Explanation

This specific risk was not identified in the FDD package. Item 20 tables show no franchisee terminations, non-renewals, or cessations of operations for other reasons over the last three years. However, this is a very young franchise system, so the lack of turnover may simply reflect its early stage rather than long-term franchisee satisfaction or success. Ongoing monitoring of this data in future FDDs would be prudent for a complete picture of system stability.

Potential Mitigations

• Engage your attorney to help formulate questions for current franchisees about their satisfaction and profitability.
• It is wise to have your accountant help you calculate the effective turnover rate from Item 20 data in any FDD you review.
• Speaking with former franchisees, when available, can provide valuable insight into why they left the system.

Explanation

This risk was not identified in the FDD package. The business of humane wildlife control is a service with ongoing demand driven by conflicts between wildlife and human structures. While specific services like holiday lighting are seasonal, the core offering is not typically considered a short-term fad. A potential franchisee should still assess the long-term viability of any business model and its adaptability to market changes, as even stable industries can face disruption.

Potential Mitigations

• To gauge long-term viability, it is useful to research the industry's history and growth trends with your business advisor.
• Evaluate the franchisor's commitment to research and development to ensure the business model can adapt to future changes.
• An accountant can help you analyze the financial sustainability of the business beyond any current popular trends.

Explanation

This risk was not identified in the FDD package. Item 2 indicates that the key individuals managing the franchise have extensive experience with the Skedaddle brand and its affiliates, with most having served in leadership roles for many years, some since 2005. Generally, experienced management can provide better support and strategic direction. However, you should still verify the quality of support with existing franchisees, as experience alone does not guarantee effective management of a franchise system.

Potential Mitigations

• It is always prudent to have your business advisor help you conduct due diligence on the specific franchising experience of the management team.
• Interviewing existing franchisees about their direct experiences with the management team's support and guidance is recommended.
• A discussion with your attorney can help clarify how management's experience translates into contractual support obligations.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor and its parent companies are part of a privately held corporate structure, not owned by a private equity firm. When evaluating any franchise, it is important to understand the ownership structure, as it can influence the franchisor's long-term goals, investment in the system, and potential exit strategies, all of which could impact franchisees.

Potential Mitigations

• Your attorney should always review the ownership structure disclosed in Item 1 to understand who controls the franchise system.
• Researching the track record of any parent or investment company with other brands can provide valuable context.
• Discussing any recent ownership changes with current franchisees can reveal shifts in company culture or strategy.

Explanation

This risk was not identified in the FDD package. The franchisor is a subsidiary of Skedaddle Franchising Company Inc., and Item 1 fully discloses a complex structure of parent companies and affiliates. The audited financial statements in Item 21 do not include parent company financials but do contain a note about the parent's ability and intent to provide capital, which addresses the franchisor's 'going concern' issue. The structure itself, however, adds a layer of complexity to the business relationship.

Potential Mitigations

• A review of the complex affiliate and parent company structure with your attorney is crucial to understanding potential dependencies.
• Your accountant should analyze the financial footnotes regarding related-party transactions and parent support.
• Inquiring about the specific roles and responsibilities of each affiliate company can provide valuable clarity.

Explanation

This risk was not identified in the FDD package. Item 1 states that the franchisor does not have any predecessors. When a franchisor does have a predecessor, it is important to review their history for any signs of trouble, such as litigation, bankruptcy, or high franchisee turnover, as these issues could potentially carry over to the current franchise system. A clean history with no predecessors can be a positive sign, but it also means the entity itself is relatively young.

Potential Mitigations

• Your attorney should always verify the predecessor information disclosed in Items 1, 3, and 4 of any FDD.
• When predecessors exist, researching their history independently can provide a more complete picture of the franchise system's background.
• Asking long-term franchisees about their experiences under any previous ownership can reveal important historical context.

Explanation

This risk was not identified in the FDD package. Item 3 states that no litigation is required to be disclosed. This is a positive indicator, as a pattern of lawsuits, especially those initiated by franchisees alleging fraud or misrepresentation, can be a major red flag about a franchise system's health and the franchisor's practices. Similarly, a high number of suits initiated by the franchisor against franchisees can suggest an overly aggressive or litigious culture.

Potential Mitigations

• Your attorney should always review Item 3 carefully for any disclosed litigation and its potential implications.
• It is wise to ask current franchisees about the nature of their relationship with the franchisor and if disputes are common.
• Even with no disclosed litigation, maintaining open communication and documenting interactions can help prevent future disputes.