Explanation

The franchisor’s audited financial statements do not indicate financial instability. Pro One Janitorial, Inc. (Pro One) appears profitable, with positive net worth and substantial revenue not primarily dependent on franchise fees. In general, a financially weak franchisor may be unable to provide support or invest in the brand, jeopardizing your investment. However, that specific risk was not identified in these financial statements.

Potential Mitigations

• A franchise accountant should still review the complete financial statements, including all footnotes, to confirm the financial health and operating trends.
• Discuss the franchisor's financial condition and plans for future system investment with your business advisor.
• Your attorney can help you understand any disclosed financial risks and their potential implications.

Explanation

This specific risk was not identified in the FDD Package. Item 20 data shows very slow and stable system growth, not rapid expansion. Generally, a franchisor growing too quickly may outpace its ability to provide adequate training and support to its franchisees. This can strain resources and negatively impact the quality of the system and brand, but that does not appear to be a concern here.

Potential Mitigations

• A business advisor can help you assess if the franchisor's growth plans are sustainable and align with their support infrastructure.
• During discussions with existing franchisees, it is good practice to ask about the quality and timeliness of the support they receive.
• Your accountant can review the franchisor's financial statements to ensure they have the resources to manage their current system size and any future growth.

Explanation

This risk was not identified. Pro One has been franchising since 1995, as disclosed in Item 1, indicating it is a mature and established system. For new systems, risks can include an unproven business model, lack of brand recognition, and underdeveloped support structures. These risks do not appear to apply in this case due to the franchisor's long history in the industry.

Potential Mitigations

• Engaging a business advisor to review the history of any franchise system is a valuable step in due diligence.
• Speaking with long-term franchisees can provide insight into how the system has evolved and matured over time.
• An attorney can help you understand the implications of a franchise's age and history on your investment.

Explanation

This risk was not identified. The FDD Package describes a business offering janitorial services, which is a well-established industry with consistent demand. A fad business is one based on a short-lived trend, posing a risk of failure once public interest declines. Pro One's business model does not appear to fit this description, suggesting a more stable market presence.

Potential Mitigations

• A business advisor can help you conduct market research to assess the long-term demand for the franchise's products or services in your area.
• Analyzing industry trends with your financial advisor can help determine the stability and longevity of the business concept.
• Your attorney can review the franchise agreement to ensure you are not locked into a business model that cannot adapt to market changes.

Explanation

This risk was not identified. Item 2 indicates that the franchisor's management team has extensive and long-term experience with the company, with most key personnel having been in their roles for over 20 years. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions and inadequate franchisee support. However, this does not appear to be a concern with Pro One.

Potential Mitigations

• A business advisor can assist in vetting the background and track record of any franchisor's management team.
• Discussing the quality of management support and strategic direction with current franchisees provides valuable, real-world insight.
• Your attorney can help assess whether the management team's experience is adequately reflected in the franchisor's obligations in the agreement.

Explanation

This risk was not identified. The disclosures in Item 1 do not indicate that Pro One is owned by a private equity firm. When a franchisor is PE-owned, there can be a risk that decisions are driven by short-term investor returns rather than the long-term health of the franchise system. This does not appear to be the case here.

Potential Mitigations

• Your attorney can help you investigate the ownership structure of any franchisor to identify potential influences from private equity or other investment firms.
• When applicable, it is wise to research a private equity firm's history with other franchise brands with a business advisor.
• Speaking with franchisees who have experienced a change in ownership can offer insights into the operational and cultural shifts that may occur.

Explanation

This risk was not identified. Item 1 of the FDD clearly states that the franchisor has no parent companies. Failure to disclose a parent company, especially one that guarantees obligations or exercises significant control, can obscure a full understanding of the franchise system's financial backing and stability. This does not appear to be an issue in this FDD.

Potential Mitigations

• Your attorney should always verify the corporate structure disclosed in Item 1 to confirm the identity of any parent or affiliated companies.
• If a parent company exists, it is important to have an accountant review its financial statements if they are provided or required.
• A business advisor can help you understand the potential impact of a parent company's influence on the franchise system's operations.

Explanation

This risk was not identified, as Item 1 states that the franchisor has no predecessors. In cases where a franchisor has acquired the system from a predecessor, there is a risk that negative history, such as litigation or high franchisee failure rates under the previous owner, may not be fully transparent. This does not seem to be a concern with this FDD.

Potential Mitigations

• It is important for your attorney to carefully review any disclosures about predecessors in Items 1, 3, and 4 of an FDD.
• A business advisor can assist in researching the history and reputation of any predecessor entity.
• Speaking with franchisees who operated under a predecessor can provide crucial insights into the system's history and evolution.