Explanation

The system has been adding a dozen or more new territories each year. While managed growth is positive, rapid expansion can strain a franchisor's resources. If the growth in support staff and infrastructure, as suggested by the financials in Item 21, does not keep pace with the increase in franchisee count from Item 20, you may find that the quality and availability of training and operational support could decline.

Potential Mitigations

• Speaking with franchisees who joined at different times (new vs. established) can provide insight into whether support levels have changed over time; your business advisor can help.
• It is prudent to ask the franchisor about their specific plans to scale support systems to match the pace of franchise sales.
• Your accountant should review the financial statements to assess if the franchisor is adequately reinvesting into its support infrastructure.

Explanation

This specific risk was not identified in the FDD package. The franchisor's predecessor has been offering franchises since 1996, and the current management team, as detailed in Item 2, appears to have extensive experience in the industry and franchising. An unproven system or inexperienced leadership would pose a higher risk of business failure, inadequate support, and a lack of brand recognition, making your investment more speculative and potentially less secure.

Potential Mitigations

• A business advisor can help you verify the experience claims made in Item 2 and assess their relevance to your potential success.
• When evaluating any franchise, it is important for your attorney to review the franchisor’s history and management background for stability and competence.
• Your accountant can review the system's growth and financial data to gauge its maturity and market acceptance.

Explanation

This specific risk was not identified in the FDD package. The residential cleaning industry is a well-established service sector, not typically considered a fad. A business based on a fleeting trend would carry a high risk of failure once consumer interest wanes, potentially leaving you with long-term contractual obligations for a business with no market demand. This franchisor appears to operate in a mature market.

Potential Mitigations

• Your business advisor can help you research the long-term demand and competitive landscape for any franchise industry you consider.
• It is always wise to assess a franchisor's plans for innovation and adaptation to changing market conditions with your financial advisor.
• Consulting with your attorney about the length of the franchise term versus the projected lifecycle of the business concept is a prudent step.

Explanation

This specific risk was not identified in the FDD package. Item 2 details the business experience of the management team for The Cleaning Authority Franchising SPE LLC (TCA-SPE) and its parent, Authority Brands, Inc., indicating that most executives have significant prior experience in the franchising sector and consumer services industries. Inexperienced leadership can pose a significant risk, as it may lead to poor strategic decisions and inadequate franchisee support.

Potential Mitigations

• A business advisor can help you independently research the backgrounds of the key executives listed in Item 2.
• When speaking with current franchisees, it is useful to ask about their perception of the management team's competence and vision.
• For any franchise, your attorney should review the management team's history for any previous business failures or litigation.

Explanation

This specific risk was not identified in the FDD package. Item 1 clearly discloses the complex parent company structure, including the ultimate parent, Authority Brands, Inc., and the guarantor, AB Assetco LLC. Furthermore, the FDD includes the audited financial statements for both the guarantor (AB Assetco) and the ultimate parent (Authority Brands, Inc.) as part of Exhibit I, providing financial transparency. A failure to disclose a parent or provide its financials when required would be a significant red flag.

Potential Mitigations

• Your accountant should review the financial statements of both the franchisor's parent and any guaranteeing entities to assess the overall financial health of the enterprise.
• Understanding the complete corporate structure and the relationships between the various entities is crucial, a task your attorney can assist with.
• In any franchise investment, it is wise to confirm with your attorney that all legally required financial disclosures have been provided.

Explanation

This specific risk was not identified in the FDD package. Item 1 identifies the most recent predecessor, The Cleaning Authority, LLC, and notes it operated the brand from 2010 to 2021. The document appears to provide the required historical context. In some cases, franchisors may fail to adequately disclose the history of predecessors, which could obscure past issues like litigation or high franchisee turnover that might be relevant to your decision.

Potential Mitigations

• Your attorney should always verify that the predecessor information in Item 1 is complete and consistent with other parts of the FDD.
• For any franchise with a predecessor, it is beneficial to ask long-tenured franchisees about their experiences under the previous ownership.
• A business advisor can help you research the public records of any predecessor entity for additional background information.