Explanation

This risk was not identified in the FDD package. The data in Item 20 indicates the franchise system has been shrinking, not growing rapidly. Rapid, unsupported growth can strain a franchisor's ability to provide adequate training and ongoing assistance to its franchisees, potentially diluting brand quality and support infrastructure. A stable, manageable growth rate is often a healthier sign for a franchise system.

Potential Mitigations

• A business advisor can help you evaluate a franchisor's growth trajectory in relation to its support staff and financial resources.
• In any franchise opportunity, it's wise to ask existing franchisees about their perception of the quality and timeliness of franchisor support.
• Reviewing the franchisor's financials with an accountant can help determine if they have the capital to support their stated growth plans.

Explanation

This risk was not identified. The business concept of a learning and childcare center is a well-established industry with long-term demand. It does not appear to be based on a short-lived trend or fad. Investing in a fad business is risky because consumer interest can disappear, leaving you with a worthless business and ongoing contractual obligations long after the trend has passed.

Potential Mitigations

• For any business concept, it's important to conduct independent market research to assess long-term consumer demand with a business advisor.
• Your financial advisor can help you evaluate a business model's resilience to economic shifts and changing consumer tastes.
• Always question how a franchisor plans to innovate and adapt to keep the brand relevant over the full term of your agreement.

Explanation

The management team detailed in Item 2 appears to have significant experience operating the affiliate-owned Safari Kid locations since 2005. This direct operational experience in the same business model is a positive factor. Inexperienced management can be a major risk, as it may lead to poor strategic decisions and inadequate support for franchisees, even if they have industry experience without franchise system management experience.

Potential Mitigations

• Engaging a business advisor to review the backgrounds of the key management personnel is always a prudent step.
• When speaking with current franchisees, you should inquire about their direct experiences with the management team's competence and responsiveness.
• Your attorney can help you understand the stability of the management team and any recent changes in key personnel.

Explanation

This risk was not identified in the FDD package. The document does not indicate that the franchisor is owned by a private equity firm. Private equity ownership can sometimes introduce risks related to prioritizing short-term returns over the long-term health of the franchise system, potentially leading to increased fees or reduced franchisee support.

Potential Mitigations

• In any franchise investigation, asking about the ownership structure is an important question for your attorney to pose.
• If a system is PE-owned, a business advisor can help research the firm's track record with other franchise brands.
• Speaking with franchisees who have been with a system before and after a PE acquisition can provide valuable insight.

Explanation

This risk was not identified. Item 1 of the FDD does not disclose any predecessors to Safari Kid Franchising, LLC. When a franchisor has predecessors, it is important to scrutinize their history for issues like litigation, bankruptcy, or high franchisee turnover, as these problems could be inherited by the current franchisor and affect the system's health and your investment.

Potential Mitigations

• Your attorney should always confirm the business lineage described in Item 1 and investigate any disclosed predecessors.
• For any franchise with a predecessor, speaking with long-term franchisees who experienced the transition is a critical due diligence step.
• A business advisor can assist in researching the public record and reputation of any predecessor entities.

Explanation

This risk was not identified. Item 3 of the FDD and the New York Addendum state that there is no material litigation involving the franchisor that requires disclosure. A pattern of lawsuits, particularly those initiated by franchisees alleging fraud or misrepresentation, can be a major red flag indicating systemic problems within a franchise organization. The absence of such litigation is a positive indicator.

Potential Mitigations

• It is always a good practice to have your attorney conduct an independent public records search for litigation involving the franchisor.
• Asking current and former franchisees about any past or pending legal disputes is a key part of due diligence.
• Understanding the nature of any disclosed litigation with your attorney is crucial to assessing its potential impact on the system.