Explanation

As Stiltz is a new franchise system that has not yet had any operating franchisees, the FDD does not disclose any franchisee turnover data. While not a direct risk, this lack of history means there is no track record to evaluate system satisfaction or franchisee success rates. High turnover in established systems can signal underlying problems, so this is a key metric to watch in the future.

Potential Mitigations

• A business advisor can help you research typical turnover rates for similar franchise systems to establish a baseline for future comparison.
• When franchisees begin to operate, speaking with them will be critical to gauge satisfaction levels.
• Your attorney can explain the importance of monitoring future Item 20 disclosures for signs of system distress.

Explanation

This risk was not identified in the FDD Package. As a new franchisor with no existing outlets, there is no history of rapid system growth. However, it's important to monitor growth if you invest. A franchisor expanding too quickly might struggle to provide adequate support, training, and quality control to all its new franchisees, potentially harming your business.

Potential Mitigations

• Your business advisor can help you assess whether the franchisor's support infrastructure is scaling appropriately with its growth.
• Engaging with other franchisees as the system develops can provide insight into the quality of franchisor support.
• An accountant should periodically review the franchisor's financials to see if they are investing in support systems during growth phases.

Explanation

This risk was not identified in the FDD Package. The business model, offering home elevator lifts for individuals with mobility challenges, addresses a long-term demographic trend rather than a short-term fad. The sustainability of a franchise is crucial, as a business tied to a fleeting trend could face a decline in consumer demand, jeopardizing your investment long after the trend has passed.

Potential Mitigations

• A business advisor can help you analyze the long-term market trends for the products and services offered.
• Reviewing the franchisor's plans for product innovation and adaptation with your business advisor can provide insight into its long-term vision.
• An accountant can help you model the financial resilience of the business under various market conditions.

Explanation

This risk was not identified in the FDD Package. The documents indicate Stiltz is owned by a UK-based parent company, not a private equity firm. When a PE firm owns a franchisor, there can be a risk that decisions prioritize short-term investor returns over the long-term health of the franchise system and its franchisees.

Potential Mitigations

• Your attorney can help you investigate the ownership structure of any franchisor to identify potential influences.
• A business advisor can help you research the track record of any parent company, PE firm or otherwise, with other brands.
• Engaging with existing franchisees can provide insight into how ownership's philosophy impacts day-to-day operations.

Explanation

This risk was not identified in the FDD Package, as Stiltz states that it does not have a predecessor. When a franchisor has acquired a business from a predecessor, it is important to review the predecessor's history for any signs of trouble, such as litigation or high franchisee turnover, as these issues could carry over to the new entity.

Potential Mitigations

• Your attorney can help you verify statements about a franchisor's history and lack of predecessors.
• For any franchise, researching the brand's history online can sometimes uncover information about prior ownership structures.
• A business advisor can help you understand the implications if a brand has a complex history of ownership changes.

Explanation

This risk was not identified in the FDD Package. Item 3 discloses no litigation history for the franchisor, its parent, or its management. A pattern of lawsuits, especially those initiated by franchisees alleging fraud or misrepresentation, can be a major red flag indicating systemic problems within a franchise.

Potential Mitigations

• Your attorney should always review the litigation section of an FDD carefully.
• Even with no disclosed litigation, it is a good practice to ask existing franchisees about any disputes they are aware of.
• A business advisor can help you understand that a clean litigation history is a positive sign, but does not eliminate all risks.