Explanation

This risk was not identified in the FDD package. Item 20 data shows very low franchisee turnover, with no terminations, non-renewals, or other cessations for cause in recent years. This is a positive indicator of system stability. Generally, high turnover can signal serious problems within a franchise system, such as a lack of profitability for franchisees, poor franchisor support, or an unviable business model, so its absence here is a good sign.

Potential Mitigations

• It is still wise to discuss the stability shown in Item 20 with a business advisor to understand how it compares to industry benchmarks.
• Your attorney can help you formulate questions for current franchisees about their satisfaction and intention to renew, to confirm the positive data.
• An accountant can review how the franchisor's stable system may impact your own financial projections.

Explanation

This risk was not identified in the FDD package. The growth of the franchise system, as shown in Item 20, has been slow and measured over several years, rather than rapid. This suggests the franchisor may not be overextending its support resources. In general, excessively rapid growth can strain a franchisor's ability to provide adequate site selection guidance, training, and ongoing operational support to all its new franchisees.

Potential Mitigations

• Engage a business advisor to evaluate if the franchisor's current infrastructure, as described in Item 11, is appropriate for its current size and any future growth plans.
• Your attorney can help you ask current franchisees about the quality and timeliness of support they receive from the corporate office.
• An accountant can analyze the franchisor's financials in Item 21 to confirm it has the resources to support its existing franchisees effectively.

Explanation

This risk was not identified in the FDD package. Tailwaggers began franchising around 2006 and has over 15 years of experience, with several operating franchises shown in Item 20. It is not an unproven or new system. Generally, investing in a new system carries higher risk due to the lack of a proven track record, minimal brand recognition, and potentially underdeveloped support systems. The franchisor's experience here appears to mitigate this specific risk.

Potential Mitigations

• A business advisor can still help you assess the maturity of the franchise system and its position within the pet care industry.
• It is valuable to have your attorney review the business experience of the key executives listed in Item 2.
• Discuss the franchisor's history and strategic direction with current long-term franchisees to gain deeper insights.

Explanation

This risk was not identified in the FDD package. The pet care industry, including dog daycare and boarding, represents a response to a long-standing and consistent consumer need rather than a fleeting trend. While market demands evolve, the core business is not typically considered a fad. A fad business poses a risk because consumer interest can disappear quickly, leaving you with a long-term contractual obligation for a business with declining demand.

Potential Mitigations

• Working with a business advisor to conduct local market research is crucial to confirm sustained demand for these services in your specific area.
• Your financial advisor can help you analyze the long-term economic viability of this business model beyond any current popular features.
• Engaging with your attorney to understand the full length of your contractual commitment is important regardless of the business type.

Explanation

This risk was not identified in the FDD package. The executives listed in Item 2 have been with the franchisor since its formation in 2006 and also have experience operating an affiliated location since 2005. This indicates significant experience in both the specific industry and in managing the franchise system. Inexperienced management can be a major risk, potentially leading to poor strategic decisions, weak support systems, and a lack of understanding of franchisee needs.

Potential Mitigations

• It is still prudent to discuss the management team's reputation and capabilities with current franchisees, which your business advisor can facilitate.
• Your attorney can help verify the background and experience claims made in Item 2 of the FDD.
• An accountant's review of the financials can provide insight into the management team's financial stewardship of the company.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor is a privately held LLC and does not disclose ownership by a private equity firm. Private equity ownership can sometimes introduce risks related to prioritizing short-term investor returns over the long-term health of the franchise system. This may lead to cuts in franchisee support, increased fees, or pressure to use certain vendors to maximize profits for the PE firm.

Potential Mitigations

• Your attorney should still confirm the ownership structure disclosed in Item 1 and investigate any parent or affiliated companies.
• A business advisor can help you understand the potential impacts if the franchisor were to be sold to a PE firm in the future.
• Discuss any known plans for the sale of the company with the franchisor's management team.

Explanation

This risk was not identified in the FDD package. Item 1 discloses an affiliate, TailWaggers Doggy Day Care, LLC, but does not indicate it is a parent company or that its financials are required for a full risk assessment. A failure to disclose a parent company or provide its required financial statements can mask the true financial stability and control structure of a franchise system, which is a significant concern for prospective franchisees.

Potential Mitigations

• Your attorney can help you verify the corporate structure and the relationship between the franchisor and any affiliates mentioned in Item 1.
• It is wise to have your accountant review the franchisor's financials to assess its capitalization and ability to operate independently.
• A business advisor can help you research the reputation and history of any disclosed affiliate companies.

Explanation

This risk was not identified in the FDD package. Item 1 states that the franchisor has no predecessors. This means the company has not acquired the system's assets from a prior entity. When a franchisor has predecessors, it's important to investigate their history for any red flags, such as litigation, bankruptcy, or high franchisee failure rates, as these past issues could potentially affect the current system's health and stability.

Potential Mitigations

• Your attorney can conduct a public records search to confirm the franchisor's corporate history and lack of predecessors.
• Discussing the full history of the brand with long-term franchisees is a good practice that your business advisor can help with.
• An accountant can analyze the franchisor's financial history from its inception to understand its development over time.

Explanation

This risk was not identified in the FDD package. Item 3 states that no litigation is required to be disclosed. A pattern of lawsuits, especially those initiated by franchisees alleging fraud or misrepresentation, can be a major red flag indicating systemic problems with the franchisor's business practices or franchisee relations. The absence of such litigation is a positive sign.

Potential Mitigations

• Your attorney can conduct an independent search of public court records to verify that there is no undisclosed litigation involving the franchisor.
• During your calls with current and former franchisees, it is prudent to ask about their experiences with disputes and if they are aware of any litigation.
• A business advisor can help you assess the overall health of franchisee relations within the system.