Explanation

This specific risk was not identified in the FDD Package. The document does not show an unusually high number of franchisee terminations, non-renewals, or other cessations of business. Item 20 data reveals a franchisee churn rate below 3% for 2024, which is not alarming. Nevertheless, understanding the reasons for any closures is a key part of due diligence.

Potential Mitigations

• It is wise to have your accountant analyze the three-year trend data in Item 20 to confirm system stability.
• Speaking with former franchisees from the provided contact list can provide valuable insight into why they left the system.
• A business advisor can help you compare these turnover rates against industry benchmarks for context.

Explanation

This specific risk was not identified in the FDD Package. PSP began franchising in 1991 through a predecessor and has an extensive operational history with hundreds of franchised and company-owned stores. Therefore, it is not considered a new or unproven system. Evaluating the franchisor's experience and track record is a fundamental step in assessing the stability of any franchise investment.

Potential Mitigations

• A thorough review of the management team's background in both the specific industry and franchising is a task for your business advisor.
• You should ask your accountant to review the financial history over several years to gauge the system's maturity and stability.
• Consulting with your attorney about the legal history in Item 3 can provide further context on the system's track record.

Explanation

This specific risk was not identified in the FDD Package. The pet supply industry is a large, established market and is not considered a fad. However, any business must adapt to changing consumer trends and competition. Evaluating a business concept's long-term sustainability is a crucial part of any investment decision.

Potential Mitigations

• To assess long-term market demand, consider working with your business advisor to research industry trends.
• It is wise to review the franchisor's history of innovation and adaptation disclosed in Item 1 and Item 11.
• An accountant can help you model the potential financial impact of market shifts on your business.

Explanation

This specific risk was not identified in the FDD Package. Item 2 indicates that the key executives of PSP have extensive, long-term experience within the company and the pet supply industry. For example, the CEO has been with the company since 2012. This level of experience is generally a positive factor, as management's expertise is vital for providing effective support and strategic direction.

Potential Mitigations

• A business advisor can help you evaluate the backgrounds of the management team listed in Item 2.
• It is still prudent to ask existing franchisees about their direct experiences with the leadership team's support and guidance.
• Your attorney can help you understand the implications of any recent management changes.

Explanation

This specific risk was not identified in the FDD Package. Item 1 clearly discloses the parent companies, up to Franchise Group, Inc. Furthermore, Item 21 and Exhibit E provide audited financial statements for the franchisor entity itself, PSP Franchising, LLC, which is appropriate. Full disclosure of parent companies and their financials, when required, is crucial for assessing the complete financial picture and any potential risks from affiliated entities.

Potential Mitigations

• Your attorney can help you verify the corporate structure if there's any suspicion of an undisclosed controlling entity.
• An accountant should confirm if the provided financials are sufficient and appropriate given the corporate structure.
• If a parent company guarantees any obligations, your attorney should ensure that arrangement is clearly documented.

Explanation

This specific risk was not identified in the FDD Package. Item 1 discloses a predecessor, Pet Supplies “Plus”/USA, Inc., and notes that historical information before September 2010 relates to this entity. The disclosure appears straightforward. A clear understanding of a system's history, including any challenges under previous owners, is important for a complete risk assessment.

Potential Mitigations

• It is prudent to have your attorney carefully review any predecessor information provided in the FDD.
• You can conduct independent research on the predecessor's history and reputation with the help of a business advisor.
• Asking long-term franchisees about their experience under any previous ownership can provide valuable context.