Explanation

While the consolidated financial statements for the franchisor, Alliance Franchise Brands LLC (AFB), show it to be a large, profitable, and financially stable company, the True Install brand itself is a new venture. Your success is dependent on the parent company's continued financial health and its willingness to support this emerging brand. The audited financials in Exhibit J do not show specific performance for the True Install concept.

Potential Mitigations

• An experienced franchise accountant should review the franchisor's consolidated financials, including all footnotes and the auditor's report.
• It is wise to discuss the parent company's long-term commitment and funding strategy for the True Install brand with your business advisor.
• Ask your attorney to clarify if there are any guarantees from the ultimate parent company, Alliance Franchise Holdings LLC, for AFB's obligations.

Explanation

This risk was not identified in the FDD package. As a new franchise system that began offering franchises in September 2023, Item 20 data shows no terminations, non-renewals, or other cessations of business. High turnover in an established system can be a major red flag indicating potential systemic problems, so monitoring this data in future FDDs will be important.

Potential Mitigations

• In the future, a business advisor can help you analyze turnover data and compare it to industry averages.
• Your attorney should advise on how to properly question former franchisees if future FDDs show high turnover.
• An accountant can help calculate the true churn rate from Item 20 data in subsequent years.

Explanation

The True Install business focuses on sign and graphic installation services. While this is an established industry, you should assess whether the franchisor's specific model offers a sustainable competitive advantage or if it is reliant on a temporary market trend. A business model that lacks long-term viability could leave you with contractual obligations long after market demand has faded. The FDD does not detail significant research and development to adapt the model.

Potential Mitigations

• It is prudent to conduct your own market research to validate the long-term demand for these specific installation services.
• A discussion with a business advisor can help you evaluate the business model's resilience to economic shifts and competitive pressures.
• Inquire with the franchisor about their long-term vision and plans for evolving the service offerings to stay competitive.

Explanation

This specific risk appears to be low. While the True Install brand is new, the management team detailed in Item 2 consists of executives with extensive experience within the parent company, Alliance Franchise Brands LLC, and its other established sign and graphics franchise concepts (like Image360 and Signs Now). This experience in the broader industry and in franchising itself may reduce the risks typically associated with a new franchisor's management.

Potential Mitigations

• A business advisor can help you further vet the management team's specific experience and track record with other brands.
• It is still wise to speak with franchisees from AFB's other brands to gauge their opinion of the overall management.
• Your attorney can help you frame questions to the franchisor about how their past experience will benefit this new venture.

Explanation

This risk was not identified in the FDD package. FDD Item 1 indicates that the franchisor, Alliance Franchise Brands LLC, is a wholly owned subsidiary of Alliance Franchise Holdings LLC, but does not state that the parent is a private equity firm. Understanding the ownership structure is important because different types of owners (e.g., founders versus private equity) can have different priorities that may affect the franchise system's direction.

Potential Mitigations

• A business advisor can help you research the ownership structure of a franchisor and its parent companies.
• Engaging an attorney to review public records can sometimes reveal more details about a company's ownership history.
• Speaking with long-term franchisees can provide insight into how ownership changes have impacted the system in the past.

Explanation

This risk was not identified in the FDD package. Item 1 clearly identifies Alliance Franchise Holdings LLC as the parent company of the franchisor. Furthermore, the FDD includes the audited consolidated financial statements of the franchisor, Alliance Franchise Brands LLC, in Exhibit J. Failure to disclose a parent company or its financials, when required, can obscure a system's true financial health and backing.

Potential Mitigations

• An accountant should always confirm that the financial statements provided are for the correct legal entity named as the franchisor.
• Your attorney can help verify the corporate structure and identify all parent and affiliate companies.
• It is prudent to ask your attorney whether parent company financials should have been included based on state or federal rules.

Explanation

This risk was not identified in the FDD package. Item 1 indicates that the franchisor has predecessors from which it acquired other brands, but there is no indication that the True Install system itself was acquired from a predecessor. The litigation history in Item 3 and bankruptcy history in Item 4 pertain to the current franchisor or its affiliates, not a predecessor of this specific brand. A negative predecessor history could indicate inherited systemic problems.

Potential Mitigations

• Your attorney can help you review Item 1 carefully to identify any predecessors and understand their historical connection to the franchise.
• If a predecessor is identified, a business advisor can assist in researching its history and track record.
• Speaking with long-term franchisees who operated under a predecessor provides invaluable firsthand insight.