Explanation

This risk was not identified in the FDD package. Rapid growth can strain a franchisor's ability to provide adequate support. If a system expands too quickly, new franchisees may find that training, site selection assistance, and ongoing operational guidance are diluted or delayed, which can negatively impact their initial success and long-term viability. It is a sign of a franchisor prioritizing franchise sales over sustainable system health.

Potential Mitigations

• A business advisor can help evaluate whether a franchisor's support infrastructure is scalable to its growth plans.
• Asking current franchisees about their recent experiences with the quality and timeliness of franchisor support is a crucial due diligence step.
• An accountant should analyze the franchisor's financial statements to determine if they are reinvesting sufficiently in support systems.

Explanation

This risk was not identified in the FDD package. SuperGlass has been in business since 1992 and franchising since 1994, indicating a long operational history rather than being a new or unproven system. Investing in a new franchise system carries heightened risk as the business model may be untested, brand recognition is minimal, and the franchisor may lack the experience and resources to provide adequate support, leading to higher failure rates.

Potential Mitigations

• When evaluating a new system, it is crucial for a business advisor to help you scrutinize the founders' industry and franchising experience.
• An accountant should carefully assess the capitalization of a new franchisor to ensure it has sufficient funds for long-term support.
• Your attorney can advise on negotiating more favorable terms to compensate for the higher risk associated with an unproven concept.

Explanation

The SuperGlass business model, focused on windshield repair, is an established automotive service rather than a fad. A fad business is tied to a fleeting trend, creating a risk that consumer interest will decline, potentially leading to business failure even while you remain bound by the long-term franchise agreement. Sustainable business models are based on consistent, long-term consumer needs rather than novelty.

Potential Mitigations

• A business advisor can help you research the long-term market demand and historical resilience of the industry.
• Asking the franchisor about their plans for innovation and adaptation to market changes is an important discussion to have.
• Your financial advisor should help you assess the business model's vulnerability to economic downturns or shifts in consumer behavior.

Explanation

This risk was not identified in the FDD package. Item 2 indicates that the executive team has extensive and long-term experience with SuperGlass and in the windshield repair industry. Inexperienced management can be a significant liability, as they may lack the knowledge to provide effective support, create robust operational systems, or make sound strategic decisions for the brand, increasing the risk for all franchisees.

Potential Mitigations

• A thorough vetting of the management team's specific experience in both the industry and in franchising is a critical due diligence step for any potential franchisee.
• Engaging a business advisor to help assess the leadership's track record can provide valuable insight.
• Speaking with current franchisees about their confidence in the management team provides a real-world perspective.

Explanation

This risk was not identified in the FDD package, as Item 1 does not indicate that the franchisor is owned by a private equity firm. When a PE firm owns a franchisor, there is a risk that decisions will prioritize short-term investor returns over the long-term health of the brand and franchisee profitability. This can sometimes lead to increased fees, reduced support, and pressure on franchisees.

Potential Mitigations

• If considering a PE-owned franchise, researching the firm's history with other franchise brands is a crucial step to perform with your business advisor.
• Your attorney should carefully review the assignment clauses in the Franchise Agreement to understand what happens if the system is sold again.
• Speaking with franchisees who have been in the system before and after a PE acquisition can provide invaluable insights.

Explanation

This risk was not identified in the FDD package. SuperGlass does not disclose having a parent company. Failing to disclose a parent company, or not providing its financial statements when it guarantees the franchisor's obligations, can obscure the true financial health and control structure of the franchise system. This prevents you from fully assessing the stability and resources backing the brand you are investing in.

Potential Mitigations

• Your attorney should verify the franchisor's corporate structure to confirm the absence of any undisclosed parent or controlling entities.
• If a parent company exists and provides a guarantee, your accountant must review its financial statements for a complete picture.
• Understanding the legal relationship and obligations between a franchisor and its parent is a key task for your legal counsel.

Explanation

This risk was not identified in the FDD package, as the franchisor states in Item 1 that it has no predecessors. When a franchisor has a predecessor, it is important to scrutinize their history for issues like litigation, bankruptcy, or high franchisee turnover. A negative history could indicate inherited systemic problems that may continue to affect the brand and its franchisees under the new ownership.

Potential Mitigations

• When a predecessor is disclosed, your attorney should carefully analyze all related information in Items 1, 3, and 4.
• A business advisor can help you research the predecessor's reputation and historical performance.
• Speaking with long-term franchisees who operated under the predecessor can reveal important historical context.