Explanation

The franchise program began in February 2020. While it has grown to over 1,000 units, it is still a relatively young system. A newer system may have business practices and support structures that are less developed than those of more mature franchise brands. This presents a risk that certain operational aspects may still be evolving as the system matures.

Potential Mitigations

• A thorough review of the management team's prior industry and franchising experience with your business advisor can provide valuable context.
• It is important to speak with some of the earliest franchisees to understand how the system and the support have evolved.
• Having your accountant review the franchisor's financials is crucial to assess the capitalization and stability of the relatively new enterprise.

Explanation

This risk was not identified in the FDD package. The business model, which supports existing retail shipping and business centers, is based on a well-established industry rather than a fleeting trend. However, you should always consider the long-term demand for any business's products and services, as market conditions can change over time, potentially affecting profitability even in established industries.

Potential Mitigations

• Your business advisor can help you conduct independent market research to assess the long-term demand and competitive landscape for this industry.
• Review the franchisor's plans for innovation and adaptation to market changes with your financial advisor.
• It is prudent to evaluate how the business model might perform during different economic cycles.

Explanation

This risk was not identified. Item 2 indicates that the key executives of PBC, LLC (PBC) have been with the company since its inception and previously held similar, long-term roles at the affiliate, Retail Shipping Associates, since as early as 2007. This suggests the management team has significant experience in this specific industry, which is a positive factor for a prospective franchisee.

Potential Mitigations

• It is still advisable to research the business reputation and track record of the key executives listed in Item 2.
• Asking existing franchisees about their direct experiences with the management team can provide valuable insight.
• A business advisor can help you assess how the leadership's experience aligns with the company's strategic direction.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor is wholly owned by PBC Capital, Inc., but there is no information suggesting this parent is a private equity firm. The dynamics of a franchise system can sometimes change under private equity ownership, which often has different investment timelines and strategic goals than a founder-led or family-owned company.

Potential Mitigations

• When evaluating any franchise, it is useful to understand the ownership structure with the help of your attorney.
• A business advisor can help research the ownership history and track record of any parent company.
• Asking franchisees about their experience with the ownership group provides direct insight into their priorities and support.

Explanation

This risk was not identified. Item 1 discloses the parent company, PBC Capital, Inc., and Item 21 financial notes explain that this parent has committed to providing the necessary funding to alleviate the 'Going Concern' issue. While the parent's financial statements are not provided, their existence and role are disclosed. In some cases, the financial health of a parent company can be crucial to the stability of the franchisor subsidiary.

Potential Mitigations

• An attorney should review the disclosures to ensure compliance with requirements regarding parent company information.
• An accountant should analyze any guarantees or financial support offered by a parent to the franchisor.
• It is beneficial to ask the franchisor about the relationship and financial interdependence between the parent and the franchisor entity.

Explanation

This risk was not identified. Item 1 discloses that PBC, LLC is the successor to a Delaware LLC of the same name, but explains this was part of a reorganization to move the company's home state to Texas. No negative history associated with a predecessor is indicated. A franchisor's history, including any previous business transfers or rebrandings, can be an important part of your due diligence.

Potential Mitigations

• Your attorney should always carefully review any predecessor information disclosed in Items 1, 3, and 4 of an FDD.
• In any franchise review, asking long-term franchisees about their experience under any former ownership can be very insightful.
• A business advisor can help you research the history of the brand and any predecessor companies.

Explanation

This risk was not identified in the FDD package, as Item 3 states, 'No litigation is required to be disclosed in this Item.' The absence of significant litigation, particularly lawsuits from franchisees alleging fraud or misrepresentation, is a positive indicator. A pattern of such litigation in an FDD would be a major red flag about the franchisor's practices and relationship with its franchisees.

Potential Mitigations

• It is always prudent to have your attorney review the litigation history in any FDD you consider.
• You can conduct independent online searches for news articles or other public information regarding litigation involving the franchisor.
• Asking current and former franchisees about any disputes, even those not rising to the level of litigation, can be informative.