Explanation

The FDD does not indicate financial instability. The audited financial statements in Item 21 and Exhibit A show consistent revenue, positive net income, and a strong balance sheet for Soccer Shots Franchising, LLC (Soccer Shots LLC). This financial stability is crucial as it suggests the franchisor has the resources to support its franchisees, invest in the brand, and meet its obligations. A financially weak franchisor could jeopardize your investment.

Potential Mitigations

• An accountant should review the financial statements, including footnotes about the parent company's debt for which Soccer Shots LLC is a guarantor.
• Discussing the franchisor’s financial health with current franchisees can provide additional comfort.
• A business advisor can help assess if the company's financial strength aligns with its support commitments.

Explanation

Item 20 data does not indicate high franchisee turnover. The system shows very low rates of termination, non-renewal, or franchisor reacquisition over the past three years, alongside consistent growth in the number of franchised outlets. This stability is a positive indicator. High turnover in a franchise system can signal underlying problems with profitability, support, or the business model itself, so its absence here is reassuring.

Potential Mitigations

• Speaking with current and former franchisees listed in Item 20 is a good practice to confirm their satisfaction levels.
• Asking your business advisor to compare these turnover rates to industry benchmarks can offer additional context.
• An attorney can help you formulate questions for franchisees about their experience with the system.

Explanation

The FDD does not suggest that the system is growing too quickly. Item 20 data shows a pattern of steady, controlled growth in the number of franchised outlets over the past three years. This is generally a positive sign, as explosive growth can sometimes strain a franchisor's ability to provide adequate support. The financial statements in Item 21 also appear to support a healthy, well-managed expansion.

Potential Mitigations

• Discussing the quality and timeliness of franchisor support with newer franchisees can provide insight into their capacity to handle growth.
• Asking your business advisor to evaluate the franchisor's support infrastructure relative to its size is a useful step.
• Your accountant can confirm from the financials if they are investing in support systems.

Explanation

This is not a new or unproven franchise system. As disclosed in Item 1, Soccer Shots LLC has been offering franchises since 2005, demonstrating a long operational history. A long-established system generally suggests a more mature business model, developed support structures, and greater brand recognition, which can be significant advantages for a new franchisee. Unproven systems carry higher inherent risks of failure.

Potential Mitigations

• An analysis of the company's evolution with a business advisor can help you understand how it has adapted over time.
• Speaking with long-term franchisees can provide perspective on the system's history and stability.
• Reviewing the franchisor's recent strategic changes with your attorney is also advisable.

Explanation

The business model, focused on youth soccer education, does not appear to be a fad. The concept has been in operation since 2005, as noted in Item 1, indicating sustained market demand for children's enrichment and sports programs. Investing in a business with long-term appeal is generally less risky than one based on a temporary trend, as it suggests a more stable customer base for your services.

Potential Mitigations

• Researching the local market demand for children's enrichment programs with a business advisor can confirm its viability in your area.
• Your financial advisor can help you assess the long-term economic outlook for this type of service-based business.
• Discussing local market saturation with the franchisor is also a prudent step.

Explanation

The management team appears to be highly experienced. Item 2 details the backgrounds of the key executives, showing that many have long tenures with Soccer Shots LLC, including experience as franchisees themselves, or have relevant external leadership experience. An experienced management team is a critical asset for a franchise system, as it can lead to better strategic decisions, more effective support, and overall system stability.

Potential Mitigations

• During your validation calls, asking current franchisees about their direct experiences and the quality of support from the leadership team is recommended.
• A business advisor can help you assess if the management team's skills align with your support needs.
• Researching the executives' public profiles may provide additional background.

Explanation

The FDD appears to properly disclose its parent companies in Item 1. Adequate disclosure of parent companies is important because their financial health and strategic decisions can directly impact the franchisor and, consequently, your franchise. The document notes that Soccer Shots LLC is a guarantor for its parent company's debt, a crucial piece of information for understanding potential financial entanglements.

Potential Mitigations

• Your accountant should carefully review the footnotes in the financial statements that describe the relationship with and obligations to the parent companies.
• An attorney can help you understand the legal implications of the parent company structure and any guarantees.
• Inquire with your business advisor about the overall structure of the brand portfolio.

Explanation

The FDD does not disclose any predecessor entities for Soccer Shots LLC. A predecessor is a company from which the franchisor acquired the business, and its history can be important for understanding the franchise system's background, including any past issues with litigation or franchisee relations. The absence of a predecessor means the current franchisor's history, as disclosed, is the complete history of the franchise system.

Potential Mitigations

• Your attorney can confirm that there are no undisclosed predecessors by reviewing the corporate history.
• Speaking with long-tenured franchisees can help verify the history of the system as presented in the FDD.
• A business advisor can assist with background research on the franchisor and its founders.

Explanation

Item 3 of the FDD does not disclose a pattern of litigation against Soccer Shots LLC involving claims of fraud, misrepresentation, or other franchise law violations from franchisees. A history of such lawsuits can be a major red flag indicating systemic problems. The document does disclose a past regulatory settlement regarding hiring provisions and litigation involving an affiliate's predecessor for a different brand, but not a pattern of franchisee disputes for this system.

Potential Mitigations

• Your attorney should review the details of any disclosed litigation, including the settlement regarding no-poaching clauses, to understand their implications.
• It is good practice to ask current franchisees about the franchisor's general approach to dispute resolution.
• An online search for news or complaints about the franchisor, guided by a business advisor, may provide additional context.