Explanation

This risk was not identified in the FDD package. Item 20 data shows a net decrease in the number of franchised outlets over the past three years, not rapid growth. Rapid growth can strain a franchisor's ability to provide adequate support to its franchisees, so its absence here is a neutral to positive factor. However, the reasons for the system's lack of growth present a different set of questions.

Potential Mitigations

• When evaluating any franchise, it's wise to have your accountant review Item 20 data to assess the system's growth trajectory.
• Asking a business advisor to help you understand if the franchisor's support infrastructure can handle its current size and any future growth is a key due diligence step.
• You should ask existing franchisees about the quality and timeliness of support with help from your attorney.

Explanation

This risk was not identified. While Safeguard Franchise Sales, Inc. was formed in 2014, its affiliate and the operator of the system, Safeguard Business Systems, Inc., has been in business since 1956. The business model of providing business products and services is well-established. Therefore, this is not considered a new or unproven system.

Potential Mitigations

• When considering a newer franchise system, it is crucial to have your business advisor help you vet the management team's experience in both the industry and in franchising.
• An accountant should be consulted to rigorously assess a new franchisor's capitalization and financial stability.
• Speaking with the earliest franchisees in a new system is a vital step to understand the real-world challenges and level of support.

Explanation

This risk was not identified in the FDD. The franchise offers business-to-business products and services like printed forms and accounting systems. This is a traditional and established market, not one based on a recent or likely fleeting consumer trend. The long operational history of the underlying brand further suggests it is not a fad.

Potential Mitigations

• It is prudent to have a business advisor help you research the long-term market demand and sustainability for any franchise concept.
• Evaluating a business's resilience to economic shifts and changing consumer tastes is a key task for your financial advisor.
• You should ask the franchisor about their plans for innovation and adaptation to stay relevant over the long term.

Explanation

This risk was not identified. The executive team described in Item 2 appears to have significant experience. Many individuals have long tenures with Safeguard, its parent company Deluxe Corporation, or within the broader business services industry. There is no indication of inexperienced management.

Potential Mitigations

• A thorough review of the management team's background in Item 2 with your business advisor is important for any franchise investment.
• Discussing the quality of management's support and strategic direction with current franchisees provides valuable insight.
• Your attorney can help you understand the roles and responsibilities of the key executives listed.

Explanation

This risk was not identified. Item 1 indicates the ultimate parent company is Deluxe Corporation, a publicly traded entity, not a private equity firm. Therefore, the specific risks associated with a private equity ownership model, such as a focus on short-term returns over system health, do not appear to be present here.

Potential Mitigations

• It is important to understand the franchisor's ownership structure, which your attorney can help clarify from Item 1.
• If a franchisor is owned by a private equity firm, a business advisor can help you research the firm's track record with other franchise brands.
• Your accountant can review financials to see if decisions appear to prioritize short-term profits over long-term system investment.

Explanation

This risk was not identified. Item 1 clearly discloses the franchisor's parent companies, Safeguard Holdings, Inc., and the ultimate parent, Deluxe Corporation. There is no indication that required disclosures about parent companies have been omitted.

Potential Mitigations

• Your attorney should verify the franchisor's corporate structure as disclosed in Item 1 to ensure all parent and affiliate entities are properly identified.
• If a parent company guarantees the franchisor's obligations, it is critical that your accountant review the parent's financial statements.
• Understanding the relationships between the franchisor and its affiliates is a key part of due diligence a business advisor can assist with.