Explanation

This specific risk was not identified in the FDD package. Item 20 data does not indicate an unusually high rate of franchisee terminations, non-renewals, or other cessations of business. While a positive sign, it is still vital to understand franchisee satisfaction, as turnover rates alone do not tell the whole story of the health of a franchise system.

Potential Mitigations

• It is always wise to speak with a significant number of current and former franchisees listed in Item 20 to understand their experiences and reasons for leaving.
• A business advisor can help you formulate questions for these franchisees about profitability, support, and overall satisfaction.
• Your accountant can help you cross-reference any financial information you gather from franchisees with the Item 19 FPR.

Explanation

This risk is not identified in the FDD. The data in Item 20 indicates that the franchise system is mature and not experiencing a period of rapid growth. Mature systems can offer stability and proven processes, but you should still assess whether the brand has sufficient momentum and plans for future innovation to remain competitive.

Potential Mitigations

• In discussions with the franchisor, inquire about their strategic plans for future growth and innovation.
• A business advisor can help you assess the brand's competitive position within its industry.
• Speaking with current franchisees can provide insight into the brand's perceived momentum and future prospects.

Explanation

This risk is not present. Item 1 shows that CCI is a very experienced franchisor, having offered franchises since 1991, with a predecessor dating back to 1980. This long history suggests a well-established brand and operating system. The key is to ensure the system has evolved and remains relevant in the current market.

Potential Mitigations

• A business advisor can help you evaluate if the mature system has adapted to current market trends and technology.
• Ask the franchisor about recent system-wide updates and their plans for future innovation.
• Inquire with franchisees about how the franchisor has supported them through changing economic conditions.

Explanation

The business model is mobile repair and restoration of various surfaces, which has been a viable service industry for decades. The franchisor has operated since 1991. Given the long history and the nature of the repair services industry, the risk of this being a short-term fad business is not present. The focus should be on its competitiveness in the current market.

Potential Mitigations

• A business advisor can help you analyze the long-term demand for these specific repair services in your local market.
• Investigate the level of competition from both independent businesses and other franchise systems in your area.
• Ask the franchisor and current franchisees about how they adapt to new materials and repair technologies.

Explanation

This risk is not present. Item 2 shows that the key executives of CCI have extensive, long-term experience with the company and its affiliate, with some tenures dating back to the 1980s and 1990s. This indicates a stable and highly experienced management team that is deeply familiar with both the industry and the franchise system's operations.

Potential Mitigations

• During your due diligence calls, you can still ask current franchisees about their perception of management's effectiveness and vision for the future.
• A business advisor can help you research the company's reputation under its current leadership.
• It is still prudent to ask the management team about their succession plans.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the company is privately held by its management team and does not disclose any ownership by a private equity firm. This can suggest a focus on long-term brand health over short-term investor returns. However, the ownership structure can always change in the future.

Potential Mitigations

• It is wise to ask the franchisor about any long-term plans regarding the sale or transfer of the company.
• Your franchise attorney should review the assignment clauses in the Franchise Agreement to understand your rights if the company is sold.
• A business advisor can provide insight into the potential impacts of a future sale to a different type of owner.

Explanation

The franchisor discloses its parent/affiliated entities (J&J's Creative Colors, Inc. and Creative Properties of Illinois, LLC) and includes their financial information in the consolidated financial statements in Exhibit G, as required. There does not appear to be a non-disclosure risk in this area. The relationship and financial standing are presented for review.

Potential Mitigations

• Your accountant should review the consolidated financial statements carefully, paying attention to the financial health of each entity.
• An attorney can help clarify the legal and financial relationships between CCI and its affiliates.
• During franchisee calls, you can inquire about the practical impact of these affiliate relationships on daily operations.

Explanation

This risk does not appear to be present. Item 1 clearly identifies J&J's Creative Colors, Inc. as a predecessor and affiliate. Items 3 and 4 state that there is no litigation or bankruptcy history to disclose for the franchisor, its predecessors, or its management. The FDD appears to properly disclose the predecessor entity and its history.

Potential Mitigations

• Even with no disclosed issues, it is prudent to ask long-tenured franchisees about their experiences under the predecessor entity.
• Your attorney can confirm that the disclosures regarding the predecessor meet all legal requirements.
• A business advisor can help you research the predecessor's historical reputation in the industry, if desired.

Explanation

This risk was not identified. Item 3 of the FDD explicitly states, "No litigation is required to be disclosed in this Item." This indicates that the franchisor, its predecessors, and management have not been involved in the types of material litigation that would legally require disclosure, which is a positive sign regarding legal disputes within the system.

Potential Mitigations

• Your attorney can perform independent searches for litigation that may not have met the technical threshold for disclosure.
• When speaking with former franchisees, it is always wise to ask about any past disputes they may have had, even if they did not result in litigation.
• A business advisor can help research the franchisor's general reputation online and within the industry.