Explanation

This risk was not identified in the FDD Package. While the franchising entity is relatively new, its parent and affiliate companies have extensive global operations. Rapid growth can strain a franchisor's ability to provide adequate support to all units, potentially diluting the quality of training, marketing, and operational assistance. This can be a particular concern if financial statements show limited resources allocated to support infrastructure.

Potential Mitigations

• A business advisor can help you evaluate if the franchisor's support systems, as described in Item 11, are robust enough for its current size and growth rate.
• In discussions with current franchisees, it is wise to inquire about the quality and timeliness of the support they currently receive.
• Your attorney can help you understand the franchisor's specific, enforceable support obligations listed in the Franchise Agreement.

Explanation

This risk was not identified in the FDD Package. The business model of providing flexible office space and related services has seen significant growth and has been an established industry for many years. However, all business models face risks from market shifts, such as changes in work-from-home trends or economic downturns affecting demand for office space. A prospective franchisee should evaluate if the concept has long-term viability beyond current trends.

Potential Mitigations

• Engage a business advisor to research the long-term outlook for the flexible and co-working office space industry in your specific market.
• In your due diligence, investigate the brand's resilience and adaptability during past economic cycles by speaking with long-term employees or partners.
• Your financial advisor can help you assess the business model's sensitivity to shifts in commercial real estate trends and corporate office policies.

Explanation

This risk was not identified in the FDD Package. The executive team members listed in Item 2 appear to have long tenures with Regus or its affiliates, suggesting deep experience within the specific industry and company. However, a prospective franchisee should always confirm that the team's experience extends to managing a franchise system and supporting independent owners, which can differ from running company-owned locations.

Potential Mitigations

• It is useful to research the professional backgrounds of the key executives listed in Item 2 to verify their franchising experience.
• When speaking with existing franchisees, inquire about their direct experiences with the management team's accessibility and support.
• A business advisor can help you assess whether the management team's skills align with the needs of a franchise network.

Explanation

This risk was not identified in the FDD Package. The FDD discloses that the franchisor is part of the International Workplace Group (IWG) plc corporate structure, but it does not state that the ultimate parent is a private equity firm. Franchisees in any system should be aware that a future sale to a PE firm could change the franchisor's priorities, potentially shifting focus from long-term brand health to short-term investor returns.

Potential Mitigations

• Your attorney can help you understand the 'Assignment' clause in the Franchise Agreement to see how a sale of the company would affect your contract.
• A business advisor can help you research the ownership structure of the parent company, IWG plc.
• During franchisee validation calls, you could inquire if there have been any past ownership changes and what impact they had.

Explanation

This risk was not identified in the FDD Package. The FDD clearly discloses the relationship with its parent companies, including the ultimate parent, IWG plc. While parent company financials are not provided, the franchisor entity itself provides audited financial statements. The primary financial risk stems not from non-disclosure, but from the disclosed financial dependence on these affiliates, which is addressed in the 'Disclosure of Franchisor's Financial Instability' risk.

Potential Mitigations

• Your accountant should review the disclosed affiliate relationships and the franchisor's own financials to assess financial dependence.
• It is wise to ask the franchisor to clarify the support structure and financial backing provided by its parent companies.
• An attorney can advise on whether the provided disclosures meet all legal requirements regarding parent and affiliate companies.

Explanation

This risk was not identified in the FDD Package. The franchisor, RGN-USF, LLC, states it has no predecessors. The significant history, including the affiliate bankruptcies disclosed in Item 4, relates to affiliated companies within the IWG plc group, not entities from which the franchisor acquired the business. Therefore, the risk of an undisclosed negative history from a direct predecessor is not present.

Potential Mitigations

• An attorney can confirm the corporate history outlined in Item 1 to ensure there are no undisclosed predecessor entities.
• A business advisor can help research the broader history of the Regus brand and its affiliated companies to provide context.
• During validation calls, asking long-term franchisees about the system's history can provide additional perspective.

Explanation

This risk was not identified in the FDD Package. Item 3 states, "No litigation is required to be disclosed in this Item." While surprising for a large system, this indicates there is no current, pending, or recently concluded litigation that meets the specific disclosure requirements under franchise law, such as actions alleging fraud, violation of franchise law, or other material claims. This lack of disclosed litigation is a positive factor, though it does not guarantee future disputes will not arise.

Potential Mitigations

• It is still prudent to ask current and former franchisees about their experiences and whether they are aware of any disputes, even if not disclosed in Item 3.
• Your attorney can explain the specific criteria for litigation that requires disclosure in Item 3.
• A business advisor can help you conduct independent online searches for news or other public information regarding the franchisor.