Explanation

This risk was not identified in the FDD package. Rapid, uncontrolled growth can strain a franchisor's ability to provide adequate support. Evaluating the franchisor's growth plans against its support infrastructure is a key part of due diligence. While not an issue here, you should still assess whether the franchisor's current support systems are robust and well-regarded by existing distributors.

Potential Mitigations

• A business advisor can help you evaluate the franchisor's capacity to support its existing and future distributors effectively.
• Speaking with a range of current distributors can provide insight into the quality and responsiveness of the franchisor's support services.
• Your accountant can review the franchisor's financials to assess whether they are investing adequately in support infrastructure.

Explanation

This risk was not identified in the FDD package. The business model, which involves selling a wide range of essential business products like forms, checks, and promotional items, is based on sustained, long-term business needs rather than a fleeting trend. The core business has been operating since 1956, indicating a stable market demand. However, you should still consider how the business adapts to technological changes, such as the shift from print to digital.

Potential Mitigations

• A business advisor can help you analyze the long-term market demand for the specific products and services in your area.
• Understanding the franchisor's strategy for innovation and adaptation to market changes is a key discussion point.
• Consider working with your financial advisor to assess the business model's resilience to economic shifts and technological disruption.

Explanation

This risk was not identified in the FDD package. The management personnel listed in Item 2 appear to have significant experience within the franchise system and its parent company, Deluxe Corporation. Several executives have long tenures, suggesting a stable leadership team with deep knowledge of the business. However, verifying the quality of support delivered by this team through franchisee interviews is still a crucial due diligence step.

Potential Mitigations

• It is still prudent to discuss the management team's reputation and effectiveness with current franchisees.
• A business advisor can help you assess whether the management team's skills align with the support you will need.
• Your attorney can help you frame questions for the franchisor about management's long-term vision for the system.

Explanation

This risk was not identified in the FDD package. The ultimate parent is Deluxe Corporation, a public company, not a private equity firm. This structure may suggest a focus on long-term brand health rather than the short-term exit strategies often associated with private equity ownership. Nonetheless, as a public company, decisions will still be driven by shareholder value, which can affect franchisee support and system investment.

Potential Mitigations

• It is still beneficial to have your business advisor research Deluxe Corporation's history and its management of other subsidiary brands.
• Discussing the corporate ownership structure and its impact on the franchise system with your attorney provides important context.
• Speaking with current franchisees about their experiences under the current corporate ownership can reveal potential cultural or operational impacts.

Explanation

This risk was not identified in the FDD package. The FDD clearly discloses the parent companies, Safeguard Holdings, Inc. and the ultimate parent, Deluxe Corporation. The franchisor's audited financial statements are provided. While there is no separate parent company financial guarantee, the operational structure is described, making the relationship clear. The primary risk stems from reliance on these affiliates, which is a disclosed part of the business model.

Potential Mitigations

• Your attorney should review the roles and responsibilities of all parent and affiliate companies as described in the FDD.
• An accountant's review of the provided financials is crucial, even without parent company statements, to understand the franchisor's health.
• Engaging a business advisor can help you assess the operational risks associated with relying on an affiliate for all products and services.

Explanation

This risk was not identified in the FDD package. The document clearly outlines the history involving various affiliated entities, including Safeguard Franchise Systems, Inc. as a former franchisor and Safeguard Business Systems, Inc. as the long-standing operational arm since 1956. There is no indication of hidden or problematic predecessor history being obscured; rather, the complex history is laid out. Your due diligence should focus on understanding the implications of this structure.

Potential Mitigations

• Your attorney can help you understand the full legal history and structure of the various Safeguard entities mentioned in Item 1.
• A business advisor can assist in researching the public reputation of the parent company, Deluxe Corporation.
• Discussing the system's history with long-tenured distributors can provide valuable context beyond the FDD's disclosures.