Explanation

This risk was not identified in the FDD package. An analysis of the data in Item 20 over the past three years does not indicate an unusually high rate of franchisee terminations, non-renewals, or other cessations. High turnover can be a significant red flag, often signaling systemic problems such as low franchisee profitability, inadequate support, or a flawed business model. Monitoring this data is crucial for assessing system health.

Potential Mitigations

• It is still advisable to contact a sample of former franchisees listed in Exhibit G to understand their reasons for leaving the system.
• Discussing the franchisee turnover rates with your business advisor can provide context on whether they align with industry norms.
• Your accountant can help you analyze the three-year trend data in Item 20 to identify any emerging patterns.

Explanation

This specific risk was not identified. While the system grew in prior years, the number of new franchised outlets opened in 2024 (29) was significantly lower than in 2023 (84), as shown in Item 20. This slowdown, combined with reduced income from franchise fees in Item 21, suggests the more immediate risk may be related to slowing growth rather than an expansion that outpaces the franchisor's support capabilities.

Potential Mitigations

• Asking the franchisor about their current and future growth plans can provide insight into the system's strategic direction.
• A conversation with your business advisor could help interpret the potential impacts of slowing growth on brand development and support.
• Consult with current franchisees to gauge their perception of the current level and quality of franchisor support.

Explanation

This risk was not identified in the FDD package. Transworld Business Advisors, LLC (TBA) began franchising in 2010 and, according to Item 20, has grown to a substantial size with over 450 franchised outlets. The business model of business brokerage is an established industry. The franchisor has a significant operational history, and this is not considered a new or unproven system.

Potential Mitigations

• Reviewing the company's history and the experience of its management in Item 1 and Item 2 with your attorney is still a recommended step.
• Discussing the system's maturity and market position with a business advisor can help you form a complete picture.
• It is beneficial to contact long-term franchisees from the list in Exhibit F to learn about the system's evolution and stability.

Explanation

This risk was not identified in the FDD. The franchise operates in the business brokerage and franchise consulting industries. These are established professional service sectors that are tied to the general lifecycle of small and medium-sized businesses. The demand for these services is not based on a short-term trend or fad, suggesting a basis for long-term market viability.

Potential Mitigations

• Engaging a business advisor to research the long-term outlook for the business brokerage industry in your local market is a prudent measure.
• Discussing the business's resilience to economic cycles with current franchisees can provide valuable real-world perspective.
• Your financial advisor can help you assess the sustainability of the business model and its core service offerings.

Explanation

This risk was not identified. A review of Item 2 shows that the key executives and managers at TBA have extensive and long-term experience. For example, the CEO has been in the business brokerage industry since 1995 and with the franchisor since 2010. Other key personnel also demonstrate significant tenures within the franchise system or its parent company, United Franchise Group, indicating a seasoned leadership team.

Potential Mitigations

• A thorough review of the management team's backgrounds in Item 2 with your business advisor is still a useful exercise.
• When speaking with current franchisees, it's helpful to inquire about their direct experiences with the management team's competence and support.
• Your attorney can help you confirm that the management team's experience aligns with the complexities of this regulated industry.

Explanation

This risk was not identified. Item 1 indicates that TBA is part of United Franchise Group (UFG), a large, privately held company that owns and manages multiple franchise brands. This structure differs from a typical private equity fund, which often has a more defined, shorter-term investment horizon focused on a rapid exit. The ownership structure appears to be centered on long-term operation of franchise systems.

Potential Mitigations

• It is still wise to research United Franchise Group's reputation and track record with its other franchise brands with your business advisor.
• Discussing the impact of the parent company's ownership with current franchisees can offer valuable insights into the corporate culture.
• Your attorney should review any clauses in the Franchise Agreement related to the sale or assignment of the franchise system.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses the franchisor's parent and affiliated companies within the United Franchise Group structure. The FDD includes the necessary financial statements and does not appear to be withholding information about a parent company that would be material to your investment decision. There are no parent guarantees mentioned that would necessitate additional financials.

Potential Mitigations

• Having your attorney review the corporate structure as described in Item 1 is a good practice to confirm your understanding.
• Your accountant should confirm that the provided financial statements in Item 21 are sufficient and that no other related-party financials seem to be required.
• Clarifying the roles of the various affiliated companies with the franchisor can prevent future confusion.

Explanation

This risk was not identified in the FDD. Item 1 provides a clear history of the franchisor's predecessors, FranchiseMart, LLC and Biz1Brokers, Inc., and the acquisition of their agreements. There are no disclosed bankruptcy or significant litigation issues related to these specific predecessors in Items 3 and 4 that would suggest a problematic history is being obscured or downplayed.

Potential Mitigations

• A careful review of the predecessor history in Item 1 with your attorney is still recommended.
• If possible, a business advisor could help you conduct independent research on the historical performance of the predecessor brands.
• When speaking with long-tenured franchisees, asking about their experience during the transition from predecessor brands can provide useful context.