Explanation

This risk was not identified in the FDD package. The franchise system has been operating for over a decade and the unit growth numbers provided in Item 20 do not suggest excessively rapid expansion that might outpace the franchisor's ability to provide support. Stable growth is generally a positive indicator for a franchise system.

Potential Mitigations

• To confirm support levels, engaging with a range of franchisees, from new to established, can provide insight into the franchisor's capabilities.
• A business advisor can help you evaluate the franchisor's support infrastructure relative to its current size and moderate growth trajectory.
• Your accountant can review the financial statements to ensure the franchisor is reinvesting into support systems to match its growth.

Explanation

This risk was not identified in the FDD package. SMSFI began offering franchises in 2009, and its affiliate has history dating back to 2006. With over a decade of operational history and a substantial number of existing franchisees listed in Item 20, the system is established and cannot be classified as new or unproven.

Potential Mitigations

• When evaluating any franchise, it is wise to have your attorney review the business experience of the key executives listed in Item 2.
• A discussion with long-tenured franchisees can provide your business advisor with valuable history on the system's evolution and stability.
• An accountant's review of multi-year financial statements helps confirm the system's long-term financial track record.

Explanation

This risk was not identified in the FDD package. The business of dog training is a well-established service industry with consistent consumer demand. It is not based on a new or fleeting trend, suggesting that the business concept has long-term market viability.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm the long-term demand for dog training services in your specific area.
• Discuss the franchisor’s strategies for innovation and staying competitive within the established pet services industry with your business advisor.
• An accountant can help you assess the business model's resilience to various economic cycles.

Explanation

This risk was not identified in the FDD package. Item 2 indicates that the key executives have been with the company since its early stages in 2009 or 2006 (with the affiliate) and possess extensive experience in the dog training industry. This suggests a stable and experienced management team is in place.

Potential Mitigations

• It is always prudent to have a business advisor help you research the professional backgrounds of the key leadership team detailed in Item 2.
• Asking current franchisees about their perception of management's competence and vision can provide valuable qualitative insight.
• Your attorney can help you verify the information presented and check for any undisclosed issues.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD does not indicate that the franchisor is owned or controlled by a private equity firm. The ownership appears to be held by the key individuals involved in its operation.

Potential Mitigations

• When reviewing any FDD, your attorney should always verify the ownership structure detailed in Item 1.
• A business advisor can help you understand the potential implications of different ownership structures, such as private equity versus founder-led companies.
• During franchisee validation calls, it is good practice to ask about any recent or anticipated changes in ownership.

Explanation

The FDD discloses that its affiliate, SMSI, is its predecessor, which began licensing operations in 2006. Item 3 discloses regulatory consent orders from 2009 and 2012 related to this predecessor's activities. While this history is disclosed and not recent, it is a part of the system's lineage that indicates past compliance issues during its early growth phase.

Potential Mitigations

• Your attorney should carefully review all disclosures related to the predecessor's history in Items 1, 3, and 4.
• Discussing the system's history with long-term franchisees who operated under the predecessor can provide valuable context.
• Inquire with the franchisor about the changes in compliance procedures that were implemented following the historical consent orders.