Explanation

This risk was not identified. The franchise system has not experienced rapid growth; Item 20 data shows the number of franchised outlets has slightly decreased over the last two years. While this avoids risks of over-expansion, it is important to understand the reasons for the lack of growth. A business advisor can help you analyze the market potential and the franchisor's growth strategy to determine if it aligns with your goals.

Potential Mitigations

• In discussions with the franchisor, inquire about their strategic plans for future growth and how they intend to support new and existing franchisees.
• A business advisor can help evaluate the market potential and competitive landscape to understand the system's growth prospects.
• Consult with your financial advisor to assess if the lack of growth could impact brand recognition and long-term value.

Explanation

This risk was not identified. The in-home senior care and placement services industry is supported by long-term demographic trends of an aging population. This is generally considered a stable and growing sector, not a short-term fad. However, it is a highly competitive market, a factor your business advisor can help you evaluate carefully to ensure the business has a sustainable competitive advantage in your specific area.

Potential Mitigations

• A business advisor should be engaged to analyze the competitive landscape for senior care services in your specific territory.
• Developing a strong, unique local marketing plan with a marketing professional is crucial to differentiate your business.
• Discussing long-term industry trends with your financial advisor can help in strategic planning for the business.

Explanation

This risk does not appear to be present. The key executives listed in Item 2 have been with the company since its formation in 2015 and have direct operational experience in the home care industry through their management of affiliate-owned outlets. This suggests a level of industry and franchising experience that is beneficial for a franchise system and should, in theory, translate into more effective support and guidance for you.

Potential Mitigations

• When speaking with current and former franchisees, it is still prudent to ask about the quality and effectiveness of management's support and guidance.
• A business advisor can help you evaluate the resumes in Item 2 to confirm their experience aligns with the support you will need.
• Before signing, seek an opportunity to speak directly with the key management personnel to gauge their vision and competence.

Explanation

This risk was not identified. Item 1 of the FDD indicates Talem is an independent entity and does not disclose ownership by a private equity firm. The risks often associated with private equity ownership, such as a focus on short-term investor returns over the long-term health of the franchise system, do not appear to be a factor in this opportunity based on the documents provided.

Potential Mitigations

• Your attorney should always confirm the ownership structure disclosed in Item 1 through a corporate records search to be certain.
• It is wise to ask the franchisor about any plans for a future sale of the company.
• Reviewing the "Assignment" clause in the Franchise Agreement with your attorney is important to understand what happens if the company is sold in the future.

Explanation

This risk was not identified. Item 1 of the FDD explicitly states that the franchisor does not have a parent company. It does disclose affiliate companies that operate similar businesses, and the franchisor's own audited financial statements are provided in Item 21. This is the appropriate disclosure in this circumstance, and there is no indication that a controlling parent entity's information is being withheld, which provides a clearer view of the franchisor's financial standing.

Potential Mitigations

• Your attorney can verify the franchisor's corporate structure and confirm the absence of an undisclosed parent entity.
• An accountant should review the affiliate transactions mentioned in the financial statement notes to understand their impact on the franchisor.
• Always ensure that the financial statements provided are for the actual entity selling you the franchise.

Explanation

This risk is not present, as Item 1 of the FDD states that the franchisor has no predecessors. This means you do not have to be concerned about inheriting historical problems, such as unresolved litigation, high failure rates, or franchisee dissatisfaction from a prior version of the franchise system. The system's track record begins with the current franchisor, making due diligence more straightforward.

Potential Mitigations

• Even without a predecessor, it's wise to ask the franchisor about the origin of their business system and brand.
• Your attorney can conduct a public records search to verify the company's history and confirm the "no predecessor" statement.
• Discussions with long-standing franchisees can provide insight into the system's evolution and historical challenges.

Explanation

This risk was not identified. Item 3 discloses a single recent lawsuit initiated by the franchisor against a franchisee, not a pattern of suits filed by franchisees alleging fraud, misrepresentation, or other misconduct. While any litigation warrants attention, this single case does not indicate a systemic issue with the franchisor's sales practices or a history of franchisee disputes that would suggest a high-risk environment.

Potential Mitigations

• You should still discuss the disclosed litigation with your attorney to understand its potential implications and the franchisor's approach to disputes.
• It is wise to attempt to contact the franchisee involved in the litigation to hear their perspective, if possible.
• A business advisor can help you assess whether the franchisor's litigation strategy appears overly aggressive or reasonable.