Explanation

This risk was not identified in the FDD package. As Rubber Ducky LLC is a new franchisor that only began offering franchises in 2025, there is no history of franchisee turnover to report in Item 20. High turnover is generally a significant red flag indicating potential systemic problems, franchisee dissatisfaction, or lack of profitability within a franchise system. The absence of this data means this specific risk cannot be assessed, but also highlights the lack of a track record.

Potential Mitigations

• Engaging a business advisor to monitor franchisee satisfaction and system stability as the franchise grows is a prudent long-term strategy.
• Discuss with your attorney the importance of establishing strong communication lines with other future franchisees to share experiences.
• Your accountant can help you create financial models that account for the higher risks of an unproven system without historical data.

Explanation

This risk was not identified in the FDD package. As a new system with no existing outlets, there is no history of rapid growth. Unchecked, rapid expansion can strain a franchisor's resources, potentially leading to a decline in the quality of franchisee support, training, and site selection assistance. While not a current issue, it is a potential future risk to monitor if the system begins to sell franchises quickly.

Potential Mitigations

• A discussion with your business advisor about the franchisor's strategic growth plan can provide insight into their capacity for future support.
• It is wise to ask the franchisor directly about their plans for scaling support infrastructure to match franchise sales.
• Your attorney can review the franchisor's contractual support obligations to ensure they are clearly defined.

Explanation

This risk was not identified in the FDD package. The business of rug cleaning and emergency water extraction is a well-established service industry, not a temporary trend or fad. While the brand itself is new, the underlying services have consistent consumer and commercial demand. Therefore, the risk of the entire business concept becoming obsolete due to shifting consumer interests appears low.

Potential Mitigations

• A business advisor can help you research the local market to confirm stable, long-term demand for restoration and cleaning services.
• It is still prudent to ask the franchisor about their plans for service innovation to stay competitive within this established industry.
• Your financial advisor can help assess the long-term economic stability of the cleaning and restoration sector.

Explanation

This risk was not identified in the FDD package. While the franchisor entity is new, the management team detailed in Item 2 has prior executive experience in other, similar franchise systems in the restoration and service industry, such as 1-800-Textiles and 1-800-Packouts. This prior experience in franchising may mitigate some of the risks typically associated with a new franchise system's management.

Potential Mitigations

• In discussions with the franchisor, you should inquire how their past franchise experience will be applied to this new system.
• A business advisor can help you verify the track record and reputation of the management team's prior franchise endeavors.
• Your attorney can review the experience of the management team to assess their qualifications.

Explanation

This risk was not identified in the FDD package. Item 1 and Item 2 do not indicate that the franchisor is owned or controlled by a private equity firm. The management team appears to consist of the founders and principal owners. This avoids risks often associated with private equity ownership, such as a focus on short-term returns over the long-term health of the franchisees.

Potential Mitigations

• It is always a good practice to have your attorney verify the ownership structure of the franchisor entity.
• A discussion with your business advisor can help you understand the potential benefits and drawbacks of different franchisor ownership structures.
• Ask the franchisor directly about their long-term vision for the company and any plans for future sale or ownership changes.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD clearly discloses several affiliate companies, such as 1-800-Textiles and PlumDry Franchises, LLC, which are under common ownership. There is no indication of a hidden or undisclosed parent company whose financial status might be relevant. The franchisor appears to be transparent about its corporate affiliations.

Potential Mitigations

• Your attorney should review the roles and relationships of all disclosed affiliate companies to understand any potential interdependencies or conflicts.
• An accountant can help assess any financial transactions or dependencies between the franchisor and its affiliates.
• A clear understanding of the entire corporate structure is beneficial; a business advisor can help you map this out.

Explanation

This risk was not identified in the FDD package. Item 1 explicitly states that the franchisor does not have any predecessors. This means the current entity did not acquire the system from a prior company, so there is no hidden history of past litigation, bankruptcy, or franchisee failures under a different name to investigate. The system's history begins with the current franchisor.

Potential Mitigations

• Your attorney can confirm the franchisor's corporate history to ensure the 'no predecessor' statement is accurate.
• Understanding that you are evaluating a brand-new system without any historical baggage is a key insight for your business advisor.
• Your due diligence should focus on the experience and track record of the current management team, as advised by your attorney.

Explanation

This risk was not identified in the FDD package. Item 3 of the FDD states that there is no history of litigation involving the franchisor, its predecessors, or its management. The absence of lawsuits, particularly from franchisees alleging fraud or misrepresentation, is a positive indicator for a new system, though it also reflects the lack of an operating history.

Potential Mitigations

• It remains a good practice to have your attorney conduct an independent public records search to verify the 'no litigation' disclosure.
• A business advisor can help you formulate questions for the franchisor about their dispute resolution philosophy.
• Monitoring future FDDs for any emerging litigation trends is a prudent step for any franchisee.