Explanation

Because Refresh is a new franchise system that only began offering franchises in March 2025, there are no existing or former franchisees. Therefore, there is no historical data in Item 20 to analyze regarding franchisee turnover, terminations, or non-renewals. While not a direct risk, this lack of history means the system's stability and franchisee satisfaction are entirely unproven. You would be among the first to establish this track record.

Potential Mitigations

• Given the lack of franchisee history, consulting with a business advisor to assess the strength of the business model and support structure is crucial.
• Your attorney should advise on negotiating protections, such as performance benchmarks or enhanced support commitments, due to the unproven nature of the system.
• An accountant can help you create financial projections with higher contingency funds to account for the increased risks of a new, untested system.

Explanation

This risk was not identified in the FDD package. Rapid growth can strain a franchisor's ability to provide adequate support to all franchisees. For new systems, it's a future risk to monitor, as explosive growth without a corresponding increase in support staff and infrastructure can lead to franchisee neglect and system-wide problems. Item 20 currently shows zero franchised outlets, so this is not a present concern, but it is a factor to watch.

Potential Mitigations

• It is wise to discuss the franchisor's growth plans and how they intend to scale their support systems with your business advisor.
• Seeking legal counsel to understand your rights if franchisor support diminishes due to rapid expansion is a prudent step.
• An accountant can help you analyze the franchisor's future financial statements to see if they are reinvesting in support infrastructure as the system grows.

Explanation

This risk was not identified in the FDD package. This risk arises when a franchise system is owned by a private equity firm, which may prioritize short-term returns over the long-term health of the brand and its franchisees. Item 1 indicates the franchisor is a standard limited liability company without disclosing any private equity ownership.

Potential Mitigations

• Your attorney can help you verify the ownership structure of the franchisor to confirm the absence of private equity involvement.
• Engaging a business advisor to research a private equity firm's track record with other franchise systems is a wise step if one is involved.
• Consulting an accountant is useful for analyzing how a potential sale of the franchise system could impact your financial obligations and return on investment.

Explanation

This risk was not identified in the FDD package. The franchisor, Refresh, does not appear to have a parent company that requires disclosure under franchise law. It is a newly formed entity, but its ownership structure seems straightforward as presented. Therefore, the risk of hidden financial weaknesses or obligations from an undisclosed parent entity is not apparent from the document.

Potential Mitigations

• A review of the franchisor's corporate documents by an attorney can confirm its ownership structure and the absence of a controlling parent entity.
• An accountant can help analyze whether a franchisor's financial stability appears dependent on an unstated guarantee from another party.
• It's prudent to have your business advisor confirm the key decision-makers and influencers within the franchisor's organization.

Explanation

This risk was not identified in the FDD package. Item 1 states that Refresh has no parent or predecessor company. The franchisor entity was newly formed to franchise the concept. Therefore, there is no risk of inheriting historical problems, litigation, or high franchisee turnover from a prior operator of the franchise system. You will be part of the initial group of franchisees establishing the company's history.

Potential Mitigations

• Your attorney can verify the franchisor's corporate history to confirm the lack of any predecessors.
• While there is no predecessor history, a business advisor can help research the business history of the individual founders.
• An accountant can help assess the risks associated with a new entity that has no historical financial data to analyze.

Explanation

This risk was not identified in the FDD package. Item 3 states there is no litigation required to be disclosed. As a new franchisor with no operating franchisees, the company has not yet had the opportunity to engage in litigation with franchisees or be sued by them. While this is positive, it also means there is no track record to evaluate how the franchisor handles disputes.

Potential Mitigations

• Your attorney should review the dispute resolution clauses in the Franchise Agreement to understand how future conflicts will be handled.
• A discussion with a business advisor about the potential for disputes in a new franchise system can help you prepare for future possibilities.
• An accountant can help you budget for potential legal costs, as disputes can arise in any business relationship.