Explanation

This risk was not identified in the FDD package. Analysis of the data in Item 20 does not indicate a high rate of franchisee terminations, non-renewals, or other cessations of business. A low turnover rate can be an indicator of a stable franchise system and general franchisee satisfaction. However, the reasons for any exits should still be investigated during your due diligence calls with former franchisees.

Potential Mitigations

• Your accountant can help you calculate and analyze the annual turnover rates from Item 20 data for the last three years to confirm system stability.
• Engaging in discussions with a significant number of former franchisees listed in Item 20 is a crucial step to understand their reasons for leaving the system.
• Asking your business advisor to compare the system's turnover rate to any available industry benchmarks can provide valuable context.

Explanation

This risk was not identified in the FDD package. The growth in the number of franchised outlets, as shown in Item 20, appears to be steady and controlled rather than exceptionally rapid. A measured growth rate can suggest that the franchisor is able to scale its support systems, such as training and field support, to adequately meet the needs of new and existing franchisees.

Potential Mitigations

• Discuss the franchisor's growth strategy and plans for scaling support systems with your business advisor to ensure they align with the number of new units being opened.
• An accountant's review of the financial statements in Item 21 can help assess if the franchisor has the financial resources to support its growth.
• It is prudent to ask existing franchisees about the current quality and responsiveness of the franchisor's support team.

Explanation

This risk was not identified in the FDD package. The disclosures in Items 1 and 20 indicate that APFI began franchising in 2009 and has grown to over 200 outlets. This demonstrates a long operational history and a mature system, not a new or unproven one. An established system often has more developed operational procedures, brand recognition, and support infrastructure, which can be beneficial for a new franchisee.

Potential Mitigations

• A review of the franchising start date in Item 1 with your attorney will confirm the system's age and history.
• Your business advisor can help assess the level of brand recognition and market penetration in your specific area.
• Speaking with long-term franchisees can provide insight into the system's evolution and stability over time.

Explanation

This risk was not identified in the FDD package. The franchise is for a retail dry cleaning business, a well-established and traditional service industry. The business model does not appear to be based on a short-term trend or fad. Investing in a business with a history of sustained consumer demand can be less risky than investing in a concept based on a new or fleeting trend.

Potential Mitigations

• Your business advisor can help you research the long-term stability and market trends of the retail dry cleaning industry.
• Consider the business's resilience to economic cycles and changing consumer habits with your financial advisor.
• During due diligence, evaluating the competitive landscape in your local market is a key step.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the management team has significant and long-term experience both within the Tide Cleaners system and with other major franchise brands like Burger King. An experienced leadership team can be a significant asset, potentially leading to better strategic decisions, more effective support systems, and greater overall system stability.

Potential Mitigations

• A thorough review of the executive biographies in Item 2 with your business advisor will provide a clear picture of the management team's qualifications.
• It is beneficial to ask existing franchisees about their direct experiences with the leadership team's competence and support.
• Your attorney can help you investigate the public record of the management team's prior business dealings if any concerns arise.

Explanation

This risk was not identified in the FDD package. Item 1 indicates the franchisor is a wholly-owned subsidiary of The Procter & Gamble Company, a major publicly-traded corporation, not a private equity firm. This ownership structure may suggest a focus on long-term brand building rather than the shorter-term investment horizons often associated with private equity ownership.

Potential Mitigations

• Your attorney can confirm the ownership structure disclosed in Item 1 of the FDD.
• Researching the parent company's public statements and history regarding its franchise brands can provide insight into its long-term strategy.
• A business advisor can help you analyze the potential benefits and drawbacks of being part of a large corporate structure.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses that the franchisor is a subsidiary of The Procter & Gamble Company. While the parent company's financials are not included, the franchisor's own audited financial statements are provided in Exhibit L, and the relationship of financial dependency is explicitly stated. This appears to meet disclosure requirements.

Potential Mitigations

• Your franchise attorney can confirm that the disclosures regarding parent companies and affiliates in Item 1 are compliant with regulations.
• An accountant should review the provided financial statements and any guarantees from the parent company to assess the overall financial picture.
• If a parent company guarantees the franchisor's obligations, your attorney should ensure that the guarantee is a formal, legally binding document.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD does not list any predecessor entities from which the franchisor acquired its assets or that previously offered franchises for this system. This suggests a consistent operational history under the current franchisor entity, which can simplify due diligence.

Potential Mitigations

• Your franchise attorney can verify the franchisor's statement in Item 1 regarding the absence of any predecessors.
• Independently researching the company's history can sometimes uncover information about prior business structures or asset acquisitions.
• A business advisor can help you assess the stability implied by a consistent ownership and operational history.

Explanation

This risk was not identified in the FDD package. Item 3 states that there is no litigation that requires disclosure. A clean litigation history can be a positive sign, potentially indicating a lower level of conflict between the franchisor and its franchisees or other parties. However, this does not eliminate the need for thorough due diligence on other aspects of the franchise relationship.

Potential Mitigations

• Your franchise attorney can conduct independent searches for litigation that may not have met the technical requirements for disclosure in Item 3.
• It is important to ask current and former franchisees about any disputes they may have had, even if they didn't result in litigation.
• A business advisor can help you evaluate the overall health of franchisee relations within the system.