Explanation

This risk was not identified in the FDD package. A stagnant or shrinking franchise system can indicate underlying problems such as low franchisee profitability, declining brand relevance, or a lack of new franchisee interest. While the system experienced a net loss of outlets in the most recent fiscal year, it has shown net growth over the three-year period, so it is not assessed as being in a state of long-term decline.

Potential Mitigations

• Your business advisor can help you analyze the multi-year trends in outlet growth shown in Item 20.
• Discussing the franchise's growth strategy and market saturation with your financial advisor is recommended.
• Posing questions to your attorney about the franchisor's obligations if the system's health deteriorates is a prudent step.

Explanation

This risk was not identified in the FDD package. Qualicare began franchising in 2011 and has an established operational history with franchisees across the country. An unproven system can carry higher risks, including undeveloped support structures, a lack of brand recognition, and an untested business model. Qualicare appears to have moved beyond this initial startup phase, though other risks concerning system health persist and should be considered.

Potential Mitigations

• It is wise to have your business advisor evaluate the franchisor's experience and track record within its specific industry.
• Speaking with the earliest franchisees in the system can provide valuable insight into how the franchisor's support has evolved over time.
• Your accountant can review financial statements to assess if the company's financial health has improved since its early stages.

Explanation

This risk was not identified in the FDD package. A fad business is one tied to a fleeting trend, which can lead to failure once consumer interest wanes. The home healthcare industry, which serves seniors and adults with chronic or acute illnesses, is generally considered to be supported by long-term demographic trends rather than being a short-term fad. However, you should still evaluate the specific service model's long-term viability.

Potential Mitigations

• A business advisor can help you conduct independent research on the long-term demand for home healthcare services in your specific market.
• Understanding the competitive landscape and how the franchisor plans to innovate is a key discussion to have with a business consultant.
• Assessing the business's resilience to economic shifts and changes in healthcare policy with your financial advisor is a prudent measure.

Explanation

This risk was not identified in the FDD package. Inexperienced management can be a significant liability for a franchise system, potentially leading to poor strategic decisions and inadequate franchisee support. The executives listed in Item 2 appear to have extensive prior experience in the franchising sector and related industries, including long tenures at other established franchise concepts. This suggests the leadership team has relevant operational and franchise management experience.

Potential Mitigations

• Validating management's reputation by speaking with current and former franchisees is a valuable due diligence step.
• A business advisor can help you research the track record of the executives and the parent company, Clear Summit Group, Inc.
• During discussions with the franchisor, you can ask direct questions about the management team's philosophy on franchisee support.

Explanation

The FDD in Item 1 identifies Qualicare, Inc., an Ontario corporation, as a predecessor. This entity was acquired by the current franchisor's parent company in 2011. While the history is disclosed, you may not have a complete picture of the system's performance, franchisee relationships, or any litigation or turnover issues that may have existed under that prior ownership. Inherited systemic issues can sometimes persist even after an acquisition.

Potential Mitigations

• Engaging a business advisor to research the history and reputation of the predecessor entity, if possible, can provide additional context.
• You should ask long-term franchisees who have been with the system since before 2011 about their experiences under the previous ownership.
• Your attorney can help you understand if any liabilities or obligations from the predecessor entity could potentially affect the current franchisor.

Explanation

This risk was not identified in the FDD package. Item 3 states, 'No litigation is required to be disclosed in this Item.' This indicates an absence of the specific types of litigation that require disclosure under FTC rules, such as pending actions or prior judgments involving fraud, securities violations, or franchise law. A clean litigation history is a positive indicator, but it does not guarantee future disputes will not arise.

Potential Mitigations

• It is still prudent to have your attorney conduct an independent search for litigation involving the franchisor or its affiliates.
• Asking current and former franchisees about their experiences with disputes, whether they resulted in litigation or not, provides valuable context.
• Understanding the dispute resolution process outlined in Item 17 with your attorney is important for assessing how future conflicts would be handled.