Explanation

This specific risk was not identified in the FDD Package. Item 20 data does not show a high rate of franchisee terminations, non-renewals, or other cessations. However, because the system only began franchising in 2023, this data reflects a very short operational history and may not be a reliable indicator of long-term franchisee success or satisfaction. A stable turnover rate is crucial as high turnover can signal systemic problems with profitability or support.

Potential Mitigations

• Your business advisor can help you monitor franchisee turnover rates in future FDDs to spot any emerging negative trends.
• Speaking with current franchisees about their satisfaction and profitability is a key due diligence step your attorney can help facilitate.
• An accountant can help you calculate the system's churn rate from Item 20 data in subsequent years.

Explanation

This risk was not identified in the FDD Package. The growth rate shown in Item 20, from zero to seven operating franchises over a two-year period, does not appear to be excessively rapid. A manageable growth pace is important because it suggests the franchisor can scale its support systems, such as training and operational assistance, to meet the needs of its new franchisees without being overwhelmed, which is a positive indicator for the system's stability.

Potential Mitigations

• Discussing the franchisor's controlled growth strategy with a business advisor can provide insight into their long-term plans.
• Asking current franchisees about the quality and responsiveness of franchisor support can validate that growth has not overwhelmed the system.
• Your accountant can help you review future FDDs to ensure growth remains sustainable.

Explanation

This risk was not identified in the FDD package. The roofing and exterior services industry is a mature and established market, not a business model based on a fleeting trend or fad. This suggests a greater likelihood of sustained consumer demand over the long term, which is a positive factor for the potential stability of your investment.

Potential Mitigations

• Your business advisor can help you research the local demand and competitive landscape for roofing services in your specific market.
• It is wise to have an accountant help you develop financial projections based on the stable, long-term nature of the industry.
• A legal review by your attorney can confirm that there are no unusual business model elements that could be considered trendy or unsustainable.

Explanation

This specific risk was not identified in the FDD package. Item 1 indicates the franchisor is owned by DESA Holdings, Inc. and does not mention ownership by a private equity firm. This can be a positive factor, as management decisions may be more focused on the long-term health of the brand and franchisee profitability rather than on short-term returns for outside financial investors.

Potential Mitigations

• Your attorney can help you verify the corporate structure and ownership to confirm the absence of private equity involvement.
• A business advisor can help you analyze the franchisor's strategic direction to ensure it aligns with long-term growth.
• It is prudent to ask current franchisees about their relationship with ownership and the overall corporate culture.

Explanation

This risk was not identified in the FDD package. Item 1 states that the franchisor has no predecessors. This means the entity has not acquired substantial assets from another company in the same line of business or is not the continuation of a prior franchise system under a new name. This simplifies due diligence, as there is no hidden history of litigation, bankruptcy, or franchisee failure from a predecessor entity to investigate.

Potential Mitigations

• Your attorney can help confirm the franchisor's corporate history to ensure no predecessor entities have been omitted.
• A business advisor can help you focus your due diligence on the current management team and the system's recent performance.
• Verifying with long-term franchisees, if any exist, that the system has not undergone a simple rebranding from a prior concept is a prudent step.

Explanation

This specific risk was not identified in the FDD. Item 3 discloses that there is no material litigation involving the franchisor, its predecessors, or its management that requires disclosure. The absence of lawsuits alleging fraud, misrepresentation, or significant disputes with other franchisees is a positive sign, though it is less meaningful for a very new franchise system with a limited operating history.

Potential Mitigations

• Your attorney can perform independent public records searches to verify that no significant litigation has been omitted.
• Asking current and former franchisees about their experiences and any informal disputes is an important part of due diligence that your attorney can help structure.
• A business advisor can help you review future FDDs for any litigation trends that may develop as the system matures.