Explanation

This risk was not identified. The FDD provides audited financial statements for the parent company, Snap-on Incorporated, which show consistent profitability and a strong balance sheet. Furthermore, the parent company provides a full financial guarantee for the franchisor's obligations. Strong financials suggest the franchisor has the resources to support the system and invest in the brand, which is a positive indicator for prospective franchisees.

Potential Mitigations

• Even with strong financials, it is wise for your accountant to review the statements for any concerning trends or footnotes.
• Your attorney should confirm the enforceability and scope of the parent company guarantee.
• A business advisor can help you understand how the franchisor's financial health translates into franchisee support and system growth.

Explanation

This risk was not identified. While the franchise system is large, the number of net new franchises has been negative over the last three years, indicating contraction rather than rapid growth. The franchisor's financial statements appear robust enough to support the existing system. This slower pace may allow the franchisor to provide more consistent support to its current franchisees without overstretching its resources.

Potential Mitigations

• Engage a business advisor to assess whether the system's maturity and slower growth align with your personal business goals.
• During your due diligence calls, ask current franchisees about the quality and consistency of franchisor support.
• Have your accountant review the franchisor's financials to confirm it has sufficient resources to maintain and innovate the system.

Explanation

This risk was not identified. Snap-on Tools Company LLC (Snap-on) and its parent, Snap-on Incorporated, have a very long operational history dating back to 1920 and began franchising in 1990. Item 2 shows that the executive team has extensive experience within the company and the industry. This long history and experienced management team suggest a well-established and mature business model, reducing the risks typically associated with new or unproven franchise systems.

Potential Mitigations

• A business advisor can help you evaluate how a mature system's established procedures fit with your entrepreneurial style.
• Discuss the company's long-term vision and plans for future innovation with your attorney and the franchisor.
• Even with an experienced team, asking current franchisees about management's recent performance and support is a sound due diligence step.

Explanation

This risk was not identified. The business of selling professional-grade tools and equipment to mechanics and technicians is a long-established industry with consistent demand tied to the automotive repair sector. While economic cycles can affect demand, the core business is not based on a short-term trend or fad. Snap-on's extensive history since 1920 further indicates a sustainable business model rather than a temporary one.

Potential Mitigations

• A business advisor can help you research the long-term outlook for the professional tool and automotive repair industries.
• Even in a stable industry, it is important to develop a sound business plan with your accountant to navigate economic cycles.
• Your attorney can review the contract for any terms that might be problematic if market conditions change unexpectedly.

Explanation

This risk was not identified. The biographical information in Item 2 indicates that the directors and principal officers of Snap-on and its parent company, Snap-on Incorporated, have extensive and long-term experience with the company and within the broader tool and equipment industry. This level of experience suggests a deep understanding of both the business model and the franchise system, which is a positive factor for prospective franchisees.

Potential Mitigations

• A business advisor can help you assess how the management team's experience may translate into effective franchisee support.
• Even with an experienced team, it is valuable to ask current franchisees about their direct interactions with and support from management.
• Your attorney can help you understand the management structure and how it relates to operational decision-making for the franchise system.

Explanation

This risk was not identified. Item 1 discloses that the franchisor, Snap-on Tools Company LLC, is a subsidiary of Snap-on Incorporated, a publicly traded company. It does not appear to be owned by a private equity firm. Public companies have different reporting requirements and shareholder pressures than PE-owned firms, which can influence long-term strategy and franchisee relations. The long history of the company also suggests a focus beyond short-term exit strategies.

Potential Mitigations

• Your accountant should review the parent company's public financial filings (like the 10-K) to understand its financial health and strategic priorities.
• A business advisor can help you understand the typical relationship dynamics between a publicly-traded parent and its franchise subsidiary.
• It is always prudent for your attorney to review any clauses in the agreement related to the sale or transfer of the franchise system.

Explanation

This risk was not identified. Item 1 clearly discloses that Snap-on Tools Company LLC is a subsidiary of Snap-on Incorporated. Item 21 provides the audited consolidated financial statements of the parent company, Snap-on Incorporated, and an explicit guarantee of the franchisor's obligations. This provides a clear picture of the financial backing and ultimate responsibility for the franchise system, which is a positive disclosure practice.

Potential Mitigations

• It is good practice to have your attorney review the parent company guarantee to understand its scope and limitations.
• Your accountant should confirm that the provided parent financials are audited and prepared according to GAAP.
• Understanding the relationship between the franchisor and its parent can be discussed with a business advisor for strategic context.

Explanation

This risk was not identified. Item 1 discloses that Snap-on Incorporated and a predecessor Wisconsin corporation are predecessors. Item 3 and Item 4, which cover litigation and bankruptcy history, include information related to these entities. The disclosure appears to provide the necessary historical context regarding the system's lineage, allowing you to assess past legal or financial issues that might impact the current operation.

Potential Mitigations

• Your attorney should carefully review the disclosures for all predecessor entities in Items 1, 3, and 4.
• A business advisor can help you research public information about a predecessor's history if any concerns arise.
• When speaking with long-term franchisees, ask about their experiences under any previous ownership or corporate structure.