Explanation

This specific risk was not identified in the FDD Package. The franchisor is new, and all 37 of its franchisees began operations in 2024, the most recent year for which data is provided. Therefore, there is no history of franchisee terminations, non-renewals, or other cessations to analyze. A high turnover rate can be a major red flag indicating systemic problems within a franchise, so this is an area to monitor in the future.

Potential Mitigations

• As the system matures, it is essential to have your accountant track the franchisee turnover rates disclosed in future FDDs.
• Engaging a business advisor to help you network with other franchisees can provide early insight into system health and satisfaction.
• Your attorney can explain the importance of monitoring Item 20 data for signs of potential distress within the franchise system.

Explanation

This risk was not identified in the FDD package. The business model, which centers on residential and commercial cleaning services like window washing, pressure washing, and holiday lighting, is based on established industries with consistent demand. These services are generally not considered to be tied to a short-term trend or fad, suggesting a more stable market foundation.

Potential Mitigations

• Working with a business advisor to research the long-term market trends for home services in your specific area is still a valuable exercise.
• An accountant can help you model the financial impact of seasonality, which is noted as a factor in Item 1.
• Consulting with your attorney can help you understand any contractual obligations to offer new services if market trends do shift.

Explanation

This risk was not identified in the FDD Package. Item 2 shows that the key executives have extensive experience in the franchise industry and related home service sectors through their roles at parent and affiliate companies like Lawn Doctor, Mosquito Hunters, and Elite Franchising. This experienced leadership team is a positive factor that may reduce risks associated with a new franchise system.

Potential Mitigations

• It is still prudent to have your business advisor research the professional backgrounds of the key management personnel.
• Asking existing franchisees about their direct experiences with the management team's support and strategic direction is a good due diligence step.
• Your attorney can advise on how management's experience might impact the franchisor's ability to fulfill its contractual obligations.

Explanation

This risk was not identified in the FDD Package. Item 1 clearly discloses the direct parent company, LD Parent, Inc., and the indirect parent, CNL Strategic Capital, LLC. Furthermore, the FDD includes the audited financial statements for the parent and guarantor, LD Parent, Inc., in Exhibit I, which provides financial transparency.

Potential Mitigations

• Your attorney should always confirm that the disclosed corporate structure is complete and that any entity providing a guarantee is clearly identified.
• An accountant should verify that if a parent company's financials are provided, they are audited and prepared according to GAAP.
• A business advisor can help you research the relationship between the franchisor and its parent to understand the operational dynamics.

Explanation

This risk was not identified in the FDD package. Item 1 states clearly that Sparkle Squad, LLC has no predecessors. The franchisor is a newly formed entity and did not acquire its assets or system from a prior company. This avoids the risk of inheriting undisclosed historical problems from a predecessor entity.

Potential Mitigations

• Your attorney should always verify the statements in Item 1 regarding predecessors and corporate history.
• A business advisor can assist in researching the history of the founders and their previous business ventures for additional context.
• If a franchisor did have a predecessor, an accountant would need to carefully review any transferred assets and liabilities.

Explanation

This risk was not identified in the FDD Package. Item 3 discloses that there is no litigation required to be disclosed. This is a positive finding, as a pattern of lawsuits, especially those initiated by franchisees alleging fraud or misrepresentation, can be a significant red flag about the health and integrity of a franchise system.

Potential Mitigations

• Your attorney can perform independent searches for litigation involving the franchisor or its principals as a final check.
• It is wise to ask current and former franchisees about any disputes they may have had, even if they did not result in litigation.
• A business advisor can help you understand that the absence of litigation is positive but not a guarantee of a dispute-free relationship.