Explanation

This risk was not identified in the FDD package. High franchisee turnover, evidenced by numerous terminations or closures in Item 20, can be a major red flag indicating systemic issues like unprofitability or poor support. This FDD's Item 20 data for the past three years shows a very low rate of terminations, non-renewals, and other cessations relative to the large system size, suggesting a stable franchisee base.

Potential Mitigations

• An accountant can help you analyze the three-year trend data in Item 20 to calculate an annual turnover rate.
• Even with low official turnover, speaking with former franchisees listed in the FDD is a crucial due diligence step your business advisor should recommend.
• Your attorney can help you understand the definitions of termination, non-renewal, and transfer used in Item 20.

Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support. The data in Item 20 shows that while the system is large, its growth rate has been moderate and steady over the last three years. This suggests a mature system that is not expanding at a pace likely to overwhelm its support infrastructure, which appears robust based on Item 21 financials.

Potential Mitigations

• It is wise to have your business advisor review the rate of new unit openings in Item 20 against the franchisor's stated support staff levels in Item 2.
• Ask current franchisees, especially those who opened recently, about the quality and timeliness of the support they received.
• Your accountant can assess whether the franchisor’s financial statements in Item 21 show sufficient reinvestment in support systems to sustain growth.

Explanation

This risk was not identified. Goddard is a well-established brand, founded in 1983, with franchising operations starting in 1988. FDD Item 1 and Item 20 demonstrate a long operational history with a large, mature system of over 600 schools. The business model is proven, and the franchisor has extensive experience. Therefore, the risks associated with a new or unproven franchise concept do not appear to apply here.

Potential Mitigations

• Your business advisor should still evaluate the long-term viability and market position of any franchise, even mature ones.
• Despite its maturity, an attorney should review the FDD for any recent fundamental changes to the business model.
• Verify the franchisor's history and system size as stated in Item 1 and Item 20 with your business advisor.

Explanation

The Goddard School operates in the childcare and early childhood education industry, which is a long-established sector rather than a new or fleeting trend. The business model, focused on providing educational programs for young children, addresses a consistent, long-term societal need for families. The brand's history, dating back to 1983, provides evidence of sustained consumer demand and adaptability over several decades, suggesting it is not a fad business.

Potential Mitigations

• It is still prudent to have a business advisor help you research local market demand and competitive trends for childcare services.
• Review the curriculum and educational philosophy with an education expert to assess its long-term relevance and quality.
• An accountant can help model the business's resilience to economic downturns, which can affect parental spending on premium childcare.

Explanation

This risk was not identified in the FDD package. FDD Item 2 lists the executive team for both Goddard Franchisor LLC (GFL) and the managing affiliate, Goddard Systems, LLC. The management team appears to possess extensive experience in franchising and related industries, with many executives having long tenures with Goddard or senior roles at other major franchise systems (e.g., Jack in the Box, Domino's Pizza, Wyndham Hotels). This suggests a seasoned leadership team is in place.

Potential Mitigations

• Your business advisor can help you research the professional backgrounds of the key executives listed in Item 2.
• Speaking with current franchisees about their perception of management's competence and support is a valuable due diligence step.
• An attorney can help verify if there have been any recent, undisclosed departures of key, long-term management personnel.

Explanation

Goddard Franchisor LLC (GFL) is the franchisor, but it is managed by an affiliate, Goddard Systems, LLC. FDD Item 1 clearly discloses this relationship and the complex parent and affiliate structure. FDD Item 21 properly includes the audited financial statements for both GFL and Goddard Systems, LLC. This transparency allows for a more complete assessment of the financial health and stability of the entities you will be relying on for support, thereby mitigating this particular disclosure risk.

Potential Mitigations

• An accountant should carefully review the financials for all disclosed parent and affiliate entities, including all footnotes.
• It is important to have your attorney explain the legal relationship and obligations between the franchisor and its managing affiliate.
• Discuss with your business advisor the operational implications of having a separate company manage the franchise system.

Explanation

This risk was not identified in the FDD package. FDD Item 1 clearly identifies Goddard Systems, LLC as the immediate predecessor. The document provides a history of the franchise system's transfer to the current franchisor as part of the 2022 Securitization Transaction. FDD Item 3 and Item 4, which would disclose litigation and bankruptcy history for predecessors, both state that no information is required to be disclosed, indicating a clean recent history for this specific risk.

Potential Mitigations

• Your attorney should still verify the corporate history outlined in Item 1 to ensure completeness.
• Speaking with long-term franchisees about their experience under the predecessor entity can provide valuable context.
• A business advisor can help you understand the implications of the system being transferred from the predecessor to the current entity.

Explanation

This risk was not identified in the FDD package. FDD Item 3 states, "No litigation is required to be disclosed in this Item." This indicates there is no current, material litigation involving the franchisor or its management that alleges franchise law violations, fraud, or other significant claims as defined by disclosure rules. The absence of such disclosed litigation is a positive indicator, though it does not guarantee the absence of all disputes.

Potential Mitigations

• Your attorney should confirm that the franchisor's statement of no disclosable litigation meets the specific requirements of franchise law.
• It is wise to conduct independent online searches for news or discussions of any disputes involving the franchisor.
• Speaking with current and former franchisees can provide insight into the franchisor's dispute resolution culture.