Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support. In this case, however, the opposite trend is observed; Item 20 data indicates the system is contracting rather than expanding rapidly. Therefore, the specific risks associated with outpacing support infrastructure are not a primary concern here, though the reasons for the contraction present a different set of risks.

Potential Mitigations

• While rapid growth is not an issue here, asking current franchisees about the quality and consistency of franchisor support remains a crucial due-diligence step.
• Your business advisor can help you analyze the franchisor's strategic plan to understand their goals for future growth or stability.
• A review of the franchisor's financials with your accountant can provide insight into their capacity to support the existing system.

Explanation

This risk was not identified in the FDD package. A fad business is tied to a fleeting trend, which is risky. The business of providing investment and retirement advisory services is a well-established, long-term industry. While specific strategies or products may evolve, the core need for retirement planning is not considered a fad. Therefore, this specific risk is not applicable to the fundamental business model being offered.

Potential Mitigations

• A business advisor can help you assess the long-term market demand for financial advisory services in your specific geographic area.
• It is still wise to discuss the franchisor's plans for innovation and adaptation to changing market regulations and investment products with their team.
• Evaluating the sustainability of any business model against economic cycles with your financial advisor is always a prudent step.

Explanation

This risk was not identified in the FDD package. The executives detailed in Item 2 appear to have extensive prior experience in the financial services and investment industry. For example, the CEO, David Scranton, has been the owner of a financial group since 1987, and the President, Patrick Farrell, has a long history in executive roles at other investment firms. This suggests the management team possesses relevant industry knowledge, although experience in managing a franchise system specifically should still be investigated.

Potential Mitigations

• Your business advisor can help you conduct further research on the backgrounds of the key management personnel.
• When speaking with current franchisees, specifically inquire about their perception of the management team's competence and support.
• It is beneficial to ask the franchisor how their past industry experience translates to supporting franchisees.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor is owned by Sound Income Group, which appears to be the operational parent company founded by the same individual, David Scranton. The FDD does not disclose ownership by a private equity firm. Therefore, the specific risks associated with short-term PE exit strategies and priorities are not directly applicable here. The ownership structure appears to be founder-led.

Potential Mitigations

• Your attorney can help verify the corporate structure and ownership of the franchisor and its parent company.
• Engaging a business advisor to research the history and reputation of the parent company, Sound Income Group, is a sound due diligence step.
• It is always prudent to ask the franchisor about their long-term vision and any plans for future sale of the company.

Explanation

This risk was not identified in the FDD package. Item 1 clearly identifies the parent company, Sound Income Group. Item 21 and the attached financial statements in Exhibit D pertain to the franchisor entity, Retirement Income Source, LLC. While the parent's financials are not provided, there is no indication that the parent guarantees the franchisor's obligations in a way that would legally mandate their inclusion. The franchisor's own financials, which show significant weakness, are provided and audited.

Potential Mitigations

• Your accountant should review the provided franchisor financials and note the dependency on the parent company, as seen in the non-cash transaction.
• It is important to understand the relationship between the franchisor and its affiliates, as your attorney can explain.
• Asking the franchisor for financial statements of the parent company could provide a more complete picture of the overall enterprise's health.

Explanation

This risk was not identified in the FDD package. Item 1 states clearly, "We do not have any predecessors." This indicates that RIS did not acquire the business from a prior entity and is the original franchisor of this system. Therefore, there are no concerns about hidden negative history, litigation, or high franchisee turnover associated with a predecessor entity that are being obscured.

Potential Mitigations

• Your attorney can verify the corporate history of Retirement Income Source, LLC to confirm the accuracy of the 'no predecessors' statement.
• A business advisor can assist in researching the operating history of the franchisor's affiliates, which have been in business longer.
• Even without predecessors, it is critical to perform thorough due diligence on the franchisor's own history as disclosed in Items 3, 4, and 20.

Explanation

This risk was not identified in the FDD package. Item 3 of the FDD states, "No litigation is required to be disclosed in this Item." This indicates that in the last fiscal year, there has been no material litigation involving the franchisor, its predecessors, or key personnel that alleges franchise law violations, fraud, or other similar claims. The absence of such disclosed litigation is a positive factor, suggesting a lack of systemic legal disputes with franchisees.

Potential Mitigations

• Your attorney can conduct independent public records searches to verify the absence of significant litigation.
• It is always a good practice to ask current and former franchisees about any disputes they may have had, even if not formal litigation.
• Engage legal counsel to review the entire FDD for any other potential areas of dispute not captured in Item 3.