Explanation

This risk was not identified in the FDD package. As a new franchise system that started offering franchises in April 2024, Scoop Brothers has no history of franchisee turnover to report in Item 20. High franchisee turnover is generally a significant red flag, often indicating systemic problems such as a lack of profitability, poor franchisor support, or an unsustainable business model. The absence of this data means this specific risk cannot be assessed, but also highlights the system's unproven nature.

Potential Mitigations

• Your business advisor should help you monitor franchisee success and turnover rates as the system grows to gauge its long-term health.
• It is important to discuss with your attorney the risks inherent in joining a new system with no performance history.
• An accountant can help you create financial models that account for the higher risk of a new, unproven system without historical franchisee data.

Explanation

This risk was not identified. Since Scoop Brothers is a new system with no operating franchisees as of the FDD issuance date, there is no data to indicate whether its growth rate is sustainable. Rapid expansion can strain a franchisor's resources, potentially leading to inadequate franchisee support, training, and quality control. While not a current issue, it is a key factor to monitor if you join the system as one of its initial franchisees.

Potential Mitigations

• Engage a business advisor to question the franchisor about their future growth plans and how they intend to scale support systems accordingly.
• Your accountant should review the franchisor's financial capacity to support growth without relying solely on new franchise fee sales.
• It is wise to have your attorney review the franchisor's support obligations outlined in the Franchise Agreement to ensure they are specific.

Explanation

This risk was not identified in the FDD package. The business model, providing pet waste removal services, serves a consistent and established market need rather than being based on a fleeting trend. The long-term viability of this type of service is generally not considered dependent on a fad. However, success will depend on operational execution, marketing, and local competition, not on the temporary popularity of the concept itself. The primary risks appear to be financial and operational, not trend-based.

Potential Mitigations

• Consulting with a business advisor to analyze the local market demand and competitive landscape for pet waste services is recommended.
• Your accountant can help you assess the long-term profitability of this service-based business model in your area.
• It is advisable to discuss with your attorney any contractual terms that could affect your ability to adapt to future market changes.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor, Scoop Brothers, is owned by B. Rugged Brands, Corp. There is no information to suggest that this parent company is a private equity firm. The risks typically associated with private equity ownership, such as a focus on short-term returns over franchisee health or a quick resale of the brand, do not appear to be present based on the provided disclosures.

Potential Mitigations

• It is always prudent to have your attorney research the ownership structure and history of the parent company.
• A business advisor can help you understand the strategic direction of the parent company and how it might impact franchisees.
• An accountant can analyze the financial relationship between the franchisor and its parent company for any potential risks.

Explanation

This risk was not identified in the FDD package. Item 1 states that Scoop Brothers has no predecessors. The business model is based on an affiliate's operation, not a business acquired from a prior entity. Therefore, there are no risks related to a predecessor's negative history, such as past litigation, bankruptcy, or high franchisee failure rates under a previous owner, because no such predecessor exists.

Potential Mitigations

• Your attorney can confirm the corporate history to ensure there are no undisclosed predecessor entities.
• A business advisor can help you focus due diligence on the affiliate's operating history, as that is the primary basis for the new franchise system.
• Discussions with your accountant should center on the current franchisor's financials and projections, as there is no predecessor history to analyze.

Explanation

This risk was not identified in the FDD package. Item 3 states that 'No litigation is required to be disclosed in this Item.' For a new franchisor, the absence of litigation is expected but provides no track record. A pattern of franchisee-initiated lawsuits alleging fraud or franchisor-initiated suits against franchisees for enforcement are both significant red flags that are not present here. You should monitor this as the system matures.

Potential Mitigations

• Although no litigation is disclosed, your attorney can conduct a public records search to verify this information.
• It is wise to ask the franchisor about their dispute resolution philosophy with guidance from a business advisor.
• During due diligence, asking any future franchisees about their satisfaction level can provide early warnings of potential disputes.