Explanation

The franchisor’s audited financial statements show positive and growing net income and a healthy balance sheet with a strong current ratio. The company appears financially stable and profitable, which is a positive factor for its ability to support the franchise system. This specific risk was not identified.

Potential Mitigations

• An accountant should still review the complete financials, including all notes, to confirm this assessment and check for any subtle risks.
• It is wise to have your financial advisor help you understand the franchisor's revenue sources to see if they rely more on royalties than on initial fees for income.
• Your attorney should verify that the financial statements are audited and comply with all disclosure requirements.

Explanation

This specific risk was not identified in the FDD package. The franchisor, Tint World, LLC, has been franchising since 2007 and its predecessor was founded in 1982, indicating a long operational history. A new or unproven system presents risks like an untested business model and minimal brand recognition, which do not appear to be primary concerns here.

Potential Mitigations

• When evaluating any franchise, it's wise for your business advisor to assess the franchisor's track record and the system's maturity.
• Speaking with the earliest franchisees can provide insight into the system's evolution and stability, a task your attorney can help prepare for.
• An accountant should always review the franchisor's financials to confirm its stability, regardless of its age.

Explanation

The business model, automotive styling, is well-established. However, the industry is subject to changing technologies and consumer tastes. While not appearing to be a fad, the long-term success of your business will depend on the franchisor's ability to adapt its services and product offerings to stay current and competitive in the automotive aftermarket industry.

Potential Mitigations

• It is beneficial to have a business advisor help you research the long-term trends and competitive landscape of the automotive styling industry.
• You should ask the franchisor about their research and development process for new products and services.
• Speaking with long-term franchisees about how the business model has evolved over time can provide valuable perspective.

Explanation

This risk was not identified. The executives and management team listed in Item 2 have extensive experience in both the automotive service industry and in franchising, with many having prior roles at large, established franchise systems like Meineke and Driven Brands. This level of experience is a positive factor and suggests the leadership team is knowledgeable about managing a franchise network.

Potential Mitigations

• Even with an experienced team, it is prudent to ask a business advisor to review the backgrounds of the key personnel who will directly support you.
• During discussions with existing franchisees, you should inquire about their direct experiences with the management team's effectiveness and support.
• Your attorney can confirm that the management team's disclosed history in Item 2 is consistent with other information in the FDD.

Explanation

This specific risk does not appear to be present. FDD Item 1 indicates the company is a privately held LLC, and Item 2 details the experience of its founder and key managers, who have long tenures with the company. There is no disclosure of ownership by a private equity firm, which can sometimes introduce risks related to short-term profit motives.

Potential Mitigations

• When analyzing any FDD, your attorney should confirm the ownership structure in Item 1 to identify any potential influence from investment firms.
• A business advisor can help you research the ownership history of a franchisor to understand if there have been recent changes in control.
• It is good practice to ask current franchisees if they have noticed any changes in company culture or support that might indicate new ownership priorities.

Explanation

This risk was not identified. The FDD discloses a predecessor entity in Item 1 and an affiliate, but does not indicate the existence of a parent company. The franchisor provides its own audited financial statements in Item 21, which appear to stand on their own without reliance on a parent. Therefore, the risk of financials being obscured by a non-disclosed parent is low.

Potential Mitigations

• Your attorney should always review Item 1 and Item 21 to confirm the franchisor's corporate structure and determine if a parent company exists.
• If a parent company is involved and provides a guarantee, an accountant should review the parent's financials as well.
• Verifying with your attorney that all required financial disclosures are present is a key step in due diligence.

Explanation

This risk was not identified as a major concern. The FDD discloses a predecessor, Tint World, Inc., which operated the business concept since 1982 before the current entity began franchising in 2007. The disclosure appears straightforward, and there are no associated litigation or bankruptcy disclosures in Items 3 and 4 that would indicate inherited problems from this predecessor.

Potential Mitigations

• Your attorney should review the details of any predecessor mentioned in Item 1 to understand the history of the business.
• Speaking with long-tenured franchisees can provide valuable insights into the transition from a predecessor entity.
• A business advisor can help you research the public records of any predecessor company for additional historical context.

Explanation

This risk was not identified in the FDD. Item 3 states that no litigation is required to be disclosed. This lack of significant legal disputes, particularly with franchisees, is a positive indicator. However, this only covers litigation meeting the specific disclosure thresholds of franchise law, not all potential disputes.

Potential Mitigations

• It is crucial to ask current and former franchisees about their experiences and whether they have had disputes with the franchisor, even if not disclosed in Item 3.
• Your attorney can conduct public record searches to see if there is any litigation that did not meet the criteria for FDD disclosure.
• Understanding the dispute resolution process in the Franchise Agreement is important, as it outlines how conflicts are handled.