Explanation

This risk was not identified in the FDD Package. The system has grown at a steady, manageable pace, expanding from 11 to 18 total outlets over the last three years. Uncontrolled, rapid growth can strain a franchisor's ability to provide adequate support. You should still verify that the support infrastructure is keeping pace with current growth.

Potential Mitigations

• A discussion with your business advisor can help you evaluate if the franchisor's support infrastructure is adequate for its current size and projected growth.
• Speaking with franchisees who opened at different times can provide insight into the consistency of support.
• Your accountant can review the financials to see if the franchisor is reinvesting in support systems.

Explanation

This risk was not identified in the FDD Package. The pet cremation and memorialization industry serves a consistent, long-term consumer need driven by the human-animal bond, rather than a short-lived trend. However, you should always assess the long-term market dynamics for any business.

Potential Mitigations

• Engaging a business advisor to research local market demographics and long-term demand for these services is a prudent step.
• You should develop a business plan that accounts for potential shifts in consumer preferences or competitive pressures.
• An attorney can help you understand any contractual obligations that would persist if market demand were to decline.

Explanation

This risk was not identified in the FDD Package. The franchisor's President and CEO, Michael Harris, has been involved in the pet cremation industry since 2009 and the funeral industry since 1994, indicating significant industry-specific experience. Evaluating management's background is key to assessing their ability to lead the system.

Potential Mitigations

• It is still advisable to discuss the management team's background and strategic vision with a business advisor.
• In conversations with existing franchisees, inquire about their confidence in the current leadership team.
• Your attorney can help you research the public records of key management personnel for any potential red flags.

Explanation

This risk was not identified in the FDD Package, as there is no disclosure of ownership by a private equity firm. Such ownership can sometimes lead to strategies focused on short-term profits over the long-term health of the brand and its franchisees. It is still important to understand the franchisor's ownership structure and their long-term goals for the system.

Potential Mitigations

• Your attorney should always confirm the full ownership structure of the franchisor entity.
• Engaging a business advisor can help you research the reputation and history of any major corporate owner.
• Discussing the franchisor's long-term vision with both management and existing franchisees is recommended.

Explanation

This risk was not identified in the FDD Package. The FDD appears to properly disclose the relationship between the franchisor, Pet Passages Franchising, Inc., and its affiliates. In some cases, a franchisor might be a thinly capitalized subsidiary, making the financial health of an undisclosed parent company a material fact. Proper disclosure is legally required to assess the full scope of risk.

Potential Mitigations

• An accountant should always review the franchisor's corporate structure and financial statements to assess its stand-alone viability.
• Your attorney can help verify if there are any undisclosed parent companies or guarantors that should have been included.
• It is wise to ask the franchisor to provide an organization chart to clarify relationships between all related entities.

Explanation

This risk was not identified in the FDD Package. The disclosed predecessor, Pet Passages, Inc., was a related licensing company operated by the same founder. The FDD does not indicate a history of acquiring a troubled system or other issues that would be masked by a predecessor structure. Understanding a system's full history is important for assessing inherited risks.

Potential Mitigations

• A business advisor can help you conduct independent research on any disclosed predecessor entities.
• When speaking with long-term franchisees, ask about their experiences under any previous ownership or business structure.
• Your attorney should confirm that the predecessor's litigation and bankruptcy history has been properly disclosed in Items 3 and 4.

Explanation

Item 3 discloses that an affiliate, Pet Passages, Inc., is the plaintiff in a trademark infringement lawsuit to protect its marks against a third party. This is not litigation initiated by franchisees against the franchisor alleging fraud or breach of contract. A franchisor defending its intellectual property can be a positive sign, though litigation always carries some uncertainty and cost.

Potential Mitigations

• Your attorney can review the disclosed litigation and explain its potential impact on the brand's intellectual property.
• Discuss the strength and enforceability of the brand's trademarks with your legal counsel.
• A business advisor can help assess if the litigation reveals any broader competitive weaknesses in the market.