holds a Certified Franchise Executive (CFE) designation, which suggests formal education in franchise management. This experience may reduce risks associated with operational and strategic guidance.

Potential Mitigations

• A business advisor can help you verify the professional backgrounds and specific franchise-related experience of the key executives.
• Inquiring with current franchisees about the quality of management's guidance and support provides direct validation.
• Your attorney can confirm if the management team's experience aligns with the support obligations outlined in the contract.

Explanation

This risk was not identified in the FDD. Item 1 indicates the franchisor is a subsidiary of OBT Corporation and does not mention any ownership by a private equity firm. The risks associated with private equity ownership, such as a focus on short-term returns over franchisee health, do not appear to be present in this ownership structure.

Potential Mitigations

• Your attorney should confirm the ownership structure of the franchisor and any parent companies.
• Discussing the franchisor's long-term vision and commitment to the brand with a business advisor is always recommended.
• An accountant can analyze the financial statements for signs of aggressive, short-term financial engineering, regardless of ownership type.

Explanation

This risk was not identified in the FDD. Item 1 clearly discloses the parent company, OBT Corporation. While the parent company's financial statements are not included, the franchisor entity provides its own audited financials. The lack of a parent guarantee is a separate financial stability risk, but the identity of the parent is not concealed.

Potential Mitigations

• Your attorney should review the relationship between the franchisor and its parent to understand any dependencies or obligations.
• It is important for your accountant to analyze the franchisor's financials on a standalone basis, noting any reliance on affiliate support.
• A business advisor can help you assess the operational impact of the parent company on the franchise system.

Explanation

This risk was not identified in the FDD. Item 1 does not disclose any legal predecessors from which OBT acquired its business. The document references an affiliate, CSLS, which has been in a similar business since 2013, but this entity is disclosed as an affiliate, not a predecessor. Therefore, there are no apparent risks from a hidden or problematic history of a prior company.

Potential Mitigations

• Your attorney can verify the franchisor's corporate history to ensure no predecessor entities have been omitted.
• A discussion with a business advisor can help you understand the relationship and history of all affiliated companies mentioned in Item 1.
• Inquiring with long-tenured employees or contacts, if possible, can sometimes provide additional historical context.

Explanation

This risk was not identified in the FDD. Item 3 explicitly states that no litigation is required to be disclosed. The absence of pending or recent material litigation against the franchisor, especially involving claims of fraud or breach of contract from other franchisees, is a positive indicator and suggests a lower risk of systemic legal disputes.

Potential Mitigations

• Your attorney can conduct an independent search of public court records to verify the absence of litigation.
• Asking current and former franchisees about their experiences and any past disputes, even if not formal litigation, is wise due diligence.
• A business advisor can help you evaluate the overall health of franchisee-franchisor relations within the system.