Explanation

This risk was not identified in the FDD package. Rapid growth can strain a franchisor's ability to provide adequate support. However, Item 20 data for TAB shows the system has been shrinking, not growing rapidly, over the past three years.

Potential Mitigations

• When evaluating any franchise, it's wise to have an accountant review the franchisor's growth trends in Item 20 against its financial capacity in Item 21.
• A business advisor can help assess whether a franchisor's support infrastructure is keeping pace with its unit growth.
• Consulting with both new and established franchisees can provide insight into the consistency of franchisor support over time.

Explanation

This risk was not identified in the FDD package. TAB has been offering franchises since 1996 and has a long operational history, so it is not considered a new or unproven system. However, the system's recent contraction and financial condition present separate, significant risks.

Potential Mitigations

• When evaluating a new franchise, a thorough review of the founders' and management's experience with a business advisor is critical.
• Your accountant should carefully assess the capitalization of any new or emerging franchisor.
• Speaking with the earliest franchisees in a young system is a key due diligence step an attorney can help facilitate.

Explanation

This risk was not identified. The business model, which involves forming peer advisory boards and providing business coaching for business leaders, is a well-established concept in the business services industry. While subject to economic cycles, it is not considered to be based on a fleeting trend or fad.

Potential Mitigations

• For any franchise concept, it is important to have a business advisor help you research the long-term market demand for its products or services.
• Your financial advisor can help assess the business model's resilience to economic downturns.
• An attorney should review the franchise agreement to understand your obligations if market trends negatively affect the business.

Explanation

This risk was not identified in the FDD package. The executive team described in Item 2 appears to have extensive, long-term experience with both the TAB system specifically and the business coaching industry generally. For example, the President and CEO has been with the company since 2001.

Potential Mitigations

• When considering any franchise, it is prudent to have a business advisor help you research the backgrounds of the key management team.
• Your attorney can help you formulate questions for current franchisees about their direct experiences with the franchisor's leadership.
• An accountant can help assess if management's experience is reflected in the company's financial stability and performance.

Explanation

This risk was not identified. FDD Item 1 does not indicate that TAB is owned by a private equity firm. It appears to be a privately held corporation. Therefore, the specific risks associated with a private equity ownership model do not seem to apply here.

Potential Mitigations

• For any franchise, your attorney should help you determine the ownership structure as disclosed in Item 1.
• If a franchisor is owned by a private equity firm, a business advisor can help you research the firm's track record with other brands.
• When PE ownership exists, it is wise to ask current franchisees about any changes in support or fees since the acquisition.

Explanation

This risk was not identified in the FDD package. Item 1 discloses several affiliates but does not mention a parent company. TAB itself is presented as the primary corporate entity. The franchisor's financials, not a parent's, are provided as required. The structure appears transparent in this regard.

Potential Mitigations

• When reviewing an FDD, your attorney should confirm the corporate structure in Item 1 and determine if a parent company exists.
• If a parent company's financials are required but not provided, an accountant should advise on the potential risks.
• An attorney can help clarify the relationship and any guarantees between a parent and the franchisor entity.

Explanation

This risk was not identified. Item 1 discloses a predecessor, Direct Communication Service, Inc. ("DCS"), from which TAB acquired the system in 1997. Given the length of time that has passed since the acquisition, any historical issues with the predecessor are unlikely to be relevant to the current operation and risks of the franchise system.

Potential Mitigations

• When a recent predecessor is disclosed, a business advisor can help you research its history for any red flags.
• Your attorney should carefully review Items 1, 3, and 4 for any negative history associated with a predecessor.
• Asking long-term franchisees about their experience under a predecessor can provide valuable insights.

Explanation

This risk was not identified in the FDD package. Item 3 discloses only one recent litigation, which was initiated by TAB against a former franchisee for common enforcement issues like collecting fees and enforcing covenants. There is no disclosure of a pattern of lawsuits brought by franchisees against the franchisor alleging fraud, misrepresentation, or similar claims.

Potential Mitigations

• An attorney should always carefully review Item 3 for any litigation history, especially lawsuits initiated by franchisees.
• A business advisor can help you understand whether the number and type of lawsuits are typical for a system of that size and age.
• Your attorney can conduct independent searches for litigation that may not have been required to be disclosed.