Explanation

This risk was not identified in the FDD Package. The predecessor franchisor began offering franchises in 2012, indicating a reasonably long operating history. For truly new systems, risks include an unproven model and inexperienced management, which can affect support and brand recognition. Always verify a franchisor's history and experience.

Potential Mitigations

• For any franchise, a business advisor can help you investigate the franchisor's history and the experience of its management team.
• It's always wise to contact the earliest franchisees in a system to learn about their experience and the evolution of the brand.
• Having an accountant review financial statements over several years helps assess the stability and maturity of the franchise.

Explanation

This risk was not identified in the FDD Package. The business model, junk removal with an eco-conscious and resale focus, addresses a consistent market need. A fad business is tied to a fleeting trend, creating a risk that demand will disappear, leaving you with long-term contractual obligations. Evaluating the long-term consumer demand for any franchise concept is a critical part of due diligence.

Potential Mitigations

• Engaging a business advisor to research the long-term market demand for the proposed services is a prudent step.
• You should assess whether the business model is adaptable to changing economic conditions and consumer preferences.
• Consulting with your financial advisor can help evaluate the business's resilience to market cycles.

Explanation

This risk was not identified in the FDD Package. The management team of Junkluggers Franchising SPE LLC (JLF-SPE) and its parent, Authority Brands, appears to have significant experience in franchising and related service industries, as detailed in Item 2. Inexperienced management can be a major risk, as it may lead to poor strategic decisions and inadequate franchisee support.

Potential Mitigations

• A thorough review of the executive team's backgrounds in Item 2 with a business advisor is always recommended.
• Validating the quality of management support by speaking with a range of existing franchisees is a key due diligence step.
• Your attorney can help you frame questions for the franchisor about the specific experience of the team that will support you.

Explanation

This risk was not identified in the FDD Package. Item 1 clearly discloses the complex parent structure, and the financial statements and a Guarantee of Performance are provided for the parent guarantor, AB Assetco LLC. Failure to disclose parent companies or provide their financials when they guarantee performance can obscure the true financial health and backing of the franchise system.

Potential Mitigations

• Your attorney should always verify that all parent companies mentioned in Item 1 are properly disclosed.
• When a parent company guarantees performance, an accountant must review their financial statements to assess their ability to back the guarantee.
• Ensuring that any guarantee is a formal, legally binding document is a task for your attorney.

Explanation

This risk was not identified in the FDD Package. Item 1 discloses that the predecessor was Junkluggers Franchising, LLC, which was acquired by Authority Brands. The document appears to integrate the historical data from the predecessor in Items 3, 4, and 20. In some cases, a franchisor might obscure negative history from a predecessor, which could hide systemic issues you might inherit.

Potential Mitigations

• Your attorney should review all disclosures related to predecessors to ensure the information appears complete.
• Asking long-term franchisees about their experience under any previous ownership is a valuable part of due diligence.
• A business advisor can help you research the public track record of any predecessor companies.

Explanation

This risk was not identified in the FDD Package, as Item 3 reports no disclosable litigation. A pattern of lawsuits filed by franchisees against a franchisor alleging fraud or misrepresentation is a significant warning sign. Similarly, a high volume of lawsuits filed by the franchisor against its franchisees can indicate an overly aggressive or litigious culture, which could pose a risk to your business relationship.

Potential Mitigations

• Your attorney should always carefully analyze any litigation reported in Item 3 for patterns and potential red flags.
• Even with no litigation disclosed, it's wise to ask current franchisees about the nature of their relationship with the franchisor.
• A business advisor can help you search public records for litigation that may not have been required to be disclosed.