Explanation

This risk was not identified in the FDD package. Analysis of Item 20 data from 2022 to 2024 shows a very low and stable number of franchisee terminations and cessations relative to the system's size. High turnover is often a critical red flag indicating systemic problems such as low profitability or poor franchisor support, but that does not appear to be the case here. Nonetheless, ongoing monitoring of system health is always prudent.

Potential Mitigations

• It is still wise to discuss the stability of the franchisee base with a significant number of current and former franchisees.
• Your business advisor can help you analyze the Item 20 tables to confirm the low turnover rate.
• During due diligence calls, you should ask franchisees about their satisfaction and the general health of the system.

Explanation

The system has shown very slow growth, adding only two net franchised outlets in 2024 and zero in 2023. While this avoids the risks of expanding too quickly for support systems to keep up, such slow growth could also indicate a saturated market or difficulty in attracting new franchisees. This might limit the expansion of brand recognition and the resources available for system-wide initiatives funded by growth.

Potential Mitigations

• Discuss the reasons for the slow growth rate with the franchisor and what their future expansion plans entail.
• A business advisor can help you assess whether the slow growth is a sign of market maturity or potential stagnation.
• Speaking with current franchisees about their perception of the brand's growth prospects and market potential is advisable.

Explanation

This risk was not identified. C12 has been in business since 1992 and has been franchising since 2007. This represents a long operational history and significant experience in franchising. An unproven system would present higher risks related to the viability of the business model and the adequacy of support, but C12 appears to be a mature and established franchise system.

Potential Mitigations

• It is still beneficial to discuss the franchisor's long-term vision and strategy with them and your business advisor.
• In talks with long-tenured franchisees, you can inquire about how the system has evolved and matured over the years.
• An accountant can review the long-term financial trends in the FDD to confirm the system's historical stability.

Explanation

This risk was not identified. The C12 business model, providing peer advisory groups and coaching for Christian business leaders, operates in an established niche within the broader business coaching industry. While subject to economic trends, the concept itself is not based on a fleeting novelty or fad. The business has a long operational history since 1992, suggesting sustained demand for its services rather than short-term hype.

Potential Mitigations

• Your business advisor can help you conduct independent market research to confirm the long-term demand for these specialized coaching services.
• Discuss with the franchisor their strategies for innovation and staying relevant within the business advisory market.
• It remains important to assess the local market's specific need for this type of service.

Explanation

This risk was not identified in the FDD. Item 2 shows that the executive team, including the President and CEO, has extensive experience with the C12 system, with some having been C12 franchisees themselves. This direct franchising experience within the same system is a positive factor, suggesting management understands the operational realities and needs of franchisees. There is no indication of a lack of relevant industry or franchising expertise.

Potential Mitigations

• You should still verify the management team's reputation by speaking with current and former franchisees.
• A review of the management team's background with your business advisor can provide additional context on their capabilities.
• In discussions with the franchisor, inquire about the management team's long-term commitment to the system.

Explanation

This risk was not identified in the FDD. Item 1 indicates that C12 is a limited liability company and does not disclose any ownership by a private equity firm. This means decisions are less likely to be driven by short-term investor return timelines that can sometimes conflict with the long-term health of franchisees. However, any future sale of the company could introduce this risk.

Potential Mitigations

• Your attorney should review the assignment clauses in the Franchise Agreement to understand what happens if the franchisor is sold.
• It is prudent to ask the franchisor about any long-term plans for the ownership structure of the company.
• A business advisor can help you understand the potential implications of any future change in ownership.

Explanation

This risk was not identified. The FDD clearly states in Item 1 that C12 does not have a parent entity. The franchisor entity, The C12 Group, LLC, is the party to the agreement and the provider of the financial statements in Item 21. There is no indication that another undisclosed entity is controlling the franchisor or that its financial stability is dependent on an undisclosed parent.

Potential Mitigations

• Your attorney can confirm the corporate structure and ensure there are no undisclosed controlling entities.
• An accountant should verify that the financial statements provided are for the correct legal entity offering the franchise.
• Always ensure the name on the Franchise Agreement matches the franchisor entity disclosed in Item 1.

Explanation

This risk was not identified in the FDD package. Item 1 provides a clear history of the company's predecessors, tracing its origins back to a sole proprietorship in 1992. The document does not appear to hide or downplay any negative history associated with these predecessors. Items 3 and 4, which cover litigation and bankruptcy, include this historical context where applicable, providing a transparent view of the system's lineage.

Potential Mitigations

• It is still good practice for your attorney to review the predecessor information in Items 1, 3, and 4.
• In discussions with long-term franchisees, you can ask about their experiences under any previous company structures.
• A business advisor can help you assess if the evolution of the company has been positive for the franchise system.