Explanation

This risk was not identified in the FDD package. While the system is growing, the rate of expansion does not appear to be so rapid as to inherently strain support systems. Rapid growth can sometimes stretch a franchisor's resources, potentially leading to a decline in the quality of training, site selection assistance, and ongoing operational support for franchisees. Diligent franchisors manage growth to ensure their support infrastructure keeps pace with the expanding number of units.

Potential Mitigations

• A business advisor can help you evaluate whether the franchisor's staffing and infrastructure, as described in Item 11, are adequate for the current system size.
• Inquiring with recent franchisees about their experience with the responsiveness and quality of franchisor support is a valuable step.
• An accountant can review the franchisor's financial statements to assess if they are reinvesting sufficiently to support their franchisee network.

Explanation

This risk was not identified. SFG has been operating and franchising for over a decade, indicating it is an established system rather than a new or unproven one. Unproven systems carry higher risks, as their business model may not be time-tested, their brand may have little recognition, and their support systems can be underdeveloped. Prospective franchisees in such systems face greater uncertainty regarding long-term viability and the adequacy of the franchisor's experience.

Potential Mitigations

• When evaluating any franchise, your attorney should review the business experience of the management team outlined in Item 2.
• Contacting the longest-operating franchisees with help from your business advisor can provide insight into the system's evolution and stability.
• Your accountant can assess the franchisor's financial track record over several years to gauge its stability and history of performance.

Explanation

This risk was not identified in the FDD package. The business model, which focuses on providing coaching and camps for popular mainstream youth sports, is based on a market with long-standing, consistent demand. Fad businesses, tied to fleeting trends, pose a significant risk because customer interest can evaporate, leaving you with long-term contractual obligations for a business with a collapsed market. A sustainable business model is crucial for long-term success.

Potential Mitigations

• A business advisor can help you research the long-term market trends for any industry you consider entering.
• Reviewing a franchisor's history of innovation and adaptation in Item 11 with your business advisor provides clues about its long-term focus.
• An accountant can help you model the financial resilience of a business concept to shifts in consumer tastes.

Explanation

This risk was not identified. The management team detailed in Item 2 of the FDD has significant and long-term experience with the Skyhawks brand and within the franchising industry. Franchisors with inexperienced management can pose a risk because they may lack the expertise to provide effective support, create robust systems, or make sound strategic decisions for the brand. This can negatively impact franchisee training, marketing, and overall potential for success.

Potential Mitigations

• When evaluating a franchise, it's wise to have a business advisor help you assess the franchising and industry-specific experience of the key executives listed in Item 2.
• Your attorney can help you formulate questions for current franchisees about the quality and effectiveness of management's support.
• You should always research the professional backgrounds of the franchisor's leadership team.

Explanation

This specific risk was not identified. Item 3 does not disclose any significant pattern of litigation initiated by franchisees against SFG alleging fraud or misrepresentation. A history of such lawsuits can be a major red flag, potentially indicating systemic problems in the franchise sales process, unfulfilled promises, or a disconnect between the franchisor's representations and the operational reality for franchisees. The absence of such litigation is a positive indicator.

Potential Mitigations

• Your attorney should always carefully review Item 3 for any disclosed litigation, including its nature, status, and outcome.
• It is good practice to perform independent online searches for news articles or other information about litigation involving the franchisor.
• Asking current and former franchisees about their experiences and if they have had any significant disputes with the franchisor is a key part of due diligence.