Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support. However, Pro Image's recent data in Item 20 shows a net decrease in the number of units in the most recent year, suggesting that overly rapid expansion is not a current primary risk.

Potential Mitigations

• A business advisor can help you review the franchisor's growth plans and assess if their support infrastructure is adequate for future expansion.
• Speaking with franchisees who joined at different times can provide insight into the consistency of franchisor support.
• Your accountant should review the franchisor's financial statements to evaluate their capacity for funding and managing growth.

Explanation

This risk was not identified in the FDD package. Pro Image has been franchising since 1985, indicating it is an established system with a long operational history. New or unproven systems carry higher risks related to unverified business models and potential instability, but that does not appear to be the case here.

Potential Mitigations

• Engaging a business advisor is useful for evaluating the history and maturity of any franchise system.
• It is always prudent to have your franchise attorney review the FDD for any signs of recent, fundamental changes to an established business model.
• An accountant can analyze financial statements to confirm the stability that a long history implies.

Explanation

The business model, retail of licensed sports apparel, is well-established and generally tied to the ongoing popularity of professional and collegiate sports rather than a short-term trend. This suggests a lower risk of the business being a fad with limited long-term viability. Your success will likely depend more on local market factors and competition.

Potential Mitigations

• A business advisor can help you research the long-term stability and local demand for sports apparel in your target market.
• Investigating local competition and market saturation is a key step before committing to this or any retail business.
• Consulting a financial advisor is recommended to assess the business model's resilience to economic shifts.

Explanation

This risk was not identified in the FDD package. Item 2 discloses that the key executives have extensive, long-term experience with Pro Image, with tenures dating back to 1998, 2005, and 2007. This suggests a stable and experienced management team is in place, which is a positive factor for a prospective franchisee.

Potential Mitigations

• It is still beneficial to discuss the management team's vision and strategy during your validation calls with existing franchisees.
• A business advisor can help you research the reputation of the key executives within the franchise industry.
• Verifying the management team's background as disclosed in Item 2 is a standard part of due diligence your attorney may assist with.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that Pro Image is owned by a private equity firm. Franchisees in PE-owned systems may face risks related to priorities that favor short-term investor returns over the long-term health of franchisees, but that does not appear to be a factor here.

Potential Mitigations

• Your attorney should always confirm the ownership structure disclosed in Item 1 to identify any controlling entities.
• If a franchisor is PE-owned, a business advisor can help research the firm's history with other franchise brands.
• It is wise to ask existing franchisees about any recent changes in ownership and the impact on the system.

Explanation

This risk was not identified in the FDD package. Item 1 does not disclose any parent companies for Pro Image. Therefore, the risk of a parent company's financial health or influence being hidden is not applicable. The provided financial statements in Item 21 are for the franchisor entity itself.

Potential Mitigations

• When analyzing any FDD, your attorney should verify the corporate structure and identify any parent companies.
• If a parent company exists and guarantees the franchisor's performance, an accountant's review of the parent's financial statements is critical.
• A business advisor can help you understand the relationships between a franchisor and its parent or affiliates.

Explanation

This risk was not identified in the FDD package. Item 1 mentions a former name (PI Acquisition, L.C.) and a previous franchise concept (

Potential Mitigations

• Having your attorney review the disclosed history of any predecessor is a crucial due diligence step.
• A business advisor can assist in researching a predecessor's public reputation and historical performance.
• It is helpful to ask long-tenured franchisees about their experiences under any prior ownership or brand names.

Explanation

This risk was not identified in the FDD package. Item 3 states there is no litigation required to be disclosed. The absence of a pattern of lawsuits, particularly those from franchisees alleging fraud or misrepresentation, is a positive indicator. This suggests a healthier relationship between the franchisor and its franchisees.

Potential Mitigations

• Your attorney should always review Item 3 carefully for any disclosed litigation and its potential implications.
• A business advisor can help you conduct independent searches for litigation not required to be disclosed in the FDD.
• Asking current and former franchisees about their experiences with disputes is an important part of your due diligence.